Centillion Data Systems, LLC v. Qwest Communications International, Inc.

February 3, 2011 – Blog Post

Ruling on the meaning of the word “use” in 35 U.S.C. § 271(a) as applied to allegations of indirect infringement of system or apparatus claims, the Federal Circuit issued an opinion in Centillion Data Systems v. Qwest Communications on Thursday, January 20.

Centillion brought this suit against Qwest, alleging infringement of a patent that claims an electronic billing system comprising four elements. Of these elements, Centillion conceded that the first three elements were elements on a “back end” system maintained by a service provider, while the fourth element, which involves a “personal computer,” was on a “front-end” system maintained by an end user. In Qwest’s systems, end users may (but do not have to) use a feature employing technology that Centillion contended is the fourth, front-end element, while service providers’ systems allegedly practice the first three elements.

Both Centillion and Qwest filed cross-motions for summary judgment on the issue of infringement. Without performing an element-by-element analysis, the district court granted summary judgment in favor of Qwest for non-infringement. In doing so, the district court cited Federal Circuit precedent to find that “use” of a system involves exercising control over and benefitting from the system’s application, and that an accused infringer must either practice every element or control or direct another that practices the element. The district court then found that Qwest does not practice the end-user, personal computer element, nor does Qwest exercise direction or control over its customers such that it should be liable for vicarious infringement. Thus the district court granted summary judgment of noninfringement.

While the Federal Circuit agreed with the district court that using a system under § 271(a) means controlling the system as a whole and obtaining benefit from it, the Federal Circuit found “control” here to require only the ability to put a system as a whole into service, not physical or direct control over all elements. By making every claimed element of a system work, one infringes a system claim directly, even if lacking physical control over some elements. The Federal Circuit therefore found that, as a matter of law, Qwest’s customers “use” Qwest’s accused system as a whole, but did not rule as to whether this use infringed every element of Centillion’s patent claims. Because Qwest itself never puts into service the end-user, personal computer portion of its system, the Federal Circuit found that Qwest never “uses” the entire accused system directly. Because Qwest’s customers necessarily make the decision to install and operate the personal computer portion of the system, the Federal Circuit found that Qwest is also free of any vicarious liability that would result from the customers’ use of its system.

The Federal Circuit also briefly addressed possible liability for “making” the claimed invention, finding that Qwest does not combine all of the claim elements and therefore does not “make” the claimed system. The Federal Circuit then proceeded to address invalidity defenses, holding that the district court improperly granted summary judgment for validity because of a genuine issue of material fact as to whether an electronic billing system from the 1980s anticipated the claimed invention.

Centillion Data Systems v. Qwest Communications shows the need for skilled claim drafting and patent prosecution. Patentees can much more easily assert direct infringement if a single accused infringer must itself practice every limitation of the claim to benefit from the invention. Therefore, patent claims are most valuable where they have few enough limitations for a single party to be likely to practice all of the limitations, yet where the claims have sufficient limitations to distinctly claim the invention and defeat any validity challenges. On the other side of the coin, because vicarious infringement of a patented system involves putting the system as a whole into service, a party that does not put a part of a system into service can argue under this case that it does not control the use of the system and thus cannot be vicariously liable for infringing use.