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Centillion Data Systems v. Qwest: Federal Circuit continues trend of interpreting "use" under §271(a) broadly

Patent Telecommunications

Centillion Data Systems, LLC v. Qwest Communications International, Inc., No. 2010-1110 (Fed. Cir. Jan. 20, 2011)

Slip Opinion

The Federal Circuit vacated an order of the United States District Court for the Southern District of Indiana, which had granted summary judgment of noninfringement in favor of Qwest on the grounds that neither Qwest nor its customers individually “practice[d] all of the limitations of the asserted claims.”

The issue was ultimately a question of what the word “use” means under 35 U.S.C. §271(a), which governs infringement of patents. The District Court, drawing from Federal Circuit precedent, had held that to “use” a system for purposes of infringement, a party must either practice every element or control and direct the actions of another that practices the elements in question. NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005). Although the Federal Circuit agreed with the District Court’s definition of “use,” it held that the District Court had misinterpreted the definition “by holding that in order to ‘use’ a system under §271(a), a party must exercise physical or direct control over each individual element of the system. The 'control' contemplated in NTP is the ability to place the system as a whole into service.” Slip Op. at 8. Thus, a customer’s use of the front-end application that utilized Qwest’s back office systems satisfied §271(a)’s requirement of “use.” In so holding, the court noted that that the District Court’s contrary interpretation would have effectively overturned NTP, since the customer in that case would not have met the District Court’s threshold of control either.

Patently-O provides an overview of the case. The Patent Prospector discusses the case and provides some commentary. IPWatchdog criticizes the decision based on concern that the holding of NTP and Qwest overextends §271(a), and that the definition of “use” under the statute is being broadened.

In the original suit, Centillion accused Qwest of infringing claims on its patent no. 5,287,270. The patent discloses a system for collecting, processing, and delivering information from a service provider, such as a telephone company, to a customer. Qwest’s billing systems were composed of two parts: Qwest’s back office systems, and front-end client applications that users could install on a personal computer. When a user was subscribed to one of Qwest’s systems, the back-end performed a standard monthly processing operation for the user and also provided custom “on-demand” reports. Following its interpretation of “use,” the Federal Circuit held that both the standard operation and the on-demand operation of the Qwest system constituted a “use” of the system by the customer as a matter of law. Qwest, however, did not “use” the system because it never “puts into service the personal computer data processing means. Supplying the software for the customer to use is not the same as using the system.” Slip Op. at 13. Moreover, the Federal Circuit concluded that Qwest was not vicariously liable for the actions of its customers, avoiding the question of joint infringement altogether. See, e.g. BMC Resources Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007); Cross Medical Products v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293 (Fed. Cir. 2005).

The Federal Circuit also rejected Centillion’s assertion that Qwest “makes” the claimed invention under §271(a), and reversed the District Court’s grant of summary judgment of no anticipation in favor of Centillion, holding that there were genuine issues of material fact regarding anticipation.

Philip Yen is a 3L at the Harvard Law School.