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Patent Infringement

Posted Wednesday, July 18, 2012 by Mike Cicero

When drafting claims for a patent application it is important for the applicant to consider how the invention will actually be practiced. Under 35 U.S.C. §271(a), an entity directly infringes on a patent if it “without authority makes, uses, offers to sell, or sells [the patented invention], within the United States, … during the term of the patent.” Successfully proving that an entity has infringed upon a patent, directly or indirectly, can result in a patent holder being awarded monetary damages from the infringing entity. However, proving that an entity has directly infringed upon a patented system claim by “use” under §271(a) requires a showing that the allegedly infringing entity used each and every element of the claimed system. Centillion Data Systems, LLC v. Qwest Communications Int’l, Inc., 631 F.3d 1279 (Fed. Cir. 2011). Although proving direct infringement is a strict prerequisite collecting monetary damages, there can be significant challenges to proving indirect infringement. Consequently, it is usually best to avoid drafting claims that, if practiced without authority, will not be practiced in their entirely by a single entity or, more specifically, by a single entity that it would be worthwhile filing an action against.

In Centillion, the patent was directed to a system for processing and delivering billing data to subscribing customers. The claims at issue required “a system for presenting information … to a user … comprising:” 1) storage means for storing transactional records, 2) data processing means for generating summary reports as specified by a user from the transaction records, 3) transferring means for transferring the transaction records and summary reports to a user, and 4) personal computer data processing means adapted to perform additional processing on the transaction records. It was conceded by Centillion that the claims include both a “back-end” system maintained by the service provider and a “front-end” system maintained by an end user. Id. at 1281. The Court identified the possible infringing entities of the claims as both Quest and Quest’s Customers which subscribed to the service.

Turning to the issue of whether Quest’s subscribing customers “use” the patented invention, the Court held that the customers did “use” the system because the customers initiate a demand for elements 1-3 to occur on the back-end and also fully practice element 4 on the front-end. Thus, “[b]y causing the system as a whole to perform this processing and obtaining the benefit of the result, the customer has ‘used’ the system under §271(a).” Id. at 1285. Regarding Quest, the Court held that Quest did not “use” the system because Quest never puts into service the fourth element of “personal computer data processing means.” Id. at 1286. Unfortunately for Centillion, establishing “use” by Quest’s customers is not enough to establish “use” by Quest and in order to collect monetary damages from Quest for direct infringement. The Court held that under these circumstances the only way that Centillion could establish “use” by Quest would be to show that Quest is vicariously liable for the actions of its customers, and because Quest did not direct its customers to complete the last step nor do the customers act as agents of Quest cannot be held vicariously liable for their actions.
Centillion further argued that Quest was liable for “making” the invention under §271(a). However, the Court was not persuaded by Centillion’s arguments and held that because the “customer, not Quest, completes the system by providing the ‘personal computer data processing means” and installing the client software” Quest did not make the patented invention.

Although Centillion did prove that Quest’s subscribing customers “used” the patented invention under the meaning of §271(a), this holding is far less than ideal because collecting small damage awards from a large number of infringers is much more difficult than collecting a large sum from a single and highly solvent entity. The situation presented in Centillion serves as a reminder for the importance of carefully drafting patent claims with consideration of how and by whom any possible infringement will later occur.

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