Primary Holding
The Court of Appeals for the Federal Circuit reversed the district court’s denial of Judgment as a Matter of Law (JMOL) and vacated the Jury Verdict. (See CloudofChange, LLC v. NCR Corporation, December 18, 2024, US Court of Appeals for the Federal Circuit, at Page 15).
Facts
The specification of the asserted patents discloses an online web-based point-of-sale-builder system that a non-expert business operator can use to assemble a point of sale (“POS”) system for managing their business operations.
CloudofChange accused NCR’s product, NCR Silver, of infringing several claims of the Asserted Patents. NCR Silver is a web-based POS solution designed for small and independent business owners. NCR Silver allows merchants to edit POS menus, perform transactions, and build their own POS screens.
A merchant’s use of NCR Silver requires application software, POS hardware – such as a tablet or personal computer – and an Internet connection to NCR’s backend servers.
It is undisputed that NCR does not provide all the necessary components of CloudofChange’s system. Specifically, NCR contractually makes users responsible for supplying and maintaining an Internet connection and most users supply their own POS hardware. (See CloudofChange, LLC v. NCR Corporation, December 18, 2024, US Court of Appeals for the Federal Circuit, at Page 5).
CloudofChange pursued a single theory of infringement: that NCR directly used the claimed system by putting it into beneficial use under the precedent of Centellion Data Sys., LLC v. Qwest Commc’ns Int’l, Inc., 631 F.3d 1279 (Fed. Cir. 2011).
CloudofChange asserted that NCR controls and benefits from each component recited in the claimed system and thus, under Centillion, uses the system.
CouldofChange’s technical expert testified that a customer-merchant downloads the NCR Silver software from an app store onto a POS terminal such as a tablet. He explained that a merchant can use NCR Silver, for example, to add new categories and add or edit buttons on the merchant’s POS screens. He also testified that using NCR Silver requires an Internet connection between the merchant’s POS terminal and NCR’s backend server.
NCR did not dispute that its Merchant Agreement makes Internet access the merchant’s responsibility; rather, NCR argued that this does not demonstrate control of the merchant’s use of NCR Silver.
Attorneys
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Jerry Robin Selinger
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Kyrie Cameron
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Barden Todd Patterson
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John Allen Yates
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Paul Whitfield Hughes, III
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Adam William Burrowbridge
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Katherine M. Pappas
Issues & Holdings
Issue: CoudofChange’s technical expert concluded that use of NCR Silver infringed claim 1 of the ’640 patent, but they did not discuss how that use could be attributed to NCR, as opposed to the merchants or users of NCR Silver. (See CloudofChange, LLC v. NCR Corporation, December 18, 2024, US Court of Appeals for the Federal Circuit, at Page 6).
Holding: Yes
Issue: Under the Fifth Circuit’s standard for Judgment as a Matter of Law (JMOL), a jury’s determination on infringement must be upheld unless it is not supported by substantial evidence. See ACCO Brands, Inc. v. ABA Locks Mfrs. Co., Ltd., 501 F.3d 1307, 1311 (Fed. Cir. 2007).
Holding: Yes
Issue: On cross-examination Plaintiff's expert agreed that it is NCR’s customer merchants who put NCR Silver into service and benefit from using it. (See CloudofChange, LLC v. NCR Corporation, December 18, 2024, US Court of Appeals for the Federal Circuit, at Page 7).
Holding: Yes
Issue: The district court correctly determined that it is NCR’s merchants (not NCR) that use the claimed system. See Centillion, 631 F.3d at 1284.
Holding: Yes
Issue: It is the NCR’s merchants, not NCR, who initiate the use of NCR Silver at the POS terminals and benefit from the POS builder software at the web server building or editing the POS terminals.
Holding: Yes
Issue: NCR does not direct or control its merchants to subscribe to the NCR Silver system, download the NCR Silver app on their POS terminals, or put the NCR Silver system into use by initiating action at the POS terminals to cause the NCR Silver software to modify its POS terminals. That NCR’s Merchant Agreement makes merchants responsible for obtaining and maintaining Internet access does not equate to contractually obligating merchants put the entire accused NCR Silver system into use. (See CloudofChange, LLC v. NCR Corporation, December 18, 2024, US Court of Appeals for the Federal Circuit, at Page 13).
Holding: Yes
Opinions
Concurrence
Before Dyk, Reyna,and Stoll (Circuit Judges).
Case Commentary
The case is noteworthy because it distinguishes between the patent infringement analysis of a method patent versus a system patent. The case also clarifies the factual and/or evidence requirements for alleged vicarious liability of patent infringement of a system patent.
The Federal Circuit Court first addressed the issue of infringement for “use” of a system claim that includes elements in the possession of more than one actor in Centillion. See CloudofChange, LLC v. NCR Corporation, December 18, 2024, US Court of Appeals for the Federal Circuit, at Page 10. The court held that a party “uses” a system for purposes of infringement when it “control[s] the system as a whole and obtain[s] benefit from it.” See Centillion, 631 F.3d at 1284. The control contemplated is not direct or physical control over each individual element of the system, but rather the ability to make the system elements “work for their patented purpose” and thus use “every element of the system by putting every element collectively into service.” Id.
The court explained on Page 10 of the judgement of the precedent Centillion: “but for the customer’s actions, the entire system would never have been put into service” and “the customer clearly benefit[ed] from this function.” Centillion, 631 F.3d at 1285. In Centillion the court held that because Qwest “in no way directs its customers to perform nor do its customers act as its agents,” Qwest was not vicariously liable for the actions of its customers. Id. At 1287.
While Qwest provided application software and technical assistance, it was entirely the decision of the customer whether to install and operate the software on its personal computer data processing means. See Centillion, 631 F.3d at 1287.
The district court’s analysis conflates use of a method claim with the use of a system claim. “…[T]he concept of ‘use’ of a patented method or process is fundamentally different from the use of a patented system or device.” See NTP, Inc v. Rsch. In motion, Ltd., 418 F.3d 1282, 1317 (Fed. Cir. 2005). “[T]he use of a process necessarily involves doing or performing each of the steps recited,” while the “use of a system as a whole” involves putting that entire system to use and benefiting from it. Id. at 1318.
The issue in this case was whether NCR directed or controlled its merchant-customer’s actions in putting the entire claimed system to service to build or edit POS systems. As the contractual obligation to supply an Internet does not amount to direction or control of a merchant’s use of the claimed system to build POS systems, the court held that NCR is not vicariously liable to that infringing use.