The Software IP Report

When Is Benefit from a System Patent Claim Infringing Use?

By Charles Bieneman

Categories: Patent Infringement, The Software IP Report

The Federal Circuit has affirmed a district court’s rule 12(b)(6)dismissal of a complaint alleging direct patent infringement where the patent owner pled that the defendant at most benefited from the claimed system as a whole, and not from every element in the patent claims.  Grecia v. McDonald’s Corporation, No 2017-1672 (Fed. Cir. March 6, 2018) (non-precedential, opinion by Judge Reyna). The court predicated its holding on the principle that an accused infringer must benefit from every element of a claimed system, and not the claimed system as a whole, to “use” the system in an infringing manner under 35 U.S.C. § 271(a).

The patents in suit, U.S. Patent Nos. 8,533,860 and 8,402,555, claimed modules to “facilitate access rights between a plurality of data processing devices,” e.g., to authenticate a credit card. The patent owner had alleged that McDonald’s directly infringed the patent claims by using “‘tokenization systems of’ various credit card companies.” The district court granted McDonald’s motion to dismiss, agreeing that the patent claims focused on the actions of a single entity, Visa, and therefore only Visa, and not McDonald’s, could infringe under Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011).

Although affirming the district court’s result, the Federal Circuit disagreed that Uniloc was controlling because here it was “not facially apparent in the drafting of the asserted claims” that the claims were “drafted in a way that focuses on ‘one entity.’” The court pointed to claim 9 of the ’860 patent which requires system users “to provide a verification token.”

But the Federal Circuit also disagreed with the patent owner that Centillion Data Systems, LLC v. Qwest Communications International, Inc., 631 F.3d 1279 (Fed. Cir. 2011), was controlling. That case held that “to ‘use’ a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.”  Unlike Centillion, where different parties undisputedly possessed different claim elements, there was no allegation here that McDonald’s possessed any of the claimed modules. The complaint did not “plausibly allege that McDonald’s benefits from each element of the claimed system necessary to allege ‘use’ under § 271.”

The court explained that, in Intellectual Ventures I LLC v. Motorola Mobility LLC, 870 F.3d 1320 (Fed. Cir. 2017), it had rejected the idea that direct infringement could be predicated on an accused infringer’s “’benefit from the system as a whole’ by deriving a benefit from ‘any claimed component of the claimed system.’” Instead, Intellectual Ventures made clear that a party found to be infringing must be found to benefit from “each and every element of the claimed system.” The patent owner here “only identified a vague benefit to McDonald’s” but did not “explain how McDonald’s benefits from each and every element of the claimed system.”

Finally, the court held that, even though it decided the case on different grounds than did the district court, the lower court nonetheless did not abuse its discretion in deciding to “deny [the patent owner] leave to amend because he failed to describe or attach an amended complaint to his request for leave nor did he ‘offer any meaningful indication of how [he] would plead differently.’” Because the patent owner had not explained how he would amend his complaint to survive rule 12(b)(6), the Federal Circuit refused to remand with instructions to allow him a second bite at the apple.