Carefully Consider the Actors and Likely Implementations of Web-Based Systems You Seek to Patent
Patenting inventions that involve web-based interactions between a business and customers or other third parties can be particularly challenging because of a problem called “divided infringement.” The problem is that in order to distinguish the prior art, you often have to identify system components or method steps in your claims which are the responsibility of multiple actors, such as a business and its customers. As far as the USPTO is concerned, that’s perfectly fine. It does not care how many different actors are involved in carrying out an invention. It’s not an issue that comes up during the examination of a patent application.
However, the situation presents a real problem once you get the patent and want to stop infringers. The reason is that in order to infringe a patent claim, you generally need a single actor who is making, using or selling the entire invention (i.e. something that includes all of the claim elements). There are some exceptions where actors are working together in a coordinated fashion, but generally speaking, if one entity or person is not making, using, or selling the entire system (for a system patent claim) or performing all of the steps (for a method claim), there is no direct infringer, and therefore, no infringement.
This means that when you are trying to patent a web-based system that involves multi-party interactions, it is important to think through who the actors will be in each of the various components of the system and what their likely interactions and contractual relationships will be with one another. That information will help you develop a tailored claim drafting strategy.
The Federal Circuit revisited this issue in December in its opinion in CloudofChange, LLC v. NCR Corp., Case No. 2023-1111. A link to the opinion can be found here. In CloudofChange the Court held that in order to directly infringe a system claim based on the “use” of the system, an actor must “control the system as a whole and obtain benefit from it.” Slip Op. at 10. Here, “control” does not mean direct or physical control over each element of the system, but rather, the ability to make the system elements work for their intended purpose by putting every element of the system collectively into service.
What is interesting here is that the Court distinguished system and method claims, holding that with a method claim, it is sufficient if the one actor either performed each step or performed some steps and directed or controlled another actor to perform other steps. Slip Op. at 14. With a system claim, however, a single actor must either put the entire system into use or direct another actor to put the entire system into use. Slip Op. at 15. The Plaintiff wanted to sue NCR, not NCR’s customers (merchants using point of sale builder software obtained from an NCR web server). However, the Federal Circuit held that it was the customer who put the entire claimed system into use, not NCR. For reasons that are unclear, CloudofChange decided not to assert theories of contributory infringement or inducement of infringement, which would have provided a basis for suing NCR based on its merchant customers’ direct infringement. While NCR contractually required the merchant customers to supply their own internet connection, the Court held that obligation did not constitute an obligation to put the entire system into service, and therefore, NCR was not a direct infringer.
With respect to web-system, multi-actor inventions, CloudofChange reinforces the importance of knowing which actors will likely perform which aspects of your patent claims so you can try to draft claims that would be directly infringed by one actor, as well as the importance of understanding the likely relationships between those actors. This is tricky because these sort of implementation details are not always worked out at the time a patent application is filed, but to the extent possible, you want to draft claims that reflect how system providers and other third parties will interact with respect to the various claim elements. It also suggests the importance of including both method and apparatus claims in your patents because the rules for imputing the performance of certain aspects of a claim to another party may differ with the two types of claims.