Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in CloudofChange, LLC v. NCR Corporation, No. 2023-1111 (Dec. 18, 2024).
CloudofChange sued NCR for infringing two patents directed to an online web-based point-of-sale (POS) builder system. The asserted claims included the following claim limitation: “wherein web server software resides and is hosted on said vendor’s remote servers and wherein subscriber company’s POS terminals access and repeatedly interact with said web server software.” CloudofChange accused NCR’s web-based POS system—NCR Silver—of infringing the asserted claims. 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.” NCR makes merchants contractually responsible for maintaining their own internet connection. Merchants download the NCR Silver software from an app store onto their own POS hardware. During the district court proceedings, CloudofChange abandoned all infringement theories other than direct infringement, asserting NCR controls and benefits from each component in the claimed system and is therefore a direct infringer under the Federal Circuit’s Centillion precedent. During trial, NCR moved for judgment as a matter of law of noninfringement arguing the merchants who use the NCR Silver system, not NCR, controlled and benefited from its use. The trial proceeded, and a jury found NCR willfully infringed the asserted claims. The district court denied NCR’s renewed motion for JMOL, concluding NCR was vicariously responsible for its merchants’ use of the system. NCR appealed.
The Federal Circuit reversed. Addressing the question of who the puts the accused system into use, the Court agreed with the district court that NCR’s merchants, not NCR, do so. As for CloudofChange’s argument that NCR “benefitted” from the merchants’ use of the system through receipt of fees and related benefits, the Court explained that these are not the sort of “benefits” on which Centillion focuses. Rather, the “benefit” should be understood to be the recited purpose or result of the use of the entire system. Addressing vicarious liability, the Court held the district court erred in finding NCR vicariously liable for its merchants’ actions because NCR did not direct or control its merchants’ actions and the merchants were not NCR’s agents. Distinguishing Akamai as involving method claims, the Court held that for system claims the proper focus is on exertion of direction or control over the entire claimed system.
