REDACTED MEMORANDUM OPINION 1
CLS Bank International (“CLS”) seeks a declaration that it is not infringing patents owned by Alice Corporation Pty. Ltd. (“Alice”) and that the patents are invalid and unenforceable. Alice counterclaims that CLS Bank is infringing its patents and seeks damages. A threshold issue is whether the U.S. patent laws reach the acts of CLS that Alice alleges constitute infringement. Because resolution of that issue could potentially dispose of the case, the Court ordered initial discovery limited in scope to CLS’s operations. See Dkt. #24. The parties have since completed that discovery.
Pending before the Court is CLS’s motion for summary judgment of no infringement within the United States [Dkt. # 42] and Alice’s cross motion for partial summary judgment as to extraterritoriality [Dkt. # 51]. 2 For the reasons explained herein, the Court will deny CLS’s motion and will deny without prejudice as premature Alice’s cross motion.
I. FACTS
Alice is an Australian company that owns three United States patents, two of which are “method patents” with claims relating to a method or process of exchanging a financial obligation between parties, and one of which is a “system patent” with claims relating to a data processing system that implements the methods. The Court has yet to construe the claims of the patents. For purposes of these motions only, the parties have agreed to assume that the steps of the patented methods can be characterized as (1) maintaining accounts for two parties to a financial transaction, (2) receiving a financial transaction, (3) adjusting the parties’ accounts to effect a financial exchange *32 obligation, and (4) generating an irrevocable instruction to another institution to adjust its accounts to reflect the financial transaction. For purposes of these motions only, the parties have agreed to assume that the patented data processing system can be characterized as encompassing a computer system and coupled storage device configured to perform each of the foregoing steps.
CLS is an “Edge Act Corporation,” organized under Section 25A of the Federal Reserve Act, as amended, 12 U.S.C. § 611, and is authorized by statute to engage in international banking activities. Relevant to this case is CLS’s provision of a “continuous linked settlement” service for the settlement of payment instructions related to underlying foreign exchange transactions (the “CLS Service”).
CLS provides the CLS Service to banks known as CLS Bank Settlement Members (“CLS Members”), who maintain multi-currency accounts with CLS. CLS Members consist of 60 banks, some of which are located in the United States. Through the CLS Members, the CLS Service is provided to other third parties, including banks, worldwide. Some of the CLS Members, including U.S.-based Bank of New York Mellon, in turn, act as “third-party service providers” and offer the CLS Service to their customers. As of December 2008, there were more than 4,000 third parties using the CLS Service, some of whom are located in the United States. U.S. banks become CLS Members by completing a membership application and executing a membership agreement governed by New York law. CLS charges each CLS Member a fee for each settlement instruction. In 2007, CLS had $139,709,000 in revenues from instruction charges around the world.
The CLS Service is implemented, and the steps of the settlement process are performed, on computer hardware and software (the “CLS Core System”) located entirely outside of the United States. 3 ’ 4 [redacted]
[redacted]
CLS Members electronically submit instructions for settlement of foreign exchange transactions on a particular date (the “settlement date”). The CLS Core System receives, authenticates and matches instructions relating to the same foreign exchange transaction, and stores the matched (“paired”) instructions until the settlement date. On the settlement date, each CLS Member makes pay-ins to its member account to cover the settlement of all instructions it submitted for that settlement date, based on a pay-in schedule that the CLS Core System prepared and transmitted. Concurrently, each paired instruction to be settled is placed in a “settlement queue” maintained on the CLS Core System, which tests the paired instructions in the settlement queue to determine if settlement would cause the balance of either of the corresponding member accounts to fall below certain predetermined values or to exceed certain limits (the “risk management tests”). If it passes the risk management tests, the CLS Core System simultaneously debits and credits the member accounts of two CLS Members. CLS Members have no ability to intervene in the functioning of the CLS Core System except to the extent that they can enter their instructions.
II. LEGAL STANDARD
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment must
*33
be granted when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c);
Anderson v. Liberty Lobby, Inc.,
In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as true.
Anderson,
III. ANALYSIS
“[Wjhoever without authority makes, uses, offers to sell, or sells any patented invention,
within the United States
or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” 35 U.S.C. § 271(a) (emphasis added). “The statute makes it clear that it is not an infringement to make or use a patented product outside of the United States.”
Deepsouth Packing Co. v. Laitram Corp.,
A. CLS “Uses” the CLS Core System “Within the United States”
“In terms of the infringing act of ‘use,’ courts have interpreted the term ‘use’ broadly.”
NTP, Inc. v. Research In Motion Ltd.,
Relying on NTP, Alice argues that CLS “uses” the CLS Core System within the United States in two ways: (1) CLS personnel in the United States exercise operational control over the system; and (2) CLS Members in the United States put the system into service by submitting settlement instructions. CLS counters that NTP is inapposite because no part of the CLS Core System is located within the United States, and, in any event, the system is not controlled from within the United States.
As a preliminary matter, CLS appears to conflate the standard for “use” of a method with the standard for “use” of a system. To determine whether a system is being “used” within the United States, “[cjourts analyze the invention as a whole to determine where the ‘claimed system as whole ... is put into service,’ and do not focus on the situs of use of each claimed element within the claimed invention.”
Renhcol Inc. v. Don Best Sports,
RIM argues that the BlackBerry system is distinguishable from the system in [Decca Ltd. v. United States,210 Ct.Cl. 546 ,544 F.2d 1070 (Ct.Cl.1976) ] because the RIM Relay, which controls the accused systems and is necessary for the other components of the system to function properly, is not located in the United States. While this distinction recognizes technical differences between the two systems, it fails to appreciate the way in which the claimed NTP system is actually used by RIM’s customers. When RIM’s United States customers send and receive messages by manipulating the handheld devices in their possession in the United States, the location of the use of the system as a whole occurs in the United States.
NTP,
Likewise, CLS’s argument that the CLS Core System is distinguishable from the system in NTP because no component of the system is located in the United States is a distinction without legal significance. The court in NTP recognized that “use” of a system’s components may “be separated from their physical location.” Id. at 1313. In determining whether a “use” occurs within the United States in such circumstances, NTP focused not on the location of the system or its components, as CLS Bank would have this Court do, but on the location of the “users” of the system. Id. at 1317 (looking to whether RIM’s U.S. customers are “users” of the system). The test articulated by the Federal Circuit in NTP is whether the system is put into service from within the United States, not whether the system is put into service from a component of the system that is physically located within the United States. The relevant inquiry under NTP, therefore, is not whether the physical situs of a component of the system is located within the United States but whether the system is being “used” within the United States. Employing the reasoning of NTP, *35 the Court concludes that a system can be “used” within the United States even if all of the system’s physical components lie entirely outside of the United States.
CLS contends in the alternative that neither its personnel in the United States nor the CLS Members in the United States “use” the CLS Core System. CLS explains:
The undisputed material facts establish that the CLS Core System ... is so highly automated that it could not possibly be controlled by personnel in the U.S. While there are CLS Bank personnel who sometimes interact with portions of the CLS Core System through remote connections from the U.S., they do so through indirect communications links, merely monitor the system, and address exceptions to normal automated processing. And those CLS Members who submit transactions from the U.S., far from controlling anything, merely provide instructions respecting the amount and proposed timing of their transactions.
CLS’s Mem. in Supp. of Mot. for Summ. J. (“CLS’s Mem.”) at 4.
NTP
rejected such a strict interpretation of “use” of a system. As the Federal Circuit explained, “The use of a claimed system under section 271(a) is the place at which the system as a whole is put into service,
i.e.,
the place where control of the system is exercised and beneficial use of the system obtained.”
NTP,
Against the backdrop of NTP, the Court finds that CLS Members in the United States “use” the CLS Core System within the United States by submitting settlement instructions from the United States. CLS argues that its U.S. members “merely transmit payment instructions for settlement relating to foreign exchange transactions over telecommunications networks used for many types of financial transactions” and that they “have no ability to intervene in the functioning of the CLS Core System.” CLS’s Mem. at 32. While that may be true, it is not determinative. In NTP, RIM’s U.S. customers merely sent and received emails and had no ability to intervene in the functioning of the RIM Relay. Nevertheless, the Federal Circuit found that they were “using” the system within the United States. CLS’s U.S. members are thus no different than RIM’s U.S. customers in NTP; both “use” the system within the United States by controlling the system’s input and benefitting from the system’s output. Indeed, much like the wireless email system in NTP which was put into service by customers sending emails from the United States, settlement and pay-out occur only in re *36 sponse to the submission of transactions by CLS Members, including U.S. members.
The Court further finds that CLS’s operators in New York “use” the CLS Core System within the United States [redacted] the system requires a human being to turn it on. It also requires human intervention to deal with exceptions to normal automatic operations that the system cannot do by itself. CLS operators in New York and London perform these functions remotely [redacted] When the CLS Operators in New York do so, they are “using” the CLS Core System within the United States.
B. CLS “Offers to Sell, or Sells” the System’s Methods “Within the United States”
NTP
also addressed an issue of first impression: “whether a sale of a claimed method can occur in the United States, even though the contemplated performance of that method would not be wholly within the United States.... ”
NTP,
Alice alleges that CLS “sells” and “offers to sell” every step of its claimed methods within the United States. CLS argues that, as a matter of law, no claim to a method can be infringed under the “sells” or “offers to sell” prongs of § 271(a), and, in any event, it does not “sell” or “offer to sell” the methods, and to the extent it does, the situs is outside of the United States.
The Federal Circuit in
NTP
could have held that method patents may never be infringed by sales or offers to sell, but it specifically declined to do so.
See NTP,
CLS argues that to the extent it “sells or offers to sell anything, it is only access to a Service that provides for settlement of payment instructions related to underlying foreign exchange transactions” and that “performance of the steps of a service for customers does not constitute a sale or offer to sell the method.” CLS’s Mem. at 35. The Court cannot agree. In
Ricoh,
the Federal Circuit held that selling “instructions to perform a process” does not constitute infringement under § 271(a) because the seller does not perform the method, but it implied that selling “the performance of the process itself’ may constitute infringement under § 271(a).
Ricoh,
The Court also disagrees with CLS’s argument that the situs of its sales and offers to sell is outside of the United States because it performs each of the steps of the methods outside the United States. The determinative factor is where the infringing act occurs. CLS seems to confuse the standard for “use” of a method with the standard for “sale” of a method. There can be no “use” infringement of a method “if one or more of the claimed steps is performed outside the United States.”
Renhcol,
C. Alice’s Cross Motion for Partial Summary Judgment is Premature
The Court agrees with Alice that CLS “uses” the CLS Core System within the United States and that CLS “sells” or “offers to sell” the CLS Core System’s methods within the United States. Nevertheless, the Court will deny without prejudice Alice’s cross motion for partial summary judgment as to extraterritoriality as premature.
To determine whether a patent claim has been infringed, a court must undertake a two-step process. The court first construes or interprets each contested claim, or phrase or word within a claim, to determine its meaning and scope; only afterward are the claims compared to the accused device(s).
See O.I. Corp. v. Tekmar Co. Inc.,
In moving for partial summary judgment as to extraterritoriality before the Court has construed its claims, Alice essentially asks the Court to reverse this process. See Alice’s Cross Mot. for Partial Summ. J. [Dkt. # 51] at 2 (arguing that CLS “uses the invention claimed in Alice’s system patent in the United States” and that “CLS is liable for infringing Alice’s method patents in the United States by ‘offering to sell, or selling’ the performance of Alice’s patented method for a fee.”) But the parties have only agreed to assume for present purposes that Alice’s claims are broad enough to cover the CLS Core System and its methods. Indeed, CLS asserts that “[i]f this case were to proceed beyond a decision on CLS’[s] Motion for Summary Judgment, CLS would contend, among other things, that Alice’s patent claims should be more narrowly construed, and that they are invalid and unenforceable.” CLS’s Mem. at 8 n. 4. Inasmuch as the Court has yet to construe Alice’s claims, Alice is seeking relief based on a hypothetical claims construction. Accordingly, the Court will deny without prejudice Alice’s cross motion for partial summary judgment as to extraterritoriality as premature.
IV. CONCLUSION
For the foregoing reasons, the Court will deny CLS’s motion for summary judgment of no infringement within the United States [Dkt. # 42] and deny without prejudice as premature Alice’s cross motion for partial summary judgment as to extraterritoriality [Dkt. # 51], A memorializing
*39 Order accompanies this Memorandum Opinion.
Notes
. The material redacted is designated “Confidential” under the Protective Order entered on May 23, 2008. See Dkt. # 33.
. The parties also filed cross motions for summary judgment on subject matter patentability.
See
Dkt. # 43 & 54. Those motions relied heavily on the Federal Circuit’s decision in
In re Bilski,
. The CLS Core System settles approximately 700,000 financial transactions per day in multiple currencies, valued at over $4 trillion.
. [redacted].
. While the Court is aware that "[t]he presumption that United States law governs domestically but does not rule the world applies with particular force in patent law[,]”
Microsoft Corp. v. AT & T Corp.,
. The Court also rejects CLS’s assertion that it cannot be held liable for "offering to sell" the system's methods in the absence of a contemplated "sale” within the United States. While there is authority to the contrary, the Court finds that an "offer to sell” within the United States is an independent infringing act and does not require a further infringing act;
i.e.
an actual sale within the United States, to be actionable.
See Wesley Jessen Corp. v. Bausch & Lomb, Inc.,