July 2012

Patent-Eligibility Decision Considers CLS Bank and Bancorp

In denying the plaintiff’s request for reconsideration of summary judgment of invalidity under 35 U.S.C. § 101, the Court in Digitech Information Systems, Inc. v. BMW Financial Services NA, LLC, No. 6:10-cv-1373 (M.D. Fla. July 30, 3012), compared the claim at issue to the claims held not patent-eligible in the Federal Circuit’s recent decision in Bancorp Services, LLC. v. Sun Life Assur. Co., and distinguished the claim at issue from the claims that were held patent-eligible in CLS Bank Int’l. v. Alice Corp. As stated above, claims of U.S. Patent No. 7,739,180 had been previously held not to recite patentable subject matter.    (A representative claim is reproduced here.)  The plaintiff set forth two arguments for reconsideration.  First, new evidence supposedly showed that the patent claims survived the machine-or-transformation test.  Second, the requirement, articulated in CLS Bank, that an abstract idea be “manifestly evident” supposedly made the claims here patentable.  The court rejected both of these arguments. What the plaintiff characterized as new evidence (information included in excerpts from depositions and an expert report) in fact simply reiterated that the preferred embodiment of the claimed invention “would not be practical without the use of a computer.”  This was not “new evidence,”… Read More »Patent-Eligibility Decision Considers CLS Bank and Bancorp

Insurance Valuation Patent Claims Invalid Under Section 101

The Federal Circuit has upheld a District Court decision invalidating, as patent-ineligible under 35 U.S.C. § 101, patent claims directed to calculating an amount that a third-party guarantor must pay based on market and book values of an insurance policy in the event the policy is paid out prematurely.  Bancorp Services, LLC. v. Sun Life Assur. Co., No. 2011-1467 (Fed. Cir. July 26, 2012).  The Court’s opinion, authored by Judge Lourie, and joined by Judges Prost and Wallach, rejected Bancorp’s “primary argument . . . that because its claims are limited to being performed on a computer, they cannot claim only an abstract idea.”  Addressing an obvious question, the Court also stated that its decision here was consistent with its recent ruling in CLS Bank International v. Alice Corp. (from which Judge Prost vigorously dissented), holding that claims directed to using an intermediary in financial transactions to eliminate settlement risk recited patent-eligible subject matter. The claims of U.S. Patents 5,926,792 and 7,249,037 are directed to “a computerized means for tracking the book value and market value of the [insurance] policies and calculating the credits representing the amount the stable value protected writer must guarantee and pay should the policy be… Read More »Insurance Valuation Patent Claims Invalid Under Section 101

Plaintiff Must Identify Software Trade Secrets

Here is a reminder that plaintiffs have an obligation to identify allegedly stolen trade secrets.  In MSCI, Inc. v. Jacob, 945 N.Y.S.2d 863 (April 20, 2012), a New York state court held that the plaintiffs were required to affirmatively identify features of their software that included trade secrets, rather than simply identify aspects of the software that did not include trade secrets. The court had previously ordered the “plaintiffs to supplement their responses to defendants’ interrogatories by providing a list of source code components: (i) that are covered by third party licenses; (ii) that are in the public domain; or (iii) over which plaintiffs do not claim trade secret  status.”  The plaintiffs argued that it was sufficient for them to comply with this discovery order, and also “that their identification of the entirety of the source code in their interrogatory responses as a trade secret, is adequate because the source code underlying their products constitutes a compilation and sequencing of component parts.” The court rejected the plaintiffs’ arguments.  Its prior order had been preliminary.  Further, it was necessary for the plaintiffs to distinguish between their trade secrets and knowledge generally in the public domain in order for the court to… Read More »Plaintiff Must Identify Software Trade Secrets

Discovery Not Limited to Patent Infringement Contentions

Because the Eastern District of Texas does not limit the scope of discovery to the plaintiff’s infringement contentions, the court in DDR Holdings, LLC v. Hotels.com, No. 2:06-CV-42-JRG (E.D. Texas, July 18, 2012), granted the plaintiff’s motion to compel one of the defendants to produce a corporate representative to testify regarding various of that defendant’s e-commerce platforms. The plaintiff had taken depositions of the defendant’s Rule 30(b)(6) witnesses, but none of them had been prepared to testify about the e-commerce platforms.  The defendant did not dispute that its witnesses were unprepared to testify about these products, but rather contended that the products were not included in the plaintiff’s infringement contentions, and were therefore outside the scope of discovery. The court rejected the defendant’s arguments that the plaintiff was attempting unreasonably to expand the scope of the case, and was seeking information that was in fact publicly available.  A protective order may have been a reasonable remedy in light of attempts to expand the case, but the defendant had not sought a protective order.  Even if public information about the platforms at issue was available, depositions would undoubtedly yield non-public information as well. The court concluded that: Infringement contentions serve the… Read More »Discovery Not Limited to Patent Infringement Contentions

Is a Patent Infringed by Activation of Software Abroad from a System in the U.S.?

In a discovery context, at least, one should assume that a U.S.-based system that activates software sold abroad can infringe a U.S. patent.  Prism Technologies v. Adobe Systems Inc., No. 8:10CV220 (D. Neb. July 17, 2012).  Prism sought financial data and activation data “pertaining to Symantec’s use of its U.S.-based software activation system to activate software sold abroad.”  The court granted Prism’s motion to compel Symantec’s responses to its interrogatories. Prism did not contend that Symantec’s customers outside the United States “used” Symantec’s software within the meaning of the patent statute.  Instead, Prism averred an intent to argue at trial that “Symantec makes its own use of the infringing system for its own benefit” and “directly infringes by controlling and operating its activation system to its own advantage, namely anti-piracy and license enforcement benefits.”  On this basis, Prism contended it was entitled to the discovery it sought. According to Prism, these circumstances were addressed by Uniloc USA, Inc. v. Microsoft Corp., 632 F. Supp. 2d 147 (D.R.I. 2009) (“Uniloc I“).  Relying on NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), the Uniloc I court stated that “a claim of infringement is only actionable (and inclusion… Read More »Is a Patent Infringed by Activation of Software Abroad from a System in the U.S.?

Attorney Fees in In rem Cybersquatting Action?

A Virginia court has granted relief to a plaintiff in an in rem action involving a domain name, but has denied a request for attorney fees because the mere failure of the domain name registrant to appear was insufficient evidence of the bad faith intent required to make an exceptional case under the Lanham Act.  United Airlines Inc. v. Unitedair.com, No. 1:12cv0143 (GBL/JFA) (E.D. Va. June 11, 2012) (see the Magistrate Judge’s report and recommendation, and the court’s order adopting the Magistrate Judge’s findings of fact and recommendation). United Airlines filed a complaint for cybersquatting under the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d) (“ACPA”), and sent written notice of the action to the registrant (a Korean individual) of the domain name at issue (unitedair.com), as well as to the registrant’s counsel and to companies that provided parking services for the domain name.  United also published notice of the action in the Washington Times.  No party responded; United’s claim was the only filing asserting any rights in the domain name. United’s complaint stated the prerequisites for a cybersquatting action (and in fact this case would provide a good primer for anyone researching the procedure for bringing an in rem action). … Read More »Attorney Fees in In rem Cybersquatting Action?

Copyright Infringement and Software Version Control

Enforcing a software copyright depends on good source code version control.  This is because enforcing a software copyright depends on being able to produce the version of software whose copyright is alleged to be infringed.  In Indyne, Inc. v. Abacus Technology Corp., No: 6:11-cv-137-Orl-22DAB (M.D. Fla. June 1, 2012), the defendant’s motion for summary judgment of noninfringement was successful because the plaintiff could not satisfy the requirement of producing the version of software alleged to be infringed. The plaintiff in this case had used its Program Information Management System (“PIMS”) software to deliver information technology services to NASA.  The plaintiff registered version 2 of the PIMS software in 2008, claiming a publication date of 2003, but had not retained a copy of version 1, or of version 2 as it existed in 2003.  In fact, “by the time of its registration in 2008, [the plaintiff] only had some version adulterated by years of government contracts and customizations and no clear roadmap by which to decipher what portions were paid for by which parties and what alterations were made.”  The plaintiff had registered version 2 only after the defendant, having replaced it as NASA’s contractor, copied certain PIMS-related files. In deciding… Read More »Copyright Infringement and Software Version Control

2nd Cir. Applies Lear Doctrine to Pre-Lititgation Settlement Agreement

The Second Circuit has held that “a clause in a settlement agreement which bars a patent licensee from later challenging the patent’s validity is void for public policy reasons under the Supreme Court’s decision in Lear, Inc. v. Adkins.”  Rates Technology Inc. v. Speakeasy, Inc., No. 11-4462-cv (July 10, 2012). Rates Technology Inc. (“RTI”), owner of two telecommunications patents, accused Speakeasy of infringement, and offered Speakeasy a release from liability “in exchange for a one-time payment consistent with RTI’s tiered pricing structure.”  The parties thereafter entered into a “Covenant Not to Sue” that included a release and promise that RTI would not sue Speakeasy (but evidently did not include the grant of a patent license).  Without admitting infringement, Speakeasy acknowledged the patents’ validity and enforceability, and agreed not to challenge the validity of the patent claims.  The no-challenge clause was supported by Speakeasy’s agreement to a $12 million liquidated damages provision. In the agreement, “Speakeasy” was defined to include Best Buy, which had announced plans to, and subsequently did, acquire Speakeasy.  However, three years later, Best Buy sold Speakeasy to Covad.  Around the same time, RTI accused Covad of infringement, and offered Covad an agreement similar to Speakeasy’s.  Covad thereupon… Read More »2nd Cir. Applies Lear Doctrine to Pre-Lititgation Settlement Agreement

Business Method Claims Patentable Says Fed. Cir.

Patent claims directed to using an intermediary in financial transactions to eliminate settlement risk have been held to recite patent-eligible subject matter under 35 U.S.C. § 101.  CLS Bank Int’l. v. Alice Corp., No. 2011-1301 (Fed. Cir. July 9, 2012).  Writing for the majority of a divided panel, Judge Linn, joined by Judge O’Malley, emphasized the court’s consideration of the claims “as a whole.”  Because the court could not conclude that the claims were drawn to an abstract idea, they were patent-eligible.  In a dissent (to which the overused description of “scathing” truly applies), Judge Prost found no limitation in the claims that made them non-abstract.  Judge Prost would have found the claims, which she characterized as similar to the claims in Bilski v. Kappos and other recent cases denying patent-eligibility, unpatentable under Section 101. In 2007, CLS brought a declaratory judgment action against Alice concerning three patents, with a fourth patent issuing in 2010.  Following the Supreme Court’s decision in Bilski v. Kappos, the District Court held “that each asserted claim of Alice’s four patents is invalid for failure to claim patent eligible subject matter.”  According to the District Court, the method claims were invalid under Section 101 because… Read More »Business Method Claims Patentable Says Fed. Cir.

Violations of Employer’s Computer Use Restrictions Does Not Violate CFAA

Hospital employees did not “exceed authorized access” under the Computer Fraud and Abuse Act (CFAA), 18 USC § 1030, when they violated the hospital’s computer usage policy by attaching removable storage devices to computers that they were otherwise authorized to access.  Wentworth-Douglass Hospital v. Young & Novis Professional Ass’n., No. 10-cv-120-SM (D. N.H. June 29, 2012). The plaintiff hospital brought its claim under the CFAA, 18 USC § 1030(a)(2)(C), because the defendants allegedly “without the prior authorization and approval of the [hospital’s] Information Systems Department and in violation of the [hospital’s use policy], . . . connected removable storage devices or external hardware to hospital computers and obtained or altered information from [hospital] computers . . . that they were not entitled to obtain or alter.”  The defendants argued that they should not be liable for “exceeding authorized access” in light of the recent Ninth Circuit decision in United States v. Nosal, 676 F.3d 854 (9th Cir. 2012).  The Nosal court held “that the phrase ‘exceeds authorized access’ in the CFAA does not extend to violations of use restrictions.” The court here agreed that the narrow view of “exceeds authorized access” under the CFAA was the better interpretation.  Where an… Read More »Violations of Employer’s Computer Use Restrictions Does Not Violate CFAA