September 2012

Financial Process Claims Held Not Patent Eligible

Patent claims directed to performing financial transactions and financial analysis have been invalidated by a D.C. District Court in two recent, and related, cases. Graff/Ross Holdings v. Fed. Home Loan Mortg. Corp., No. 07-796 (RJL) (D. D.C. Sept. 24, 2012); Fed. Home Loan Mortg. Corp. v. Graff/Ross Holdings, No. 10-1948 (RJL) (D. D.C. Sept. 26, 2012). In the first case, Freddie Mac had made a motion to dismiss, alleging invalidity of a patent directed to “System and Methods for Computing to Support Decomposing Property into Value Components” (U.S. Patent No. 6,192,347).  In that case, the court affirmed a magistrate’s 2010 opinion holding the patent claims invalid under 35 U.S.C. § 101, and granted the motion. In the other case, Freddie Mac had moved for summary judgment of invalidity, while Graff/Ross, the patent owner, had moved for summary judgment of validity.  The court agreed with Freddie Mac, invalidating, under Section 101, claims directed to a “Bidder System Using Multiple Computers Communicating Data to Carry Out Selling Fixed Income Instruments” (U.S. Patent No. 7,685,053) and a “Computer System to Generate Financial Analysis Output” (U.S. Patent No. 7,908,202). Patent prosecutors in the business methods area often speak of drafting claims with a technical… Read More »Financial Process Claims Held Not Patent Eligible

Patent Applications and Stolen Trade Secrets

The court in VasoNova, Inc. v. Grunwald, No. C 12-02422 WHA (N.D. Cal. Sept. 18, 2012), addressed the classic scenario of a departing employee allegedly stealing trade secrets.  In a not wholly unusual twist, the departing employee, Grunwald, filed patent applications containing the alleged trade secrets.  Grunwald then sold the technology, including the patent applications, to a third-party, Bard Access Systems, Inc.  The plaintiff, VasoNova, sued Grunwald, Grunwald’s company (Romodex), and Bard alleging various causes of action including trade secret misappropriation.  The court denied Bard’s motion to dismiss insofar as it related to the trade secret claim. The California Uniform Trade Secrets Act (CUTSA) requires a plaintiff to identify allegedly stolen trade secrets with “reasonable particularity.”  However, at the pleading stage the “trade secret designation is to be liberally construed, and reasonable doubts regarding its adequacy are to be resolved in favor of allowing discovery to go forward.”  Here, patent applications were alleged to include misappropriated trade secrets.  Trade secret information was identified as relating to software and its operation, as well as “and implementation information such as the ‘devices, algorithms, and processes useful for catheter guidance.’”  Software could be a trade secret under the CUTSA.  Therefore, “[t]he first amended… Read More »Patent Applications and Stolen Trade Secrets

Copyright First Sale Doctrine and Burdens of Proof

Adobe, having been precluded from relying on license agreements that it failed to produce during discovery, has lost a summary judgment motion on its claim for copyright infringement against a defendant who asserted the first sale doctrine as a defense.  Adobe Systems, Inc. v. Christenson, No. 2:10-CV-00422-LRH-GWF (D. Nev. 2012). Defendants sold software over the Internet.  Although not authorized Adobe distributors, they resold Adobe software, purchased from third parties, through their website.  Adobe brought claims for copyright infringement under the Copyright Act of 1976, and for trademark infringement under the Lanham Act (not relevant to this post).  In addition to the first sale doctrine defense, the defendants responded with counterclaims and a third-party complaint (also not relevant to this post).  Following discovery, the parties brought motions for summary judgment, and the defendants also brought a motion to strike certain evidence relied upon by Adobe. During discovery, the court found that Adobe had “failed to identify contracts or license agreements in its Rule 26(a) disclosures.”  Based on this finding, the court ordered that Adobe “is precluded from using or introducing license agreements in support of its motion for summary judgment or at trial.”  However, the court explicitly did not preclude Adobe… Read More »Copyright First Sale Doctrine and Burdens of Proof

No Intent to Deceive, No Inequitable Conduct

The Federal Circuit has reversed a finding of inequitable conduct where “the record contains no evidence of a deliberate decision to withhold those references from the PTO as required under Therasense, Inc. v. Becton, Dickinson & Co.”  1st Media, LLC v. Electronic Arts, Inc., No. 2010-1435 (Fed. Cir. Dec; 13, 2012).  The opinion was authored by Judge Linn, and joined by Chief Judge Rader and Judge Wallach. The patent-in-suit, U.S. Patent No. 5,464,946, was directed to “an entertainment system for use in purchasing and storing songs, videos, and multimedia karaoke information.”  Attorney Joseph Sawyer prosecuted the application for the ‘946 patent and certain related applications, including a PCT application and two U.S. applications that later issued as U.S. Patent No. 5,325,423 and U.S. Patent No. 5,564,001.  The ‘423 patent application was filed the same day as the ‘946 patent application.  The ‘001 patent application was a continuation-in-part of the ‘423 patent application. The ‘946 applicant failed to cite three references cited in the related applications.  The trial court, ruling prior to the Federal Circuit’s decision in Therasense, held that the failure to cite these references was inequitable conduct rendering ‘946 patent unenforceable.  At trial, the inventor and the prosecuting attorney… Read More »No Intent to Deceive, No Inequitable Conduct

E-Commerce Patent Claims Held Not Patent-Eligible

Patent claims directed to “automated testing and selection of prices for goods and services sold online” have been held invalid under 35 U.S.C. § 101 for failing to recite patent-eligible subject matter.  In Oip Techs. v. Amazon.com, Inc., No. C-12-1233 EMC (N.D. Cal. Sept. 11, 2012), the court granted Amazon’s Rule 12(b)(6) motion to dismiss Oip’s complaint alleging that Amazon infringed claims of U.S. Patent No. 7,970,713. Oip argued that Amazon’s motion was premature because it was brought before the patent claims were construed.  Noting that the Federal Circuit has stated that determining patent eligibility does not always require claim construction, the court rejected this argument. Then, after a lengthy and detailed review of Supreme Court and Federal Circuit jurisprudence, the court held that Oips’ “patent describes an abstract idea of price optimization and is therefore patent-ineligible.”  The patent failed the machine-or-transformation test because the claims recited a computer only for the “inconsequential functions” of “storing, retrieving and providing data.”  Further, the claims recited an abstract idea because they recited nothing more than “steps [that] describe what any business owner or economist does in calculating a demand curve for a given product.”  The court agreed with Amazon’s argument that “absent the… Read More »E-Commerce Patent Claims Held Not Patent-Eligible

Software Means-Plus-Function Claims Held Indefinite

Software patent claims were held indefinite under 35 U.S.C. § 112 where the patent specification failed to provide any algorithm for performing the recited function.  Ibormeith IP, LLC v. Mercedes-Benz USA, LLC, No. 10-5378 (D. N.J., Sept. 5, 2012).  The claims recited “computational means” and thus were means-plus-function claims within the ambit of 35 U.S.C. § 112, sixth paragraph.  Accordingly, the patent was required to disclose an algorithm or algorithms to perform the functions carried out by the computational means.  It did not.  Therefore, the claims were invalid. U.S. Patent No. 6,313,749 is directed to a method of raising an alarm when conditions indicate that a vehicle driver may be sleepy.  For example, claim 1 of the ’749 patent recites in part: computational means for weighting the operational model according to time of day in relation to the driver or operator circadian rhythm pattern(s) and for deriving from the weighted model, driver or operator sleepiness condition and producing an output determined thereby. Claim 9 of the ’749 patent includes a similar recitation.  Along with their claim construction arguments, the defendants argued that claims 1 and 9 were invalid because the “computational means” limitation was indefinite.  The court then reserved its… Read More »Software Means-Plus-Function Claims Held Indefinite

What is the Pleading Standard for Invalidity Counterclaims?

Bare-bones counterclaims alleging invalidity of patents-in-suit were held sufficient to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6) and 8(a).  Helferich Patent Licensing, LLC v. J.C. Penney Corporation, Inc., No. 11 CV 9143 (N.D. Ill. Aug. 28, 2012).  J.C. Penney had pled six nearly identical invalidity counterclaims.  Helferich, the plaintiff, “argue[d] J.C. Penney’s counterclaims fail to meet the requirements of Fed. R. Civ. P. 8(a) as they ‘consist solely of bald averments of broad defenses, wholly lacking in any factual support or specific legal theories.’” The court disagreed that J.C. Penney’s counterclaims were insufficient, because even if they were factually bare, Helferich had been provided sufficient notice of the counterclaims. A representative one of the counterclaims, reproduced by the court, stated: One or more of the claims of the ‘757 Patent are invalid for failure to comply with one or more of the statutory  provisions of 35 U.S.C. §§ 101, et seq., including without limitation §§ 102, 103, and/or 112. More specifically and without limitation, the ‘757 Patent is invalid as anticipated pursuant to 35 U.S.C. § 102 or as obvious pursuant to 35 U.S.C. § 103 based upon prior art including but not necessarily limited to… Read More »What is the Pleading Standard for Invalidity Counterclaims?

Inducement Does Not Require a Single Direct Infringer, Federal Circuit Now Says

Many owners of Internet patents must be rejoicing.  The Federal Circuit, in a 6-5 en banc decision, has overruled its precedent holding “that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement.”  The Court explained “that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.”   Akamai Technologies, Inc. v, Limelight Networks, Inc., Nos. 2009-1372, -1380, -1416, -1417, 2010-1291 (Fed. Cir. Aug. 31, 2012).  This is a sweeping holding that will surely have far-reaching consequences for much software patent litigation, both ongoing and prospective. At issue in these consolidated cases were patents owned by Akamai Technologies and McKesson Information Solutions covering, respectively, Internet content delivery and “a method of electronic communication between healthcare providers and their patients.”  The respective district courts had followed BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), in granting motions for judgment as a matter of law and summary judgment of non-infringement. Direct patent… Read More »Inducement Does Not Require a Single Direct Infringer, Federal Circuit Now Says