§ 102(b) On-Sale Bar Combined with § 103 Prior Art Invalidates Software Patent Claims as Obvious

Software claims directed to a client-server system were held invalid as obvious under 35 U.S.C. § 103(a) based on the combination of a reference that qualified as prior art by having been on sale under 35 U.S.C. § 102(b), and references that qualified as prior art under Section 103.  eBay Inc. v. PartsRiver, Inc., Nos. C 10-4947, C 11-1398, and C 11-1548 (N.D. Cal. May 21, 2012).

Kelora, the plaintiff  and successor to PartsRiver, Inc., had asserted against the defendants independent claims 1 and 9, as well as claims 2-4 depending from claim 1, of U.S. Patent No. 6,275,821.  The ’821 patent had undergone a re-examination, in which claim 1 (and necessarily, therefore, claim 2) was amended to overcome prior art.  Claim 9 was added.  Asserted dependent claims 3 and 4 were not re-examined.  Before the re-examination, independent claim 1 and dependent claim 2 had been held invalid based on the on-sale bar of 35 U.S.C. § 102(b).  After the re-examination, the Federal Circuit ordered dismissal of the earlier judgment of invalidity.

After construing certain claim terms, the court turned to the law governing the defendants' motion for summary judgment of obviousness under 35 U.S.C. § 103(a), citing, of course, KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), for the proposition that, to be patentable, claims must recite “more than the predictable use of prior art elements according to their established functions.”  The court also noted the factual findings required by Graham v. John Deere Co., 383 U.S. 1 (1966): “(1) the scope and content of the prior art; (2) the level of ordinary skill in the pertinent art; (3) the differences between the claimed invention and the prior art; and (4) evidence of secondary factors, such as commercial success, long-felt need, and the failure of others.”  [Citation omitted.]

The parties having agreed that an appropriate standard for the level of skill in the art was “a low level of skill,” the court adopted Kelora's proposed definition of a person having “2-3 years of experience or education with computer programming and familiarity with standards that had been established at the time,” i.e., the early 1990s.  Kelora argued that such a person, e.g., a student with only a few years of experience, would not have been capable of going beyond the basic parameters of an assignment to adapt an application for the Web.  The court rejected this argument.

The scope and content of the prior art depended first upon the time when the invention was made.  Kelora had pointed only to inventor testimony as proving a conception date prior to the effective filing date of Oct. 14, 1994.  However, inventor testimony by itself was insufficient as a matter of law to establish a date of invention earlier than the filing date.  Therefore, there was no factual dispute concerning the conception date of the invention or the date used to determine what references qualified as prior art.

Kelora further contended that the “AMP Navigator demonstration program,” which qualified as prior art under the on-sale provision of 35 U.S.C. § 102(b), could not be combined with another reference and used to show obviousness under 35 U.S.C. § 103(a).  However, Kelora's arguments flew in the face of a plethora of cases establishing that “Section 102(b) may create a bar to patentability . . . in conjunction with [§ 103], if the claimed invention would have been obvious from the on-sale device in conjunction with the prior art.” [Citations omitted.]  Citing Chisum on Patents, the court explained that “[f]or the purposes of  obviousness, the relevant prior art consists of those sources that are otherwise “prior art for purposes of Section 103 . . . plus those sources enumerated in Section 102(b) with effective dates more than one year before the applicant’s filing date.”

The court had “already determined that the AMP Navigator demonstration program constituted a reduction to practice of the original claims and thus that all elements of the local embodiment of the original claims were obvious.”  The defendants did not need to re-litigate these prior findings, but instead could “prove the obviousness of the current claims by showing that they would have been obvious from the combination of AMP Navigator, including the concept of parametric search, with other prior art, including the Arnett and Suzuki prior art.”  Indeed, according to the defendants, “the only differences between the original and re-examined claims are the requirement of the client-server arrangement and the resubmission requirement for iterative searching,” each of these elements allegedly being taught in the prior art.

Kelora did not dispute that a web server arrangement was taught by the Suzuki reference, but instead argued that the AMP Navigator taught away from such an arrangement because its code could not be altered to include it.  However, the defendants had offered “substantial evidence” that such an arrangement would have been obvious.  This evidence was borne out by statements made by the examiner in the grandparent to the ’821 patent.

Likewise, “resubmission of all search terms was a method taught by the prior art to resolve the problem of statelessness.”  The fact that there may have been other ways of solving the problem of statelessness did not mean that resubmission would not have been obvious to try.  Further, addressing Kelora's argument that Arnett, the reference cited for teaching resubmission, did so at a high level of abstraction, the court stated that Arnett “provide[d] the same level of detail as the specification of the ’821 patent itself does regarding how resubmission is performed.”

Motivation to combine the references existed because evidence showed that one of ordinary skill would have been motivated to adapt client-server arrangements to the Internet, and because the references taught the concept of resubmission as a solution to the problem of statelessness.  The cited references were not cumulative to references considered by the patent examiner, because they were not before the examiner.  Kelora made no showing of commercial success not due to elements disclosed in the prior art, and in any case such a showing would have had to have been substantial to overcome the strong showing of obviousness.

The defendants' motion of summary judgment of invalidity based on obviousness was granted, and their other motions were moot.  The court ordered judgment entered in favor of the defendants, and also, interestingly, ordered that “Defendants shall recover their costs from Kelora.”

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