Muniauction v. Thomson (CAFC 2007-1485)

The gist of the patent -

[T]he invention of the '099 patent provides an "integrated system on a single server" that allows issuers to run the auction and bidders to prepare and submit bids using a conventional web browser, without the use of other separate software. Id. at col.5 ll.13-28. The system of the '099 patent also allows issuers to monitor the progress of the auction and allows bidders to monitor their bid vis-à-vis the current best bid. Id. at col.12 l.60 to col.13 l.60.

Thomson was using a system that grew from Parity®, acknowledged prior art.

The '099 patent discusses many prior art electronic auction and trading systems, yet criticizes those systems as inapplicable to original issuer auctions of financial instruments. Id. at col.2 ll.49-60. The '099 patent also discusses the Parity® electronic bid submission system, developed by 21st Century Municipals, Inc. for use in municipal bond auctions. "The PARITY bid submission system allows bidders who have previously obtained and installed appropriate software to electronically submit bids in an auction over a computer network." Id. at col.3 ll.4-7. The '099 patent criticizes the Parity® system for three reasons. First, the prior art system requires bidders to obtain and install the Parity® software prior to participating in an auction over the computer network; second, the system "is designed to be used together with fax and other bid submission methods during an auction"; and third, the system operates as a sealed bid system in which the received bids are not evaluated and no feedback is provided to the bidders until the auction closes. Id. at col.3 ll.4-12.

The accused process has as its genesis the Parity® system discussed in the '099 patent. Originally introduced in 1992, Parity® allowed bidders using a modem to access bid calculation software on a central server over a proprietary computer network and input data to calculate a TIC for a given bid. Bidders could then submit a bid over the electronic network to a central server, which ordered the bids according to TICs and transmitted the bids to issuers' computers for display. In 1995, 21st Century Municipals modified Parity® to work with other bid calculation programs, including Thomson's BidComp software, originally introduced in 1988. In 1997, Thomson acquired Parity® from 21st Century Municipals and integrated the BidComp and Parity® products into a single system marketed as BidComp/Parity®. In 1998, Thomson modified BidComp/Parity® to allow issuers to view bids over the Internet using a web browser rather than over a proprietary computer network.

Obzilla didn't lighten the district court's step, but it should have.

On October 20, 2006, Thomson filed a motion for judgment as a matter of law ("JMOL") or a new trial, asserting, inter alia, that the claims of the '099 patent were obvious and that Thomson did not infringe the claims under the appropriate standard for joint infringement. On April 30, 2007, the Supreme Court issued KSR International Co. v. Teleflex Inc., which rejected a rigid application of this court's teaching-suggestion-motivation test for obviousness. 127 S. Ct. 1727, 1739 (2007). The district court considered KSR, but denied Thomson's motion in all respects, enhanced the damages award to $76.9 million, awarded $7.7 million in pre-judgment interest, and granted a permanent injunction against Thomson.

Thomson argues that a bidding process employing the prior art Parity® system performed every step of the claimed methods other than a web browser. Because Muniauction's expert conceded that bid submissions using Parity® performed every limitation of claims 1 and 31 as construed by the district court, other than a web browser, no reasonable juror could find to the contrary.

The CAFC played the Obzilla theme song.

Section 103 of Title 35 "forbids issuance of a patent when 'the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.'" KSR Int'l Co. v. Teleflex Inc., 127 S. Ct. 1727, 1734 (2007) (quoting 35 U.S.C. § 103). A central principle in this inquiry is that "a court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions." Id. at 1740.

You could hear it coming. Adding a web browser as a front-end interface isn't particularly clever.

When the '099 patent's application was filed on May 29, 1998, the use of web browsers was well known. Indeed, the written description of the '099 patent itself identifies the invention as using "a conventional Internet browser," '099 patent, Abstract, and "conventional web browsing software," id. at col.6 l.43. The use of "conventional" to modify "Internet browser" and "web browsing software" denotes a reference to web browsers in existence at the time of the alleged invention of the '099 patent. See PC Connector Solutions LLC v. SmartDisk Corp., 406 F.3d 1359, 1363 (Fed. Cir. 2005) (concluding that term "conventional" is implicitly time dependent and construing "the literal scope of the claim limitations qualified by th[at] term[] as being limited to technologies existing at the time of the invention").

Hindsight reasoning got a welcome and appropriate nod before bringing down the hammer.

In our analysis of the obviousness of independent claims 1 and 31, we recognize our obligation to guard against any hindsight bias, see Graham v. John Deere Co., 386 U.S. 1, 36 (1966), but we note that the use of the internet and web browser technology to conduct electronic auctions was well-established at the time the '099 patent application was filed.

The CAFC cited prior art examples of auctions using web browsers, then reminisces about its KSR-contemporaneous Leapfrog ruling as analogous. In mulling secondary considerations, "skepticism, legally appropriate praise, copying, and commercial success" were found overstated, lacking "the requisite nexus to the claims," and to the extent they did, "their relationship to the claims is simply too attenuated to overcome the strong prima facie demonstration by Thomson that the claims are obvious." Nice nuanced attribution there: "attenuated."

For us to accord substantial weight to the secondary considerations proffered by Muniauction, "[a] nexus between the merits of the claimed invention and evidence of secondary considerations is required in order for the evidence to be given substantial weight in an obviousness decision." Ruiz v. A.B. Chance Co., 234 F.3d 654, 668 (Fed. Cir. 2000) (quoting Simmons Fastener Corp. v. Ill. Tool Works, Inc., 739 F.2d 1573, 1575 (Fed. Cir. 1984)). Put another way, commercial success or other secondary considerations may presumptively be attributed to the patented invention only where "'the marketed product embodies the claimed features, and is coextensive with them.'" Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311-12 (Fed. Cir. 2006) (quoting Brown & Williamson Tobacco Corp. v. Philip Morris Inc., 229 F.3d 1120, 1130 (Fed. Cir. 2000)).

We further note that our conclusion as to the nexus between this award and the claims is consistent with the long-established rule that "[c]laims which are broad enough to read on obvious subject matter are unpatentable even though they also read on nonobvious subject matter." In re Lintner, 458 F.2d 1013, 1007 (CCPA 1972) (citing In re Mraz, 455 F.2d 1069, 1073 (CCPA 1972)).

Another nail in the coffin was suspicious lack of enablement.

Because the '099 patent is itself silent regarding how to actually implement the methods claimed therein with a web browser, Muniauction's argument therefore might suggest that the claims present an enablement issue, rather than support a conclusion of nonobviousness. See, e.g., Sitrick v. Dreamworks, LLC, 516 F.3d 993, 999 (Fed. Cir. 2008) ("The 'enablement requirement is satisfied when one skilled in the art, after reading the specification, could practice the claimed invention without undue experimentation.'" (quoting AK Steel Corp. v. Sollac, 344 F.3d 1234, 1238-39 (Fed. Cir. 2003))).

Forrest Gump obviousness found: "obvious is as obvious looks."

Willfulness and infringement case law also got makeovers in the interim between district court ruling and appeal.

While the appeal was pending, this court issued two opinions relevant to issues presented by this case. First, on August 20, 2007, In re Seagate Technology, LLC changed the standard of willful infringement from one akin to negligence to that of objective recklessness. 497 F.3d 1360, 1371 (Fed. Cir. 2007). Second, on September 20, 2007, BMC Resources, Inc. v. Paymentech, L.P. held that where steps of a method claim are performed by multiple parties, the entire method must be performed at the control or direction of the alleged direct infringer. 498 F.3d 1373, 1380-81 (Fed. Cir. 2007). This court thus granted Thomson's motion for a stay of the injunction pending appeal, concluding that Thomson had shown a likelihood of success on the merits under BMC Resources. Muniauction, Inc. v. Thomson Corp., 07-1485, 2007 WL 2827915 (Fed. Cir. Sept. 28, 2007).

And so infringement wobbled and fell under the BMC standard, for lack of direct infringement by the defendant.

Turning to infringement of the remaining dependent claims, the only theory of infringement presented by Muniauction is that of so-called joint infringement. The law of this circuit is axiomatic that a method claim is directly infringed only if each step of the claimed method is performed. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378-79 (Fed. Cir. 2007) (citing cases). With respect to the '099 patent, the parties do not dispute that no single party performs every step of the asserted claims.

In BMC Resources, this court clarified the proper standard for whether a method claim is directly infringed by the combined actions of multiple parties. The court's analysis was founded on the proposition that direct infringement requires a single party to perform every step of a claimed method. 498 F.3d at 1380 (concluding that this requirement derived directly from 35 U.S.C. § 271(a)); see also NTP, Inc. v. Research in Motion, 418 F.3d 1282, 1317-18 (Fed. Cir. 2005) (holding that users of accused system could not infringe method claims in the United States because one step of the method was performed in Canada). Yet the court recognized a tension between this proposition and the well-settled rule that "a defendant cannot thus avoid liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf." Id. at 1379. Accordingly, where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises "control or direction" over the entire process such that every step is attributable to the controlling party, i.e., the "mastermind." Id. at 1380-81. At the other end of this multi-party spectrum, mere "arms-length cooperation" will not give rise to direct infringement by any party. Id. at 1371.

In this case, Thomson neither performed every step of the claimed methods nor had another party perform steps on its behalf, and Muniauction has identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders. Therefore, Thomson does not infringe the asserted claims as a matter of law.

The claims either invalid or not infringed, the rest was moot.

Costs went to Thomson, but otherwise off the hook.