Stamps.com v. Endicia and PSI Systems (CAFC 2010-1328) nonprecedential; Judges Bryson (dissent), Dyk (author), and Prost

Stamps.com asserted claims of its postage stamp patents, which got stomped in summary judgment by indefiniteness and prior art.

Prior Art

The district court held that the asserted claims of the '991 and '777 patents were obvious over a combination of prior art, including the Tygar-Yee article. That article was asserted as § 102(b) prior art. Section § 102(b) provides, in relevant part, that an invention is not patentable if it was "described in a printed publication" more than one year prior to the filing date of the application from which the patent issued. 35 U.S.C. § 102(b). A prior art reference cannot constitute a "printed publication" under §102(b) if it has not been made "publicly accessible." In re Klopfenstein, 380 F.3d 1345, 1348 (Fed. Cir. 2004). That inquiry focuses on the reference's accessibility to the "public interested in the art." Id. Stamps.com contends that the Tygar-Yee article should not have been treated as § 102(b) prior art because it was not publicly accessible.

The district court and CAFC majority cavalierly found the Tygar-Yee article publicly accessible. Judge Bryson in dissent was more circumspect about the wanton killing on a suspicious publication.

The Tygar-Yee article is dated March 1, 1993, but there is no evidence as to the date of its publication. The majority notes that the article was cited in a subsequent article by Tygar and Yee published in 1994. That citation, however, does not constitute evidence that the 1993 Tygar-Yee article was ever publicly accessible, particularly in light of the fact that the later article was written by the same authors. The majority also relies on a declaration by Dr. Tygar, the co-author of the Tygar-Yee article, stating that the article is prior art. Dr. Tygar's declaration, however, consists of a conclusory legal assertion and provides nothing by way of evidence in support of that assertion.

Endicia had a printout of a webpage listing purportedly from May 8, 1993, of Carnegie Mellon University's School of Computer Science archive, the source of the Tygar-Yee article. Judge Bryson:

The major-ity characterizes the website as a "public forum," but the record contains no evidence that the webpage in the exhibit was accessible to the public or widely disseminated in 1993. See In re Lister, 583 F.3d 1307, 1211 (Fed. Cir. 2009) ("A reference is considered publicly accessible if it was disseminated or otherwise made available to the extent that persons interested and ordinarily skilled in the subject matter or art[,] exercising reasonable diligence, can locate it."); Cordis Corp. v. Boston Scientific Corp., 561 F.3d 1319, 1332-35 (Fed. Cir. 2009) (holding that an academic paper distributed among a limited set of professional colleagues is not a prior art publication).

The majority highlights the fact that Stamps.com identified the Tygar-Yee article as bearing a 1993 date in several information disclosure statements that it filed in 2000 in connection with other patents. It is well settled, however, that a patentee's inclusion of a reference in an information disclosure statement does not constitute an admission that the reference is prior art. 37 C.F.R. § 19.7(h); ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 866 (Fed. Cir. 2010); Abbott Labs. v. Baxter Pharm. Prods., Inc., 334 F.3d 1274, 1279 (Fed. Cir. 2003).

Finally, the majority states that Stamps.com submitted no evidence that the Tygar-Yee article was not published in 1993. Apart from the ordinary difficulty of proving a negative, it is well settled that, at the summary judgment stage, "the moving party must make a prima facie showing that it is entitled to summary judgment." Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986). When the movant has the ultimate burden of proof on an issue, it must show that it is entitled to judgment, and if it does not do so, the non-moving party need not come forward with opposing evidence. Saab Cars USA, Inc. v. United States, 434 F.3d 1359, 1368 (Fed. Cir. 2006); 11 James Wm. Moore, Moore's Federal Practice ¶ 56.40[1][c] (2011 ed.) ("[T]he movant [with the burden of proof on the merits] must produce evidence that would conclusively support its right to a judgment after trial should the nonmovant fail to rebut the evidence. . . . [T]he evidence in the movant's favor must be so powerful that no reasonable jury would be free to disbelieve it.") In the context of a motion for summary judgment of invalidity, the burden is not on the patentee to present evidence that a reference is not prior art; instead, the party challenging the patent has the burden to make a prima facie showing that the reference was publicly accessible. Because Endicia failed to show that the Tygar-Yee article is prior art, I would hold that the district court erred in invalidating the six asserted claims of the '777 and '991 patents as obvious.

Stamps.com's argument of secondary considerations was disregarded.

Stamps.com argues that the district court erred in not considering the secondary considerations it offered to rebut arguments that the asserted claims of the '991 and '777 patents were obvious. These secondary considerations included a showing of expert skepticism and commercial success. However, Stamps.com did not demonstrate the requisite "nexus between the merits of the claimed invention" and the "evidence of secondary considerations." Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1327 (Fed. Cir. 2008) (quoting Ruiz v. A.B. Chance Co., 234 F.3d 654, 668 (Fed. Cir. 2000)); see also In re Huang, 100 F.3d 135, 140 (Fed. Cir. 1996) (holding that the patentee's proof must show "that the sales were a direct result of the unique characteristics of the claimed invention"). Given the strong showing of obviousness, we find that the evidence of secondary considerations was inadequate to overcome the legal conclusion that the contested claims would have been obvious. See Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1162 (Fed. Cir. 2007).

Leapfrog was the first CAFC Obzilla killing, finding obviousness from a multitudinous prior art combination that altogether didn't put the claimed invention together. The CAFC Leapfrog ruling came days after the Supreme Court's KSR ruling. Leapfrog was an egregious sop by the CAFC to show the higher-up Supremes that it had the killing chops.

This "nexus of success" finding here is a thin cover, considering the claimed invention covered the accused product, whose success, as a matter of fact, could only be attributed to incorporating the invention..

By contrast, a panel of Judges Newman, Clevenger and Bryson (the dissenter here) took legally proper account of commercial success as a secondary consideration of nonobviousness in the recent precedential decision Spectralytics v. Cordis. Just as the quality of a trail court judge makes a major difference, panel composition at the CAFC can make a dispositive difference in whether justice or judicial incompetence is served.

6,249,777 suffered from a first-to-invent race condition with prior art that it lost. This section alone makes the ruling precedent-worthy, but the panel knew this sordid opinion was better buried.

The district court found claims 3, 50, and 63 of the '777 patent obvious over the Tygar-Yee article and the Lewis '565 patent, concluding that the Lewis '565 patent was § 102(a) prior art. Section 102(a) provides that a person is not entitled to a patent if "the invention was . . . patented . . . in this or a foreign country, before the invention thereof by the applicant for patent." 35 U.S.C. § 102(a). Section 102(g) contains the basic rule for determining priority. Id. § 102(g); Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1577 (Fed. Cir. 1996). This section provides that "[a] person shall be entitled to a patent unless . . . the invention was made in this country by another inventor who had not abandoned, suppressed, or concealed it." 35 U.S.C. § 102(g)(2). Priority of invention "goes to the first party to reduce an invention to practice unless the other party can show that it was the first to conceive the invention and that it exercised reasonable diligence in later reducing that invention to practice." Mahurkar, 79 F.3d at 1577. A showing that a patent was conceived at an earlier date and reduced to practice with reasonable diligence is called an effort to swear behind an earlier patent. See, e.g., Honeywell Inc. v. Victor Co. of Japan, Ltd., 298 F.3d 1317, 1327 (Fed. Cir. 2002).

Therefore, "if a patentee's invention has been made by another, prior inventor who has not abandoned, suppressed, or concealed the invention, § 102(g) will invalidate that patent." Apotex USA, Inc. v. Merck & Co., 254 F.3d 1031, 1035 (Fed. Cir. 2001). The Lewis '565 patent was filed on February 13, 1998, and constitutes § 102(a) prior art as long as the '777 patent was not conceived at an earlier date and reduced to practice with reasonable diligence. Stamps.com argues that the Lewis '565 patent could not be § 102(a) prior art because the '777 patent had an earlier conception date, or that, at a minimum, a genuine issue of material fact remains as to the conception date of the '777 patent.

At issue then is the '777 patent's date of conception. Conception is the formation, in the mind of the inventor, of "a definite and permanent idea of the complete and operative invention . . . . The idea must be 'so clearly defined in the inventor's mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.'" Mahurkar, 79 F.3d at 1577 (quoting Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1228 (Fed. Cir. 1994)).

In order to show that the subject matter of the '777 patent had been invented before the February 13, 1998, filing date of the Lewis '565 patent, Stamps.com offered two pieces of evidence to swear-behind the reference: (1) a September 24, 2009, declaration from Martin Pagel, the co-inventor of the '777 patent ("First Pagel Declaration"); and (2) a corroborating "Executive Status Report" dated March 19, 1998, discussing activity allegedly connected with the development of the '777 patent ("March Status Report").

In rejecting this evidence as insufficient to establish prior conception, the district court stated that "[p]laintiff has not been able to prove by clear and convincing evidence . . . that the invention claimed in the '777 patent was conceived before its July 15, 1998, filing date." J.A. 26. The district court erred in placing the burden of proof on the patentee.² Though the patentee has the burden of production in antedating a reference, the burden of persuasion, by clear and convincing evidence, remains with the party that challenges an issued patent's validity. Mahurkar, 79 F.3d at 1576 ("By challenging the validity of the [patent], [the alleged infringer] bore the burden of persuasion by clear and convincing evidence on all issues relating to the status of the [reference] as [§ 102(a)] prior art.").

² Endicia cites Price v. Symsek, 988 F.2d 1187, 1190 (Fed. Cir. 1993), for the proposition that Stamps.com had the burden of showing conception and reduction to practice. However, Price is an interference action in which the priority dates of multiple patent applications were challenged. Id. at 1189. Patent applications, unlike patents that have been reviewed and issued by the PTO, deserve no presumption of validity in interference proceedings. See 35 U.S.C. § 282. Accordingly, the burden of proof in interference actions is the lower preponderance of evidence standard, and the burden is generally assigned to the junior party (the party that entered the interference action with a later filing date). See 37 C.F.R. § 1.657. In contrast, a party asserting invalidity in a district court always bears the burden of proof by clear and convincing evidence. Innovative Scuba Concepts, Inc. v. Feder Indus., Inc., 26 F.3d 1112, 1115 (Fed. Cir. 1994).

However, the patentee here did not meet its burden of production in antedating the Lewis '565 patent. The First Pagel Declaration claims that "the conception of the invention . . . occurred in the second half of 1997, and certainly well before January 1, 1998." J.A. 10388. Nonetheless, an inventor, such as Pagel, claiming prior conception must proffer evidence corroborating his testimony. See Mahurkar, 79 F.3d at 1577. "This requirement arose out of a concern that inventors testifying in patent infringement cases would be tempted to remember facts favorable to their case by the lure of protecting their patent or defeating another's patent." Id.; see also Eibel Process Co. v. Minn. & Ontario Paper Co., 261 U.S. 45, 60 (1923); Washburn & Moen Mfg. Co. v. Beat 'Em All Barbed-Wire Co., 143 U.S. 275, 284-85 (1892); Gasser Chair Co. v. Infanti Chair Mfg. Corp., 60 F.3d 770, 776 (Fed. Cir. 1995). The requirement for the corroboration of inventor testimony applies to efforts to swear behind a prior art reference. See, e.g., Mahurkar, 79 F.3d at 1577.

The "Executive Status Report" that Stamps.com relied upon was disregarded as inadequate after defense characterized that "its cursory language renders much of [the status report] unintelligible."

Stamps.com offered no contrary expert evidence. There is no evidence that the March Status Report corroborates Pagel's declaration.

Some poor lawyering by Stamps.com came into play, in not anticipating defendants' blowback: failing to file telling declarations with the first motion (instead, waiting to reply).

Additionally, Stamps.com argues that the district court abused its discretion in not considering evidence in a reply brief to cross-motions for summary judgment that it had submitted on October 5, 2009. This evidence included a second declaration by Pagel ("Second Pagel Declaration") and a corroborating declaration ("Desai Declaration") by Manish Desai, an engineer who was supervised by Pagel at Stamps.com's predecessor company. Because these declarations were raised for the first time in a reply brief to which Endicia did not have an opportunity to respond, we hold that the district court acted within its discretion when it did not consider these supplementary declarations. See In re Cygnus Telecomms. Tech., LLC, Patent Litig., 536 F.3d 1343, 1351-53 (Fed. Cir. 2008) (applying regional circuit law in deciding the admissibility of evidence that was not included in motions for summary judgment); Merrick v. Paul Revere Life Ins. Co., 500 F.3d 1007, 1013 (Fed. Cir. 2007) (holding that issues raised for the first time in a reply brief are generally considered waived, but making an exception where appellee was given an opportunity to respond); Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007) (holding that a district court "need not consider arguments raised for the first time in a reply brief").

Indefiniteness

A claim in an asserted patent (claim 23 of 6,233,568) was found "indefinite for failing to disclose a corresponding structure for 'means for determining a value of said transaction associated with two or more of said plurality of providers utilizing ones [sic] of said transaction parameters.'"

In Blackboard, Inc. v. Desire2Learn, Inc., 574 F.3d 1371, 1382 (Fed. Cir. 2009), we held that, "if one employs means-plus-function language in a claim, one must set forth in the specification an adequate disclosure showing what is meant by that language." (citation and quotation omitted); see 35 U.S.C. § 112, ¶ 2. "If the specification does not contain an adequate disclosure of the structure that corresponds to the claimed function, the patentee will have 'failed to particularly point out and distinctly claim the invention as required by the second paragraph of section 112,' which renders the claim invalid for indefiniteness." Blackboard, 574 F.3d at 1382 (quoting In re Donaldson Co., 16 F.3d 1189, 1195 (Fed. Cir. 1994) (en banc)).

In Aristocrat Technologies Australia Pty Ltd. v. International Game Technology, 521 F.3d 1328, 1333 (Fed. Cir. 2008), we held that a "computer-implemented meansplus-function term is limited to the corresponding structure disclosed in the specification and equivalents thereof, and the corresponding structure is the algorithm." (quoting Harris Corp. v. Ericsson Inc., 417 F.3d 1241, 1253 (Fed. Cir. 2005)). In a means-plus-function claim in which the disclosed structure is a computer, "the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm." WMS Gaming, Inc. v. Int'l Game Tech., 184 F.3d 1339, 1349 (Fed. Cir. 1999). "In software cases, . . . algorithms in the specification need only disclose adequate defining structure to render the bounds of the claim understandable to one of ordinary skill in the art." AllVoice Computing PLC v. Nuance Commc'ns, Inc., 504 F.3d 1236, 1245 (Fed. Cir. 2007).

Claim term construction and a search in the spec for structure found structure, but not enough algorithmic punch. The intricately complex technology that would hurt the head to cogitate: "how to calculate shipping costs." Those folks in the post office must be smarter than they look.

Stamps.com appears to contend that, given certain transaction parameters (e.g., weight, class, zone), one of skill in the art would know how to calculate the shipping costs.

Though the E-STAMP program may constitute the structure for the contested means, it is not sufficiently described for one of skill in the art to implement it. It is not enough that a person of skill in the art can identify a structure to determine the transaction value.

We must determine whether a skilled artisan would have understood the specification to encompass the necessary program and could have implemented the program--not simply whether he could have written the program. See Med. Instrumentation & Diagnostics Corp. v. Elekta AB, 344 F.3d 1205, 1212 (Fed. Cir. 2003). "It is not proper to look to the knowledge of one of skill in the art apart from and unconnected to the disclosure of the patent." Id. Here, the calculation of shipping value appears to involve a complex interaction of zone variables, weight variables, and class variables. There is no disclosure of the actual algorithms necessary to calculate the transaction value, nor is there any disclosure that these algorithms involve only simple arithmetic. The failure to provide such an algorithm in the specification renders claim 23 of the '568 patent invalid as indefinite.

Affirmed.

Stamps.com will doubtlessly petition for rehearing, which will be summarily denied. That's the normal course in such instances of injustice by the Court of Errors, where corruption has its nuance.