The Software IP Report

Federal Circuit Holds E-Commerce Claims Obvious

The Federal Circuit has held claims of three e-commerce patents invalid on grounds of obviousness. Soverain Software, LLC v. Newegg, Inc., No. 2011-1009 (Fed. Cir. Jan 22, 2013). The court, in an opinion authored by Judge Newman, reversed the holding of the U.S. District Court for the Eastern District of Texas that claims of United States Patent Nos. 5,715,3145,909,492, and 7,272,639 were valid, and accordingly vacated judgments of infringement and an award of damages.

Strikingly, the district court had not even allowed the question of obviousness to go to the jury. Judge Newman’s opinion gave little credence to the district court’s action, noting that the district court gave little explanation in stating that there was insufficient evidence to support a finding of obviousness, and that the question would simply “confuse the jury.” Moreover, the question of obviousness is a question of law that the Federal Circuit reviews de novo. Quoting KSR International Co. v. Teleflex, Inc., 550 U.S. 398 (2007), the court explained that summary judgment without remand was appropriate where the prior art as well as “the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute” and lead to a conclusion of obviousness.

Also strikingly, after quoting KSR to justify reversing the lower court and then granting summary judgment on appeal, Judge Newman’s opinion mentioned KSR only once. After touching on the Graham v. John Deere factors, and citing three Federal Circuit decisions that came after KSR, the court dove into a factual analysis of the primary prior art reference compared to the pending claims. The main reference was a pre-Internet CompuServe shopping application, “CompuServe Mall.”

In essence, for each of the different claims at issue, the question of obviousness boiled down to whether adapting the CompuServe Mall for the Internet would have been obvious to one of ordinary skill. Citing Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), the court repeatedly applied the principle that “conducting previously known methods through an Internet web browser was obvious because it amounted to no more than applying the use of the Internet to existing electronic processes at a time when doing so was commonplace.” In one instance, where CompuServe was silent as to the use of the database, the court noted the plaintiff’s expert’s concession that a database would have been a “reasonable design choice.”

In a brief coda, the court discounted the plaintiff’s arguments that secondary considerations outweighed other considerations of obviousness. The original patent owner was not successful in licensing the patents apart from the allegedly covered software, which in fact was abandoned by all original licensees.