Patent Watch: Soverain Software LLC v. Newegg Inc.

Alerts / January 23, 2013

Although both sides had presented witnesses and evidence on the question of obviousness, the district court's removal of the legal question from the jury did not violate the right to jury trial.

On January 22, 2013, in Soverain Software LLC v. Newegg Inc., the U.S. Court of Appeals for the Federal Circuit (Newman,* Prost, Reyna) reversed-in-part and vacated-in-part the district court's judgment that Newegg infringed U.S. Patents No. 5,715,314, No. 5,909,492 and No. 7,272,639, which related to electronic commerce where a merchant's products are offered and purchased online through computers interconnected by a network, and that the patents were not invalid for obviousness. The Federal Circuit stated:

Obviousness is a question of law based on underlying facts[:] (1) the scope and content of the prior art, (2) the difference between the prior art and the claimed invention, (3) the level of ordinary skill in the field of the invention, and (4) any relevant objective considerations. . . . Newegg argues that it was wrongfully deprived of a jury determination of the question of obviousness, pointing to the extensive testimony on this issue at trial. However, Federal Rule of Civil Procedure 50 "allows the trial court to remove cases or issues from the jury's consideration 'when the facts are sufficiently clear that the law requires a particular result.'" [T]he purpose of Rule 50 is "to speed litigation and avoid unnecessary retrials." Although here both sides had presented witnesses and evidence on the question of obviousness, the district court's removal of the legal question from the jury did not violate the right to jury trial. . . .

Newegg relied primarily on a prior electronic commerce system called "CompuServe Mall." The district court, sustaining validity of all claims in suit, did not discuss the claims or the prior art; the court stated that Newegg's expert had not presented a prima facie case of obviousness, and criticized Newegg for not presenting "some articulated reasoning with some rational underpinning to support the legal conclusion of obviousness." The parties divided the claims in suit into three groups, and presented evidence and argument, including expert and other witness testimony, for the claims as grouped. We retain the parties' groupings, as follows:

Soverain asserted claims 34 and 51 of the '314 patent and claim 17 of the '492 patent as a group called the "shopping cart" claims. These claims are directed to the overall system wherein products are offered online by a merchant, a buyer designates products for purchase, and payment for the designated products is initiated upon the buyer's request for checkout, all operating through a computer network. The parties agreed that claim 34 of the '314 patent is representative of this group. . . .

At the trial the CompuServe Mall system was the primary reference against the shopping cart claims, including two books describing the system: Bowen & Peyton, How to Get the Most Out of CompuServe (4th ed. 1989) and Ellsworth & Ellsworth, Using CompuServe (1994). Newegg presented testimony of CompuServe's former Chief Technology Officer Alexander Trevor, Newegg's expert witness Mr. Edward Tittel, and Newegg's Chief Technology Officer James Wu, who designed the Newegg system. Mr. Tittel compared claim 34 with the prior art system, element by element. . . . Soverain's expert witness Dr. Michael Shamos stated that the Newegg witnesses' description of the CompuServe Mall was "consistent with my understanding," but presented the argument that the CompuServe Mall lacked two elements of the shopping cart claims: first, that the CompuServe system lacked the "shopping cart message [that] comprises a product identifier" of claim clause [5]; and second, that CompuServe lacked the "shopping cart database" of clause [3]. Dr. Shamos did not dispute that the other elements of claim 34 were embodied in the CompuServe Mall. We have given particular attention to the two aspects on which the witnesses stated divergent views.

"[C]onducting 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." Precedent agrees with Newegg that a person of ordinary skill could have adapted the CompuServe order command to known browser capabilities when these capabilities became commonplace, and that it was obvious to do so. The product identifier message term does not distinguish the shopping cart claims from the prior art CompuServe Mall. . . .

The district court's conclusion that a prima facie case of obviousness was not met is not explained by the court or by Soverain, and does not accord with the record. Dr. Shamos did not provide evidence to rebut Newegg's prima facie case that every claim element was embodied in the prior art. Although the district court criticized Mr. Tittel's expert report on the question of obviousness, the trial record contains extensive testimony of the experts for both sides, discussing every claimed element of the patented subject matter and the prior art system. Their testimony was subjected to examination and cross-examination, before decision of the question of obviousness was removed from the jury. Also, precedent does not require "expert" opinions on matters of law. . . . We conclude that the prior art CompuServe Mallsystem, by clear and convincing evidence, rendered obvious the "shopping cart" claims: claims 34 and 51 of the '314 patent and claim 17 of the '482 patent. These claims are invalid; the district court's contrary ruling is reversed. . . .

The '492 patent is a division of the '314 patent, with the same specification and drawings. Soverain asserted infringement of claims 41 and 61 of the '492 patent, called the "hypertext statement" claims. These claims are directed to the aspect of the online shopping system set forth in the patents, in which the client computer receives transaction statements from the server computer, in response to a request from the client computer. The district court included these claims in its ruling of nonobviousness, although the specific subject matter and claims were not mentioned by the court. . . . We conclude that Newegg presented clear and convincing evidence of obviousness of claims 41 and 61 of the'492 patent. The district court's ruling of nonobviousness is reversed. . . .

The '639 patent is directed to "methods of processing service requests from a client to a server system through a network." . . . Newegg relies on U.S. Patent No. 5,560,008 to Johnson and U.S. Patent No. 5,724,424 to Gifford, stating that either Johnson alone, or Johnson in view of Gifford, renders obvious the claimed subject matter. Soverain responds that neither Johnson nor Gifford discloses a "session identifier." Soverain states that the "credential identifier" of Johnson cannot be a "session identifier" because it identifies a "user rather than a session," and therefore "can cover a portion of a single session or . . . multiple sessions." . . . On the agreed claim construction and the teachings of Johnson and Gifford, we discern no distinction between the session identifier claims and Johnson alone, or Johnson with Gifford. . . . We conclude that claim 79 of '639 patent is invalid on the ground of obviousness.

If you have questions about the material presented above, please contact Dr. Lawrence M. Sung (lsung@bakerlaw.com or 202.861.1537) or any member of our Intellectual Property Team.

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