United States: Court Affirms SJ That Google’s Online Advertising System Did Not Infringe

Judges:  Newman, Bryson (author), Moore
[Appealed from E.D. Va., Judge Friedman]

In Bid for Position, LLC v. AOL, LLC No. 09-1068 (Fed. Cir. Apr. 7, 2010), the Federal Circuit affirmed the district court's grant of SJ of noninfringement in favor of defendants AOL, LLC ("AOL") and Google, Inc. (collectively "Google").

Bid for Position, LLC ("Bid for Position") sued Google for infringement of U.S. Patent No. 7,225,151 ("the '151 patent").  The '151 patent describes a method for conducting a continuous auction, such as a consumers' auction on the Internet for goods or services, or a vendor's auction for positions in an Internet advertising display.  The claimed method allows a bidder to select a position of priority in the auction and automatically adjusts the bidder's bid so as to maintain that chosen priority status.  The accused system is Google's Internet advertising system, AdWords, which runs continuous auctions to determine the placement of advertisements on Google's search results pages.  AOL's system is a rebranded version of Google's AdWords.

The Federal Circuit noted that three clauses recited in two independent claims of the '151 patent—method claim 1 and system claim 11—were relevant to the appeal:  (1) "information for selecting one of the two or more positions of priority that the first bidder wishes to maintain in the auction" (claim 1) and "selected one of the two or more positions of priority that the first bidder wishes to maintain in the auction" (claim 11); (2) "wherein the relative position of priority for providing the service for the first bidder is dependent upon whether the value of the first bid exceeds the value of the second bid"; and (3) "the auction for determining continuing priority for providing an ongoing service."  Slip op. at 5.  The district court found that AdWords did not satisfy each of the three contested limitations. 

On appeal, the Federal Circuit affirmed the district court's ruling that AdWords without "Position Preference" does not infringe, because the Court agreed that the '151 patent does not read on a system that simply selects the highest ranking position of priority that is available for the offered bid, which is what AdWords does when the Position Preference feature is not activated.  The Federal Circuit explained that the claims recite that the bidder must submit information for selecting a priority position that the bidder wishes to maintain in the auction, which suggests that the bidder must select a particular position and not simply accept whatever position its bid will support.  According to the Federal Circuit, the prosecution history confirms that the '151 patent does not cover a system in which the bidder simply bids for the "best available" position.

The Federal Court noted that the patent examiner issued a rejection stating that the prior art already taught "selecting a bidding position, specifically the highest ranking bid position," and then "automatically reducing the first bid to a minimum which allows the bidder to keep the selected position of priority."  Id. at 10.  The Federal Circuit further noted that, in response to the rejection and to avoid prior art cited by the examiner, the inventor amended the claims to require the entry of information regarding the specific position of priority that the bidder wishes to maintain.  Accordingly, citing Seachange International, Inc. v. C-Cor, Inc., 413 F.3d 1361, 1372-73 (Fed. Cir. 2005), the Court found that it was clear that the inventor disclaimed the subject matter of selecting, through inaction, the highest available priority position.  Because that is how AdWords functions without the Position Preference feature activated, the Federal Circuit held that configuration does not satisfy every limitation of claims 1 and 11, and therefore does not infringe the '151 patent.

The Federal Circuit reached the same conclusion with respect to AdWords with the Position Preference feature activated, but for a different reason.  The Federal Circuit found that, while AdWords with Position Preference allows a bidder to select a specific position of priority, it does not satisfy the limitation of the '151 patent claims, which states:  "the relative position of priority for providing the service for the first bidder is dependent on whether the value of the first bid exceeds the value of the second bid."  The Federal Circuit found this limitation unsatisfied because, in AdWords, the relative position of priority is not determined solely by the monetary amount of the bid. 

The Federal Circuit also rejected Bid for Position's argument that the claim term "value" was different from the amount or price of the bid because the "claim language uses the terms 'bid' and 'value of the bid' interchangeably, such that the two cannot be read to have separate meanings."  Slip op. at 11.  The Court noted that "[c]laim 1 recites, in a single subparagraph, the step of 'checking for whether a first bid from the first bidder exceeds a second bid from the second bidder,' wherein the bidders' relative position of priority 'is dependent on whether the value of the first bid exceeds the value of the second bid.'"  Id. (quoting '151 patent, col. 14, ll. 15-16, 20-22).  Under that formulation, according to the Federal Circuit, it is clear that checking for whether the first bid exceeds the second bid has the function of determining whether the value of the first bid exceeds the value of the second bid, and, thus, there is no distinction between the comparison of "bids" and the comparison of "bid values."

The Court further recognized that the language in the next step in claim 1—"incrementing the first bid to a value exceeding the second bid if the first bid does not exceed the second bid"—would make no sense if the "value" of the bid for purposes of the patent were different from the amount of the bid submitted by the bidder.  The Federal Circuit explained that it would be meaningless to refer to the "value" of the first bid "exceeding the second bid" if the value of a bid meant something different from the amount of the bid.  The Federal Circuit concluded that the consistent use of the term "value" throughout the '151 patent to refer to a bid amount confirmed that the '151 patent did not read on AdWords with Position Preference, which bases the award of priority on something other than a comparison of the bid amounts.  Therefore, the Federal Circuit held that the district court correctly entered SJ of no literal infringement with respect to AdWords with Position Preference.

The Federal Circuit also affirmed that the AdWords system did not infringe the "position of priority" limitation under the DOE.  The Federal Circuit agreed with the district court that the method recited in the '151 patent, in which the amount of the bidder's bid determines the placement of the advertisement, is substantially different from AdWords, with or without Position Preference.  The Court explained that, in the method of the '151 patent, the ultimate placement of an advertisement is purely a function of the relative amounts of the competing advertisers' bids, whereas, in AdWords, the ultimate placement of an advertisement is dictated by the product of the bid amount and the Quality Score that AdWords assigns.  Thus, according to the Court, AdWords is not a pure bidding system like the system recited in the '151 patent, but instead operates in a quite different manner that enables the bid recipient, i.e., Google, to exercise substantial control over the outcome of the auction.  The Federal Circuit found that this difference is sufficiently fundamental to conclude that a trier of fact could not properly find the AdWords system to be equivalent to the system recited in the '151 patent.

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