United States: Claims Incorporating Internet Technology Into Existing Processes Obvious In View Of The Prior Art

In Soverain Software LLC v. Newegg Inc., No. 11-1009 (Fed. Cir. Jan. 22, 2013), the Federal Circuit reversed the district court and invalidated claims from all three asserted patents as being obvious in view of the prior art.

Soverain Software LLC ("Soverain") filed a patent infringement suit against Newegg Inc. ("Newegg"), asserting U.S. Patent Nos. 5,715,314 ("the '314 patent"); 5,909,492 ("the '492 patent"); and 7,272,639 ("the '639 patent").  The patents relate to electronic commerce and arise from a software system called "Transact," which was developed in 1996 by a company named Open Market, Inc. ("Open Market").  Soverain acquired the patents and the Transact software from Open Market.  At trial, the district court removed the question of obviousness from the jury because of insufficient testimony.  The district court further held that, as a matter of law, the asserted claims were not invalid on the ground of obviousness and denied Newegg's motions for JMOL and a new trial.  On appeal, because obviousness is a question of law, the Federal Circuit reviewed the district court's determination of obviousness de novo.

The asserted claims of the '314 patent and the '492 patent are directed to initiating payment of products after a buyer requests to check out.  Representative claim 34 of the '314 patent requires a "buyer computer" to send "shopping cart messages" to a "shopping cart computer," each message including "a product identifier."  After receiving the "shopping cart messages," the "shopping cart computer" modifies a "shopping cart" in a "shopping cart database" to include the products identified by the "product identifier."  Soverain argued that the prior art CompuServe system lacked the claimed "shopping cart message [that] comprises a product identifier" because in CompuServe, the product identifier was not in the message.  Slip op. at 10 (alteration in original) (citation omitted).  The Federal Circuit disagreed because "[t]he term 'product identifier' was not given a special meaning in the specification or through claim construction, and contains no designated format requirements."  Id. at 11.  Thus, the claimed "product identifier" does not distinguish the claims over CompuServe.  Soverain also argued that the claimed system is superior to that of CompuServe because it is adapted to the Internet, whereas the CompuServe reference was a pre-Internet network.  The Court dismissed this argument, citing Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1327 (Fed. Cir. 2008), and holding that it is obvious to apply previously known methods to the Internet, because such an application was commonplace.

"Open Market did not invent the Internet, or hypertext, or the URL.  Newegg is correct that the use of hypertext to communicate a 'statement document' or 'transaction detail document' was a routine incorporation of Internet technology into existing processes."  Slip op. at 20 (citation omitted).

Asserted claims 41 and 61 of the '492 patent are the "hypertext statement" claims, directed to online shopping, in which a client computer receives transaction statements from a server.  Claim 41 uses a "statement URL" while claim 61 uses a "hypertext statement" to deliver transaction information.  The Court held that the distinction offered by Soverain between the claims and CompuServe "is not a limitation on the claims other than a commonplace Internet capability to facilitate on-line transactions."
Slip op. at 19.  The Court further noted that "Open Market did not invent the Internet, or hypertext, or the URL.  Newegg is correct that the use of hypertext to communicate a 'statement document' or 'transaction detail document' was a routine incorporation of Internet technology into existing processes."  Id. at 20. 

Asserted claim 78 of the '492 patent, known as one of the "session identifier" claims, is directed to a "server system" "receiving, from the client, a service request to which a session identifier stored at the client has been appended by the client."  During claim construction, the parties stipulated that the claimed "session identifier" means a "text string that identifies a session," and a "session" is a "series of requests and responses to perform a complete task or set of tasks between a client and a server system."  Id. at 21-22 (citation omitted).  Although Newegg alleged this claim is obvious in view of U.S. Patent No. 5,560,008 to Johnson ("Johnson") and U.S. Patent No. 5,724,424 to Gifford ("Gifford"), Soverain argued that neither reference discloses the claimed "session identifier," and Soverain's expert further stated that the Johnson reference predated the World Wide Web.  The Court disagreed with Soverain and held that the "credential identifier" of Soverain rendered obvious the claimed "session identifier" and that the Gifford reference included the additional Internet functionality not taught in Johnson.  Accordingly, the Court held that claim 79 was invalid.

As secondary considerations of nonobviousness, Soverain argued that the "Transact" product, which allegedly corresponds to the asserted claims, enjoyed widespread recognition in the media and also alleged that the asserted claims had been widely licensed.  Newegg responded by alleging that the "Transact" product was abandoned by its developers and that all licenses taken were for the patents and not for the software.  The Court held that, based on the record, there was not a nexus between the "Transact" software and the patents, and noted that the software was abandoned by its original licensees.

Accordingly, the Federal Circuit reversed the judgments of validity and vacated the judgments of infringement and damages.

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