United States: Claims Patent Eligible Under § 101 Where Claimed Solution To Technological

In DDR Holdings, LLC v. Hotels.com, L.P., No. 13-1505 (Fed. Cir. Dec. 5, 2014), the Federal Circuit reversed the district court's denial of JMOL on the validity of U.S. Patent No. 6,993,572 ("the '572 patent"), finding that the '572 patent was anticipated, and affirmed the district court's denial of JMOL of noninfringement and invalidity of U.S. Patent No. 7,818,399 ("the '399 patent"), finding that the '399 patent's claims were novel, patent eligible, and definite.

DDR Holdings, LLC ("DDR") is the assignee of the '399 and '572 patents—continuations of U.S. Patent No. 6,629,135 ("the '135 patent")—which describe a method for generating a composite web page. DDR sued National Leisure Group, Inc. and World Travel Holdings, Inc. (collectively "NLG"), Digital River, Inc. ("Digital River"), and nine other defendants, alleging infringement of certain claims of the '135 and '572 patents. DDR's suit was stayed during the pendency of certain ex parte reexaminations pertaining to the '135 and '572 patents. After the PTO confirmed the validity of the '135 and '572 patents, the district court lifted the litigation stay. Afterwards, the '399 patent issued and DDR amended its complaint to add claims for infringement of the '399 patent. Prior to trial, DDR settled with all defendants except for NLG and Digital River. A jury found that NLG and Digital River directly infringed the claims of the '572 patent and that NLG directly infringed the claims of the '399 patent, but that neither willfully infringed. The jury further found that NLG and Digital River did not induce infringement of claim 17 of the '572 patent and that the asserted claims were not invalid. The district court denied NLG's and Digital River's renewed motions for JMOL on, inter alia, noninfringement and invalidity of the '399 and '572 patents, and Digital River's motion for a new trial. NLG and Digital River appealed. Prior to oral argument in the present appeal, DDR and Digital River settled.

"As an initial matter, it is true that the claims here are similar to the claims in the cases discussed above in the sense that the claims involve both a computer and the Internet. But these claims stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks." Slip op. at 20.

On appeal, the Federal Circuit held that "clear and convincing evidence establishes that Digital River's prior art [Secure Sales System ('SSS')] anticipates the asserted claims of the '572 patent." Slip op. at 12. The Court found that the prior art SSS, like the asserted claims in the '572 patent, generated a composite web page that looked and felt like the host site but allowed for purchasing and downloading of third-party content. Indeed, the Court noted that "the SSS was consistently promoted and advertised as creating a composite web page that retained the 'look and feel' of the host website." Id. at 14 (citation omitted). In finding that the claims of the '572 patent were anticipated, the Court rejected the district court's importation of a requirement that "the generated composite web page have an 'overall match' in appearance with the host website" because neither the claim language nor the specification supported such an interpretation. Id. (citation omitted).

Because it found the '572 patent invalid as anticipated, the Federal Circuit only considered the patent eligibility of the '399 patent, finding that the claims of the '399 patent were directed to patent-eligible subject matter under 35 U.S.C. § 101. After discussing the case law undergirding the § 101 analysis, the Court acknowledged that "the claims here are similar to the [patent-ineligible] claims in the cases discussed above in the sense that the claims involve both a computer and the Internet," but distinguished the current claims because "the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks." Id. at 20. The Court further explained that standard Internet communication protocols "introduce[] a problem that does not arise in the 'brick and mortar' context." Id. at 21. The Court further found that the '399 patent claims survive a § 101 analysis because they "do not attempt to preempt every application of the idea of increasing sales by making two web pages look the same." Id. at 23.

Again noting that the '572 patent was invalid as anticipated, the Federal Circuit then considered the definiteness of the claims of only the '399 patent. The Court rejected NLG's argument that the claim term "look and feel" is subjective and found the claims to be definite. The Court found that "'look and feel' had an established, sufficiently objective meaning in the art, and that the '399 patent used the term consistent with that meaning." Id. at 26. The Court also pointed to advertisements for the prior art SSS and trial testimony to support the interpretation that "the term had an established meaning in the art by the relevant timeframe." Id. at 27.

Turning to the district court's denial of NLG's motion for JMOL of noninfringement, the Court found that the jury was presented with substantial evidence to support its finding of infringement of the '399 patent. Despite NLG's arguments to the contrary, the Court found that for the "visually perceptible elements," the jury viewed screenshot images of accused composite web pages and DDR's expert presented lists of "look and feel elements" for the accused composite web pages. Id. at 28. Thus, the Court concluded that "[t]he jury was free to use this proffered evidence and testimony to form its own conclusions as to whether NLG's accused composite web pages satisfied the 'visually perceptible elements' limitation of the asserted claims." Id.

The Federal Circuit then vacated the jury's damages award. At trial, the parties agreed on a verdict form that provided an instruction to award a single sum to compensate DDR for NLG's infringement. The jury awarded DDR $750,000 in damages, but did not specify how the award was apportioned between the '572 and '399 patents. Because the Federal Circuit found the '572 patent invalid as anticipated, the Court remanded to the district court to determine the effect of the '572 patent's invalidation on the damages award.

Finally, the Federal Circuit reviewed the district court's award of prejudgment interest. The Court noted that NLG failed to cite any case law in support of its contention that DDR should not be entitled to prejudgment interest because it is a nonpracticing entity, and the Court "decline[d] to create such a statutory exception." Id. at 30. However, due to its finding of invalidity of the '572 patent, the Court instructed that "the district court must recalculate its award of prejudgment interest so that it is tied solely to NLG's infringement of the '399 patent, which issued in 2010, more than four years after issuance of the '572 patent." Id. at 31. Due to the fact that the '399 patent issued after the stay was lifted, the Federal Circuit did not need to address whether DDR was entitled to prejudgment interest.

Accordingly, the Federal Circuit held that the district court erred in denying NLG's motion for JMOL of invalidity as to the '572 patent, it vacated the award of damages and prejudgment interest to DDR based on NLG's infringement of the '572 and '399 patents, and remanded to the district court for determination of damages and prejudgment interest attributable solely to NLG's infringement of the '399 patent. In his dissent, Judge Mayer disagreed with the holding of the Court with respect to the eligibility analysis under § 101. Specifically, Judge Mayer would have found that the claims of the '399 and '572 patents were directed to a computer application of the abstract concept "that an online merchant's sales can be increased if two web pages have the same 'look and feel.'" Mayer Dissent at 2. In his view, the claims "simply take a well-known and widely-applied business practice and apply it using a generic computer and the Internet." Id. at 4. Further, Judge Mayer took issue with the Court's finding that the claims were not preemptive, specifically noting that the "potential scope of DDR's patents is staggering, arguably covering vast swaths of Internet commerce." Id. at 6.

Judges: Wallach, Mayer (dissenting), Chen (author)

[Appealed from E.D. Tex., Judge Gilstrap]

This article previously appeared in Last Month at the Federal Circuit, January, 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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