United States: Don't Quote The District Court: Federal Circuit Reverses SJ Decisions On Invalidity And Infringement In Light Of Issues of Material Fact

Judges: Rader (author), Plager, Schall
[Appealed from D.N.J., Senior Judge Debevoise]

In Source Search Technologies, LLC v. LendingTree, LLC, Nos. 08-1505, -1524 (Fed. Cir. Dec. 7, 2009), the Federal Circuit vacated-in-part the district court's grant of SJ on the issues of invalidity based on obviousness and infringement. The Federal Circuit also affirmed the district court's denial of SJ of invalidity based on indefiniteness.

Source Search Technologies, LLC ("SST") is the owner of U.S. Patent No. 5,758,328 ("the '328 patent"). The '328 patent claims a computerized procurement service for matching potential buyers with potential vendors over a network, such as the Internet. According to the claimed system, buyers submit requests for quotations ("RFQs") for standard goods or services, which are broadcast via the network to vendors selected based on filter criteria set by buyers, sellers, and/or network operators. The selected vendors' responses to the RFQs are then communicated to buyers over the network. Slip op. at 2.

LendingTree, LLC ("LendingTree") operates a website, which refers prospective borrowers to potential lenders for a variety of home, auto, and personal loans. Id. at 3. Prospective borrowers provide financial information about themselves by filling out a "qualification form" ("QF") on the website. LendingTree then uses the information submitted in the QFs to match borrowers with potential lenders. Id. at 4. When potential lenders respond with loan offers, LendingTree communicates the details of such offers to the prospective borrowers. After loan offers are communicated to borrowers, LendingTree plays no further role in the loan process. Id.

In 2006, SST brought suit against LendingTree, alleging that LendingTree's website infringed, among others, claim 14 of the '328 patent. Over the course of the dispute, the parties filed various motions for SJ. The district court granted LendingTree's motion for SJ of invalidity on obviousness grounds.
Id. at 5-6. Nevertheless, the district court granted SST's motion for SJ of infringement. In addition, the district court denied LendingTree's motion for SJ of invalidity based on indefiniteness. Both LendingTree and SST appealed the respective adverse judgments.

On appeal, the Federal Circuit first noted that the district court's grant of SJ of obviousness was based on two sets of prior art, namely, the "e-commerce" prior art and the "bricks and mortar" prior art.
Id. at 7. The former consisted of early e-commerce systems that employed the Internet for access and distribution, while the latter consisted of pre-Internet referral services (e.g., home contractor networks and social services networks) used by consumers to locate suitable service providers for particular projects.

"Thus, even beyond the problem of no quote in the prior art systems, the claimed invention's filtering system presents factual issues preventing a conclusion that one of ordinary skill in 1996 would find the advances of the
'328 patent easy, obvious, routine, or within the grasp of a common sense application of prior art to the apparent problems." Slip op. at 15.

The Federal Circuit also noted that claim 14, the only claim at issue, required obtaining "quotes" from potential sellers and forwarding "said quotes" to potential buyers. Id. at 12. Additionally, the district court had construed the phrase "request for a quotation" to mean "a request for the price and other terms of a particular transaction in sufficient detail to constitute an offer capable of acceptance." Id. The record revealed that the "quotes" forwarded back to potential customers in the e-commerce prior art were "non-binding, inventory availability responses, not contractual offers." Id. Indeed, potential sellers retained options to reject and renegotiate offer terms. Likewise, the bricks and mortar prior art also failed to supply a qualifying "quote," as required by claim 14. In these systems, a "quote" in any meaningful sense of the word could only arise at or after meetings between clients and potential service providers―meetings over which the bricks and mortar systems had no control. Id.

The Federal Circuit further found that combining the bricks and mortar prior art with the e-commerce prior art did not produce the invention taught in the '328 patent. Id. at 14. Specifically, the Federal Circuit observed that even if the combined prior art included a quoting feature, it lacked any meaningful filtering process―a process on which the claimed invention placed great emphasis. Id. The bricks and mortar prior art could be read to disclose a "filtering" process involving the use of human judgment, but such a disclosure would still require a person of ordinary skill to make the additional nontrivial connection between such filtering and the search results of the e-commerce prior art. Id. Although the e-commerce prior art generally disclosed filtering in the computer context, it did not apply the filtering methods to the particular context of matching buyers with vendors. Id.

Based on these findings, the Federal Circuit concluded that the lack of a quote or appropriate filtering system in the prior art systems presented factual issues that precluded the grant of SJ on the issue of invalidity based on obviousness. Id. at 15.

The Federal Circuit next considered LendingTree's argument that the district court had erred in granting SJ of infringement because its service lacked the "request for a quotation" and "goods and services" limitations of claim 14. Id. First, the Court considered whether LendingTree was collaterally estopped from arguing that its website does not provide "quotes" based on the decision in a different case between LendingTree and IMX, Inc. ("IMX"). The Federal Circuit found no error in the district court's conclusion that the doctrine of estoppel did not apply because the IMX litigation involved an unrelated patent, with different asserted claims, and dissimilar claim constructions. In other words, the issues presented in the IMX case were wholly different from those in this case. Id. at 17.

Continuing its review of the infringement decision, the Federal Circuit stressed that, in keeping with its well-established precedent, claims are to be "construed the same way for both invalidity and infringement." Id. at 18. Based on the same construction of the term "quote" applied in the context of invalidity, the Court concluded that a lack of undisputed facts showing that LendingTree's site provides "quotes," as required in claim 14, mandates vacating the district court's SJ on the issue of infringement as well. Id. at 19.

Despite the Federal Circuit's conclusion, it nevertheless sustained the trial court's ruling that LendingTree's website did indeed meet the "goods or services" limitation of claim 14. Id. at 20. The Federal Circuit observed that LendingTree's website provided a location where potential borrowers sought loans, which were essentially promises to repay sums of money in exchange for lenders' promises to advance sums of money. Id. at 19-20. In advancing money, lenders did in fact offer services, namely, financial services. Id. at 20. Additionally, the Federal Circuit sustained the district court's holding that these loans were "standard" services within the meaning of the '328 patent. Id. Citing language within the '328 patent that the "[s]tandardization of product or service descriptions is essential to avoid confusion," the Federal Circuit explained that the loans associated with LendingTree's website were "standard" items, in that both borrowers and lenders had a shared understanding of the promises made and the financial services offered, and that there was therefore no fundamental likelihood of misunderstanding or confusion. Id. (alteration in original).

Finally, in reviewing the district court's denial of SJ of indefiniteness, the Federal Circuit first noted that absolute clarity is not necessary to overcome charges of indefiniteness, and only claims that are "not amenable to construction" or "insolubly ambiguous" are indefinite. Id. at 21 (quoting Exxon Research & Eng'g Co. v. United States, 265 F.3d 1371, 1375 (Fed. Cir. 2001)). The Federal Circuit found that, although it might be difficult to determine the bounds of a "standard" product or service, a person of ordinary skill in the art, based on his/her understanding of the system in view of its applications to various specific networks and markets, will be able to supply an objective definition for a "standard" product or service. Id. Based on this finding, the Federal Circuit upheld the district court's denial of LendingTree's SJ motion of invalidity for indefiniteness.

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