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District Court Properly Relied on the Specification and Looked to the Accused Technology to Construe Dispositive Claim Term

April 30, 2009

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Last Month at the Federal Circuit - May 2009

Judges: Michel, Bryson, Cudahy (Senior Circuit Judge sitting by designation, author)

[Appealed from: M.D. Fla., Judge Lazzara]

In Every Penny Counts, Inc. v. American Express Co., No. 08-1434, and Every Penny Counts, Inc. v. First Data Corp., No. 08-1438 (Fed. Cir. Apr. 30, 2009), the Federal Circuit affirmed the district court’s claim construction of “excess cash” and, consequently, its judgment of noninfringement.

Every Penny Counts, Inc. (“EPC”) holds several patents directed to systems for contributing a portion of a retail sale transaction to a charity or a bank account. The patented invention allows the customer to contribute change from a transaction (i.e., “excess cash”) into a predetermined charity or bank account. EPC asserted five patents against two groups of defendants, each of which makes and sells gift cards that can be used instead of cash to complete retail transactions. EPC claimed that those gift cards infringe its patents because they involve means of “loading value onto accounts at a point-of-sale terminal.” Slip op. at 4.

The district court held a joint claim construction hearing. At the hearing, the parties agreed that the construction of “excess cash” was potentially dispositive. One of the defendant groups proposed the construction “amount selected by the payor beyond the total amount due at the point of sale.” EPC’s proposed construction was “an amount . . . offered in excess of the sale price of merchandise.” EPC further interpreted “sale price” as the portion of a transaction that a merchant would account for as a sale. In other words, under the defendants’ construction, the customer fully controls the amount of “excess cash,” whereas under EPC’s construction, the amount of “excess cash” depends on the merchant’s accounting practices. This distinction was critical as the “sale price” of a $50 gift card could be as low as $0 under EPC’s construction because merchants do not typically account for transactions involving gift cards as “sales” until the gift card is redeemed. Under such circumstances, the “excess cash” would include the $50 value of the gift card, which is loaded into the gift card’s account. The district court adopted the defendants’ proposed construction, and EPC stipulated to the entry of final judgment in both cases, recognizing that it could not prove infringement under that construction.

In analyzing the district court’s claim construction, the Federal Circuit first reiterated that the patent specification’s use of disputed terms is “of particular relevance” during the claim construction process. Id. at 6. The Federal Circuit concluded that the specification describes “excess cash” as the difference between the amount tendered by the customer and the price of the items purchased, which most naturally aligns with the district court’s construction.

The Federal Circuit then analyzed EPC’s arguments that (1) the district court erred by analyzing the term “sales price,” which was not a disputed claim term; and (2) the district court improperly looked to the accused products to arrive at a construction that would make it impossible to prove infringement. The Court found EPC’s first argument “puzzling,” especially since it was EPC’s own construction that used the term “sales price,” and the parties disagreed about the meaning of that term. Moreover, citing O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351, 1361-62 (Fed. Cir. 2008), the Federal Circuit noted that questions bearing on the scope of a claim must be resolved by a court and not left to the jury, and consequently found that the district court acted properly.

The Federal Circuit also rejected EPC’s second argument regarding the consideration of the accused product. The Federal Circuit noted that the district court had considered the accused products to elicit the parties’ views about the meaning of “excess cash” in the context of hypothetical transactions, some of which involved the accused products. The Court further noted that a trial court’s knowledge or awareness of the accused product is permissible and may provide meaningful context during claim construction. Accordingly, the Federal Circuit affirmed the district court’s claim construction.


Summary authored by Michael Skopets, Esq.