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Social Networking Patent Invalidated Due to Offer for Sale Under 35 U.S.C. § 102(b)

May 08, 2012

Decision icon Decision

Last Month at the Federal Circuit - June 2012

Judges: Lourie (author), Moore, Wallach

[Appealed from: D. Del., Judge Stark]

In Leader Technologies, Inc. v. Facebook, Inc., No. 11-1366 (Fed. Cir. May 8, 2012), the Federal Circuit affirmed the invalidation of U.S. Patent No. 7,139,761 (“the ’761 patent”), finding substantial evidence to support a jury’s finding that the claimed invention was offered for sale and publicly demonstrated prior to the critical date.

Leader Technologies, Inc. (“Leader”) owns the ’761 patent, which is directed to software that allows users on a network to communicate on a large scale. Broadly, the ’761 patent purports to improve upon conventional systems by associating data with an individual, group of individuals, and topical content, and not simply with a folder, as in traditional systems. The system achieves this improvement by having users collaborate and communicate through “boards” that are accessible through an Internet browser and appear as a webpage. To do so, the data management system employs metadata.

Prior to filing the application that issued as the ’761 patent in December 2003, Leader developed a product called Leader2Leader®. Leader’s founder, Michael McKibben, testified that the ’761 patent claims cover Leader2Leader®’s “underlying engine,” which is referred to as the Digital Leaderboard®.
In January 2002, Leader presented a white paper to Wright-Patterson Air Force Base offering 20,000 licenses to the Leader2Leader® product and discussing the functionality of the system. Leader also represented that the Digital Leaderboard® software had been fully developed. In November 2002, Leader demonstrated the Leader2Leader® system to Boston Scientific and by December 8, 2002, had demonstrated it to a number of other companies. Leader filed a provisional patent application on December 11, 2002, and, on December 10, 2003, it filed the nonprovisional application that issued as the ’761 patent.

When Leader sued Facebook, Inc. (“Facebook”) for infringement in 2008, the jury returned a verdict in favor of Facebook, finding that the ’761 patent was subject to an invalidating sale and an invalidating public use. The district court thereafter denied Leader’s post-trial motions for JMOL or, in the alternative, a new trial.

On appeal, the Federal Circuit agreed with Facebook that legally sufficient evidence supported the jury’s verdict that the version of Leader2Leader® demonstrated and offered for sale prior to the critical date was an embodiment of the asserted claims. Contrary to Leader’s arguments, the Court found that the record was not devoid of the minimum quantity of evidence to support the jury’s verdict. First, the Court noted that Leader admitted in its interrogatory responses that Leader2Leader® powered by the Digital Leaderboard® engine “embodies” the asserted claims of the ’761 patent. Leader argued that, by employing the present tense, its admissions were limited to only the instance of the Leader2Leader® powered by the Digital Leaderboard® engine that existed at the time Leader served its responses on Facebook. But the Court found that Leader did not qualify its interrogatory responses in that manner. Moreover, the Court found that McKibben contended at trial that the Leader2Leader® powered by the Digital Leaderboard® engine not only fell within the scope of the asserted claims in 2009 when Leader served its responses, but also in 2007 before the lawsuit was initiated and in 2010 during the trial. Moreover, the Court observed that, in his deposition, McKibben could not identify a single instance of Leader2Leader® that did not fall within the scope of the ’761 patent claims.

The Court also found legally sufficient evidence in the record linking the precritical date software to the software that Leader admitted fell within the scope of the asserted claims. The evidence showed that in 2002, for example, Leader offered for sale the exact software product that Leader admitted fell within the asserted claims—the Digital Leaderboard® engine provided under the Leader2Leader® brand. Regarding the jury’s decision to discredit McKibben’s trial testimony that the precritical date Leader2Leader® did not fall within the scope of the asserted claims, the Court generally agreed with Leader that “[n]ormally,” a witness’s “discredited testimony is not considered a sufficient basis for drawing a contrary conclusion.” Slip op. at 14 (alteration in original) (citing Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 512 (1984)). The Federal Circuit, however, found substantial evidence that the Leader2Leader® product that was on sale and in public use prior to the critical date fell within the scope of the asserted claims. In the Court’s view, at a minimum, McKibben’s lack of credibility fortified that conclusion and provided an independent basis for disbelieving his factual assertions.

In upholding the jury’s verdict, the Court recognized that “as a general matter a computer scientist can easily modify and change software code and that two versions of the same software product may function differently.” Id. But, in this case, the Court concluded that Leader failed to point to any contemporaneous evidence in the record that indicated that the Leader2Leader® powered by the Digital Leaderboard® engine that existed prior to the critical date was substantively different from the postcritical date software.

The Court also agreed with Facebook that the district court did not abuse its discretion in denying Leader’s motion for a new trial. Facebook relied almost exclusively on Leader’s own admissions to prove invalidity, and those documents on their face did not support Leader’s position. Thus, the Court concluded that it was not in error for the district court to conclude that the verdict was not against the great weight of the evidence. Moreover, the Court noted that Leader failed to explain why upholding the verdict would result in a miscarriage of justice. For these reasons, the Federal Circuit affirmed the decisions of the district court.