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Courts Have Discretion to Limit the Number of Asserted Claims in Complex Patent Suits

February 18, 2011
Ra Jr., Andrew J.

Decision icon Decision

Last Month at the Federal Circuit - March 2011

Judges: Newman, Lourie, Bryson (author)

[Appealed from: C.D. Cal., Judge Klausner]

In In re Katz Interactive Call Processing Patent Litigation, Nos. 09-1450, -1451, -1452, -1468, -1469,
10-1017 (Fed. Cir. Feb. 18, 2011), the Federal Circuit affirmed the district court’s claim selection procedure limiting the number of claims asserted.  With respect to certain asserted claims, the Court affirmed in part grants of SJ of indefiniteness, obviousness, and failure to comply with the written description requirement.  For other asserted claims, the Court vacated the district court’s grants of SJ of indefiniteness, written description, and noninfringement, and remanded the case for proceedings consistent with its opinion.

In a multidistrict litigation patent case, the plaintiff Ronald A. Katz Technology Licensing LP (“Katz”) asserted four groups of patents relating to interactive call processing systems against numerous defendants (“Defendants”).  The first group of patents—the “Statistical Interface” group—covered a telephonic interface system for acquiring data from callers and using that data to identify a subset of the group.  The second group—the “Conditional Interface Plus” group—covered a telephonic computer interface system capable of handling large volumes of calls and directing them to live-operator or computer-operated stations.  The third group—the “Dual Call Mode” group—covered a telephone call processing system for receiving calls for a game or contest that neutralized the advantages gained by repeat callers.  Finally, the last group—the “Voice-Data” group—claimed a telephone-computer interface system capable of receiving and identifying digital signals and voice signals from callers. 

Katz initially filed 25 separate actions asserting a total of 1,975 claims from 31 patents against 165 defendants that were later consolidated and transferred.  Over Katz’s objections, Defendants asked the district court to limit the number of asserted claims.  After initially determining that many claims were duplicative, the district court limited the maximum number of assertable claims.  However, it also added a proviso permitting Katz to add new claims if they “raise[d] issues of infringement/validity that [were] not duplicative” of previously selected claims.  Instead of selecting additional claims, Katz moved the court to sever and stay the unselected claims on the ground that the district court’s order violated its due process rights.  The district court denied Katz’s motion.  Defendants then jointly moved for SJ on the grounds of invalidity and noninfringement.  Several Defendants also moved individually for SJ on case-specific grounds.  The district court held all the claims selected against Defendants to be either invalid or not infringed and entered final judgments in favor of Defendants.

On appeal, the Court addressed the following rulings by the district court: (1) the denial of Katz’s motion to stay and sever; (2) SJ for indefiniteness; (3) SJ for failing to satisfy the written description requirement; (4) SJ for obviousness; (5) claim constructions; and (6) SJ of noninfringement for three of the Defendants, U.S. Bancorp and U.S. Bank National Association (collectively “U.S. Bank”), American Airlines, Inc. (“American Airlines”), and DHL Express (USA), Inc. (“DHL”).

As to the first issue—the Court affirmed the denial of Katz’s motion to stay and sever, and approved the district court’s claim selection procedure.  In addressing Katz’s due process arguments, the Court found the district court appropriately placed the burden on Katz to show that the unasserted claims were not duplicative.  “When the claimant is in the best position to narrow the dispute, allocating the production burden to the claimant will benefit the decision-making process and therefore will not offend due process unless the burden allocation unfairly prejudices the claimant’s opportunity to present its claim.”  Slip op. at 11.  The Court found no error in the district court’s determination that many claims were duplicative and concluded it was both efficient and fair to require Katz to identify nonduplicative claims.  Because Katz failed to make any showing that the unasserted claims were nonduplicative, it was reasonable for the district court to deny the motion to stay and sever.

Although the Court approved the district court’s court selection process, it cautioned that it was not suggesting that such a decision was unreviewable.  Rather, “the problem with Katz’s position is that [it] made no effort to [show that some of its unselected claims presented unique issues as to liability or damages].  Instead, Katz chose to make the ‘all or nothing’ argument that the entire claim selection process was flawed from the start . . . .  That sort of global claim of impropriety is unpersuasive.  In complex cases, . . . the district court ‘needs to have broad discretion to administer the proceeding.’”  Id. at 14.

The Court also rejected arguments that the district court violated the statutory presumption that each claim is independently presumed valid.  “While different claims are presumed to be of different scope, that does not mean that they necessarily present different questions of validity or infringement.”  Id. at 15.

As to the second issue, indefiniteness, the Court affirmed as to three claims and remanded on the remaining seven.  Based on Federal Circuit precedent—that a computer-implemented means-plus-function term is limited to the corresponding structure disclosed in the specification, and the corresponding structure is the algorithm—the district court ruled that the asserted means-plus-function claims were invalid as indefinite because the specifications disclosed only general purpose processors and not the algorithms used to perform the recited functions. 

With respect to three of the asserted claims reciting a “processing means . . . for receiving customer number data entered by a caller and for storing the customer number data . . . and based on a condition coupling an incoming call to the operator terminal,” the Court agreed with the district court.  The Court found that the specification failed to disclose an algorithm that corresponded to the “based on a condition coupling an incoming call to the operator terminal” function.  “[B]y claiming a processor programmed to perform a specialized function without disclosing the internal structure of that processor in the form of an algorithm, Katz’s claims exhibit the ‘overbreadth inherent in open-ended functional claims.’”  Id. at 19.  In addition, the Court affirmed the district court’s ruling that several claims from the Statistical Interface group were indefinite because they claimed both an apparatus and a method of use. 

With respect to the other seven asserted claims, however, the Court concluded that the district court interpreted Federal Circuit precedent too broadly and vacated the ruling on indefiniteness.  “Those seven claims do not run afoul of the rule against purely functional claiming, because the functions of ‘processing,’ ‘receiving,’ and ‘storing’ are coextensive with the structure disclosed, i.e., a general purpose processor.”  Id. at 21. 

As to the third issue, written description, the Court affirmed the district court’s ruling invalidating the asserted method claims from the Statistical Interface group for failing to satisfy the written description requirement, but vacated the district court’s decision to invalidate the asserted claims from the Dual Call Mode group.

The Statistical Interface group involved method claims with the steps of “visually displaying customer number data” and “receiving customer number data entered by a caller.”  The Court agreed with the district court’s conclusion that the specification had to describe the visual display of customer number data entered by a caller.  And, after examining the specification, the Court found that the patents lacked such a description because the specification only described visual displays involving information that was not entered by customers, failing to satisfy the written description requirement. 

As for the Dual Call Mode group, the Court vacated the district court’s judgment of invalidity and remanded for construction of the term “operating process format.”  The district court found the specification lacked description for a system in which “called number identification signals (DNIS) . . . identif[y] said operating process format.”  Katz argued that the specification described such a system by disclosing that DNIS signals correspond to different “call modes,” such as 800 or 900 numbers, and that different call modes are used to identify different “call processing flows.”  Based on the district court’s construction of “format,” the Court agreed with Katz that the different call modes disclosed by the specification identified different formats because the specification described asking different questions to and gathering different information from callers who dialed an 800 number as opposed to a 900 number.  However, the Court concluded that an open question remained as to what description was actually required because it was possible that “operating process format” could have a narrower construction than “format.”  Accordingly, the Court remanded for construction of “operating process format.”

As to the fourth issue, obviousness, the Court affirmed the finding that several of the Voice-Data and Dual Call Mode claims were obvious in light of the prior art.  Two prior art references—Yoshizawa (a telephone betting system that allowed callers to place and cancel bets with a registration number) and Szlam (a customer service system that used a voice response system to take orders or transfer calls to agents)—disclosed all the elements of the Voice-Data claims.  The Court concluded that combining the two references would have been obvious, even though Yoshizawa called for use under “tight time constraints,” because it also explicitly allowed for use under normal order entry systems.  Conversely, Szlam did not operate under “tight time constraints.”  Further, it rejected Katz’s contention that a person of ordinary skill in the art would not be motivated to combine Yoshizawa and Szlam.  “A reference can distinguish prior art in order to show the novelty of an invention without teaching away from combining the prior art with the invention disclosed in the reference.”  Id. at 31. 

The Court also found that Yoshizawa and Szlam did not teach away from one of the asserted Voice-Data claims requiring both caller-entered customer numbers and automatic number identification (“ANI”) to obtain account information.  Although Szlam only disclosed the use of ANI and Yoshizawa worked in a system that could not utilize ANI, neither reference discouraged the use of both ANI and caller-entered numbers to obtain account information.  Finally, the Court determined that Katz could not establish priority over Szlam because it could not point out anything in its specification that disclosed Szlam’s invention—the display of data corresponding to caller-entered signals.

The Court also concluded that asserted claims in the Dual Call Mode group were obvious in light of Szlam and another reference, Student Registration.  The asserted claims of the Dual Call Mode group contained a “cue suppression” limitation that used identification signals based on ANI data to avoid prompting callers with previously provided cues.  Student Registration described a system that allowed students to use their ID to register for courses and adjusted each response based on a student’s registration status.  Although Katz argued that Student Registration lacked the “cue suppression” limitation, the Court concluded otherwise because the registration status acted as an identification signal to elicit the proper response.  Since Student Registration disclosed a multifaced identification technique to suppress cues and Szlam disclosed an ANI-based identification process, the asserted claims were also obvious in light of the two references.

As to the fifth issue, claim construction, the Court found no reversible error in the district court’s claim construction.  Although the Court found that the district court inappropriately limited the scope of “acknowledgement number” by importing limitations from a single embodiment, it concluded that the proper construction did not affect any of the district court’s SJ rulings because the asserted claims were found invalid for obviousness.  The Court also agreed that Katz’s statements made during reexam to avoid prior art—“[a] password that is composed . . . serves as an access code or PIN, rather than personal identification data” —effectively disclaimed “personal identification data” from all composed passwords.  Finally, the Court also affirmed the district court’s construction of “customer number” to mean distinct from a credit card number because Katz could not point out anywhere in the specification that linked the term “customer number” to a credit card number. 

As to the sixth, and final, issue, noninfringement, the Court affirmed in part and vacated in part the individual SJs against defendants U.S. Bank, American Airlines, and DHL.  For U.S. Bank, the Court reversed the grant of SJ as to the asserted claims of the Statistical Interface and Conditional Interface Plus groups because it was unclear whether the district court’s construction of the DNIS limitation required that the accused system use the full ten-digit called telephone number or some representation.  However, it affirmed the grant of SJ of noninfringement for the asserted claim in the Dual Call Mode group because the accused system did not receive calls in the same way as provided in the asserted claim.  For American Airlines, the Court vacated the grant of SJ of noninfringement because there was a genuine issue of material fact as to whether the accused device had a “record structure” that stored information representative of caller-entered data.  For DHL, the Court declined to address the noninfringement issue because it previously concluded that the asserted claim was invalid. 

Finally, although Katz raised additional issues on appeal, the Court declined to address the district court’s rulings on claims that were not selected against any of the appellees.


Summary authored by Andrew J. Ra Jr., Esq.