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To Anticipate, a Prior Art Reference Must Contain All of the Limitations Arranged or Combined in the Same Way as Recited in the Claim

October 20, 2008
Tull, Susan Y.

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Last Month at the Federal Circuit - November 2008

Judges: Linn (author), Clevenger, Moore

[Appealed from: D. Ariz., Judge Collins]

In Net MoneyIN, Inc. v. VeriSign, Inc., No. 07-1565 (Fed. Cir. Oct. 20, 2008), the Federal Circuit affirmed-in-part and reversed-in-part the district court’s judgments in favor of defendant VeriSign, Inc. (“VeriSign”). The Court affirmed that claims 1, 13, and 14 of U.S. Patent No. 5,822,737 (“the ’737 patent”) and claim 1 of U.S. Patent No. 5,963,917 (“the ’917 patent”) are invalid under 35 U.S.C. § 112, ¶ 2. The Court also affirmed the district court’s denial of plaintiff Net MoneyIN, Inc.’s (“Net MoneyIN”) motion to amend its complaint. The Court, however, reversed the district court’s grant of SJ that claim 23 of the ’737 patent is invalid under 35 U.S.C. § 102(a) because the district court applied an incorrect standard of law.

Net MoneyIN’s patents are directed to systems for processing credit card transactions over the Internet and for addressing security concerns related to these transactions. The prior art for processing online transactions involved four entities: the customer, merchant, merchant’s bank, and issuing bank. In addition to imposing a heavy financial burden on merchants, these conventional models also required customers to convey confidential information over the Internet to unknown merchants. Net MoneyIN’s patents added a fifth entity to this model, a financial processing entity that (1) received credit card account information and an amount to be charged from the customer when an order was placed; (2) sought authorization from the card issuer over the existing bank network; and (3) notified both the customer and the merchant of authorization. Of note, the ’737 patent recited a bank computer that included means for generating an authorization indicia while the ’917 patent recited a financial processing computer that included means for receiving customer account and amount data from both the customer and merchant computers.

Net MoneyIN sued VeriSign, among others, for infringement of the ’737 and ’917 patents. As part of its construction of the claim terms, the district court invalidated claims 1, 13, and 14 of the ’737 patent and claim 1 of the ’917 patent, which contain limitations in means-plus-function format, as lacking corresponding structure and, thus, indefinite under 35 U.S.C. § 112, ¶ 2. Following claim construction, the district court denied Net MoneyIN’s motion for leave to amend its complaint to add a claim for induced infringement, and granted VeriSign’s motion for SJ that it did not induce infringement of Net MoneyIN’s patents. The district court also granted VeriSign’s motion for SJ of invalidity of claim 23 of the ’737 patent under U.S.C. § 102(a), as anticipated. The district court then entered final judgment in favor of VeriSign and Net MoneyIN appealed.

On appeal, the Federal Circuit first addressed the district court’s ruling on indefiniteness under 35 U.S.C. § 112, ¶ 2. Noting that claims 1, 13, and 14 of the ’737 patent rise and fall together, the Court focused on claim 1 alone. Net MoneyIN argued that means-plus-function language was not present in claim 1 of the ’737 patent, and alternatively, that if such language were present, the specification recited sufficient structure to make the claim definite. The Court disagreed. The claim’s use of the word “means” and recital of a function triggered the presumption of means-plus-function under 35 U.S.C. § 112, ¶ 6 and the Court found that Net MoneyIN failed to rebut this presumption. Claim 1 of the ’737 patent is directed to a financial transaction system comprising, among other things, “a first bank computer” including “means for generating an authorization indicia.” Net MoneyIN contended that a “bank computer” was a commonly known structure for generating authorization indicia. The Court rejected this argument because the bank computer is not linked in the claim as the “means” for generating an authorization indicia. Rather, the bank computer is recited as “including” those means. Slip op. at 9. Because the Court concluded that the claimed generating means is a subset of the bank computer, it required recitation of structure that is a component of the bank computer to rebut the presumption. The Court reiterated its holding in Aristocrat Technologies Australia Pty Ltd v. International Game Technologies, 521 F.3d 1328, 1333 (Fed. Cir. 2008), that, “in a means-plus-function claim in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm.” Slip op. at 10-11 (internal quotation marks omitted). Here, because the Court found no disclosure of an algorithm by which a general purpose bank computer generates an authorization indicia, the Court affirmed the district court’s conclusion that claims 1, 13, and 14 of the ’737 patent are invalid.

The Federal Circuit next considered whether claim 1 of the ’917 patent is indefinite. The district court construed the function specifying that both the amount data and the account data must come from both the customer computer and the merchant computer. Net MoneyIN argued that the financial processing center received the data from either the customer computer, the merchant computer, or both computers. The Court concluded that Net MoneyIN’s proffered construction was different from, and broader in scope than, the construction it asserted in the district court. Because Net MoneyIN’s new construction was not proper on appeal, the Court affirmed the district court’s construction of this claim. Because Net MoneyIN conceded that, under the district court’s construction, no structure is disclosed in the specification to perform the claimed function, the Federal Circuit affirmed that claim 1 of the ’917 patent is invalid.

Turning to claim 23 of the ’737 patent, the Federal Circuit clarified that, “unless a reference discloses within the four corners of the document not only all of the limitations claimed but also all of the limitations arranged or combined the same way as recited in the claim, it cannot be said to prove prior invention of the thing claimed and, thus, cannot anticipate under 35 U.S.C. § 102.” Id. at 17-18. The prior art at issue disclosed two protocols for processing Internet credit card transactions. Neither protocol contained all of the elements arranged or combined in the same manner as the ’737 patent. The Court concluded that the district court erred in combining parts of the separate protocols shown in the reference to find claim 23 anticipated. Accordingly, the Court reversed the district court’s grant of SJ of invalidity.

Finally, the Court reviewed the district court’s denial of Net MoneyIN’s motion to amend its complaint. The Court held that, because VeriSign did not consent—either implicitly or explicitly—to litigate inducement, the district court possessed the discretion to deny Net MoneyIN’s motion. Because it found no abuse of the district court’s discretion, the Court affirmed the denial of the motion to amend.