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Patent Invalid for Sale of Software Embodying the Invention Prior to Critical Date

July 29, 2003

Decision icon Decision

Last Month at the Federal Circuit - August 2003

Judges: Lourie (author), Linn, and Gajarsa (concurring)

In Minton v. National Association of Securities Dealers, Inc., No. 02-1560 (Fed. Cir. July 29, 2003), the Federal Circuit affirmed a final decision of the United States District Court for the Eastern District of Texas granting SJ of patent invalidity under 35 U.S.C. § 102(b) because the claimed subject matter was on sale more than one year prior to the filing of the patent application.

Vernon F. Minton is the sole inventor and owner of U.S. Patent No. 6,014,642 (“the ‘642 patent”), which is directed to a computerized securities-trading system. When using the system, individuals connect to a computer network through which they are able to post offers to trade securities as well as to select and reply to posted offers to cause trades to occur. In particular, according to method claim 1, which is representative, offers to trade a security are transmitted over a network to an individual’s computer, where the offers are ranked and displayed.

More than one year prior to the filing of the ‘642 patent, Minton leased a computer program and telecommunication network called “TEXCEN” to a brokerage firm that performed similarly to what is claimed in the ‘642 patent. The district court granted SJ of invalidity on two grounds: (1) Minton’s lease of TEXCEN was an anticipatory on-sale bar under 35 U.S.C. § 102(b); and (2) the claimed invention would have been obvious over TEXCEN in view of another patent.

Minton filed a motion for reconsideration, in which he argued for the first time that the lease of TEXCEN was experimental and therefore not “on-sale,” but the district court denied the motion.

On appeal, Minton raised two principal arguments that TEXCEN was not on-sale under 35 U.S.C. § 102(b). First, Minton argued that, as in In re Kollar, 286 F.3d 1326 (Fed. Cir. 2002), the license of the TEXCEN process was not a commercial offer for sale. Second, Minton argued that the district court failed to analyze the experimental-use issue, even though Minton properly raised the issue for the first time in its motion for reconsideration.

The Federal Circuit found that, unlike the transaction in Kollar, Minton conveyed a fully operational computer program implementing and, thus, embodying the claimed invention. Accordingly, the Federal Circuit held that Minton’s lease of TEXCEN, thereby enabling the practice of the invention, was an offer for sale within the meaning of the on-sale bar.

With regard to Minton’s experimentaluse argument, Minton argued that he properly raised the issue in his postjudgment briefing after the Federal Circuit issued a decision in EZ Dock, Inc. v. Schafer Systems, Inc., 276 F.3d 1347 (Fed. Cir. 2002), which Minton contended changed the landscape of experimental-use law.

Disagreeing with Minton, the Federal Circuit concluded that the district court was well within its discretion in declining to entertain Minton’s new argument on reconsideration.