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Prudential Reasons and Perceived Increases in Efficiency Cannot Empower a Federal Court to Hear a Case Where No Case or Controversy Exists

May 28, 2010

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Last Month at the Federal Circuit - June 2010

Judges: Michel (author), Rader, Folsom (Chief District Judge sitting by designation)

[Appealed from: D.D.C., Judge Robertson]

In Dow Jones & Co. v. Ablaise Ltd., 09−1524 (Fed. Cir. May 28, 2010), the Federal Circuit reversed the district court’s denial of Ablaise Ltd.’s (“Ablaise”) motion to dismiss Dow Jones & Company, Inc.’s (“Dow Jones”) DJ invalidity claim against U.S. Patent No. 6,295,530 (“the ’530 patent”) and affirmed the district court’s grant of SJ that the asserted claims of U.S. Patent No. 6,961,737 (“the ’737 patent”) were invalid as obvious.  The Federal Circuit did not address Dow Jones’s claim that the ’530 patent was invalid as anticipated by the prior art or the district court’s holding to that effect because the district court lacked subject matter jurisdiction to hear that claim.

Hypertext Markup Language (“HTML”) is a language embodying sets of instructions that control the format of a Web page displayed on the browser application of a user’s PC.  It was undisputed that by the priority date claimed in the ’737 and ’530 patents, (1) HTML was well known to persons of ordinary skill in the art of Web design, and (2) the ability of Web site developers to construct Web pages on the fly (i.e., upon user demand) by using programs known as Common Gateway Interfaces (“CGI programs” or “CGI scripts”) was well known in the art.  Using a CGI program, a person of ordinary skill in the art could create individualized, dynamically generated Web pages for each end user.  The ’737 and ’530 patents are directed to methods for using a Web server to send individualized content and formatting instructions in the form of Web pages that are generated on the fly in response to user preference information encoded in the user’s Hypertext Transfer Protocol (“HTTP”) request for the specific Web page.  While multiple claims of each patent were at issue, the parties agreed that the determination regarding the validity of claim 1 of each patent dictated the validity of the other claims therein.

The patents differ from one another in two relevant respects.  First, the ’737 patent claims a more flexible method of formatting and, second, discloses a server that stores the user’s preferences in a database to be matched against subsequent requests by that user.  The ’530 patent, in contrast, discloses a method that is capable of accommodating only a user’s current request that information be displayed according to a selected template, and since that information is not stored in a database for future retrieval, the user must reselect his preferred content template each time he requests information from the server.

The present suit arose from a DJ action filed by Dow Jones for invalidity and noninfringement of the ’737 and ’530 patents.  Ablaise counterclaimed for infringement of both patents.  Following the district court’s claim construction, Ablaise offered Dow Jones a covenant not to sue on the ’530 patent if Dow Jones would dismiss its invalidity claim.  Dow Jones demanded that Ablaise include News Corporation (“News Corp.”), Dow Jones’s parent company (which had acquired Dow Jones subsequent to the date of suit), in the covenant, which Ablaise refused to do.  The district court denied without prejudice Ablaise’s motion to dismiss the invalidity claim with respect to the ’530 patent and subsequently found that patent invalid as anticipated by the prior art and the ’737 patent invalid as obvious on SJ.

As a threshold matter, the Federal Circuit determined that Ablaise’s offer of a covenant not to sue Dow Jones for infringement of the ’530 patent was sufficient to divest the district court of subject matter jurisdiction over Dow Jones’s invalidity claim against that patent.  The Federal Circuit found that the district court’s denial of Ablaise’s motion was without support in the law and contrary to the Federal Circuit’s jurisprudence established by Super Sack Manufacturing Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1060 (Fed. Cir. 1995), and continuing, post−MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), through Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294, 1297 (Fed. Cir. 2009).  Specifically, because Ablaise’s covenant not to sue avowed that it would not sue Dow Jones for any acts of infringement of its ’530 patent, the covenant extinguished any current or future case or controversy between the parties.  Additionally, the Federal Circuit, responding to the district court’s statements regarding prudential reasons to retain jurisdiction, stated, “Subject matter jurisdiction is a threshold requirement for a court’s power to exercise jurisdiction over a case, and no amount of ‘prudential reasons’ or perceived increases in efficiency, however sound, can empower a federal court to hear a case where there is no extant case or controversy.”  Slip op. at 19.

Furthermore, the Federal Circuit rejected the district court’s attempt to analogize retaining jurisdiction over the ’530 patent to supplemental jurisdiction because each of the claims over which a district court exercises supplemental jurisdiction must have standing on its own, which was not the case with the claims against the ’530 patent following Ablaise’s offer of a covenant not to sue.  The Federal Circuit also rejected Dow Jones’s argument that the controversy was not extinguished because News Corp. was not included in the covenant offered.  Because News Corp. and Dow Jones are distinct legal entities, and, because, absent a piercing of the corporate veil (which neither party alleged), a parent company is not liable for the acts of its subsidiary, News Corp. was insulated from liability should Dow Jones be found liable for infringement.  Thus, the Federal Circuit found that Ablaise’s infringement suit against Dow Jones could not be said to constitute a case or controversy involving News Corp. or its divisions and subsidiaries, which were legally distinct entities from Dow Jones, whether or not Ablaise at present (or in the future) seeks to assert the ’530 patent against News Corp.  Accordingly, the Court reversed the district court’s denial of Ablaise’s motion to dismiss Dow Jones’s invalidity claim against the ’530 patent, and did not reach the question of whether the asserted claims of that patent were invalid as anticipated by the prior art.

The Federal Circuit then addressed the district court’s SJ invalidity finding that the ’737 patent was obvious.  The Court noted that Ablaise conceded that an artisan of ordinary skill would have been aware that HTML tags affect content location on a Web page, and Ablaise did not dispute that by the priority date of the patent, HTML, including the functions of the tags used therein, was well known to persons of skill in the art.  The Court also found that Ablaise did not dispute that (1) there was both design need and market pressure to add location−changing HTML tags to the teachings of the prior art; (2) that personalized formatting was well known on non−Web products such as database systems; or (3) that during the relevant period, there was an effort in the art to bring established features of non−Web programs to the Web.  Further, Ablaise implicitly conceded that the only differences between the prior art and the ’737 patent were the extension of the user−selected display options of the prior art to personalize the location of text or graphics on the page.  And the Federal Circuit found that such changes in location were well known in both non−Web applications and in the HTML language extant at the time, and known to artisans of ordinary skill.  Given those factors, the Federal Circuit agreed that the ’737 patent would have been obvious to an artisan of ordinary skill in light of the prior art and knowledge known in the art.

Finally, the Federal Circuit characterized Ablaise’s reliance on the secondary consideration of skepticism as “weak” because the references relied upon did not directly address whether there was actual skepticism concerning the invention of dynamically generated personalized Web pages.  The Court thus found that Ablaise’s evidence of skepticism was irrelevant and not supportive of its claim.  Accordingly, the Court affirmed the district court’s grant of SJ of invalidity of the ’737 patent, finding it obvious in light of the prior art and general knowledge in the field.


Summary authored by Bart A. Gerstenblith, Esq.