The e-Commerce King Has Left the Building… (Actually, He Never Showed Up)

telco-phone-ecommerce

Eon-Net LP v. Flagstar Bancorp, No. 2009-1308 (Fed. Cir. July 29, 2011) (Judges Lourie, Mayer, and O’Malley)

You may not have heard of Mitchell Medina, one of the inventors of the patents at issue (and one of the principals of Eon-Net), but maybe you should have. It seems, according to him and his attorneys, that he invented e-commerce!

What’s that? You say his patents don’t mention the Internet? Or have a computer network of any kind as part of the invention?

Your problem is that you’re too literal. Sure, the specification seems to talk about nothing but scanning hard copy documents and extracting information from them, but really it’s about eBay and Amazon.com and online banking!

Or maybe not.

Eon-Net sued Flagstar in 2005 for infringement of several document processing patents. Eon-Net, including its related companies, has filed over 100 lawsuits on these patents in the last decade.

Flagstar quickly moved for sanctions for violations of Rule 11 of the Federal Rules of Civil Procedure, alleging that Eon-Net had failed to do an adequate investigation and asserted baseless claims of patent infringement. The district court agreed and imposed sanctions. On appeal, the Federal Circuit returned the case to the lower court with instructions to do a full claim construction analysis in order to determine if Eon-Net’s positions were without merit. See Eon-Net LP v. Flagstar Bancorp, 249 F. App’x 189 (Fed. Cir. 2007).

On remand, the district court determined that the claims were limited to processing hard copy documents. Based on those constructions, Eon-Net stipulated to non-infringement. The district court found the case exceptional and also awarded sanctions under Rule 11 for Eon-Net’s failure to conduct an adequate investigation before it filed suit.

A big part of the sanctions ruling was based on the finding that Eon-Net claimed to have patents covering all e-commerce, and its attorney felt that simply looking at a company’s website and deciding that it was doing e-commerce was a sufficient pre-filing investigation. The district court also found that any claim construction that didn’t require hard copy documents to be part of the claimed invention was unreasonable.

There were other issues, too. Apparently, Eon-Net didn’t have a document retention policy in place and destroyed documents before filing suit against Flagstar. Eon-Net also didn’t propose any constructions for any terms, which the district court found quite unhelpful.

The district court also didn’t care for an interrogatory response that Eon-Net served in an earlier case. Apparently, it took the position that the appropriate skill level for one of ordinary skill in the art is “the skill in the art required is that sufficient to converse meaningfully with Mitchell Medina.”

You get the idea.

Less humorously, the judge called Eon-Net’s pattern of filing suit and then demanding a relatively small settlement, which a defendant would be likely to pay as a nuisance, an “indicia of extortion.”

The Federal Circuit affirmed. It agreed with the district court’s claim construction, and found no errors in the lower court’s factual findings.

The net cost to Eon-Net: $ 631,135.18. That’s a big ouchie.

You can read the opinion here.

Update: You can read the district court’s opinion on Rule 11 sanctions here.

 

Aerotel, Ltd. v. Telco Group, Inc., No. 2010-1515 (Fed. Cir. July 26, 2011) (Chief Judge Rader, Judges Linn and O’Malley) (nonprecedential)

This opinion is perhaps most notable because it is Judge O’Malley’s first patent opinion for the court since joining the Federal Circuit. (Judge O’Malley has authored dissents and concurrences, and she also wrote the opinion in Biomedical v. California, 505 F.3d 1328 (Fed. Cir. 2007), when she was sitting by designation as a district court judge.)

This case also disputes the old adage that time is money. At least, it isn’t in this case.

The patent-in-suit covers a telephone system that allows prepaying for telephone calls. One of the key claim terms was “credit.” Aerotel argued that “credit” could mean time left as well as money left, but the district court disagreed, construing credit to be limited to money. The district court also found that the structure for one means-plus-function term was not disclosed, and so the patent was invalid for indefiniteness.

Based on that claim construction, the parties agreed to a Consent Order that the patent was invalid and not infringed. Aerotel appealed the claim construction.

The Federal Circuit agreed that, in the context of the patent, “credit” was limited to money. But the court disagreed on the missing structure, finding that one of ordinary skill in the art would have known what was meant.

The judgment of non-infringement was affirmed, and the judgment of invalidity was reversed.

You can read the opinion here.

 

Eli Lilly and Co. v. Actavis Elizabeth LLC, No. 2010-1500 (Fed. Cir. July 29, 2011) (Judges Newman, Friedman, and Lourie) (nonprecedential)

This opinion comes with a sad note. Judge Friedman passed away after oral argument, so only Judges Newman and Lourie participated in the opinion. This is an Abbreviated New Drug Application (ANDA) case involving Lilly’s drug Strattera®, which is used to treat attention-deficit/hyperactivity disorder (ADHD).

The defendants filed ANDAs with the Food & Drug Administration, seeking to market generic versions of Strattera®. Lilly then sued them for patent infringement.

The most interesting issue in the opinion is whether Lilly’s patent is invalid for a lack of utility. The district court found that the patent specification did not disclose experimental data showing that the drug is effective for treating ADHD. Lilly couldn’t put experimental data in its application, because the drug hadn’t yet been approved for human testing, although it did state that the drug’s purpose was to treat ADHD. Lilly conducted experiments not long after filing.

The Federal Circuit reversed. The court noted that applicants don’t have to provide experimental data with their applications, except to show priority. The U.S. Patent & Trademark Office rules allow examiners to request experimental data if they have a reason to doubt the utility of the claimed compound. Examiners are instructed to presume utility if the drug has been approved for human trials. So there was no reason for the examiner to ask to see experimental data.

The end result is that Lilly’s patent is valid and indirectly infringed (both by inducement and contributory infringement) by the defendants.

You can read the opinion here.

 

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