Muniauction, Inc. v. Thomson Corp. and I-Deal (Fed. Cir. 2008)
Ray Niro's team helped Muniauction win a jury verdict of willful infringement resulting in an award of $77 million for lost profit and enhanced damages. On appeal, the CAFC reversed finding some of the claims obvious as a matter of law and others not infringed. As its name implies, Muniauction's patent relates to municipal bond auctions.
Infringement by a Single Actor: If it were not well understood already, this opinion completely rejects the rogue theory of joint infringement. Rather, a method claim is only infringed when a single party can be charged with performing each step of the asserted claim. Here, Muni's claims required action by both a bidder and an auction system.
There are times when infringement can be found despite multiple actors. However, in those cases, a single party must be shown to exercise "control or direction" over the entire infringement. This is known as the "mastermind" requirement, and the CAFC has noted that it closely parallels the theory of vicarious liability.
"the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method."
The CAFC left some wiggle room. A later case could still hold that it is not necessary to show facts sufficient to support traditional vicarious liability. (This case notes that such facts would be sufficient, but does not state they are necessary). Thus activities by an independent contractor could potentially still be attributed to the principal. However, the court made clear that direct infringement will not be found when the steps of a method claim are performed "mere arms-length cooperation" between parties. I have suggested that the line be drawn with collusion or conspiracy to infringe rather than limited to principal-agent relationships.
Obviousness: Muni's expert admitted that claims 1 and 31 were identical to a prior art system except for the patentee's use of a web browser to access the auction. In a post-KSR world that type of invention is difficult to protect. The court reversed the jury verdict – finding the invention obvious as a matter of law. [More on Muniauction obviousness in tomorrow's post]
Notes: The non-infringed claim reads as follows:
1. In an electronic auction system including an issuer's computer having a display and at least one bidder's computer having an input device and a display, said bidder's computer being located remotely from said issuer's computer, said computers being coupled to at least one electronic network for communicating data messages between said computers, an electronic auctioning process for auctioning fixed income financial instruments comprising:
inputting data associated with at least one bid for at least one fixed income financial instrument into said bidder's computer via said input device;
automatically computing at least one interest cost value based at least in part on said inputted data, said automatically computed interest cost value specifying a rate representing borrowing cost associated with said at least one fixed income financial instrument;
submitting said bid by transmitting at least some of said inputted data from said bidder's computer over said at least one electronic network; and
communicating at least one message associated with said submitted bid to said issuer's computer over said at least one electronic network and displaying, on said issuer's computer display, information associated with said bid including said computed interest cost value,
wherein at least one of the inputting step, the automatically computing step, the submitting step, the communicating step and the displaying step is performed using a web browser.