Soverain Software v. Newegg (Fed. Cir. 2013) (on rehearing)
In a rare grant of rehearing, the Federal Circuit has amended its original decision in this case. In the original opinion, the Federal Circuit reversed the lower court's finding of non-obviousness and replaced that with a holding that the asserted claims are obvious as a matter of law. [Link]
According to the request for rehearing – "The panel's decision analyzed the wrong claim of the '314 patent. The asserted claims at trial were claims 35 and 51--not claims 34 and 51." I reviewed the original briefs and those briefs suggest that claim 34 should be the focus. However, the Federal Circuit allowed the patentee another shot on appeal.
Claim 34 – the one already found obvious by the court – is directed to a "network-based sales system" that links a buyer's computer with a "shopping cart computer" and that facilitates certain purchasing functionality, including using a "payment message" that initiates the transaction once activated. Claim 35 adds one further limitation to the mix – that "shopping cart computer is programmed to cause said payment message to be created before said buyer computer causes said payment message to be activated."
After reviewing the small amount of evidence presented, the court held that claim 35 is also invalid as obvious.
On this rehearing, Soverain has not provided any new information concerning the specific limitation of claim 35. The inclusion of an additional known element from a similar system, as set forth in claim 35, is subject to review on established principles, as summarized in KSR International Co. v. Teleflex Inc., 550 U.S. 398, 417 (2007) (an unobvious combination must be "more than the predictable use of prior art elements according to their established functions"). The supplemental briefing reinforces the absence of dispute that that the element in claim 35 is in the CompuServe Mall prior art.
On consideration of the additional briefing and arguments, we confirm that claim 34 is representative of the "shopping cart" claims, including claim 35, and conclude that dependent claim 35 is invalid on the ground of obviousness. The court's judgment is amended accordingly.
Now Soverain's patent is really invalid.
In its motion for rehearing en banc, Soverain cited my prior Patently-O essay for the notion that the original opinion was big news in the way that the court fully reversed the lower court's finding of nonobviousness. The en banc rehearing request focuses on the distinction between questions of fact and law and argues that Federal Circuit improperly delved into a fact-finding expedition. The fact-law divide is difficult for questions of obviousness since the ultimate question of obviousness is an issue-at-law based upon the factual determinations found in the Graham analysis. In its opinion, the Federal Circuit states that it is only deciding the ultimate legal question while the en banc request argues that the court delved into the factual underpinnings without providing appropriate deference. That en banc request has been denied.
I suspect that Soverain will push for a petition for writ of certiorari. In the en banc rehearing request, the company added Seth Waxman to the list of counsel and the company has at least 15 live infringement cases involving the '314 patent. (U.S. Patent No. 5,715,314). The damages overturned by the court here amounted to $2.5 million plus costs and an ongoing royalty of $0.15 per infringing transaction until the patent expires in 2015 (denying injunctive relief).
Now, before you feel too sorry for Soverain, you should note that the company has a set of additional patents in the family that it can still assert. See, e.g., 5,909,492, 5,708,780, 6,449,599, and 7,272,639.