CPLRG™ 0026 - Trading Techs. Int'l, Inc. v. eSpeed, Inc. - Feb. 25, 2010

Trading Techs. Int’l, Inc. v. eSpeed, Inc., 595 F.3d 1340 (Fed. Cir. 2010) (RADER & Clark, district judge; LOURIE, concurring “in the result”; CLARK, concurring)


MAJOR ISSUES: (1) claim construction; claim phrase limited by discussion in specification; doctrine of equivalents; prosecution history estoppel; (2) definiteness; “short period of time”; (3) priority for provisional application; disclosure of species showing possession of readily understandable genus; (4) inventor’s contracting for software services; no Section 102(b) “on sale” bar

COMMENT: Ironically, this case involves patent claims concerning electronic commodities trading, as did the Supreme Court’s June 28, 2010, decision in Bilski v. Kappos.   See https://www.chisum.com/category/current-developments/bilski-watch  In Trading Tech. infringement suit, a narrow claim construction meant that an initial infringer escaped further liability by its two redesigned versions of its original product. On the patent’s validity, the court rejected an argument that the inventor’s payment for custom software to carry out the invention constituted a Section 102(b) “on sale” bar. It held that the patent owner was entitled to the benefit of a provisional application even though the subsequent application and claims generalized a phrase, “single click of a computer mouse” to “a single action of a user input device.” Finally, it rejected an inequitable conduct charge based on the patent owner’s failure to disclose the potential “on sale” bar.

1. DISPLAYING ELECTRONIC COMMODITIES TRADING SYSTEM. Two patents’ claims concerned a graphical user interface for an electronic commodities trading system in which traders click on a range of bids (offers to buy) and asks (offers to sell) from the “inside market”, the bid and ask prices being displayed in grids. U.S. Pat. No. 6,772,132; U.S. Pat. No. 6,766,304.  USPatNo6772132  USPatNo6766304

     a. PRIOR ART; PROBLEM: PRICE CHANGE AS TRADER CLICKS GRID. In prior art systems, the grids did not change but the prices in the grids changed with market conditions, often frequently. A problem was that a price would change just as the trader clicked on the grid.

     b. PATENT: DYNAMIC DISPLAY AND “STATIC” DISPLAY. To solve the problem, the patented system included both a dynamic display for bids and asks and a static display on which prices did not change. This allowed a trader to click on a grid with confidence that the price would not change. A trader followed changes in the market up and down a price column.

2. INFRINGEMENT; THREE ACCUSED SYSTEMS. The patent owner alleged infringement by three systems.

     a. ORIGINAL PRODUCT; “FUTURE VIEW”: INFRINGING. The accused infringer’s “Future View” product satisfied all the asserted claims limitations. The accused infringer stopped marketing the product after the patent owner sued or infringement.

           i. FIRST MODIFICATION: “DUAL DYNAMICS” WITH TWO RE-CENTERING FEATURES (MANUALLY, AUTOMATICALLY AFTER MARKET MOVES A PREDETERMINED NUMBER OF TICKS. Just before a preliminary injunction hearing, the accused infringer introduced its “Dual Dynamic” product, a redesign of the “Future View.” The product had two features that re-centered the price level display: (1) manual by the trader, and (2) automatically when the marketed moves a predetermined number of ticks.

           ii. SECOND MODIFICATION: “eSPEEDOMETER”; AUTOMATIC CENTERING; SLOW DRIFT AFTER VERY MARKET CHANGE. After the district court found likely infringement by the “Dual Dynamic,” the accused introduced a second modification, the “eSpeedometer.” The product had automatic re-centering only, with the display slowly drifting towards the center.

     b. DISPUTE: CLAIM REQUIREMENTS OF A “STATIC DISPLAY OF PRICES” AND A “COMMON STATIC PRICE AXIS.” The asserted claims required a “static display of prices” or a “common static price axis.” The patent owner and accused infringer disputed whether the “Dual Dynamic” and “eSpeedometer” products met these “static” requirements, given that both products entailed some automatic re-centering.

     c. CLAIM CONSTRUCTION: “STATIC” MEANS NO CHANGE IN POSITION EXCEPT IN RESPONSE TO A MANUAL COMMAND. The district court did not err in ruling that, properly construed in light of the patent’s specification and prosecution history, “static” meant that the price display did not change position except in response to a manual command.

          i. DEFINITION OF “STATIC” IN SPECIFICATION: PRICE “NOT NORMALLY CHANGE UNLESS A RE-CENTERING COMMAND IS RECEIVED; “DISCUSSED IN DETAIL LATER”. In the patent’s specification, the inventor defined “static” for price columns as follows: “that is, they do not normally change positions unless a re-centering command is received (discussed in detail later).”

                A. DEFINITION MODIFIED BY SUBSEQUENT DISCUSSION: DELETE “NORMALLY”; ADD: MANUAL COMMAND. The district court’s construction deleted “normally” and added a requirement that the command be manual. These modifications were supported by the subsequent discussion, which the definition promised. The discussion referred to manual commands and did not mention automatic re-centering.

                B. RISK OF READING EMBODIMENT INTO CLAIM; “THE PRESENT INVENTION”, NOT MERELY PREFERRED EMBODIMENT. Reliance on the specification to construe “static” entailed a risk of improperly reading an embodiment into the claim, but, here, the specification referred to “the present invention,” not a preferred embodiment.

          ii. OTHER CLAIM LANGUAGE: “WHEREIN” CLAUSE EXCLUDING STATIC PRICE DISPLAY MOVEMENT IN RESPONSE TO CHANGE IN INSIDE MARKET. One patent’s claims had a “wherein” clause requiring that the static price display not move in response to change in the inside market. The clause did not exclude all automatic re-centering, but it supported the district court’s construction by excluding some automatic re-centering.

          iii. COMPRISING; AUTOMATIC RE-CENTERING NOT AN ADDITIONAL FEATURE. The patent owner argued that the construction of “re-centering command” as a manual command did not exclude additional features, such as automatic re-centering, from the claims because the claims used the open transition “comprising.” However, automatic re-centering was a negation of a claim requirement, to wit, only manual re-centering, not an additional feature. See § 2432.

          iv. INVENTION’S GOAL. Construing “static” to allow automatic re-centering would “defy the invention’s goal” by allowing re-centering “just as the trader was getting ready to execute a trade, causing the trader to miss the intended price.”

          v. PROSECUTION ARGUMENT; OVERCOMING EXAMINER REJECTION BASED ON INDEFINITENESS OF “STATIC.” The prosecution history supported the district court’s construction. In response to an examiner’s rejection of claims on the ground that “static” was indefinite, the patent owner argued that the price column did not change unless a re-centering command was received.

          vi. DEPENDENT CLAIM NOT RENDERED SUPERFLUOUS. The patent owner argued that the construction of “static” in the patent’s claim 1 as requiring no automatic re-centering was incorrect because it would render superfluous a dependent claim. The dependent claim recited that “market depth” be based on an “exchange order book” and required that the static price display not move in response to price changes in the exchange order book. The argument lacked merit.

               A. LIMITATION ADDED. The dependent claim added a limitation–“an exchange order book.”

               B. OVERLAP PROBLEM OVERCOME BY CONTRARY CONSTRUCTION DICTATED BY PATENT’S WRITTEN DESCRIPTION AND PROSECUTION HISTORY. Any claim overlap problem is overcome by the contrary claim construction that the written description and prosecution history dictate.

     f. NO LITERAL INFRINGEMENT. Two accused products (Dual Dynamic and eSpeedometer) did not literally infringe the claims because both had mandatory re-centering features. The former re-centered after a predetermined number of market ticks. The latter continuously and slowly re-centers after each inside market change.

     g. DOCTRINE OF EQUIVALENTS. The district court denied the patent owner’s assertions of infringement under the doctrine of equivalents.

          i. OCCASIONAL AUTOMATIC RE-CENTERING OF ACCUSED “DUAL DYNAMIC” PRODUCT; VITIATION OF “STATIC” (ONLY MANUAL RE-CENTERING) LIMITATION. On the Dual Dynamic product, which had “an occasional automatic re-centering” of the price axis, an equivalency finding would impermissibly vitiate the “static” limitation as construed to require only manual re-centering. Vitiation would occur because the occasional automatic re-centering was not a “subtle difference of degree.” This was so even though the automatic re-centering would only be once or twice per trading day because the vitiation standard is substantiality, not frequency.

          ii. SLOW CONTINUOUS RE-CENTERING OF ACCUSED “eSPEEDOMETER” PRODUCT; PROSECUTION HISTORY ESTOPPEL. The district court correctly held that prosecution history estoppel precluded equivalency of the accused eSpeedometer product, in which the price level automatically drifts toward the center.

               A. CLAIMS AMENDED TO ADD “WHEREIN” CLAUSE: STATIC PRICE DISPLAY DOES NOT MOVE IN RESPONSE TO CHANGE IN INSIDE MARKET.” The PTO sent a notice of allowance of the patent owner’s claims, which required a “static” display. The patent owner submitted a prior art reference showing a static display. It amended its claims to add a “wherein” clause: “wherein the static display of prices does not move in response to a change in the inside market.”

               B. PATENT OWNER: AMENDMENT DID NOT NARROW CLAIMS BECAUSE (1) THE CLAIMS ALREADY CONTAINED “STATIC”, AND (2) THE COURT HAD CONSTRUED “STATIC” AS PRECLUDING PRICE DISPLAY MOVEM.NT IN RESPONSE TO MARKET CHANGES. The patent owner argued that the amendments did not narrow the claims (and therefore did not create an estoppel) because the claims already contained the term “static” and the court had construed “static” as precluding price display movement in response to market changes.

               C.  CIRCULAR ARGUMENT; CONSTRUCTION VERSUS ESTOPPEL AGAINST EQUIVALENCY. The argument was “circular.” It assumed that “static” would have been construed the same way absent the amendment. Claim construction limited the claims. The estoppel by the amendment precluded an assertion that an accused product is an equivalent.

CROSS-REFERENCES ON INFRINGEMENT: On claim construction in view of a patent’s specification, see Chisum on Patents 18.03[2][c]; Chisum Patent Law Digest 5223. On the doctrine of equivalents and claim vitiation, see Chisum on Patents 18.04[1][b]; Chisum Patent Law Digest 5420. On prosecution history estoppel, see Chisum on Patents 18.05; Chisum Patent Law Digest 5410.

2. DEFINITENESS: “SINGLE ACTION”; “SHORT” TIME PERIOD. A claim required, inter alia, a “single action of a user input device.” A district court construed the phrase to mean “an action by a user within a short period of time that may comprise one or more clicks of a mouse button or other input device.” A “short” time period “may vary slightly,” but a person of ordinary skill “would not finding the term insolubly ambiguous.”

CROSS-REFERENCES ON DEFINITENESS: On indefiniteness as a ground for rejecting or invalidating a patent claim, see Chisum on Patents 8.03; Chisum Patent Law Digest 2420.

3. “ON SALE” BAR TO PATENTABILITY; INVENTOR PURCHASE OF SERVICES AND SOFTWARE TO IMPLEMENT INVENTION. The inventor named in the patents, Brumfield, was an avid electronic exchanges and conceived the “idea that formed the basis” of the later patented invention. The inventor entered into an agreement with a company, Trading Tech, that eventually obtained ownership of the patents. More than a year before filing an application for the patents, the inventor paid for custom software that Trading Tech provided to implement the invention. An accused infringer argued that the pre-critical date sales contract invalidated the patent. The Federal Circuit disagreed, noting that “[i]nventors can request another entity’s services in developing products embodying the invention without triggering the on-sale bar.”

CROSS-REFERENCES ON “ON SALE” BARS: On the Section 102(b) “on sale” bar, see Chisum on Patents 6.02[6]; Chisum Patent Law Digest 1312.

4. PRIORITY; PROVISIONAL APPLICATION. A provisional application’s disclosure of a “single click of a computer mouse” by a user provided written description support for a later added claim phrase “a single action of a user input device.” Expert testimony indicated that (1) the provisional application’s disclosure distinguished between single and multiple actions, not between clicks and other types of actions, and (2) ordinarily skilled persons knew of other forms of “single action,” such as double clicks or pressing a key. Here, disclosure of a species supported “a later filed claim directed to a very similar and understandable genus.”

CROSS-REFERENCES ON PRIORITY AND PROVISIONAL APPLICATIONS. On the requirements for a subsequent patent application to obtain the benefit of an earlier application, see Chisum on Patents 7.04, 11.02[1], 13.01; Chisum Patent Law Digest 2200, 3210, 3600.

5. INEQUITABLE CONDUCT. Prior to filing the provisional patent application on March 2, 2000, to implement the invention, the inventor procured by contract custom software and tested the software. After March 2, 1999 but before the filing, the inventor used the software. The Federal Circuit confirmed a district court’s finding that the failure to disclose the software procurement, testing, and use was not inequitable conduct because those activities would not have been regarded as material by a reasonable examiner. The procurement was not an “on-sale” bar because it was not a commercial sale of an embodiment of the invention. The testing was experimental. The uses were within the one year grace period. The inventor and patent owner believed, in good faith, that the March 2, 2000 provisional application filing, was effective for priority purposes. During prosecution of the patent, the PTO examiner did not question the provisional application’s effectiveness.

CROSS-REFERENCES ON INEQUITABLE CONDUCT. On inequitable conduct, see Chisum on Patents 19.03; Chisum Patent Law Digest 4000.

©2010 Donald S. Chisum - All Rights Reserved

Website design by Bluegrass Internet Services