• November 30, 2012

With the passing of another “Cyber Monday” comes the not so secret news that consumers are comfortable (and eager) to shop for goods and services on the internet more than ever before. While this trend is lucrative to online suppliers, it puts local affiliate retailers in a bind. How can the local retailers stay in business if their customers are buying the same products from the supplier’s online store?

In two lawsuits, Reshare Commerce, LLC alleges that two separate groups of defendants (insurance companies: State Farm Mutual Automobile Insurance and American Family Mutual Automobile Insurance; and commercial entities: Creative Memories and Demalogica, Inc.) have infringed on its patent, which is designed to help local retailers weather this problem. The defendants have all denied infringing on the patent and some have asserting counterclaims for declaratory judgment. Interestingly, Reshare has previously sued companies for infringing on the same patent.

Recently, U.S. Judge Ann D. Montgomery (D. Minn.) ruled on a combined motion on the construction of 11 disputed terms in Reshare’s patent and gave a very look into how a court construes words in patents.

The patent at issue, U.S. Patent No. 6,594,641 titled the “Computer Facilitated Product Selling System,” allows customers to purchase products directly from a supplier (through its website or other remote means) but then gives credit for the sale to either the local retailer that the customer chooses or that is geographically closest to the customer’s address. This gives the local retailer some or all of the lost profits that it would have made but for the online sale.

Judge Montgomery provides an instructive hierarchy that courts should follow in construing claims (a comprehensive word) in patents. Most importantly, Judge Montgomery notes that courts should look to intrinsic evidence, including the claims, the specification (definition contained in the patent), and the prosecution history on the claims.

Claim terms are “generally given their ordinary and customary meaning,” which is “the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention, i.e., as of the effective filing date of the patent application.” Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005) (quotation and citations omitted).

While these standards are similar to the statutory canons of construction used to determine the meaning of contractual and statutory terms, there is a specific emphasis on how the claims relate to the patent.

Claim terms “should be construed consistently with [their] appearance in other places in the same claim or other claims of the same patent.” Rexnord Corp. v. Laitram Corp., 274 F.3d 1336, 1342 (Fed. Cir. 2001). In addition, the specification is usually “dispositive; it is the single best guide to the meaning of a disputed term.” Vitrionics, 90 F.3d at 1582. Courts are nonetheless cautioned not to import limitations from the specification into the claims. Phillips, 415 F.3d at 1323; Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1347 (Fed. Cir. 1998).

Of the 11 terms that were disputed, the court held that the seven of the terms would have their ordinary meaning, while two would have the specification detailed in the patent, one claim that had a specification was changed, and one claim that was not in the patent was defined. I have to admit that before reading this Order I was unfamiliar with this type of hearing, but considering how important (and potentially costly) the terminology and descriptions in patents can be, it makes sense how counsel vigorously contested certain definitions.

Now that the court has clarified the terms, it will be interesting to see how the parties continue to litigate their claims or agree to other terms (such as settlement).

Although Jake Smith does not prosecute or file patents, he does represent individuals, small businesses and other commercial entities in his general litigation practice. He also participated in his first Cyber Monday this year.

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