Sunday, September 12, 2004

Arguments in eBay appeal of MercExchange verdict set for Oct. 5

The CAFC will hear oral argument in the appeal, by eBay, of a $29.5 million jury verdict against it for infringement of claims of a patent of MercExchange.

Forbes identified one issue on appeal: whether or not a certain videotape was prior art which invalidated the claims of the patent of MercExchange. The videotape was before the jury. Thus, on appeal, an issue is whether or not there is substantial evidence to support the jury verdict [see earlier post in IPBiz]. The Forbes article also points to an issue about whether or not the videotape is prior art at all. There was a recent decision of the CAFC [IN RE CARL F. KLOPFENSTEIN and JOHN L. BRENT, JR.] which gave guidance on what is, and is not, prior art. The Forbes article also mentions a re-examination of Woolston's patents [Woolston is the inventor of the MercExchange patent in the litigation.]

from the article in Forbes:

Yesterday [Sept. 8, 2004], the U.S. Court of Appeals for the Federal Circuit set Oct. 5 as the date when it will hear arguments in the eBay appeal of a judgment of patent infringement against it.

Sure to figure in that hearing is a videotape that eBay hopes will exonerate the company. The tape, narrated by former newsman Edwin Newman, was made by New York gallery owner Ken Nahan in 1994 for his company Hanicorp. Nahan hoped the investors who saw it would back his patent to tie together art inventories across the world, allowing customers to view art via computer.

That video, eBay has argued, is what is known in the patent business as "prior art," because it proves that Hanicorp was the first to propose an Internet auction in February 1994. That would have been a few months before MercExchange's founder Thomas Woolston, an electrical engineer who served in the military and with the U.S. Central Intelligence Agency, did the same.

A jury, however, was not convinced. They were shown the tape during a four-week trial in Virginia last year and returned a verdict that eBay willfully infringed on 41 claims in two MercExchange patents (see: "EBay Loses Round One In Patent Fight"). The court awarded MercExchange $29.5 million.

Now eBay is in the midst of a battle to overturn that verdict. The way the tape got into evidence and how eBay is using it now makes one thing clear: eBay is not treating MercExchange as a tiny nuisance.

An eBay attorney attempted to hand over the video to MercExchange late one night after the trial had already begun, not, as is usual, during discovery. A woman who described herself as hotel security called a MercExchange attorney's room at the Norfolk Marriott, claiming there was a disturbance on the floor and that she needed to come up immediately. Suspecting a ruse, the attorney told her that there was no disturbance and refused to give his room number. It was then that she told him a paralegal wanted to serve him with papers. He again refused.

The next morning, eBay served the attorney with the tape and introduced the video in court. The federal court accepted assurances from eBay's outside counsel that the tape was authentic, and outside counsel explained that the video was a publicly available infomercial "displayed on national television."

But the verdict caught the attention of Nahan, and he contacted Woolston last summer with curious news: Two attorneys, who later identified themselves as representatives of eBay, had called his wife Sherri on March 7, 2003, and asked if they could meet with them on the following Tuesday. The Nahans agreed.

After explaining the litigation with Woolston, the lawyers asked the Nahans whether they would testify on behalf of eBay and for permission to use the Hanicorp video. But, in a deposition to be used in oral arguments in the appeal, Nahan says he told the lawyers that the tape was never publicly distributed to anyone prior to 1996 and thus that it could not be considered prior art to the Woolston patents. "It was not as...eBay has infomercial, i.e., a public advertisement," Nahan says. What's more, Hanicorp required anyone who viewed the tape to sign a confidentiality agreement and since that was still in force, Nahan declined to give the tape to the eBay lawyers.

The company is using the tape not just in appealing the verdict, but also in its request in June to the U.S. Patent and Trademark Office to reexamine all of Woolston's patents. The office agreed to a reexamination. About that reexamination, Durzy says that MercExchange used these same arguments and failed to stop the patent office from going forward with the reexamination. Of course, by agreeing to the reexamination, the Patent office did not make a ruling on the validity of any charges. That won't happen for at least 18 months.

from CAFC case [IN RE CARL F. KLOPFENSTEIN and JOHN L. BRENT, JR.] on prior art:

The appellants argue on appeal that the key to establishing whether or not a reference constitutes a “printed publication” lies in determining whether or not it had been disseminated by the distribution of reproductions or copies and/or indexed in a library or database. They assert that because the Liu reference was not distributed and indexed, it cannot count as a “printed publication” for the purposes of 35 U.S.C. § 102(b). To support their argument, they rely on several precedents from this court and our predecessor court on “printed publications.” They argue that In re Cronyn, In re Hall, 781 F.2d 897 (Fed. Cir. 1986), Massachusetts Institute of Technology v. AB Fortia, 774 F.2d 1104 (Fed. Cir. 1985) (“MIT”), and In re Wyer, 655 F.2d 221 (CCPA 1981), among other cases, all support the view that distribution and/or indexing is required for something to be considered a “printed publication.”
We find the appellants’ argument unconvincing and disagree with their characterization of our controlling precedent. Even if the cases cited by the appellants relied on inquiries into distribution and indexing to reach their holdings, they do not limit this court to finding something to be a “printed publication” only when there is distribution and/or indexing. Indeed, the key inquiry is whether or not a reference has been made “publicly accessible.”

As we have previously stated,
The statutory phrase “printed publication” has been interpreted to mean that before the critical date the reference must have been sufficiently accessible to the public interested in the art; dissemination and public accessibility are the keys to the legal determination whether a prior art reference was “published.”

Footnote 4 is relevant to the eBay argument (as it applies to material in a videotape shown to others as prior art):

With regard to scientific presentations, it is important to note than an entirely oral presentation at a scientific conference that includes neither slides nor copies of the presentation is without question not a “printed publication” for the purposes of 35 U.S.C. § 102(b). Furthermore, a presentation that includes a transient display of slides is likewise not necessarily a “printed publication.” See, e.g., Regents of the Univ. of Cal. v. Howmedica, Inc., 530 F. Supp. 846, 860 (D.N.J. 1981) (holding that “the projection of slides at the lecture [that] was limited in duration and could not disclose the invention to the extent necessary to enable a person of ordinary skill in the art to make or use the invention” was not a “printed publication”), aff’d, 676 F.2d 687 (3d Cir. 1982) (unpublished table decision). While Howmedica is not binding on this court, it stands for the important proposition that the mere presentation of slides accompanying an oral presentation at a professional conference is not per se a “printed publication” for the purposes of § 102(b).


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