ADVANCED SOFTWARE DESIGN CORPORATION, et al., Plaintiffs, vs. FISERV, INC., Defendant.
Case No. 4:07CV185 CDP
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION
May 15, 2012
CATHERINE D. PERRY
This patent infringement case is set for trial on June 27, 2012, and before me now are various motions for summary judgment and to exclude testimony. As set forth below, I will deny the motions.
I. Background
Plaintiff Advanced Software alleges that defendant Fiserv’s “Secure Seal” product infringes a patent titled “Apparatus and Method for Enhancing the Security of Negotiable Instruments,” patent no. 6,792,110. The Court of Appeals described the case as follows:
Advanced Software and Fiserv offer competing products for preventing check fraud and forgery. The products generally work by encrypting selected information on a check, such as the name of the payee or the amount of the check, and printing the encrypted information on the check. When someone attempts to cash a protected check, the products validate the check by decrypting the encrypted information and comparing it to the corresponding unencrypted information that has been entered on the check. If the decrypted
information does not match the selected unencrypted information on the check, the check is deemed fraudulent or forged and will not be cashed.
Advanced Software Design Corp. v. Fiserv, Inc., 641 F.3d 1368, 1371 (Fed. Cir. 2011). The independent claims relevant to these motions are Claims 1 and 9, as all other asserted claims are dependent on these and do not materially change the analysis of the motions.
Claim 1 is a process claim and states:
A process of validating a negotiable financial instrument by a payor, in which selected information found on the financial instrument which varies for each instantiation of the financial instrument made by the same payor is encrypted in combination with key information not found on the financial instrument to generate a control code which is printed on the financial instrument along with the selected information, the process comprising:
reading the selected information from the financial instrument; and
one of (i) decrypting the control code to thereby obtain decrypted information whereby the cheque validator may refuse to honour the financial instrument if the selected information found on the financial instrument does not match the decrypted information, and (ii) re-encrypting the selected information as presented on the financial instrument to re-obtain a second control code, whereby the cheque validator may refuse to honour the financial instrument if the second control code does not match the control code printed on the financial instrument.
’110 patent, col. 13, l. 60 - col. 14, l. 13. Claim 9, a system claim, states:
A system for validating the authenticity of selected information found on a negotiable financial instrument, wherein the selected information varies for each instantiation of the financial instrument presented by the same payor, and wherein the selected information is encrypted in
combination with key information not found on the financial instrument to generate a control code which is printed on the financial instrument along with the selected information, the system comprising: a scanner for reading the selected information and the control code from the financial instrument; and
a data processing device programmed to (i) decrypt the control code and generate decrypted information for comparison against the selected information found on the financial instrument and for generating a signal in response to the equality thereof, or (ii) re-encrypt the selected information as found on the financial instrument to re-obtain a second control code and for generating a signal in response to the quality of the control code found on the financial instrument against the second control code.
’110 patent, col. 14, ll. 35-55. The Federal Circuit held that the preamble in each claim defines the environment in which the invention works, and is not part of the claim. Advanced Software Design Corp., 641 F.3d at 1375. “[T]he asserted claims of the ’110 patent recite a process or system for validating checks, not for encrypting and printing them.” Id. Although the process steps or the system contents listed in the preambles must have been done or exist in the checks before the patented invention can be used to validate them, it does not matter whether the accused infringer does or induces others to do those things.
II. Fiserv’s Motions for Summary Judgment of Invalidity
I previously denied both parties’ motions for summary judgment relating to invalidity, because I concluded genuine issues of material fact remained. Fiserv has now filed two additional motions claiming invalidity. One motion argues that the ’110 patent is invalid as being anticipated and/or obvious under
Fiserv’s second motion on invalidity presents a question of law: whether the patent is invalid under
A. Anticipation
In the previous motions for summary judgment for anticipation, the parties cited four references: White, Merkle, Schatz, and Wang. Fiserv now asserts two additional references. The first is an article by Jose Pastor, titled “CRYPTOPOST A Cryptographic Application to Mail Processing.” The second is U.S. Patent No. 3,990,558, referred to by the parties as the Ehrat reference.
The presumption that issued patents are valid is set out in
First, Fiserv argues that Pastor anticipates the ’110 patent because the postage stamp in Pastor can constitute a “financial instrument.” Advanced Software argues that “financial instrument” refers back to “negotiable financial instrument,” and a postage stamp is not negotiable. I agree with Advanced Software on this point.
Fiserv is urging a hyper-technical reading of common-sense language. Each of the references to “financial instrument” or “instrument” relates back to the initial reference to “negotiable financial instrument.” Additionally, every iteration of “negotiable financial instrument” is preceded by the indefinite article “a,” whereas every iteration of “financial instrument” or “instrument” is preceded by the definite article “the.” “Negotiable financial instrument” is thus the antecedent to which all uses of “financial instrument” refer, and so that narrower definition should be applied throughout. See Creative Internet Adver. Corp. v. Yahoo! Inc., No. 2010-1215, 2011 WL 1522414 at *4 (Fed. Cir. Apr. 22, 2011) (citing Baldwin Graphic Sys., Inc. v. Siebert, Inc., 512 F.3d 1338, 1342 (Fed. Cir. 2008) (holding that the subsequent use of definite articles “the” or “said” reinvoke the meaning of the antecedent claim term)). A person of ordinary skill in the art would not understand a postage stamp to be a “negotiable financial instrument.”
The plain meaning of ”selected information” is that something is selected, or chosen. Otherwise, the language could have been “check information being protected,” or something of that nature. Furthermore, the dependent claims Fiserv relies on all say, “wherein the selected information includes . . .” (emphasis added). “Includes” means that it is not exclusive, or in other words, the payor has chosen at least the specified information (e.g. monetary value), but could also choose to include more. “Selected information” therefore requires that the information be chosen. I believe that genuine disputes remain regarding whether the Pastor reference discloses this. Additionally, the Pastor reference does not include re-encryption as a method of validation, and that is an element of the ’110 claims.
Genuine disputes also remain regarding whether Ehrat discloses the use of selected information. In the Ehrat process, the check amount and check serial number are enciphered to produce a crypto code. These amounts are automatically encrypted. Although Fiserv argues that the user has the option of including more or
B. Obviousness
The previous summary judgment motions addressed Fiserv’s obviousness defense based on prior art references referred to as Chapman, Oz, Tygar and Yee, as well as a list of 10 others. Fiserv this time argues obviousness based on Ehrat in connection with White, Merkle, and Schatz.
Each side has presented expert testimony supporting its arguments. I again conclude that the language of the patent and of the prior art references, as well as the expert reports, raise questions of fact regarding what the prior art discloses and whether it would have been obvious to one skilled in the art to combine different elements of these various prior art references. Additionally, there are numerous disputes about the success or lack thereof of this invention, and resolution of the factual issues regarding these secondary considerations makes summary judgment inappropriate.
C. Abstract Idea or Law of Nature
Fiserv’s motion for summary judgment of invalidity under
As a preliminary matter, I reject Advanced Software’s arguments that this issue was not timely disclosed and that it conflicts with a position taken by Fiserv regarding another patent. Fiserv addressed § 101 in its affirmative defenses and counterclaims, and after the case was remanded from the Federal Circuit, Fiserv again indicated an intention to file this motion. This issue is no surprise, and it was timely raised. Additionally, I am not concerned with Fiserv’s argument in some other case, as this motion presents a question of law; arguments in other cases are not relevant to the legal issue presented by the patent in this case.
The merits of this argument present a very close case, especially in light of recent Supreme Court cases and Federal Circuit cases that – at least to me – do not make this decision any easier. Section 101 explains that only inventions can be patented: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”
Although the Supreme Court’s more recent Prometheus case dealt with a “law of nature” rather than an “abstract idea,” it also found the algorithm cases of
Both the Supreme Court and the Federal Circuit recognize that § 101 is meant to allow patentability of most new processes or systems. The Federal Circuit has referred to § 101 as “merely a threshold check” and “broadly inclusive.” See Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1326 (Fed. Cir. 2011). Similarly, the Supreme Court has referred to § 101 as a “threshold,” and has recognized that Congress took a “permissive approach” to patentability. Bilski, 130 S. Ct. at 3225.
Fiserv argues that neither Claim 1 nor Claim 9 meets the machine or transformation test, which Bilski found was still a useful tool. Id. at 3227. Fiserv argues that Claim 1 merely sets out steps that can be performed entirely in the human mind, while Advanced Software argues that both the control code and the printed check constitute transformations. Fiserv argues that the scanner and programmed data processing device (which are obviously machines) of Claim 9 do not add meaningful limits to the scope of the claim.
Even though the preambles here are not part of the claims, both parties agree that they limit the claims, and so it is appropriate to consider them in discussing this issue. I agree with Advanced Software that the process and system set out in the preambles meet the machine or transformation test. Both claims, when considered in the context of the entire patent, including its specifications, contemplate the use of a computer that is specially programmed to perform the encryption that is necessary for the invention to have any useful purpose. This is analogous to the patent in Ultramercial, where the test was met because, “Viewing the subject matter as a whole, the invention involves an extensive computer interface.” 657 F.3d at
Moreover, I conclude that the validation steps of Claim 1 meet the machine prong of the test – which is met if the process is “tied to a particular machine.” See Bilski, 130 S. Ct. at 1325-27. Fiserv is correct that nothing in the plain language of the claim mentions a machine, but the specification regarding the re-encryption or decryption steps contemplates use of a computer to perform those steps. The specification refers to a “verification system“, and the preferred embodiment uses a machine readable code such as a bar code. When read as a whole, the patent contemplates using a computer.
Similarly, the validation system in Claim 9 explicitly contemplates using both a scanner and a programmed “data processing device.” The scanner itself may not be sufficient to confer patentability if all it does is gather data. Cybersource, 654 F.3d at 1372. But the “data processing device” must be programmed to perform the re-encryption or decryption functions. The court has recognized that “programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular
Finally, I do not believe the subject is unpatentable because it uses an algorithm, or that it would “wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.” Cf. Gottschalk v. Benson, 409 U.S. at 72, 93. Nor do I believe that this is just an attempt to limit the use of the algorithm to a particular technological environment, as with the unpatentable system in Flook. Instead, I believe the case is more like Diehr and is, like the invention in Diehr, applies a “mathematical formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were
For all the above reasons, I conclude that ’110 patent does not cover unpatentable subject matter, and it therefore passes § 101’s threshold test.
III. Advanced Software’s Motion for Summary Judgment of Infringement
Advanced Software has filed a motion for partial summary judgment, arguing that Fiserv infringes claims 1, 5, 6, 7, 8, 9, 13, 14, and 15 of the ’110 patent. Fiserv argues that operation of the Secure Seal product does not infringe because the environmental limitations of the preamble are not met, and because it does not meet all of the validation limitations present in the patent. For infringement, every claim limitation must be present in the accused device. See Bayer AG v. Elan Pharm. Research Corp., 212 F.3d 1241, 1247-48 (Fed. Cir. 2000). I conclude that genuine disputes of material fact exist regarding claim limitations, and I will list some of those issues here.
A. The Preamble Requirements
Fiserv argues that the checks validated by Secure Seal do not satisfy the preamble requirements of the ’110 patent because Secure Seal does not (i) use key information, (ii) use encrypted information, (iii) perform an encryption, or (iv)
Fiserv argues that the permutation seed (the key information) is not encrypted in combination with selected information because it is not incorporated into the end result of the permutation algorithm. This argument relies on testimony from Dr. Jagannathan, who stated that “a permutation . . . does not involve any combination whatsoever – mathematical or otherwise – with any other piece of information. Additionally the permutation seed is not incorporated in the end result of the rearrangement.” Jagannathan Decl. at ¶ 113. Advanced Software argues that this conflicts with Dr. Jagannathan’s Markman testimony, as well as the testimony of Secure Seal’s developer, Mr. Wells. Given the competing testimony and evidence, this issue presents a genuine issue of material fact to be decided by a jury.
B. The Validation Steps
I agree that Fiserv has shown genuine disputes of material fact at least as to whether Secure Seal decrypts, as to whether Secure Seal reads selected information from the face of the check, and as to whether Secure Seal compares information, all as contemplated by the ’110 patent. These disputes preclude summary judgment of infringement.
Fiserv’s last two arguments both concern what the Secure Seal process does with the decrypted information. Fiserv argues that Secure Seal does not allow a user to refuse to honor a check if the selected information does not match the decrypted control code, and that Secure Seal does not generate a signal in response to the equality of the control code and the decrypted selected information. Fiserv’s argument is that Secure Seal simply provides decoded information to a database, where another software application does the actual comparison with the check information. Since, allegedly, no comparison is done by Secure Seal, it cannot generate a signal in response to the equality of information (since it does not know whether there is equality or not). Although Advanced Software argues that Fiserv’s witnesses have testified to the contrary, I do not find the evidence as clear as Advanced Software would urge, and I believe this is a remaining fact issue.
Fiserv seeks to exclude Advanced Software’s damages expert, Michael T. Lewis, and Advanced Software seeks to exclude Fiserv’s damages expert, Richard Bero. Additionally, each side seeks to exclude opinion testimony of other witnesses, Srinivasan Jagannathan (Fiserv’s obviousness expert) and Calin Sandru (a named plaintiff and the inventor of the ’110 patent). I will deny all the motions regarding experts.
A. Damages Experts
Both sides seek to prevent the other’s damages expert from testifying, arguing that the opinions are inadmissible under the law relating to damages in patent cases. I have reviewed the reports and briefs under the appropriate standards, and I will deny these motions. Although most of the disputes about the proposed testimony are things that go to credibility and weight of the testimony, rather than its admissibility, I remain concerned about the foundation for both experts’ opinions. They give very different versions of the marketplace and even about the products that allegedly incorporate the patented invention, as well as about most other factual issues on which their opinions are based. From the record before me I conclude that factual disputes remain, and so I will deny the motions in limine to exclude the testimony. As with many rulings on motions in limine, because my ultimate decision on admissibility will depend on the evidence that is actually
B. Srinivasan Jagannathan
Advanced Software asks that I preclude Fiserv’s expert witness Dr. Srinivasan Jagannathan from testifying as to obviousness, on the grounds that he did not apply a proper obviousness analysis. Specifically, Advanced Software argues that Jagannathan failed to provide a reason why a person skilled in the art would combine the prior references. As the Supreme Court pointed out when it rejected the rigid “teaching, suggestion or motivation” test in KSR International Co. v. Teleflex, Inc. 550 U.S. 398 (2007), a person of ordinary skill in the art is expected to use common sense and to understand the market demands. Id. at 421. See also Unigene Labs, Inc. v. Apotex, Inc,, 655 F.3d 1352, 1360-62 (Fed. Cir. 2011). Throughout Jagannathan’s report are statements explaining why one skilled in the art would consider combining the various items. The report does not ignore this aspect of the obviousness analysis, as Advanced Software argues.
C. Calin Sandru
Fiserv asks that I not allow the inventor of the ’110 patent, Calin Sandru, to give opinion testimony. On March 29, 2012, Advanced Software disclosed Sandru as a non-retained expert expected to provide technical or opinion testimony regarding “the scope and content of the prior art, as well as the differences between
I will deny this motion. As Advanced Software points out, both
I caution that no one should interpret this decision as somehow saying that the March 2012 disclosure is or is not compliant with
V. Conclusion
In conclusion, I am denying all the pending motions, although I acknowledge that some of the issues are quite close. I am concerned about the upcoming trial, however, and here provide some of my concerns for the parties’ contemplation.
Counsel have informed me that they believe the jury trial of this case can be completed in a week and a half, and I do not expect to take more time than that. But this is a technical case, and the parties will be required to provide the jury a great deal of information about an area of study most jurors are unlikely to have encountered. The parties must focus their cases on what is important, and I do not want them to waste time or to confuse the judge or the jury with extraneous issues. I expect everyone to be prepared to move quickly through jury selection and to present their evidence without undue delay. Accordingly,
IT IS HEREBY ORDERED that defendant’s motions for summary judgment [## 233, 237] and plaintiffs’ motion for partial summary judgment [#230] are denied.
Dated this 15th day of May, 2012.
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE