Patented Method of Arbitration :

PatentLawPic005Cybersettle v. National Arbitration Forum (NAF) (Fed. Cir. 2007) (non-precedential)

Cybersettle owns the patent on a computerized dispute resolution method. Disputing parties make settlement bids into a computer. If there is a close-enough match between the parties, the case is settled. A party may pre-submit multiple bids to be used in consecutive bidding rounds.

The National Arbitrators Forum (NAF) is a private corporation that handles arbitration and was sued for infringement — apparently after conducting 100,000+ such resolutions. NAF lost its infringement suit, but appealed on claim construction.

Cybersettle’s claimed method includes the steps of “receiving a plurality of demands [and] a plurality of settlement offers.” The lower court, however, did not require the receipt of multiple offers and demands. Rather, the claim was construed to be satisfied if the system “has the capacity to receive multiple offers and demands, even if ony one demand and one offer are received.”

On appeal, the CAFC reversed, finding that a claimed method requires actual practice of the method — not simply the capability.

A patented method is a series of steps, each of which must be performed for infringement to occur. It is not enough that a claimed step be “capable” of being performed.

On remand, the district court will need to determine what portion of NAF’s infringing actions included multiple offers and demands.

In the course of their operation, the accused … systems would infringe (assuming all the other claim limitations were satisfied) only when they received multiple demands and multiple offers; proof that those systems were capable of receiving multiple demands and multiple offers is not proof that they ever performed the claimed methods.

Vacated and remanded.

Notes:

  • National Journal (Andrew Noyes) previewed the case on July 9, 2007. [LINK]
  • Interestingly, the opinion offered no discussion of patentable subject matter issues.
  • The patent [LINK]

8 thoughts on “Patented Method of Arbitration :

  1. Capability to perform a specified function is enough for an apparatus/system claim. But it’s crystal clear that won’t work for a method claim. To infringe a method claim, you have to perform each and every step – not just parts of each and every step. Were they crazy for thinking otherwise? No. But they certainly weren’t very bright.

  2. Keep in mind that this was a method claim. If the claim were for an apparatus that performed these functions, then capability may have been enough – thus the Plaintiff was not crazy for believing it could get the “capability” argument in on the method claim.

    As for obviousness, can someone point me to a prior art dispute resolution service that AUTOMATICALLY FORCES a settlement based on a series of blind bids? That would be good to know about. Most dispute resolution requires a live mediator who hears bids, takes them to the other side for consideration, etc.

  3. I just looked at the patent (#6,330,551). The claims are terrible! I can see why only 5 of the 200 claims were asserted. For example, Claim 8 requires 3 rounds of demands and offers, but states that, if after the first round they match, there is a settlement. Huh? Then why claim rounds 2 and 3?

    Looking at PAIR, the attorneys listed have very low registration numbers. The attorney with the highest number was registered in 1979. After reading the claims, whoever drafted the claims had to have very little understanding of computers. I didn’t see any claims that attempted to include any limitations relating to any advantage of using a computer to perform the method steps. There are many claims that are pure method claims and I cannot believe that they are not anticipated by known, manually based, dispute resolution methods. In fact, the specification reads like they invented a new form of dispute resolution. The examiner had to be asleep at the wheel.

    If nothing else, this patent is a good example of why an inventor is always well advised to use a patent attorney with some knowledge in the field of the invention.

  4. I guess the fact that this went to trial is pretty good evidence that both pieces of software suck.

  5. Oh good grief. I remember a colleague saying to me about 10 years ago (shortly after State Street) that now all you needed to get a patent was recite a known method of doing business and add the words “on the internet” to the claim. Because the claimed method here is carried out using a computer, as opposed to manually, that makes it patentable? Puh-leez. We’re post-KSR people, let’s get this one knocked out for obviousness.

  6. Perhaps the defendant is a PatentlyO reader and will raise the patentable subject matter issue below.

  7. While admittedly I only read through the decision quickly, I really wonder what the heck they were (Cybersettle’s attorneys) were thinking. Yes, they convinced a trial court judge that a method claim requiring the separate steps of 1) receiving a plurality of demands from a first party, and 2) receiving a plurality of settlement offers from a second party was satisfied if the defendant’s system “has the capacity to receive multiple offers and demands, even if only one demand and one offer are received.” But is anyone surprised that the CAFC did not go along with such an interpretation of a method claim?

    And arguing that a claim interpretation is flawed because it excludes a preferred embodiment from the scope of the claim is typically a loser of an argument at the CAFC. But it seems borderline specious to make that argument when the patent includes a different claim which clearly covers the preferred embodiment argued to be excluded from the scope of the claim in question.

    What is not clear is whether the defendant might still infringe under the correct interpretation of the claims in question. Nor is it clear whether or not there are any other claims in play in this litigation – after all, the patent in suit has 200 claims.

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