MUNIAUCTION: Joint Infringement Requires Mastermind

Muniauction, Inc. v. Thomson Corp. and I-Deal (Fed. Cir. 2008)

Ray Niro’s team helped Muniauction win a jury verdict of willful infringement resulting in an award of $77 million for lost profit and enhanced damages. On appeal, the CAFC reversed finding some of the claims obvious as a matter of law and others not infringed. As its name implies, Muniauction’s patent relates to municipal bond auctions.

Infringement by a Single Actor: If it were not well understood already, this opinion completely rejects the rogue theory of joint infringement. Rather, a method claim is only infringed when a single party can be charged with performing each step of the asserted claim. Here, Muni’s claims required action by both a bidder and an auction system.

There are times when infringement can be found despite multiple actors. However, in those cases, a single party must be shown to exercise “control or direction” over the entire infringement. This is known as the “mastermind” requirement, and the CAFC has noted that it closely parallels the theory of vicarious liability.

“the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method.”

The CAFC left some wiggle room. A later case could still hold that it is not necessary to show facts sufficient to support traditional vicarious liability. (This case notes that such facts would be sufficient, but does not state they are necessary). Thus activities by an independent contractor could potentially still be attributed to the principal. However, the court made clear that direct infringement will not be found when the steps of a method claim are performed “mere arms-length cooperation” between parties. I have suggested that the line be drawn with collusion or conspiracy to infringe rather than limited to principal-agent relationships.

Obviousness: Muni’s expert admitted that claims 1 and 31 were identical to a prior art system except for the patentee’s use of a web browser to access the auction. In a post-KSR world that type of invention is difficult to protect. The court reversed the jury verdict – finding the invention obvious as a matter of law. [More on Muniauction obviousness in tomorrow's post]

Notes: The non-infringed claim reads as follows:

1. In an electronic auction system including an issuer’s computer having a display and at least one bidder’s computer having an input device and a display, said bidder’s computer being located remotely from said issuer’s computer, said computers being coupled to at least one electronic network for communicating data messages between said computers, an electronic auctioning process for auctioning fixed income financial instruments comprising:

inputting data associated with at least one bid for at least one fixed income financial instrument into said bidder’s computer via said input device;

automatically computing at least one interest cost value based at least in part on said inputted data, said automatically computed interest cost value specifying a rate representing borrowing cost associated with said at least one fixed income financial instrument;

submitting said bid by transmitting at least some of said inputted data from said bidder’s computer over said at least one electronic network; and

communicating at least one message associated with said submitted bid to said issuer’s computer over said at least one electronic network and displaying, on said issuer’s computer display, information associated with said bid including said computed interest cost value,

wherein at least one of the inputting step, the automatically computing step, the submitting step, the communicating step and the displaying step is performed using a web browser.

    

29 thoughts on “MUNIAUCTION: Joint Infringement Requires Mastermind

  1. Spinning this thread in a different direction (if anyone’s even still reading it): 271(g) defines as an act of infringement the importation of a product made abroad by a patented process. As I read it, in the context of 271(g) the practice of that process abroad may be conducted by multiple actors – the statute focuses on the product of the process, not whether the production of the product (i.e. the process itself), if carried out in the USA, would constitute infringement under current process claim infringement jurisprudence.

    Thus, for example, if the claim recites a process for making drug C by converting A to B and converting B to C, if actor 1 supplies A to actor 2 in the USA, actor 2 converts A to B in the USA and then provides the B to actor 3, and actor 3 converts B to C in the USA, I don’t believe there’s joint infringement (although I take note of Dennis’ caveat about possible implications of “control”, or possible issues of inducement to infringe). But if those same steps took place outside the USA, then C is the product of a patented process and would infringe upon being imported into the USA.

    Has anyone else encountered/thought about this?

  2. Alun

    Bingo.

    I just realized that one can’t search published applications on the attorney/agent, and I don’t see any issued patents filed under your name that look relevant. BTW, you are, apparently, the only “Alun” agent/attorney, for whatever that’s worth.

    Can you point us to a published app or a patent that demonstrates your technique?

    [Patent it and make millions! A method of drafting a methods claim for a US patent,wherein the claim avoids a joint infringement defense if infringed, said method comprising the steps of:]

  3. Personally, if I have a disclosure of an interactive computer system, say involving a client and a server, I write two mirror image sets of claims, one from the client point of view, and one from the server point of view, with things done by the other end inferentially claimed (or their obverse claimed, i.e. changing sending to receiving, etc.) and things done at that end positively recited. Claiming the whole thing in one claim leads to difficulty in finding direct infringement, and it is obvious to me that this is so, even though I am a mere patent agent, who not only doesn’t, but can’t litigate. It amazes me that anyone drafts claims like that.

  4. Clive, my main point was that MuniAuction is not a drastic change from BMC. So I was mostly talking about what the law apparently is, not what it should be. But, since you bring it up…

    “A bidder who performs one or more steps of the patented method and does so at the inducement of the seller (or to the seller’s benefit and with its approval) should have his performance imputed to the seller.”

    Why? Commercial transactions don’t happen unless the buyer and seller both perceive a benefit. So can’t I turn your statement around and state, just as plausibly: “A seller who performs one or more steps of the patented method, and does so at the inducement of the bidder (to the seller’s benefit and at its behest) should have his performance imputed to the bidder.”

    “The seller *knows* the patented method is going to be performed.”

    Maybe. The bidder might also know that. Why should the bidder escape liability merely because the arms-length seller acted precisely as the bidder hoped?

  5. Mr. Bloom, I don’t think the argument’s goal is that the bidder bear any liability for infringement. Rather, I think a bidder who performs one or more steps of the patented method and does so at the inducement of the seller (or to the seller’s benefit and with its approval) should have his performance imputed to the seller.

    The seller *knows* the patented method is going to be performed. The seller *wants* it to be performed. The seller benefits from the method’s performance. Why then should that seller escape liability? Merely because the arm’s-length buyer acted precisely as the seller hoped in performing one of the method’s steps?

  6. “fails to capture any infringement where an enterprising mastermind enlists a customer or business partner or other non-agent to complete a patented process”

    Agreed, provided it’s not a sham transaction. But BMC already made it clear that the vendor/customer relationship was not enough to trigger joint infringement. The court said that “arms-length” transactions weren’t joint action – that rules out legitimate vendor-customer transactions. A customer doing what the vendor hopes he’ll do is neither acting under the “control” nor under the “direction” of the vendor. Muniauction doesn’t change that, although it appears to establish one standard for showing joint infringment – the vicarious liability standard.

  7. Dennis,

    I’m not sure that “mastermind” liability survives the panel’s decision in MuniAuction. The facts before the panel suggest otherwise. The alleged infringer knew and intended that the issuers and bidders would complete the patented process, provided directions to these issuers and bidders directing these completing steps, and reaped the full benefit of the patented process. How is this not a “mastermind” situation?

    The standard proffered in the opinion — vicarious liability — fails to capture any infringement where an enterprising mastermind enlists a customer or business partner or other non-agent to complete a patented process. It reads the “direction” element out of the “direction OR control” test outlined in BMC and, in doing so, severely restricts “mastermind” liability.

  8. Good point Moon — how could you sue the bidder for doing just one step (submitting) and the seller for doing another step (computing)?

    Good point In House — there must be gerunds out there somewhere that would work.

    How about — “providing”. Providing a means for a bidder to bid. Providing a means for receiving. Providing a means for computing. Now, if different blokes do all these providing steps, they must surely be in collusion or under common control.

    Of course, if your spec just discloses the bidding, receiving, and computing, you may be DOA. Or if your spec restricts as to what entity or entities provide, you may have a useless claim.

    Only once have I gotten a rejection (112) on a methods claim in which the examiner demanded I claim the identity of the entity doing the steps. A difficult rejection to deal with without narrowing the claims to meaninglessness.

    Or could you write a multi-user claim like the one at issue and then throw in a dependent-looking independent along the lines of “Providing a system for performing the method of Claim 1.” ?? Claim 1 is valid, it just can’t be infringed. But the dependent claim could be infringed by one agent or a group in concert.

  9. “If you want an element/feature/limitation in the preamble to have a limiting effect, move it to the body.”

    Tell that to the accused infringer! ;)

  10. ‘”A modest proposal: if the preamble is longer than ten words, it’s per se limiting.”

    I don’t know about that. ‘

    You know, e6k, you really don’t need to comment on everything…

  11. “#32 – World of Warcraft does that.”

    When did WoW come out? 2004? Funny, this was filed before that I do believe.

    “Get in early with your comments before e6k and Looney wake up. ”

    Or before they go to bed.

    “But as to the joint inventorship issue, given RIM, BMC Resources and now Muniauction, how would one draft a claim for an interactive computer method wherein one actor does all the steps? By definition it’s not possible because “interactive” requires more than one actor. Muniauction is a good example – assuming you have a novel/non-obvious method for selling bonds online, how do you claim it in a way that there’s only one actor? Why should infringement of a method require all steps be done or controlled by one actor anyway?

    It appears to me that what the CAFC has done is to wave their wand and make an entire class of patentable subject matter disappear — and increase patent practitioner’s malpractice premiums simultaneously.”

    That was what I thought about it too but it was late and I figured I must have been reading it wrong. Though, to be honest, I agree with them, there must be a mastermind otherwise as everyone is well aware you cannot properly sue someone for doing only some parts of the claim.

    “A modest proposal: if the preamble is longer than ten words, it’s per se limiting.”

    I don’t know about that.

  12. I never understood why the preamble is often deemed non-limiting. Why else is the preamble there? Usually the preamble gives context and helps avoid having the claims read on “reverse equivalents” and other squirrelly results.

    The statute doesn’t say ‘the invention is defined by the claims once you get past the preamble.”

    How about if the applicant said in the “We claim:” phrase something like “We claim the following and intend the preambles of these claims to be limiting:”

  13. I think that the presumption should be that the preamble (unless in Jepson format) has no limiting effect (no matter how long it is). If you want an element/feature/limitation in the preamble to have a limiting effect, move it to the body.

  14. “1. In an electronic auction system including an issuer’s computer having a display and at least one bidder’s computer having an input device and a display, said bidder’s computer being located remotely from said issuer’s computer, said computers being coupled to at least one electronic network for communicating data messages between said computers, an electronic auctioning process for auctioning fixed income financial instruments comprising”

    A modest proposal: if the preamble is longer than ten words, it’s per se limiting. That would be a major step toward eliminating uncertainty about claim scope so I’m sure that it will be unanimously favored.

  15. My comments concern your report of the MuniAuction case:

    I think the control test and the conspiracy test may be mutually exclusive. Conspiracy would require knowledge of the patent by both parties. Control would not.

    Therefore the test should be an either/or proposition.

  16. Thanks for including the claim Dennis!

    The patent 611099 was filed May 29, 1998 and issued Dec. 12, 2000. A quintessential bubble patent.

    The PTO appears to have considered some non-patent prior art.

    link to patft1.uspto.gov

  17. “By definition it’s not possible because “interactive” requires more than one actor.”

    Babel,
    can’t you just cahnge the actions that are happening? For example, in claim 1 from this patent, instead of “inputting data” change it to “receiving data”?

    Just a thought.

  18. Oops, I should have read the entire opinion. The examiner apparently based allowance on finding the second “automatically computing” step absent from the Parity prior art. So, the CAFC finds that allowance mistaken based on the expert’s contrary testimony. This obviousness decision seems SOP for the CAFC following KSR.

  19. “Why should infringement of a method require all steps be done or controlled by one actor anyway?”

    Think about it in the context of an (allegedly) non-obvious method claim where all the steps (A, B, C, and D) are old in the art. The answer to your question is that it would be absurd to sue two people for independently carrying out the steps without knowledge of what the other is doing (i.e., one person does A and B, while another does C and D). In essence, if you didn’t require control, you’d be able to sue people for practicing the prior art.

    Also, I agree with Dennis that “the line be drawn with collusion or conspiracy to infringe rather than limited to principal-agent relationships.”

  20. I couldn’t agree more that the patent is a 103 dung heap, but in this post Dennis is focusing on the joint inventorship issue. Can’t wait for tomorrow for Dennis to open the pit bull cage on the obviousness issue. Get in early with your comments before e6k and Looney wake up.

    But as to the joint inventorship issue, given RIM, BMC Resources and now Muniauction, how would one draft a claim for an interactive computer method wherein one actor does all the steps? By definition it’s not possible because “interactive” requires more than one actor. Muniauction is a good example – assuming you have a novel/non-obvious method for selling bonds online, how do you claim it in a way that there’s only one actor? Why should infringement of a method require all steps be done or controlled by one actor anyway?

    It appears to me that what the CAFC has done is to wave their wand and make an entire class of patentable subject matter disappear — and increase patent practitioner’s malpractice premiums simultaneously.

  21. Yet Another Anon may be right on. For example. some patents issued relating to VOIP or techniques of monitoring or programming devices implanted in patients via the “world wide web” or internet might be affected. But in most of these medical device patents, the particular claimed method or system would include elements that are necessitated in order to use the internet or web browser and would not necessarily be found literally or inherently in the prior art RF systems and methods.

    I think that most examiners came to the conclusion early on that merely practicing a known method using the internet was obvious per se. However, the examiner might not know that all of the elements of the claimed method were known and instead rely mistakenly on another claim limitation. The expert testimony evidence relied on by the CAFC in this case was probably not known to the examiner. But, it seems pretty clear from the claim language itself that the point of novelty must reside in the final “wherein” expression. Not having seen the file wrapper, I wonder how the claims came to be allowed, whether the examiner made a 103 rejection, and what the examiner’s reasons for allowance stated.

  22. Niro should appeal. I would like to see SCOTUS confronted with Claim 1 and see what they have to say about it.

  23. This patent is just garbage. Maybe it’s my 20 years of experience in computer before getting a law degree but there is absolutely nothing novel or inventive whatsoever. The a piece of junk like this made it through the patent process is a testament to the ineptitude of the PTO. There is absolutely nothing inventive or original within this patent.

    We already note that 1-31 are not original.

    #32 – World of Warcraft does that.
    #33-34 – Duh? An auction
    #35-36 – Like ebay does?

    And so on. It is clear that whoever granted this patent had no concept of the standard computer processes of data editing and validation.

    This kind of crap has become the norm in software/business patents. If the PTO is going grant patents like this one, litigation is the inevitable result.

  24. Patrick, I think we are on the same page and just have a definitional issue. In my mind, a theory of “Joint Infringement” would allow the patentee to sue either of the joint infringers. This follows the traditional notion of joint liability. Here, the court said that this type of joint liability is not available, but that a patentee may sue the “mastermind” who organized and controlled several folks to conduct the infringement.

  25. Why do you say that “If it were not well understood already, this opinion completely rejects the rogue theory of joint infringement”? Both Muniauction and BMC Resources recognize the theory, but find that the facts fail to meet the requirement of direction and control by the accused party. I don’t see how this case rejects the “theory”.

  26. This case could stand for the proposition that if a web browser is known, and the application is known, putting the application on the web is obvious.

  27. This shows how KSR gutted the “clear and convincing” standard. Essentially, the CAFC disagrees with the jury. The District Judge, the Examiner and the jury saw it one way, and the CAFC saw it the other. If the statutory standard truly is clear and convincing evidence, then what would it take to overturn a jury verdict on appeal – clearly erroneous, clear and convincing? There’s none of that in the CAFC opinion, so they elevate mere evidence up to the level of clear and convincing. The panel simply ‘feels’ that this invention was a ‘bad patent.’ To find that the patentee’s expert statement, apparently when cross-examined about the judge’s claim construction, that this one statement was all the clear & convincing evidence that the jury should have embraced is proof -proof that the CAFC decides cases, then decides what to say to support that decision.
    This patent and invention may not be worthy of protection, but if an examiner, a jury, and a district judge have done their statutory duty, then it looks bogus for the CAFC to reverse without anything more than one remark on cross by the patentee’s expert.

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