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Federal Circuit Reverses $84.6M Award Against Thomson in Muniauction's Online Bond Auction Patent Suit
Muniauction, Inc. v. Thomson Corp.
No. 2007-1485, U.S. Court of Appeals for the Federal Circuit, 07/14/2008
Companies Mentioned: I-Deal, LLC, Muniauction, Inc. d.b.a. Grant Street Group, Thomson Corp. d.b.a. Thomson Financial LLC and Thomson Financial Municipals Group
Holding
The U.S. Court of Appeals for the Federal Circuit reversed a Pennsylvania district court's $84.6 million judgment that found defendant-appellant Thomson willfully infringed Muniauction's patent relating to online auction of municipal bonds. In ruling on plaintiff-appelllee Muniauction's claim of infringement, the Federal Circuit noted that the only theory of infringement presented by Muniauction was that of so-called joint infringement. The law of the Federal Circuit is axiomatic that a method claim is directly infringed only if each step of the claimed method is performed. Under court precedent, the issue of infringement in this case turned on whether Thomson sufficiently controls or directs other parties (e.g., the bidder) such that Thomson itself can be said to have performed every step of the asserted claims. In this case, Thomson neither performed every step of the claimed methods nor had another party perform steps on its behalf. Further, Muniauction had identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders. Therefore, Thomson did not infringe the asserted claims as a matter of law.
Detailed Summary
This is a patent infringement case. Defendant-appellant Thomson Corporation and I-Deal, LLC (collectively “Thomson”) appealed from a final judgment by the U.S. District Court for the Western District of Pennsylvania, after a jury trial, that the asserted claims of U.S. Patent No. 6,161,099 (“the ’099 patent”) were not obvious, that Thomson willfully infringed the asserted claims of the ’099 patent, that plaintiff-appellee Muniauction, Inc. was entitled to approximately $77 million for lost profits damages enhanced for Thomson’s willful infringement, plus $7.7 million in pre-judgment interest, and that Thomson was permanently enjoined from continued infringement of the ’099 patent. Opinion, p. 1, citing Muniauction, Inc. v. Thomson Corp., 502 F. Supp. 2d 477 (W.D. Pa. 2007).
The ’099 patent is directed to electronic methods for conducting “original issuer auctions of financial instruments.” Id., p.2, citing ’099 patent col.2 ll.49–50. Specifically, the ’099 patent is directed to original issuer municipal bond auctions over an electronic network, e.g., the Internet, using a web browser. Id., citing id. at col.1 ll.13–15.
In other words, the invention of the ’099 patent provides an “integrated system on a single server” that allows issuers to run the auction and bidders to prepare and submit bids using a conventional web browser, without the use of other separate software. Id., p. 3, citing id. at col.5 ll.13–28.
While this appeal was pending, the Federal Circuit issued two opinions relevant to issues presented by this case. First, on August 20, 2007, In re Seagate Technology, LLC changed the standard of willful infringement from one akin to negligence to that of objective recklessness. Id., p. 5, citing 497 F.3d 1360, 1371 (Fed. Cir. 2007). Second, on September 20, 2007, BMC Resources, Inc. v. Paymentech, L.P. held that where steps of a method claim are performed by multiple parties, the entire method must be performed at the control or direction of the alleged direct infringer. Id., citing 498 F.3d 1373, 1380–81 (Fed. Cir. 2007).
In ruling on plaintiff-appelllee’s claim of infringement, the Federal Circuit noted that the only theory of infringement presented by Muniauction was that of so-called joint infringement. The law of the Federal Circuit is axiomatic that a method claim is directly infringed only if each step of the claimed method is performed. Id., p. 15, citing BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1378–79 (Fed. Cir. 2007). With respect to the ’099 patent, the parties did not dispute that no single party performs every step of the asserted claims.
In BMC Resources, the Federal Circuit clarified the proper standard for whether a method claim is directly infringed by the combined actions of multiple parties. The Federal Circuit’s analysis was founded on the proposition that direct infringement requires a single party to perform every step of a claimed method. Id., p. 16, citing 498 F.3d at 1380. Accordingly, where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises “control or direction” over the entire process such that every step is attributable to the controlling party, i.e., the “mastermind.” Id., p. 17, citing id. at 1380–81.
Under BMC Resources, the issue of infringement in this case turned on whether Thomson sufficiently controls or directs other parties (e.g., the bidder) such that Thomson itself can be said to have performed every step of the asserted claims.
Under BMC Resources, 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. Id., p. 18, citing 498 F.3d at 1379. In this case, Thomson neither performed every step of the claimed methods nor had another party perform steps on its behalf, and Muniauction had identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders. Therefore, Thomson did not infringe the asserted claims as a matter of law.
On the basis of the foregoing, the Federal Circuit reversed the finding of infringement issued by the district court.
View a PDF of the judicial opinion.Service
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