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In the rapidly evolving world of the Internet and electronic business and commercial systems, patent attorneys should keep in mind that what looks novel given its use on the Internet may not truly be novel or may even be obvious. Invalidating prior art may be found in non-Internet systems such as the closed, dial-up systems that predate the Internet and in purely textual references in commercial publications. Further, care must be taken during prosecution of a patent application so as not to limit the scope of the claims of the patent that eventually issues. These points are demonstrated by two recent opinions in the Federal Circuit, both of which involve recently issued Internet patents. Numerous actions for infringement of Internet patents have been threatened and instituted since the 1998 decision in State Street Bank & Trust Co. v. Signature Financial Group, raising the prospect that patent holders could demand royalties on an enormous number of Internet transactions. Recently the Federal Circuit rendered decisions in two significant Internet patent disputes and in both cases, the patent owners’ claims were found wanting. One case involved one of the most controversial Internet patents, Amazon.com’s “One Click” ordering system patent, and the other involved the Netword patent on Internet keywords. Amazon.com Inc. v. Barnesandnoble.com Inc., No. 00-1109, 2001 U.S. App. LEXIS 2163 (Fed. Cir. Feb. 14, 2001). Online retailer amazon.com was quick to move following the 1998 decision and in 1999 Amazon obtained a patent for its “One Click” ordering system. The battle between Amazon and competitor barnesandnoble.com (BN) for book buyers has been mirrored in their legal dispute over the validity of the patent. Amazon brought suit against BN, alleging infringement of U.S. Patent No. 5,960,411 (“the ’411 patent”) and seeking a preliminary injunction to prohibit BN’s use of a feature of its web site called “Express Lane.” The district court held that Amazon had shown a likelihood of infringement by BN, and that BN’s validity challenge was not sufficient to avoid the issuance of preliminary injunctive relief. Amazon apparently developed the ’411 patent to cope with frustrations presented by what is known as the “shopping cart model” purchase system for electronic-commerce purchasing events. In that model, a purchaser using a client computer system could select an item from an electronic catalogue typically by clicking on an “Add to Shopping Cart” icon, thereby placing the item in the virtual shopping cart. Other items from the catalogue could be added to the shopping cart in the same manner. When the shopper completed the selecting process, the electronic commercial event would move to the checkout counter. Then the purchaser would enter information regarding the purchaser’s identity, billing and shipping addresses, and credit payment method into the transactional information base. Finally, the purchaser would click on a button displayed on the screen or somehow issue a command to execute the completed order, and the server computer system would verify and store the information concerning the transaction. The ’411 patent sought to reduce the number of actions required from a consumer to effect a placed order. The system reduces the number of purchaser interactions because the purchaser has previously visited the seller’s web site and previously entered into the database of the seller all the required billing and shipping information needed to effect a sales transaction. Thereafter, when the purchaser visits the seller’s web site and wishes to purchase a product from that site, the patent specifies that only a single action is necessary to place the order for the item. BN’s Express Lane, like the system contemplated by the ’411 patent, contains previously entered billing and shipping information for a customer. In one implementation, after a person is presented with BN’s “menu page,” the person can click on an icon on the menu page to get to a “product page.” BN’s product page displays an image and a description of the selected product and also presents the person with a description of a single action that can be taken to complete a purchase order for the item. If the single action described is taken, for example by a mouse click, the person will have effected a purchase order using BN’s Express Lane feature. LIKELY INFRINGEMENT FOUND The Federal Circuit upheld the district court’s conclusion that Amazon had demonstrated likely literal infringement of at least all the independent claims of the ’411 patent and thus had made the requisite showing that it is likely to succeed at trial on its infringement case. However, the court also concluded that BN had mounted a substantial challenge to the validity of the ’411 patent, based upon BN’s prior art references, including a CompuServe service for obtaining electronic stock charts, a “Web-Basket” online ordering system, and a 1996 publication entitled “Creating the Virtual Store.” The case was remanded for further proceedings. In Netword LLC v. Centraal Corp., Netword LLC had obtained U.S. Patent No. 5,764,906 (“the ’906 patent”) on a “Universal Electronic Resource Denotation, Request and Delivery System.” See Netword LLC v. Centraal Corp., No. 99-1257, 2001 U.S. App. LEXIS 3895 (Fed. Cir. Mar. 14, 2001). The ’906 patent describes a system for locating and retrieving information on a distributed computer system or network, such as the Internet, using so-called aliases or incomplete designations to denote resources whose retrieval is sought. In practical effect, the invention describes a system that permits a user to type a simple word into the address bar of a browser and obtain the correct URL for the resource being sought rather than typing the entire, lengthy URL. Claim 1 of the ’906 patent claims an electronic resource denotation, request and delivery system within a network that shares information resources among its user community, consisting of a central registry computer, one or more local server computers, and one or more client computers, wherein aliases are maintained in at least the central registry computer and one or more of the local server computers. The RealNames system, the accused system of Centraal Corp., similar to the one contemplated by the ’906 patent, also permits a user to type a simple word, rather than type the entire, lengthy URL, into the address bar of a browser and obtain the correct URL for the resource being sought. The district court held, however, that, unlike the system claimed in the ’906 patent, the RealNames system makes no use of local server computers, and that the subscribers’ computers communicate directly with “Resolver” computers and store all the RealNames metadata entries. The district court held that the Resolver computers in Centraal’s system do not function as intermediary local servers between the subscriber (or client) computers and a central computer. The district court thus granted summary judgment for Centraal, concluding that the RealNames system did not infringe claim 1 of the ’906 patent, either literally or under the doctrine of equivalents. The Federal Circuit agreed with the district court. On appeal, Netword argued that the district court erred when it construed claim 1 to require the local server computer to maintain a cache of aliases, because claim 1 does not state such a limitation. Netword contended that the specification does not require that the local server computer maintain a limited database of aliases separate from that of the central registry computer, and that claim 1 was incorrectly construed. Centraal, relying on various statements made by Netword during prosecution of the claims of the ’906 patent, argued that the specification of the ’906 patent defines the local server computer as an intermediary computer that caches frequently accessed alias records, transmits cached alias records to the client computer, and requests updates from the central registry. FEDERAL CIRCUIT AGREES The Federal Circuit agreed with the claim construction urged by Centraal and its expert during the summary judgment hearing and held that the RealNames system does not literally infringe claim 1 of the ’906 patent. Further, because the RealNames system does not contain any element that is the same or equivalent to the local server of claim 1, the Federal Circuit further held that the RealNames system does not infringe under the doctrine of equivalents. There has been a great deal of concern over whether the issuance of Internet patents would permit patent holders to lay claim to major areas of Internet business enterprise. The Federal Circuit’s treatment of these patents is a reminder that the issuance of a patent is not the final word on a patent holder’s ability to appropriate the use of a claimed invention. The courts will still apply strict standards to the evaluation of these patents, on issues of infringement and validity as well as issues of prior art. Andres Madrid is a senior litigation associate at the New York offices of Brown Raysman Millstein Felder & Steiner LLP.

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