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In a case closely watched by intellectual property lawyers, a New York federal judge Wednesday issued an initial ruling that may undermine British Telecommunications Inc.’s claims that it owns rights to the use of Internet hyperlinking. Though the order focuses solely on the meaning of specific terms in British Telecom’s patent and does not address issues of invalidity and infringement, the judge’s analysis may serve as the basis to have British Telecom’s patent infringement suit against Austin, Texas-based Prodigy Communications Corp. tossed. U.S. District Judge Colleen McMahon’s ruling — dense with computer jargon — attempts to unravel the terminology in British Telecom’s patent and determine how closely related to the Internet it is. McMahon, of the Southern District of New York, appears to disagree with claims made by British Telecom that its patent closely mirrors methods common to the Internet. Willem Schuurman, a partner in Houston-based Vinson & Elkins who represents Prodigy, touted McMahon’s order as giving “four or five independent reasons why there should be no infringement. She’s laid out a pretty clear road map of the basis for a summary judgment motion of non-infringement.” However, other lawyers say it’s too soon to decide how the suit will play out. “You can’t really tell who ‘won’ a claim construction hearing until you do an analysis of how that is likely to affect the ability of the patentee to make those definitions read on the accused’s products,” said James Pooley, a partner at Milbank, Tweed, Hadley & McCloy’s Palo Alto, Calif., office. British Telecom’s suit against Prodigy is a test case, and if the company prevails it is expected to seek royalty payments from other Internet service providers for their use of hyperlinks. That could be a costly prospect for a host of companies. British Telecom’s attorneys at New York’s Kenyon & Kenyon did not return calls for comment Wednesday. The case, British Telecommunications Inc. v. Prodigy Communications Corp., 00-9451, has been closely watched by industry, academia and intellectual property lawyers because it will help establish whether patents filed prior to the emergence of the Internet can be broadly interpreted to cover Internet-related technology. “Should the court rule in Prodigy’s favor it will quell concerns within the high-tech sector about significant exposure relating to very basic features of the Internet’s functionality,” said professor Peter Menell of the University of California, Berkeley’s Boalt Hall School of Law. British Telecom’s original patent application, filed in 1977, covers a system to allow users to access text-based information via a telephone network. The company submitted several successor applications before the patent issued in 1989. The issued patent describes an improved way for multiple users, each located at a remote terminal, to access data stored on a central computer. Communication between the terminals takes place over a telephone network. McMahon said in her ruling that the information accessed by the remote terminals is stored on the central computer in the form of blocks, each block identified by an address. “In this patent, the computer is a single device, in one location,” McMahon wrote. “It is referred to as ‘central’ because it is connected to numerous physically separate stations, called ‘remote terminals,’ by the telephone lines of a telephone network.” This analysis “indicates their patent does not cover the Internet,” Schuurman contends. “The way the Internet operates there is no single central computer. The Internet has hundreds of millions of computers.” While Menell had not yet read the order, he said that if British Telecom’s patent claim is limited to a central computer it “makes for a plausible argument that hyperlinking does not read on this claim.” How broadly the patent claims can be interpreted is a separate issue from whether the patent is valid. That question is to be addressed at a trial set to begin Sept. 9. If the case continues to trial, Prodigy’s attorneys plan to present prior art, including a demonstration by a Stanford Research Institute researcher in the 1960s of a system for linking files.

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