Is Soverain Software v. Newegg Supreme Court Bound?

Seth Waxman

Earlier today the United States Court of Appeals for the Federal Circuit issued it latest decision in Soverain Software LLC v. Newegg, Inc. (Fed. Cir., September 4, 2013). This latest decision was necessitated by the limited grant of rehearing ordered on June 13, 2013. The rehearing was granted for the purpose of clarifying the status of claims 34 and 35 of U.S. Patent No. 5,715,314.

The Federal Circuit’s original opinion issued January 22, 2013, and was authored by Judge Neman with Judges Prost and Reyna in agreement. In that January 2013 opinion the Court identified claim 34 as representative of the “shopping cart” claims, and held claim 34 invalid on the ground of obviousness. The parties stated, on petition for rehearing, that the Federal Circuit ruling should have been for claim 35, which would conform to the judgment entered on the jury verdict. But that is where the agreement between the parties ended. Soverain requested further proceedings on the merits, while Newegg proposed that the Federal Circuit correct what they referred to as a “typographical error.” The Federal Circuit ordered additional briefing.

Supreme Court Bound?

Before jumping into the substance of this case, the first thing I noticed was that Seth Waxman of Wilmer Cutler Pickering Hale and Dorr was listed as the lead attorney for Soverain Software in both the petition for rehearing and the ensuing briefs. Robert Wilson of Quinn Emanuel Urquhart & Sullivan, who specializes in life sciences litigation and appellate matters, was previously the lead attorney for Soverain. Wilson remains on the brief, which is common when the next step toward the Supreme Court is contemplated. But it is hard to imagine that Soverain has brought in Seth Waxman at this late stage if they are not contemplating an appeal to the Supreme Court.

Seth Waxman is not your ordinary appellate attorney. He is one of America’s super lawyers with a long Supreme Court pedigree. See Exclusive with Seth Waxman, Supreme Court Patent Superstar. He is a former Solicitor General, and in my opinion absolutely has to be at or very near the top of the list when it comes to patent matters at the Supreme Court. This is not to say that Waxman is only a patent specialist at the Supreme Court, but I know patents best and if I were to be looking to hire someone to represent me or my company at the Supreme Court in a patent matter Waxman would be my first call. While the Supreme Court has typically been hostile to patent owners Waxman has achieved several impressive victories in recent years, including in Microsoft v. i4i (see Clear & Convincing: Supreme Court Affirms CAFC in Microsoft v. i4i) and Bowman v. Monsanto (see Supreme Court Hears Bowman v. Monsanto and Unanimous SCOTUS Sides with Monsanto on Seeds).

Thus, whenever you see Seth Waxman’s name appear, whether it be at the district court or Court of Appeals level, you should start to think that the party he represents is planning on taking the matter all the way to the Supreme Court. Of course, the Supreme Court is selective about the cases it chooses to hear. Nevertheless, it seems virtually certain to me that there will be a Petition for certiorari filed in this case and the petition for rehearing was merely to clarify the Federal Circuit ruling prior to moving forward.

[Patent-Litigation]

Background

Soverain brought this patent infringement suit against Newegg for infringement of claims of the ‘314 patent, its continuation Patent No. 5,909,492, and Patent No. 7,272,639. The patents relate to electronic commerce, wherein a merchant’s products are offered and purchased online, through computers interconnected by a network.

The jury found Newegg liable for infringement of the ’314 and ’492 patents, and awarded Soverain damages of $2.5 million. The jury found that Newegg did not infringe the ’639 patent, but the district court granted Soverain’s motion for JMOL of infringement of the ’639 patent, and ordered a new trial to assess damages for the ’639 patent, to be tried after the completion of appeals. The district court awarded Soverain post-verdict damages and an ongoing royalty.

After the close of evidence the district court removed the question of obviousness from the jury, the court stating: “I don’t think there’s sufficient testimony to present an obviousness case to the jury. I think it would be very confusing to them.”  The district court then held that the claims are not invalid on the ground of obviousness. Newegg’s motions for JMOL or a new trial were denied.

In a 25 page opinion authored by Judge Newman, the claims in suit of the ’314 and ’492 patents were determined to be invalid for obviousness over the CompuServe Mall system. The claims of the ’639 patent were also invalidated for obviousness over Johnson in view of additional prior art, and the other evidence presented. Accordingly, the judgments of validity were reversed, and the judgment of infringement and damages were vacated.

At trial Soverain’s expert witness Dr. Michael Shamos stated that the Newegg witnesses’ description of the CompuServe Mall was consistent with his understanding, but presented the argument that the CompuServe Mall lacked two elements of the shopping cart claims: first, that the CompuServe system lacked the shopping cart message that comprises a product identifier and second, that CompuServe lacked the shopping cart database. With respect to the first difference, Judge Newman explained: “The distinction proposed by Dr. Shamos and advanced by Soverain is not embodied in the claims and not reflected in the claim construction.” With respect to the second difference, Judge Newman found multiple pieces of evidence that supported the conclusion that the CompuServe prior art did include a database, among other things citing specifically to is testimony from the Newegg expert: “because CompuServe supported multiple individuals shopping in the same store at the same time, a collection of such files would be maintained, and that would meet the Court’s requirements for a shopping cart database.”

Essentially, it seems to me that the Federal Circuit was of the opinion that the Soverain expert did not rebut the Newegg expert with anything other than naked conclusions.

The Claims at Issue in the Rehearing

The claims at issue are claims 34 and 35 of the ‘314 patent, which are as follows:

34. A network-based sales system, comprising:

at least one buyer computer for operation by a user desiring to buy products;

at least one shopping cart computer; and

a shopping cart database connected to said shopping cart computer;

said buyer computer and said shopping cart com- puter being interconnected by a computer network;

said buyer computer being programmed to receive a plurality of requests from a user to add a plurality of respective products to a shopping cart in said shopping cart database, and, in response to said requests to add said products, to send a plurality of respective shopping cart messages to said shopping cart computer each of which comprises a product identifier identifying one of said plurality of products;

said shopping cart computer being programmed to receive said plurality of shopping cart messages, to modify said shopping cart in said shopping cart database to reflect said plurality of requests to add said plurality of products to said shopping cart, and to cause a payment message associated with said shopping cart to be created; and

said buyer computer being programmed to receive a request from said user to purchase said plurality of products added to said shopping cart and to cause said payment message to be activated to initiate a payment transaction for said plurality of products added to said shopping cart;

said shopping cart database being a database of stored representations of collections of products, and said shopping cart computer being a computer that modifies said stored representations of collections of products in said database.

35. A network-based sales system in accordance with claim 34, wherein said shopping cart computer is programmed to cause said payment message to be created before said buyer computer causes said payment message to be activated.

In the order issued September 4, 2013, Judge Newman went to great lengths to explain that claim 35 was not addressed or discussed much, if at all, on appeal. She wrote:

On the appeal, the parties again focused their presentations and argument solely on claim 34. Newegg’s brief stated that Soverain “asserted” claim 34, and also that claim 34 is “representative of the shopping cart claims.” Newegg Br. 6. Soverain neither objected to nor corrected this recitation. The parties cited the evidentiary record, discussed the prior art (primarily the CompuServe Mall system) and argued the district court’s decision to remove the question of obviousness from the jury. Claim 35 was not briefed on this appeal, and was not mentioned in the argument of the appeal. Soverain’s brief stated that claim 35 was in suit, but did not discuss the specific limitation in that claim, while extensively discussing the limitations of claim 34. At oral argument the parties argued claim 34, and did not mention claim 35. This court treated claim 34 as “representative” of the shopping cart claims in suit, and held claim 34 invalid on the ground of obviousness.

Judge Newman then pointed out that when a dependent claim is not separately argued it rises and falls together with the independent claim, citing Gardner v. TEC Sys., Inc., 725 F.2d 1338, 1350 (Fed. Cir. 1984) (en banc) (“Gardner has not argued the validity of the remaining claims in suit, claims 3, 4, and 8, apart from the validity of claim 1, from which they depend. We cannot discern for ourselves any independent basis for their validity. We therefore affirm the holding of invalidity of these claims as well.”)

Thus, the rehearing was not successful and claim 35, like claim 34, was ruled invalid because it was obvious.