Federal Circuit Reiterates Limits of Incorporation by Reference in Win for Priceline

The U.S. Court of Appeals for the Federal Circuit (CAFC) on Monday, December 9, in a precedential decision affirmed a district court determination that Priceline.com and Booking.com did not infringe DDR Holdings’ U.S. Patent No. 7,818,399. The opinion was authored by Judge Chen.

The ‘399 patent relates to “generating a composite web page that combines certain visual elements of a ‘host’ website with content from a third-party ‘merchant,’” according to the CAFC opinion. The patent was also at issue in the CAFC’s 2014 decision between DDR and Hotels.com, with the court ultimately upholding the ‘399 patent as eligible under Section 101.

Priceline challenged the ‘399 patent at the Patent Trial and Appeal Board (PTAB) after DDR filed suit against Priceline in district court in 2017. The PTAB found that the challenged claims of the ’399 patent were not proven unpatentable and “applied the ‘broadest reasonable interpretation’ standard to construe ‘merchants’ as ‘producers, distributors, or resellers of the goods or services to be sold.’” Once the district court lifted the stay and did its own claim construction, it ultimately construed “‘merchants’ as ‘producers, distributors, or resellers of the goods to be sold.’” The district court also adopted Priceline’s construction of “commerce object” to exclude “services,” explaining that “the [’399 patent’s] written description treats ‘goods’ and ‘product’ interchangeably, and it distinguishe[s] them [from] ‘services.’”

On appeal, DDR argued that the district court erred in construing the two claim terms: first, DDR said “merchants” should not be limited to “purveyors of goods alone” but should encompass “purveyors of goods and services.” And second, DDR said “commerce object” should include both goods and services.” DDR pointed to the provisional application to which the ‘399 patent claims priority, which included a section where it stated that the relevant merchants “defined as producers, manufacturers, and select distributors of products or services, are strongly attracted to the sales potential of the Internet.” However, the district court noted that the ‘399 patent’s specification did not include a reference to “services” and focused only on products or goods.

DDR argued on appeal that it acted as its own lexicographer—thus warranting an exception to the rule that “claim terms are generally given their plain and ordinary meanings to one of skill in the art when read in the context of the specification and prosecution history”—by “providing, in the provisional application, an ‘explicit definition’ of ‘merchants’ to include ‘both goods and services,’ as well as making this definition an ‘explicit part’ of the ’399 patent specification by incorporating the provisional application by reference.” However, the CAFC rejected this argument, noting that DDR did not offer any explanation as to why the specification omitted the term “services.” Additionally, said the opinion:

“Here, the deletion made by the patent drafter between the provisional application and the patent specification is highly significant. Although DDR’s provisional application discussed merchants as both purveyors of ‘goods’ and purveyors of ‘products or services,’ DDR elected in its patent specification to delete the reference to ‘products or services’ and instead discuss merchants as purveyors of ‘goods’ alone. A skilled artisan would understand this progression between the provisional application and the patent specification to indicate an evolution of the applicant’s intended meaning of the claim term…”

The CAFC further explained that the fact the provisional application was incorporated by reference did not undermine the court’s reasoning. Quoting from Finjan LLC v. ESET LLC, the CAFC said:

“This court has explained…that when a host patent incorporates another patent by reference, ‘the disclosure of the host patent provides context to determine what impact, if any, a patent incorporated by reference will have on construction of the host patent claims.”

Essentially, said the CAFC, the deliberate deletion of “services” from the specification would lead a skilled artisan to believe that “the patentee intended ‘merchants’ to exclude Services.”

Furthermore, the CAFC said DDR’s argument that Priceline was collaterally estopped by the PTAB decision from raising the issue of whether the specification contains a definition was forfeited both on appeal and in the district court proceedings. However, added the CAFC, “[e]ven ignoring DDR’s forfeiture, we note that neither this court nor the district court—both of which employ a Phillips standard for claim construction—is bound by the Board’s constructions under the broadest reasonable interpretation standard.”

For that reason, “although the Board found the statement at issue in the specification to not be definitional, we conclude under Phillips that it is, in light of the intrinsic evidence,” write the CAFC.

As the term “merchants” was construed using the same reasoning as “commerce object,” the parties agreed that the two constructions should agree and thus the CAFC also affirmed the district court’s construction of that term.