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Elcommerce.Com, Inc v. Sap Ag and Sap America

February 28, 2011

ELCOMMERCE.COM, INC.,
PLAINTIFF-COUNTER-DEFENDANT,
v.
SAP AG AND SAP AMERICA, INC., DEFENDANTS-COUNTER-PLAINTIFFS.



The opinion of the court was delivered by: DuBOIS, J.

MEMORANDUM

I. INTRODUCTION

In this patent infringement case, plaintiff elcommerce.com, Inc. ("elcommerce") asserts that defendants SAP AG and SAP America, Inc. (collectively "SAP") willfully infringed United States Patent Number 6,947,903 (the "'903 patent"). SAP filed counterclaims seeking declaratory judgments of non-infringement, invalidity and unenforceability.

On December 1, 2010, the Court conducted a day-long Markman Hearing in which the parties amplified the positions set forth in their briefs on claim construction. The parties' disputes can be broken down into two categories. First, the parties disagree about the definitions of specific terms. Second, they dispute whether certain terms -- known as "means-plus-function" terms -- should be declared indefinite under 35 U.S.C. § 112 ¶ 2 for failure to disclose the required corresponding structure under 35 U.S.C. § 112 ¶ 6.

For the reasons that follow, the Court (1) defines the terms requiring construction as set forth in this Memorandum and (2) concludes that all the disputed means-plus-function claim terms are indefinite.

II. BACKGROUND

The '903 Patent provides a "method for monitoring supply chain activity throughout a plurality of supply chain sites." ('903 Patent, Abstract.) In sum, the patent attempts to solve the problem presented when different actors within a supply chain -- including original equipment manufacturers ("OEMs"), contract manufacturers ("CMs"), distributors and vendors -- maintain supply-related data in different formats and, as a consequence, are unable to respond to rapid changes in supply and demand from other actors within the chain. To combat this problem, a "data transfer engine" ("DTE") is installed at each supply chain site. (Id. at 1:63-64.) The DTE then, inter alia, extracts data from each site and sends it to a "data collection site" ("DCS") (Id. at 2:2-5.) Any user within the supply chain can then access the data collected at the DCS for its own use. (Id. at 2:37-44.) elcommerce filed suit against SAP in the U.S. District Court for the Eastern District of Texas on August 31, 2007. After two years of disputes over venue, the case was transferred to this Court on September 29, 2009. The parties briefed the issues relevant to claim construction prior to the Markman Hearing, and then filed supplemental briefs after the hearing. All the disputes related to claim construction are thus ripe for review.

III. CLAIM CONSTRUCTION

The Court has been asked to construe the following terms, and the parties have submitted the following proposals:

Term SAP's Proposed Construction elcommerce's Proposed Construction

Independent supply chain site A supply chain entity that is not No construction required; (Phrase or variation thereof subject to the control or in the alternative, a appears in Claims 1, 22, 37, authority of, and is unrelated to, separate entity within the 38, 50, 53, 54) each other supply chain entity supply chain Extracting supply-related data Taking out, at each independent No construction required or information (Phrase or supply chain site, the supply-variation thereof appears in related data or information Claims 1, 22, 37, 38, 50, 53,54)

Scanning for changed supply- Searching, at each independent No construction required related data or information supply chain site within the (Phrase or variation thereof supply chain, for supply-related appears in Claims 1, 50) data or information that has changed by comparing supply-related data or information with data or information previously sent to a data collection site Detecting changed supply- Determining, at each No construction required related data or information independent supply chain site, (Phrase or variation thereof what supply-related data or appears in Claims 22, 38, 53) information has changed by searching for supply-related data or information and comparing it with data or information previously sent to a data collection site Monitoring changed supply- Keeping track of supply-related No construction required related data or information data or information, at each (Phrase or variation thereof supply chain site, to determine appears in Claims 37, 54) what supply-related data or information has changed by searching for supply-related data or information and comparing it with data or information previously sent to a data collection site The Court's definitions for each term are set forth at the end of the section discussing each term. The Court will address the terms in the order in which they were presented at the Markman Hearing.

A. Legal Standard

Construction of disputed patent claims is a question of law and is therefore the province of the court, not the jury. Markman v. Westview Instruments, Inc., 517 U.S. 370, 389-91 (1996). The words in a claim "are generally given their ordinary and customary meaning" from the perspective of one of ordinary skill in the art of the patent at issue. Phillips v. AWH Corp., 415F.3d 1303, 1313 (Fed. Cir. 2005) (en banc) (citations omitted).

In determining the ordinary and customary meaning, courts look to a variety of sources.

"Those sources include 'the words of the claims themselves, the remainder of the specification, the prosecution history, and extrinsic evidence concerning relevant scientific principles, the meaning of technical terms, and the state of the art.'" Id. (quoting Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1116 (Fed. Cir. 2004)). While intrinsic evidence -- the patent and its prosecution history -- is generally given more weight, the Federal Circuit has approved the use of extrinsic evidence, such as dictionaries and treatises. Id. at 1317-18.

There is no precise formula for how a court should weigh the different sources of evidence. Rather, "in weighing all the evidence bearing on claim construction, the court should keep in mind the flaws inherent in each type of evidence and assess that evidence accordingly." Id. at 1319.

B. Analysis

1. Independent Supply Chain Site elcommerce argues that the term "independent supply chain site" does not need to be defined, or, in the alternative, means simply "a separate entity within the supply chain." SAP's preferred definition is "a supply chain entity that is not subject to the control or authority of, and is unrelated to, each other supply chain entity." The Court adopts SAP's construction, with the proviso that "each" refers to each supply chain entity referenced in that particular claim term, not necessarily each site in the entire supply chain.

At least three factors support the Court's conclusion. First, elcommerce's proposed construction would render the term "independent" mere surplusage. As a general rule, "[c]laims must be 'interpreted with an eye toward giving effect to all terms in the claim.'" Becton, Dickinson & Co. v. Tyco Healthcare Grp., LP, 616 F.3d 1249, 1257 (Fed. Cir. 2010) (quoting Bicon, Inc. v. Straumann Co., 441 F.3d 945, 950 (Fed Cir. 2006)). Even without use of the term "independent," supply chain sites would have to be separate entities. (See, e.g., '903 Patent, 2:23-26 ("The present invention facilitates the relationships between the OEM, distributor, CMs and vendors (collectively, the 'sites') in the context of raw materials flow through the supply chain.").) Defining "independent" as merely "separate" essentially writes the word "independent" out of the term.

Second, SAP's construction is more consistent with the manner in which the term "independent" is used in the patent specification.*fn1 "[T]he specification 'is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term.'" Phillips, 415 F.3d at 1315 (quoting Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)). In this case, the specification includes the following passage:

In the past, teams of Information Technology software engineers have typically re-engineered the existing systems. This can be a huge data conversion and software integration effort, even at a single site, and becomes much more problematic when trying to make the data uniform across independent contract manufacturers and vendors who likely will not be eager to redesign their business method and database. ('903 Patent, 5:42-49.) By implication, then, these "independent" sites must be unrelated and not subject to one another's control. Were it otherwise, getting each site to coordinate its "business method and database" with those of the other sites would not present a challenge requiring use of the invention. Thus, the text of the specification counsels in favor of SAP's construction.

Third, the prosecution history supports SAP's construction. "Like the specification, the prosecution history provides evidence of how the [United States Patent and Trademark Office ('PTO')] and the inventor understood the patent." Phillips, 415 F.3d at 1317. In this case, the prosecution history buttresses the determination that "independent" sites must be unrelated.

In 2002, the PTO rejected an earlier version of the '903 Patent as obvious under 35 U.S.C. § 103(a) in light of the Huang patent (No. 5,953,703). (elcommerce's Opening Br., Ex. 5_000231.) To distinguish the eventual '903 patent from Huang, elcommerce added the term "independent" to the phrase "supply chain sites." (Id. at Ex. 5_000220.) elcommerce argued to the PTO that the proposed invention was different from Huang because Huang was addressed to "an intra-enterprise system," whereas the proposed invention "suggests monitoring of independent supply chain sites within a supply chain." (Id. at Ex. 5_000215) (emphasis in original.) That "independent" was added to distinguish the eventual '903 Patent from a prior invention that addressed related entities is strong evidence that "independent" limits the phrase "supply chain sites" to only those sites that are not related to one another or subject to one another's control.

Moreover, elcommerce continues to invoke the term "independent" in reexamination proceedings before the PTO to distinguish the '903 Patent from prior art. (See SAP Supplemental Br., Ex. A.) These references also support the conclusion that the term "independent," as used in the patent, means that two supply chain sites must be unrelated to one another. (See, e.g., id., Ex. A at 48 (stating that a prior invention "suggests that . . . 'inter-enterprise data warehouses' are for companies that are related to each other, and not directed to companies that are independent entities, as in the present invention.") (emphasis added).)

Thus, the file history, including the reexamination proceedings, supports SAP's interpretation of the term "independent supply chain sites."

Two other points raised by elcommerce on this issue merit further discussion. First, elcommerce argued at the Markman Hearing that using the term "each" in the definition of "independent supply chain sites" was improper because some of the disputed terms refer only to a limited number of sites. (See, e.g., '903 Patent, 15:67-16:1 (". . . the first supply chain site being independent of a second supply chain site . . .").) This is a red herring. As used in SAP's proposed definition, the word "each" refers only to each other site referenced in that particular claim term. (See Markman Hr'g Tr. at 69 ("[E]ach is clearly intending to convey each of the claim's supply chain entities so they put up a slide that said a first and a second. We mean each to mean the first and second. In other words, it's the supply chain entity in the claims. If you wanted to say each claimed supply chain entity that would be fine.").)

Second, elcommerce protests against SAP's use of general purpose dictionaries in formulating this and others of its definitions. However, there is no prohibition against using dictionaries to aid in the claim construction process. See Phillips, 415 F.3d at 1314. Moreover, after examining the text of the claims, specification and prosecution history, it is clear that the intrinsic record supports SAP's proposed definition, and not elcommerce's. That SAP's definition of "independent" was originally derived from a general purpose dictionary is no bar to adoption of that definition by the Court.

In conclusion, the Court defines "independent supply chain site" as "a supply chain entity that is not subject to the control or authority of, and is unrelated to, each other supply chain entity," with the proviso that "each" refers to each supply chain entity referenced in that particular claim term, not necessarily each site in the entire supply chain.

2. Extracting Supply-Related Data or Information

The Court next turns to the meaning of "extracting supply-related data or information." Though the parties initially debated the meaning of the word "extracting," at the Markman Hearing, they finally agreed that the term could be defined as "copying data and removing the copy and/or the data." (Markman Hr'g Tr. at 135.) The Court adopts this construction.

This agreement still leaves for the Court the question of where the data extraction occurs. SAP argues that the extraction must occur at independent supply chain sites, while elcommerce argues that the term is not so limited. SAP again has the better argument.

The language of the specification strongly supports SAP's position. The Abstract to the '903 Patent begins, "A method of monitoring supply chain activity throughout a plurality of supply chain sites includes extracting, at each supply chain site, supply-related data to be monitored." (emphasis added). The ...


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