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E-Lynxx Corporation v. Innerworkings

September 27, 2012

E-LYNXX CORPORATION,
PLAINTIFF,
v.
INNERWORKINGS, INC., RENT-A-CENTER, INC., DR. PEPPER SNAPPLE GROUP, INC., R.R. DONNELLEY & SONS CO., NEWLINENOOSH, INC., THE STANDARD REGISTER CO., AND CIRQIT.COM, INC., DEFENDANTS



The opinion of the court was delivered by: (Judge Conner)

MEMORANDUM

Presently before the court in this patent infringement action is the motion for summary judgment (Doc. 109) of defendants Innerworkings, Inc., Taylor Corporation, Rent-a-Center, Inc., Dr. Pepper Snapple Group, Inc., Staples, Inc., R.R. Donnelley & Sons Company, NewlineNoosh, Inc., The Standard Register Company, and Cirqit.com, Inc. (collectively, "defendants"). Also before the court are the parties' contentions regarding the proper interpretation of claim terms. (Docs. 112, 113, 125, 126). The court will first construe the disputed terms and limitations pursuant to Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). Having construed the terms, the court will then consider defendants' motion for summary judgment.

I. Factual Background and Procedural History

A. Factual Background

At issue in the instant matter are U.S. Patent No. 7,451,106 (the "'106 patent") and U.S. Patent No. 7,788,143 (the "'143 patent"). These patents cover procurement systems used for competitive bidding on customized goods and services. See '106 patent, abstract; '143 patent, abstract. The '143 patent is a continuation of the '106 patent and shares its specification with the '106 patent. William A. Gindlesperger invented the system covered by both patents, which was assigned to plaintiff eLYNXX Corporation ("e-LYNXX").

Abstracts of the '106 patent and the '143 patent describe the invention as "[a]n apparatus and method for selecting a lowest bidding vendor from a plurality of vendors of a customized good or service."'106 patent, abstract; '143 patent, abstract. As the name suggests, custom-produced goods and services, unlike pre-stocked or "off-the-shelf" goods, are manufactured to the specific requirements of the buyer. '106 patent, col. 1, ll. 30-45. Pricing, availability, and buyer specifications are likely to vary from project to project, leading to the so-called "iron triangle" of cost, timeliness, and quality. Id. col. 2, ll. 12-21. The "iron triangle" problem derives from the conundrum that buyers desire: (1) high quality goods; (2) quickly; and (3) at an inexpensive price, but can generally achieve only two of these desires -- for example, high quality goods on short notice, but at great cost, or inexpensive goods quickly, but lacking in quality. It is this problem that the invention at issue seeks to solve.

The method claimed by e-LYNXX is designed to streamline the procurement process for custom goods. As described in the specification, the prior art in this area entailed high search costs for buyers. Buyers were generally limited to soliciting bids from a small number of vendors, and then simply awarding the contract to the lowest bidder, or awarding it to a vendor who did not submit the lowest bid but with whom the buyer had a previous relationship and could trust to produce high quality work. Buyers could also solicit bids and then "shop" the lowest bid to other vendors seeking a better deal. See id. col. 2, ll. 4-11.

Problems persisted on the supply side of the transaction as well. Manufacturers in industries with substantial overhead and labor costs -- for example, printing and information product suppliers, see id. col. 2, ll. 35-50 -- must balance their need to maintain a steady production schedule with the need to be available on short-notice to handle rush orders from regular customers. Manufacturers do not want to allow machinery and labor to sit idle for too long, thereby cutting into their profit margins. Id. Hence, manufacturers build into their production schedules a certain amount of slack time in the event that a customer places an unexpected rush order. Id. But if an expected order is withdrawn or cancelled, a manufacturer may be left with both an unscheduled lapse in its regular production schedule, and planned downtime that it has yet to fill with a rush order. Id. col. 2, ll. 43-50. Vendors seek to fill these unexpected holes in their production schedule with short-turnaround orders, securing these by low prices to undercut any competitive bids. Id. col. 2, ll. 50-56. This process is referred to as "contribution pricing."*fn1

On the demand side, the substantial administrative cost of a search for suitable vendors leads inexorably to a small number of primary vendors who receive bid solicitations, which in turn leads to higher prices due to reduced competition. Id. col. 3, ll. 7-27. Maintaining a large database of qualified vendors in order to take advantage of competitive pricing is oftentimes impractical for buyers. Id. col. 3, ll. 42-46 ("In the actual business environment . . . identifying such a large vendor pool is generally not practical . . . . [G]athering and maintaining information about a large number of current and potential vendors is time consuming and expensive."). The claimed invention combines the benefits of vendors' contribution pricing with a method for aggregating vendor qualifications and attributes to allow buyers to solicit bids from a greater number of vendors, thereby capturing the benefit of increased competition.

The claimed system involves an eight-step process: (1) the vendors enter records regarding their plurality of capabilities; (2) the buyers identify a potential pool of vendors for the job solicitation; (3) the buyer enters job data with a plurality of characteristics; (4) the system automatically compares the vendor's plurality of capabilities to the plurality of characteristics of the job; (5) the system identifies the subset of the vendor pool which are qualified for the job; (6) the system solicits bids to the subset of the vendor pool who are qualified for the job; (7) the system receives bid response data from the subset of the vendor pool who are qualified for the job; (8) the bid response data is transmitted to the buyer. '143 patent, col. 18, l. 50 -- col. 19, l. 32 (Claim 1); '106 patent, col. 20 l. 64 -- col. 21, l. 49 (Claim 13).

B. Procedural History

On December 14, 2010, e-LYNXX filed this patent infringement action against defendants.*fn2 (See Doc. 1). e-LYNXX alleges infringement of claims 13, 14, 15, 16, and 18 of the '106 patent and claims 1 and 2 of the '143 patent against each defendant. (Doc. 110¶ 1, Doc. 129 ¶ 1). Claims 14, 15, 16, 17, and 18 of the '106 patent are dependent claims referring back to independent claim 13; claims 1 and 2 of the '143 patent are independent.*fn3 The parties filed claim construction briefs (Docs. 111, 112) on August 12, 2011. e-LYNXX and defendants dispute twelve claim terms and eight means plus-function limitations.*fn4 (See Doc. 102-1).On August 12, 2011, defendants jointly moved for summary judgment against e-LYNXX, asserting that all asserted claims are invalid for failure to meet the patentability requirements of 35 U.S.C. § 112, ¶ 1 (written description requirement) and ¶ 2 (indefiniteness). (See Doc. 109). On October 11, 2011, the court conducted a Markman hearing and heard oral argument on the pending motion for summary judgment. (Doc. 160).The parties have fully briefed the issues, and the matter is now ripe for disposition.

II. Standard of Review

A. Motion for Summary Judgment

Through summary adjudication the court may dispose of those claims that do not present a "genuine issue as to any material fact" and for which a jury trial would be an empty and unnecessary formality. See FED. R. CIV. P. 56(a). The burden of proof is upon the non-moving party to come forth with "affirmative evidence, beyond the allegations of the pleadings," in support of its right to relief. Pappas v. City of Lebanon, 331 F. Supp. 2d 311, 315 (M.D. Pa. 2004); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). This evidence must be adequate, as a matter of law, to sustain a judgment in favor of the non-moving party on the claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-57 (1986); Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-89 (1986); see also FED. R. CIV. P. 56(a). Only if this threshold is met may the cause of action proceed. Pappas, 331 F. Supp. 2d at 315.

B. Claim Construction

An inventor may assert ownership only over those designs encompassed within the claims section of the patent. See 35 U.S.C. § 112; Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 63 (1998); Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005), cert. denied, 546 U.S. 1170 (2006). The proper construction of claims is a question of law, Markman v. Westview Instruments, Inc., 52 F.3d 967, 979 (Fed. Cir. 1995) (en banc), aff'd, 517 U.S. 370 (1996), of which the central purpose is to aid the jury. O2 Micro Intern. Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351, 1360-63 (Fed. Cir. 2008).

Claim construction requires the court to determine the "ordinary and customary meaning" of the claim terms as they would be understood by "a person of ordinary skill in the art in question at the time of the invention." Phillips, 415 F.3d at 1312-13; see also Arlington Indus., Inc. v. Bridgeport Fittings, Inc., 290 F. Supp. 2d 508, 519 (M.D. Pa. 2003). Intrinsic evidence -- i.e., the language of the patent and its prosecution history -- are the "primary resources" reviewing courts use to construe claims. Kara Tech. v. Stamps.com, Inc., 582 F.3d 1341, 1348 (Fed. Cir. 2009). The court may use extrinsic evidence, such as dictionaries, treatises, and expert testimony, to aid in claim construction, but such evidence is "less significant than the intrinsic record" and is "unlikely to result in a reliable interpretation of patent claim scope unless considered in the context of the intrinsic evidence." Phillips, 415 F.3d at 1317-19, 1324; see also Home Diagnostics, Inc. v. LifeScan, Inc., 381 F.3d 1352, 1355-56 (2004).

In using the language of the patent itself, "claims 'must be read in view of the specification,' . . . [which] is the single best guide to the meaning of a disputed term." Phillips, 415 F.3d at 1315 (citing Markman, 52 F.3d at 979; and Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)). Likewise, "the claims themselves provide substantial guidance as to the meaning of particular claim terms." Id. at 1314 (citing Vitronics, 90 F.3d at 1582). To this end, the context in which a claim term is used, the language of other claims in the patent, and the differences among claims can assist the court in construing disputed claim terms. See id. at 1314-15.

III. Discussion

The court will first construe the disputed claim terms. Then, having done so, the court will consider defendants' motion for summary judgment. Because construction of the disputed means-plus-function limitations is inextricably intertwined with the validity analysis of those limitations, the court will construe them in the context of the parties' summary judgment arguments.

A. Claim Construction

1. Disputed Claim Terms

The parties dispute the meaning of twelve claim terms. The court will address them seriatim.

i. "buyer"

The parties dispute the meaning of the claim term "buyer," which appears at various locations in claim 13 of the '106 patent and claims 1 and 2 of the '143 patent. e-LYNXX contends that "buyer" requires no construction, but to the extent that the court decides to construe it, the term should mean "one who makes a purchase." (Doc. 113 at 7). Defendants counter that the term "buyer" refers specifically to the "ultimate purchaser of customized goods or services," excluding from the definition any intermediary who procures or buys goods on behalf of the ultimate purchaser. (Doc. 112 at 6).

A claim term must be read in the context of the particular claim of which it is a part, and in the context of the patent as a whole. See Phillips, 415 F.3d at 1313. The manner in which a term is referenced in the claim itself may provide "substantial guidance" as to the term's definition. Id. (citing Vitronics, 90 F.3d at 1582). Indeed, "the context of the surrounding words of the claim must be considered in determining the ordinary and customary meaning of those terms." ACTV, Inc. v. Walt Disney Co., 346 F.3d 1082, 1088 (Fed. Cir. 2003).

With these principles in mind, the court adopts defendants' proposed claim construction. The term "buyer" as used in the claims is often preceded by language distinguishing an intermediary from the ultimate purchaser. See, e.g., '106 patent, col. 21, ll. 21-22 ("job for which bids are sought by or on behalf of the buyer") (emphasis added); id. at col. 21, ll. 23-24 ("a means for receiving an electronic communication defining a job data from or on behalf of at least one buyer")

(emphasis added); '143 patent, col. 19, ll. 1-2 ("receiving an electronic communication from or on behalf of any buyer") (emphasis added); id. at col. 19, ll. 11-12 ("analysis of job data pertaining to a job for which bids are sought by or on behalf of the buyer") (emphasis added); id. col. 20, ll. 9-10 ("receive an electronic communication from or on behalf of any buyer") (emphasis added). This distinguishing language strongly implies that the definition of "buyer" is narrower than simply "one who makes a purchase," otherwise there would be no need to differentiate between a buyer and an intermediary. Cf. Phillips, 415 F.3d at 1314 ("steel baffles" implies that baffles are not "inherently" steel). Moreover, to adopt e-LYNXX's proposed construction would swallow any distinction between a "buyer" and one who purchases "from or on behalf of" a buyer, because both entities would be "one who makes a purchase." This would violate the Federal Circuit's instruction that differences in claim language are presumed to reflect a difference in scope. See Forest Labs., Inc. v. Abbott Labs., 239 F.3d 1305, 1310 (Fed. Cir. 2001); see also Elekta Instrument S.A. v. O.U.R. Scientific Intern., Inc., 214 F.3d 1302, 1307 (Fed. Cir. 2000) (claim construction that rendered a portion of the claim language superfluous reversed).

This construction is buttressed by the manner in which "buyer" is used in the specification. While it is improper for a court to read a limitation into a claim from the specification, claims "must be read in view of the specification, of which they are a part." Phillips, 415 F.3d at 1315; see also id. ("[T]he specification is always highly relevant to the claim construction analysis. Usually, it is dispositive. . . .) (internal citation and quotations omitted); Merck & Co. v. Teva Pharms. USA, Inc., 347 F.3d 1367, 1371 (Fed. Cir. 2003) ("[C]laims must be construed so as to be consistent with the specification . . . .") The use of "buyer" in the specification therefore sheds light on its meaning as used in the claims. The specification generally describes job data input into the system in the context of the buyer's preferences. See '106 patent, col. 1, ll. 35-36 (goods are manufactured "to meet the buyer's particular requirements"); id. at col. 16, ll. 26-27 (the invention "quantif[ies] . . . the buyer's procurement needs"); id. at col. 5, ll. 57-59 (describing the "buyer's requested manufactured item or customized service"); id. at col. 10, ll. 19-22 (a winning vendor produces "the buyer-required manufactured item or customized service"). The "particular requirements" of job solicitations originate not from third-parties who enter them on behalf of buyers, but from the buyers themselves. Put another way, it is not the intermediary who determines the specifications of a job solicitation, but the buyer on whose behalf the intermediary acts. Defendants' proposed construction of "buyer" therefore finds support in both the specification and the claims.

ii. " electronic communications" e-LYNXX contends that "electronic communications" -- like "buyer" -- requires no construction, or alternatively that the term means "information transmitted or conveyed electronically." (Doc. 113 at 8). Defendants urge the court to adopt a narrower construction, limiting the definition to "electronic data input/output directly to/from the system." (Doc. 112 at 9). They assert that the claims identify four specific types of "electronic communications," each of which references a specific actor in the system who must input data directly into, or receive data output directly from, the system. (Id. at 9-10). These four types include "electronic communications from a plurality of vendors," '106 patent, col. 21, ll. 1-2; electronic communications "from any buyer using the system," id. col. 21, ll. 12-13; electronic communications "defining a job data from or on behalf of at least one buyer," id. col. 21, ll. 23-24; and electronic communications "providing at least one . . . bid response" to a buyer, id. col. 21, ll. 48-49. They posit that the "named actor" must directly input or receive output directly from the system, through an internet browser.

Defendants' construction is unsupported by the specification and, moreover, would be inconsistent with their asserted definition of the term "buyer." To reiterate, the court has adopted defendants' proposed construction of "buyer" -- that the term refers distinctly to the ultimate purchaser, excluding any intermediary. In light of the court's construction, one must consider the context in which "electronic communication" is used: claim 13 of the '106 patent describes, in part, "an electronic communication defining a job data from or on behalf of at least one buyer." Col. 21, ll. 23-24. If "electronic communication" inherently required input by the "named actor" -- in this instance, the buyer -- then it would construe out of the claims the option of the electronic communication originating from one "on behalf" of the buyer. As the Federal Circuit has instructed, "all claim terms are presumed to have meaning in a claim." Innova/Pure Water, Inc. v. Safari Water Filtration Systems, Inc., 381 F.3d 1111, 1119 (Fed. Cir. 2004). Defendants' construction would drain any meaning from the phrase "from or on behalf." Furthermore, claim terms are normally used consistently throughout a patent. See Phillips, 415 F.3d at 1314-15 ("the usage of a term in one claim can often illuminate the meaning of the same term in other claims"). Defendants' narrow construction of "electronic communication" would be inconsistent with its use relative to the term "buyer," and that finding must influence how the term is used in other portions of the patent. e-LYNXX's interpretation of "electronic communication" to mean simply "information transmitted or conveyed electronically" is entirely consistent with the specification. Contrary to defendants' contention, the specification expressly provides for communication of information through computers via means other than web browsers. See '106 patent, col. 15, l. 67 -- col. 16, l. 4 (computers may receive "vendor bid information or other data via facsimile, voice, or electronic mail" and may be "linked directly with the database servers in order to transfer this information to the database servers automatically"). And finally, the specification discloses that print vendors may transmit their vendor attributes to the system "by e-mail or equivalent means" and that this may be communicated by the vendor themselves or "any authorized third party," id. at col. 11, ll. 31-34, further undermining defendants' argument that only the "named actors" themselves may initiate or receive the communication. The court therefore adopts e-LYNXX's proposed construction of "electronic communications" to refer to "information transmitted or conveyed electronically."

iii. "vendor records" e-LYNXX asserts that "vendor records" refers simply to "a set of attributes associated with a vendor." (Doc. 113 at 9). These attributes include the production capabilities of the vendor, but also such information as geographic location. (Id.) Defendants argue that "vendor records" means "data input into the system by the vendor which identifies the vendor's capabilities," (Doc. 112 at 12), a narrower construction in that it limits both who may enter the records (the vendor), and what data constitutes the records ("vendor capability data," rather than the broader "attributes").

Defendants correctly assert that "vendor capability data" must be included within the vendor records, see '106 patent, col. 22, ll. 42-46 ("[T]he vendor records corresponding to each of a plurality of vendors and having vendor capability data . . . ) (emphasis added), but it does not follow that the vendor records must consist exclusively of vendor capability data. The specification explicitly reflects that the database stores information about a vendor above and beyond its capabilities. See '106 patent, col. 7, ll. 60-67 ("entry by the vendors 8 of a set of vendor's attributes VATTR, each VATTR representing the name, geographical location and the manufacturing, production, and/or provider capabilities and other attributes of the . . . vendor[] submitting it"). Indeed, the specification describes "other attributes," such as whether the vendor uses union labor, is a small or disadvantaged business, or is minority- or women-owned. Id. col. 8, ll. 50-54.

Similarly, the court concurs with e-LYNXX's assertion that the vendor records need not be input by the vendors themselves, but may be input by an intermediary or third-party. First, the specification itself describes an alternative embodiment that contemplates just such a possibility. '106 patent, col. 11 ll. 31-34 ("Alternatively, the print vendors 8 can transmit their respective vendor attributes VATTR to the print buyer 6 by e-mail or equivalent means for entry by the print buyers 6 or any authorized third party.") (emphasis added). Second, defendants' argument that this embodiment was disavowed in prosecution is unpersuasive. The claim amendment that defendants cite for the alleged disavowal references only "receiving electronic communications from a plurality of vendors, the electronic communications being used in establishing a plurality of vendor records which are stored in an electronic memory associated with a computer system." (See Doc. 112 at 12); (Doc. 113-10 at App'x 760). This language does not support defendants' claim that e-LYNXX disavowed any embodiment which contemplates vendor record entry by a party other than the vendor. See Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 906 (Fed. Cir. 2004) ("[T]he claims of the patent will not be read restrictively unless the patentee has demonstrated a clear intention to limit the claim scope using 'words or expressions of manifest exclusion or restriction.'" (quoting Teleflex, Inc. v. Ficosa North America Corp., 299 F.3d 1313, 1327 (Fed. Cir. 2002)). The claim amendment contains no such express disavowal of an embodiment allowing vendor record entry by a third party, and therefore defendants' argument is rejected, and e-LYNXX's interpretation of "vendor records" is adopted.

iv. "vendor capability data" and "plurality of capabilities for said vendor to provide a customized good or service"

The parties' constructions for "vendor capability data" and "plurality of capabilities for said vendor to provide a customized good or service" are quite similar, with the noted exception that defendants would exclude from the definition the vendor's name, contact information, payment preferences, type of business, and goods sold. (See Doc. 112 at 15). e-LYNXX proposes that these terms need no construction, or alternatively that "vendor capability data" means "a set of information identifying a plurality of capabilities for a vendor to provide a customized good or service," and that "plurality of capabilities for said vendor to provide a customized good or service" means "two or more capabilities of a vendor to provide a customized good or service." (Doc. 113 at 10). Defendants would construe the two terms as synonyms, both meaning "two or more capabilities of a vendor to manufacture or produce a customized good or service and excluding the vendor's name, contact information, payment preferences, type of business and goods sold." (Doc. 112 at 15).

The gravamen of defendants' argument is that, in order to differentiate this application from the prior art, the applicant for the patents-in-suit disclaimed information such as name, contact information, payment preferences, type of business, and the goods sold from the definition of a "plurality of capabilities." (Id. at 16). The court agrees. In his application, the inventor expressly disclaimed that this information qualified as "vendor capability data:"

In regard to the [prior art] seller database, the specification notes that the database maintains data on sellers with fields such as name, contact information, payment preferences, type of business, and the goods sold. . . . None of the referenced fields indicate that data regarding a plurality of capabilities for each vendor should be maintained for subsequent comparison. . . . Nothing in the referenced portion of the cited document or any other portion could reasonably be considered to be data identifying a plurality of capabilities of each vendor.

See Amendment F, Sep. 19, 2006, U.S. Patent Application No. 09/450,023 at 7 (filed Nov. 29, 1999). According to e-LYNXX, the applicant was arguing that, at most, only the "type of goods sold" identified in prior art databases would fall within the ambit of a capability, and so the prior art disclosed only a single vendor capability, not a plurality of vendor capabilities, thus distinguishing the instant application. (See Doc. 126 at 10). This argument is unpersuasive.

In context, it is clear that the applicant disclaimed vendor name, contact information, payment preferences, type of business, and the goods sold as encompassed within "vendor capability data." In attempting to distinguish the instant invention from the prior art, the applicant stated unequivocally that the aforementioned attributes did not constitute capabilities. When an applicant disclaims specific claim term meanings in the course of prosecution, they may not be recaptured through claim construction in litigation. See Omega Eng'g, Inc. v. Raytek Corp., 334 F.3d 1314, 1323-24 (Fed. Cir. 2003). It is true that the Federal Circuit has been reluctant to find disclaimer when the prosecution history is ambiguous. See, e.g., Northern Telecom Ltd. v. Samsung Elecs. Co., 215 F.3d 1281, 1293-95 (Fed. Cir. 2000) (declining to find disclaimer where statements were ambiguous and amenable to multiple reasonable interpretations). Here, the court finds that the applicant unambiguously disclaimed the vendor's name, contact information, payment preferences, type of business, and goods sold from within the meaning of "vendor capability data" when he stated that this information "could [not] reasonably be considered to be data identifying a plurality of capabilities of each vendor." See Amendment F, supra, at 7. Defendants' construction is therefore adopted.

v. "information identifying a plurality of vendors" and "a pool of vendors associated with said buyer"

Defendants assert that these claim terms are indefinite and that the specification lacks a written description to support the terms, and so they are therefore invalid and cannot be construed. (Doc. 112 at 17). This argument is the basis for defendants' motion for summary judgment. Consequently, the court will address ...


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