Interactive Gift Express v. Compuserve Inc. el al

• Decision Date: 03 November 2000
• Docket Number: ZIFF-DAVIS,E-D
• Citation: 231 F.3d 859,56 USPQ2d 1647
• Parties: (Fed. Cir. 2000) INTERACTIVE GIFT EXPRESS, INC. (now known asata, Corp.), Plaintiff-Appellant, v. COMPUSERVE INCORPORATED, and BRODERBUND SOFTWARE, INC. and INTUIT, INC., and INTERNET SOFTWARE INC. (now known as Internet Shopping Network, Inc.), and SOFTLOCK SERVICES, INC., and TELEBASE SYSTEMS, INC., and THE LIBRARY CORPORATION, and WALDENBOOKS, andPUBLISHING COMPANY, Defendants-Appellees, and APOGEE SOFTWARE LIMITED, and SOFT & NET DISTRIBUTION, S.A., Defendants. 99-1324 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 859

231 F.3d 859 (Fed. Cir. 2000)

INTERACTIVE GIFT EXPRESS, INC. (now known as E-Data, Corp.), Plaintiff-Appellant, v. COMPUSERVE INCORPORATED, and BRODERBUND SOFTWARE, INC. and INTUIT, INC., and INTERNET SOFTWARE INC. (now known as Internet Shopping Network, Inc.), and SOFTLOCK SERVICES, INC.,

and

TELEBASE SYSTEMS, INC., and THE LIBRARY CORPORATION,

and

WALDENBOOKS,

and

ZIFF-DAVIS PUBLISHING COMPANY, Defendants-Appellees,

and

APOGEE SOFTWARE LIMITED, and SOFT & NET DISTRIBUTION, S.A., Defendants.

99-1324

United States Court of Appeals for the Federal Circuit

DECIDED:November 3, 2000

Appealed from: United States District Court for the Southern District of New York

Judge Barbara S. Jones

[Copyrighted Material Omitted] Albert L. Jacobs, Jr., Graham & James LLP, of New York, New York, argued for plaintiff-appellant. With him on the brief were Daniel A. Ladow, and Philip M. Weiss.

Walter E. Hanley, Jr., Kenyon & Kenyon, of New York, New York, for defendant-appellee, Internet Software, Inc. (now known as Internet Shopping Network, Inc.)

Carl Oppedahl, Oppedahl & Larson, of Dillon, Colorado, for defendant-appellee, Softlock Services, Inc.

Timothy J. O'Hearn, Jones, Day, Reavis, & Pogue, of Cleveland, Ohio, argued for defendant-appellee, CompuServe Incorporated. With him on the brief was David B. Cochran.

Robert Thomas Maldonado, Cooper & Dunham, LLP, of New York, New York, argued for defendant-appellee, Waldenbooks. With him on the brief was Peter David Murray.

George F. Pappas, and James R. Burdett, Venable, Baetjer, Howard & Civiletti, LLP, of Washington, DC, for defendant-appellee The Library Corporation.

Claude M. Stern, Fenwick & West LLP, of Palo Alto, California, argued for defendant-appellees, Broderbund Software, Inc. and Intuit, Inc. With him on the brief were David C. McIntyre, and Susan M. Reid. Of counsel was Marta Y. Beckwith.

Catherine M. McGrath, Brown Raysman, of New York, New York, for defendant-appellee, Ziff-Davis Publishing Company. Of counsel was Louis Greco.

Griffith G. deNoyelles, Jr., Chernofsky & deNoyelles, of New York, New York, for defendant-appellee, Telebase Systems, Inc. (now known as CDnow, Inc.)

Before PLAGER, SCHALL, and LINN, Circuit Judges.

LINN, Circuit Judge.

Interactive Gift Express, Inc. ("IGE"), now known as E-Data, Corp., seeks review of a judgment of non-infringement of U.S. Patent No. 4,528,643 ("Freeny patent") entered by the U. S. District Court for the Southern District of New York on March 12, 1999. Because the district court erred as a matter of law in the construction of each of the five claim terms giving rise to IGE's non-infringement stipulation, we vacate and remand.

BACKGROUND

A. The Freeny Patent

The Freeny patent is directed to a system for reproducing information in material objects at point of sale locations. Prior to the invention disclosed in the Freeny patent, information disseminated to consumers in material objects, such as tape recordings, books, and records, was recorded onto the material objects at a central manufacturing facility, and the material objects were then shipped to remote retail locations for sale. These systems required centralized manufacturing facilities for reproducing the information in the material objects and extended distribution networks for distributing the material objects, once made, to various point of sale locations for sale to consumers. The manufacturing facilities and distribution networks represented substantial costs ultimately borne by consumers.

In such prior art systems, manufacturers had to estimate consumer demand for each new information-specific product and had to manufacture and ship quantities of material objects sufficient to meet the estimated demand at each retail location. Retailers had to make similar estimates to determine how many material objects for each information-specific product to order and keep in inventory. A low estimate of consumer demand resulted in unsatisfied customers and lost sales. On the other hand, high estimates left some material objects unsold, resulting in unrecouped costs.

To overcome these and other related problems, the Freeny patent provides a system for the distributed manufacture and sale of material objects at multiple locations directly serving consumers. The system includes a central control station, referred to in the Freeny patent as an "information control machine" or "ICM," and a plurality of remotely located manufacturing stations referred to as "information manufacturing machines" or "IMMs." At each IMM, a consumer selects the desired information and initiates a communication from the IMM to the ICM to gain authorization for copying of the selected information onto a desired type of material object. The consumer then waits for the IMM to receive the authorization, after which the selected information is copied by the IMM onto a blank material object. The invention can be used with a wide variety of information and material objects, such as music on cassettes and text on paper. Irrespective of the type of information and material object, the invention requires the purchase of the material object by the consumer, and the material object must contain information that was copied onto it at the point of sale location.

According to the Freeny patent, the information can be copied onto a selected type of material object whenever a consumer requests it. Consumer demand thus can be met without having to rely on manufacturing estimates and without having to bear the costs associated with overproduction, inventory control, shipping, and warehousing. The Freeny system also provides "for reproducing or manufacturing material objects at point of sale locations only with the permission of the owner of the information, thereby assuring that the owner of the information will be compensated in connection with such reproduction." Freeny patent, col. 4, ll. 8-13. The Freeny patent, in the description of the background of the invention, states that the invention overcomes the problem of "how to manufacture and distribute material objects embodying . . . information in an economical and efficient manner and in a manner which virtually assures that the owners of [the] information will be compensated in connection with the sale of such material objects." Freeny patent, col. 3, ll. 28-33.

Claim 1 of the Freeny patent is representative of the method claims at issue and defines the invention as follows:

1. A method for reproducing information in material objects utilizing information manufacturing machines located at point of sale locations, comprising the steps of:

providing from a source remotely located with respect to the information manufacturing machine the information to be reproduced to the information manufacturing machine, each information being uniquely identified by a catalog code;

providing a request reproduction code including a catalog code uniquely identifying the information to be reproduced to the information manufacturing machine requesting to reproduce certain information identified by the catalog code in a material object;

providing an authorization code at the information manufacturing machine authorizing the reproduction of the information identified by the catalog code included in the request reproduction code; and

receiving the request reproduction code and the authorization code at the information manufacturing machine and reproducing in a material object the information identified by the catalog code included in the request reproduction code in response to the authorization code authorizing such reproduction.

Freeny patent, col. 28, ll. 22-47.

Exemplary of the apparatus claims is claim 37, which reads as follows:

37. An apparatus for reproducing information in material objects at point of sale locations, comprising:

an information manufacturing machine located at a point of sale location for reproducing information in material objects, each information to be reproduced being uniquely identified by a catalog code and each information being received from a source remotely located with respect to the information manufacturing machine and each information being stored in the information manufacturing machine, the information manufacturing machine receiving a request reproduction code including a catalog code uniquely identifying the information to be reproduced and being adapted to provide an authorization code including the catalog code included in the request reproduction code, and the information manufacturing machine being adapted to reproduce the information identified by the catalog code in a material object in response to receiving the authorization code.

Freeny patent, col. 36, ll. 45-64.

B. The Accused Activities

The defendants are computer software and publishing companies and one retail bookstore. Plaintiff contends that the computer software and publishing companies infringe the Freeny patent by selling software or documents "online," that is, over the Internet and the World Wide Web. Plaintiff maintains that the retail bookstore infringes the Freeny patent by selling books that include a CD-ROM containing encrypted computer applications, access to which is not possible until the consumer retrieves a password. Plaintiff, through the construction it proffered in its Revised Claim Construction Report of November 12, 1996, has effectively conceded that none of the defendants are direct infringers.

With the one exception of the retail bookstore defendant, all of the accused systems distribute information directly to consumers' personal computers without using an intermediate retail location, the consumer instead dealing directly with a web-site over the Internet. Information is distributed and downloaded onto a consumer's own internal hard disk or other storage device without the purchase of any material object such as a floppy disk or CD-ROM.

In the case of the CD-ROMs sold to consumers by the retail...