Telemac Cellular Corp v. Topp Telecom, Inc.

• Citation: 58 USPQ2d 1545,247 F.3d 1316
• Decision Date: 25 April 2001
• Docket Number: PLAINTIFF-APPELLANT,DEFENDANT-APPELLEE,No. 99-1562,99-1562
• Parties: (Fed. Cir. 2001) TELEMAC CELLULAR CORPORATION,, v. TOPP TELECOM, INC.,
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 1316

247 F.3d 1316 (Fed. Cir. 2001)

TELEMAC CELLULAR CORPORATION, PLAINTIFF-APPELLANT, v. TOPP TELECOM, INC., DEFENDANT-APPELLEE.

No. 99-1562

United States Court of Appeals for the Federal Circuit

April 25, 2001

Appealed from: United States District Court for the Northern District of California

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Guy W. Chambers, Townsend and Townsend and Crew, Llp, of San Francisco, California, argued for plaintiff-appellant. With him on the brief was Roger L. Cook.

Daniel A. DeVito, Skadden, Arps, Slate, Meagher & Flom Llp, of New York, New York, argued for defendant-appellee. With him on the brief was Carolyn H. Blankenship. Of counsel on the brief were David W. Hansen, and Benjamin R. Ostapuk, Skadden, Arps, Slate, Meagher & Flom Llp, of Palo Alto, California.

Before Newman, Lourie, and Gajarsa, Circuit Judges.

Gajarsa, Circuit Judge.

Judge Claudia Wilken

Telemac Cellular Corporation ("Telemac") appeals from a grant of summary judgment by the United States District Court for the Northern District of California finding claims 1, 4, 6, 9, 18, 20-24, 29 and 30 of Telemac's U.S. Patent No. 5,577,100 ("the '100 patent") invalid and not infringed by the TRACFONE system. Telemac Cellular Corp., v. Topp Telecom, Inc., No. 98-CV-22 (N.D. Cal. Aug. 25, 1999). For the reasons discussed below, we affirm the judgment of the district court.

BACKGROUND

Appellant, Telemac, plaintiff below, was formed in the early 1990s with a focus on the rental cellular telephone market. In an effort to minimize credit risk, Telemac sought to provide a cellular phone that automatically debited the cost of each call from an available credit account stored within the cellular phone. On January 30, 1995, Telemac filed a patent application describing that technology. The application issued as the '100 patent on November 19, 1996. The '100 patent discloses and claims a phone system including a mobile phone having internal accounting capabilities for performing real-time call debiting.

The patented debit phone differs from the conventional mobile phone in that the user pre-pays for calls, or "air time," when the user takes possession of the phone from the rental company. Specifically, the user is allowed a certain total amount of credit, which amount is stored in the phone's memory. As the user places calls, the cost for each call is debited from the stored credited amount in real-time. Debiting is accomplished using a program for carrying out the functional steps of the billing algorithm. In accordance with that algorithm, the call is first classified into one of the appropriate categories including local, long distance, international, or roaming calls. An internal rate table stores rate values corresponding to each calling category. The charge amount is determined based on the call's classification, the length of time of the call, and the corresponding rate value stored in the rate table.

The phone may be activated and programmed by placing it in a module, or "boot," connected to the host processor. It may also be programmed remotely using cellular paging signals to establish the call, and Dual Tone Multi-Frequency ("DTMF") signals for communicating programming codes. In both programming methods, the host processor initiates communication and automatically transmits operating codes to the cellular phone to enable its operation. In accordance with yet a third programming method, the phone is activated manually via a user-initiated technique. In that activation method, a user calls the system provider's toll-free number and obtains activation codes from an operator, which the user enters manually.

Claim 1 of the '100 patent is the only independent claim. It reads as follows:

1. A mobile phone system comprising a system provider having a host processor unit and a plurality of system users each having at least one mobile phone unit wherein:

the host processor unit has communication means for selectively establishing a communication link with each mobile phone unit; and,

each phone unit includes a processor, a clock chip, memory associated with the processor, program means including a complex billing algorithm and rate data for internally calculating call charges as calls are made, wherein the phone unit includes internal accounting means for generating a debit account with an account amount in the phone unit and decrementing the account amount in the debit account in real time, and wherein the system provider has payment verification means under system provider control for setting a phone use account amount and communicating the account amount to the phone unit, wherein the internal account means adds the account amount to the debit account.

'100 patent, col. 19, ll. 2-21.

Topp Telecom, Inc. ("Topp"), the appellee-defendant, sells the TRACFONE system which also utilizes a prepaid cellular telephone. To activate Topp's phone, or to have credit amounts replenished, a user contacts a customer service representative at Topp's central service facility using a telephone other than the one purchased from Topp. The user provides an operator with the serial number of the Topp telephone unit as well as information identifying the user. The operator, in turn, provides the user with operating codes and instruction necessary to activate the phone. Manual entry of the operating codes by the user causes the telephone to store a credit amount and completes activation. Once activated, the charges for each call are calculated using prestored rates, and those charges are subtracted from the stored credited amount. Upon exhaustion of the credit amount, the user can purchase additional airtime through Topp's service center.

Because the phone is preprogrammed to recognize and block placement of international calls, the TRACFONE's billing algorithm does not calculate charges for international calls using an international rate. A TRACFONE user cannot place international calls directly, but must place international calls using an external exchange via a calling card or with the assistance of an operator.

In January 1998, Telemac filed an action against Topp alleging that Topp's TRACFONE system infringed the claims of the '100 patent. On October 16, 1998, Topp filed a motion for summary judgment alleging that claims 1, 4, 6, 9, 18, 20-24, 29 and 30 of the '100 patent should be declared invalid under 35 U.S.C. §§ 102(b) as anticipated by U.S. Patent No. 5,631,947, granted to Wittstein et al. (the "Wittstein patent"). In opposition to that motion, Telemac submitted a declaration from Mr. Stephen Bristow, an industry expert, opposing Topp's invalidity allegation. The district court heard argument on Topp's summary judgment motion and on issues involving claim construction. In February 1999, the district court issued an order construing the claims of the patent, rejecting Telemac's expert evidence, and granting Topp's motion for partial summary judgment of invalidity finding the claims anticipated by the Wittstein patent. In an additional order issued in March 1999, the district court denied Telemac's motion for reconsideration finding that, while not expressly described, the claimed billing algorithm was necessarily present in Wittstein's patent. On subsequent cross-motions for summary judgment, the district court found as a matter of law that none of the claims of the '100 patent was infringed by the accused TRACFONE system. In August 1999, the parties agreed to an entry of final judgment. The district court entered the requested final judgment citing portions of each of the previously described orders for its validity and infringement determinations.

In reviewing the district court's analysis, we note that, consistent with the arguments of the parties, its claim construction was limited solely to an interpretation of claim 1. The district court concluded that, in accordance with the plain language of that claim, the host processor initiates communications with the mobile phone. Specifically, the court based its construction of the claim on the language requiring that "the host processor . . . selectively establish[es] a communication link . . . with" the mobile telephone. The court explained that an interpretation in which the customer initiates the claimed communication is contrary to the plain meaning of the claim. The court further rejected Telemac's argument that such a construction of claim 1 would render similar language in claim 3 duplicative, concluding that the dependent claim included limitations not found in claim 1 as construed.

Relying on both the language of the claims and the written description, the court next determined that the term "communication link" be construed to require "automatic communications." First, the court reiterated that the claim requires communications established by the host processor, not the customer. Looking to the written description, the court determined that in each embodiment in which the host processor establishes the communication, the communication is established automatically. It further determined that in those embodiments, the communication is established to perform activation and programming of a customer's phone. The court cited various portions of the specification in support of its argument, including a description of the preferred embodiment in which activation of the phone is accomplished using "a terminal interconnect" for direct machine-to-machine communication. Similarly, another section of the specification describing "automatic" communications cited by the court recited reprogramming of the rate table over the air at the initiation of the system provider. Thus, the court concluded that the "communication means" should be construed to encompass automatically established communications initiated for the sole purpose of performing activation or programming.

Rejecting Telemac's proffered construction, the court concluded that the...