Interactive Gift Express v. CompuServe

• Decision Date: 13 July 2001
• Docket Number: ZIFF-DAVIS,E-D
• Citation: 59 USPQ2d 1401,256 F.3d 1323
• Parties: (Fed. Cir. 2001) 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
• Court: U.S. Court of Appeals — Federal Circuit

Page 1323

256 F.3d 1323 (Fed. Cir. 2001)

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

July 13, 2001

Appealed from: United States District Court for the Southern District of New York Judge Barbara S. Jones

[Copyrighted Material Omitted]

[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. de Noyelles, Jr., Chernofsky & de Noyelles, of New York, New York, for defendant-appellee, Telebase Systems, Inc. (now known as CDnow, Inc.)

Before MAYER, Chief Judge, NEWMAN, MICHEL, LOURIE, RADER, SCHALL, BRYSON, GAJARSA, and LINN, Circuit Judges.^*

ORDER

A combined petition for panel rehearing and rehearing en banc was filed by Broderbund Software, Inc. ("Broderbund") and Intuit, Inc. ("Intuit"), and joined in by Waldenbooks, The Library Corporation, Internet Software, Inc. (now known as Internet Shopping Network, Inc.), Compuserve, Inc., and Telebase Systems, Inc. (now known as CDnow, Inc.). A response thereto was invited by the court and filed by Interactive Gift Express, Inc. (now known as E-Data, Inc.) ("IGE"). Leave to file a reply to IGE's response was requested by, and granted to, Broderbund and Intuit, and a reply was filed. Thereafter, these filings were referred to the merits panel that heard the appeal and then referred, along with the panel's new opinion, to the circuit judges who are in regular active service.

Upon consideration thereof,

IT IS ORDERED THAT:

(1) the petition for panel rehearing is granted for the limited purpose of addressing the issues of waiver and judicial estoppel, and

(2) the petition for rehearing en banc be, and the same hereby is, denied, and

(3) the previous opinion of the court in this appeal, issued on November 3, 2000 and reported at 231 F.3d 859, is withdrawn. The new opinion accompanies this order.

Before Schall, Circuit Judge, Plager, Senior Circuit Judge, and Linn, Circuit Judge.^**

Opinion

Linn, Circuit Judge

Interactive Gift Express, Inc. ("IGE"), now known as E-Data, Corp., seeks review of a judgment of noninfringement of U.S. Patent No. 4,528,643 ("Freeny patent") entered by the United States 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 noninfringement stipulation, we vacate and remand.

The petition for panel rehearing was granted to address issues of waiver and judicial estoppel, and we have modified our original opinion accordingly. The changes take note of IGE's binding positions and acknowledge our doctrines of waiver and judicial estoppel, but do not alter our disposition of this case.

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...