Kara Technology Inc. v. Stamps.Com Inc.

• Decision Date: 24 September 2009
• Docket Number: No. 2009-1028.,No. 2009-1027.,2009-1027.,2009-1028.
• Citation: 582 F.3d 1341
• Parties: KARA TECHNOLOGY INCORPORATED, Plaintiff-Appellant, v. STAMPS.COM INC., Defendant-Cross Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

582 F.3d 1341

KARA TECHNOLOGY INCORPORATED, Plaintiff-Appellant, v. STAMPS.COM INC., Defendant-Cross Appellant.

No. 2009-1027.

No. 2009-1028.

United States Court of Appeals, Federal Circuit.

September 24, 2009.

Eliot D. Williams, Baker Botts L.L.P., of New York, New York, argued for plaintiff-appellant. With him on the brief was Robert C. Scheinfeld.

Philip J. Graves, Graves Law Office, P.C., argued for defendant-cross appellant.

Before SCHALL, PLAGER, and MOORE, Circuit Judges.

MOORE, Circuit Judge.

Kara Technology (Kara) appeals from the final judgment of the United States District Court for the Central District of California, following a jury trial, that Stamps.com did not infringe various claims of U.S. Patent Nos. 6,505,179 (the '179 patent) and 6,735,575 (the '575 patent) with its Pre-Version 5 (Pre-V5) or Versions 5 and later (V5) products. Kara also appeals from the district court's grant of summary judgment in favor of Stamps.com on its breach of contract claim. The court ruled, as a matter of law, that Stamps.com did not breach its nondisclosure agreement (NDA) with Kara. For its part, Stamps.com cross appeals the determination of the district court that it was not a prevailing party in the litigation, and that it thus was not entitled to costs under 28 U.S.C. § 1920 or attorney's fees under the NDA. For the following reasons, we vacate-in-part, reverse-in-part, and remand.

BACKGROUND

Kara owns the '179 and '575 patents. Salim Kara is the sole inventor listed on both patents. The '179 patent is a continuation-in-part of the '575 patent. The '179 and '575 patents are directed toward apparatuses and methods of creating and verifying the authenticity of documents such as postage. The patents concern technology that allows a customer to print a secured document (such as a stamp or an airline ticket) at home using preprinted label sheets. Data contained in the preprinted label sheets are used to both create the final document and later validate its authenticity. Figures 1 and 2 (identical in both the '179 and '575 patents) illustrate one embodiment of the invention.

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Figure 1 depicts a label sheet preprinted with a bar code (16a) and a serial number (16b). The patent refers to this preprinted information as "preestablished data." A consumer communicates information contained in the preprinted sheet to a processor, which then uses the information to create a security indicia (21). The consumer may then print out the final document at home. As shown in figure 2, the final document contains both the preprinted information and the security indicia. A seller (e.g., the post office or an airline) later verifies the authenticity of the document using both the preprinted information and the security indicia.

Stamps.com offers Internet-based shipping and postage services. In May of 2000, Stamps.com approached Kara to collaborate on Kara's Personal Computer-based (PC-based) stamp technology. On May 9, 2000, the two signed an NDA, requiring Stamps.com to "keep secret and not disclose ... and not use for its own use in any capacity whatsoever any Confidential Information for any purpose other than for the purpose for which such information was disclosed" (i.e., to facilitate "business discussions"). NDA, ¶¶ 1, 3. Further, the NDA specifically provided that Stamps.com was not permitted to "make written, electronic, or photostatic copies or excerpts of or summaries of Confidential Information" without prior written consent from Kara. Id. ¶ 5.

In July of 2000, Stamps.com indicated it was no longer interested in pursuing a business relationship with Kara. On October 24, 2001, Stamps.com announced that the U.S. Postal Service had approved beta testing of its PC-based postage product. The Pre-V5 product was launched commercially on July 17, 2002, while the V5 line was launched on June 28, 2005.

Kara brought suit against Stamps.com, alleging infringement and breach of contract (among other claims not on appeal) on October 22, 2004, in the United States District Court for the Southern District of New York. Eventually, the case was transferred to the Central District of California, at which point Stamps.com counterclaimed for patent invalidity and unenforceability and, relevant to this appeal, moved for summary judgment on Kara's breach of contract claim. The district court granted the summary judgment motion on August 23, 2006, finding that the statute of limitations for the contract claim had run. Furthermore, assuming arguendo that the statute of limitations had not run, the court found all alleged "confidential" information was in the public domain, and thus Stamps.com could not have breached the NDA by copying and retaining the information learned through its business dealings with Kara.

Thereafter, following a Markman hearing, the district court construed the relevant patent terms and entered a Markman Order on September 10, 2007. Stamps.com then moved for summary judgment of noninfringement and invalidity, which was denied by the court. Infringement of claims 1, 4, 5, 7, and 42 of the '575 patent and of claims 24, 27-31, 36-39, 42, 44, and 54, as well as Stamps.com's invalidity counterclaims, were then tried before a jury. After the close of evidence, Kara moved for judgment as a matter of law (JMOL) that Stamps.com's Pre-V5 product infringed claim 42 of the '575 patent and claims 36, 38, and 42 of the '179 patent. Upon denial of this motion, the court submitted the infringement and invalidity issues to a jury. The jury found that neither the Pre-V5 nor the V5 line of products infringed the asserted claims. For that reason, it did not address any of the invalidity counterclaims.

The court entered judgment on July 16, 2008, holding that Stamps.com was the prevailing party. Kara subsequently filed a renewed JMOL motion that Stamps. com's Pre-V5 product infringed claim 42 of the '575 patent and claims 36, 38, and 42 of the '179 patent; a motion for a new trial; a motion to strike the part of the July 16 judgment stating that Stamps.com was the prevailing party; and a motion to dismiss Stamps.com's invalidity and unenforceability counterclaims. On September 10, 2008, the district court denied the motions for a new trial and renewed JMOL, but granted the motion to strike the reference to Stamps.com as a prevailing party, entered judgment for Kara on the counterclaim of unenforceability, and dismissed the invalidity counterclaims without prejudice. Both parties timely appealed; we have jurisdiction under 28 U.S.C. § 1295(a)(1).

DISCUSSION

I. Claim Construction

We review claim construction de novo. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1455-56 (Fed.Cir.1998) (en banc). The words of a claim are generally given their ordinary and customary meaning as understood by a person of ordinary skill in the art in question at the time of the invention. Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed.Cir.2005) (en banc). "[A]lthough the specification often describes very specific embodiments of the invention, we have repeatedly warned against confining the claims to those embodiments." Id. at 1323. "In particular, we have expressly rejected the contention that if a patent describes only a single embodiment, the claims of the patent must be construed as being limited to that embodiment." Id.

Claim 36 of the '179 patent is representative of the claims at issue on appeal:¹

36. A method for establishing the validity of a display created by a non-secure printer, said method comprising the steps of:

placing in said printer paper upon which information may be created, said paper containing preestablished data which is unique to said paper;

communicating at least a portion of said preestablished data to a location independent from said printer, said independent location operable to send to said printer a security indicia, as part of a human readable display, said security indicia created in part by information contained in said preestablished media data and whereby said security indicia is validatable at a subsequent time partially under control of data contained in said preestablished paper data, said unique data being created on said paper defining one or more from the group consisting of:

postage stamps, money orders, bank drafts, letters of credit, legal documents, legal certificates, diplomas, passports, birth certificates, visas, drivers licenses, social security cards, medical insurance cards, vacation packages, travel vouchers, car rental vouchers, hotel vouchers, meal vouchers, drink vouchers, food stamps, tickets, baggage tags, prescriptions (Rx), vehicle licenses, vehicle titles;

wherein said paper is divided into sections each section adapted for printing thereon information pertaining to a different display, each such display having associated therewith a security indicia.

The central dispute concerns the meaning of the underlined language describing the creation and validation of the security indicia. The claim construction dispute pertains to three separate terms or phrases:

(1) "security indicia"

(2) "said independent location operable to send to said printer a security indicia, as part of a human readable display, said security indicia created in part by information contained in said preestablished media data" (the creation limitation)

(3) "and whereby said security indicia is validatable at a subsequent time partially under control of data contained in said preestablished paper data" (the validation limitation)

The construction of all three terms, however, turns on the same issue: whether the security indicia must be created and validated under control of a key contained in the preestablished data. In its Markman Order, the district court construed "security indicia" by stating that the indicia must "be created under control of a key" and stated that the ...