Aerotel, Ltd. v. Telco Group, Inc., 072611 FEDFED, 2010-1515

Docket Nº:2010-1515
Opinion Judge:O'Malley, Circuit Judge.
Party Name:AEROTEL, LTD., Plaintiff-Appellant, v. TELCO GROUP, INC., STI PHONECARD, INC., STI PREPAID DISTRIBUTORS, INC. AND SAMER TAWFIK, Defendants-Appellees, and RADIANT TELECOM, INC., INTELLIGENT SWITCHING & SOFTWARE, LLC, AND NTERA HOLDINGS, INC., Defendants-Appellees, And 9278 COMMUNICATIONS, INC., 9278 DISTRIBUTORS, INC., SAJID KAPADIA, AND NTSE COMMUN
Attorney:DENNIS M. FLAHERTY, Ostrager Chong Flaherty & Broitman, P.C., of New York, New York, argued for plain
Judge Panel:Before Rader, Chief Judge, Linn and O'Malley, Circuit Judges.
Case Date:July 26, 2011
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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AEROTEL, LTD., Plaintiff-Appellant,

v.

TELCO GROUP, INC., STI PHONECARD, INC., STI PREPAID DISTRIBUTORS, INC. AND SAMER TAWFIK, Defendants-Appellees,

and

RADIANT TELECOM, INC., INTELLIGENT SWITCHING & SOFTWARE, LLC, AND NTERA HOLDINGS, INC., Defendants-Appellees,

And

9278 COMMUNICATIONS, INC., 9278 DISTRIBUTORS, INC., SAJID KAPADIA, AND NTSE COMMUNICATIONS, INC., Defendants.

No. 2010-1515

United States Court of Appeals, Federal Circuit

July 26, 2011

This disposition is nonprecedential.

Appeal from the United States District Court for the Southern District of New York in Case No. 04-CV-10292, Judge Richard J. Holwell

DENNIS M. FLAHERTY, Ostrager Chong Flaherty & Broitman, P.C., of New York, New York, argued for plain­tiff-appellant. With him on the brief was Glenn F. Ostrager. Of counsel on the brief was Jeanne C. Curtis, Ropes & Gray, LLP, of New York, New York.

ROBERT T. MALDONADO, Cooper & Dunham, LLP, of New York, New York, argued for all defendants-appellees. With him on the brief for Telco Group, Inc., et al, were William E. Pelton and Tonia A. Sayour. Of counsel was John C. Carey, Carey, Rodriguez, Greenberg & Paul, LLP, of Miami, Florida, for defendants-appellees Radiant Telecom, Inc., et al.

Before Rader, Chief Judge, Linn and O'Malley, Circuit Judges.

O'Malley, Circuit Judge.

In this patent case, Aerotel, Ltd. ("Aerotel") appeals from a Consent Judgment in which the parties agreed that, based on the district court's claim construction order, Claim 9 of U.S. Patent No. 4, 706, 275 ("the '275 Patent") is invalid and not infringed by any Defendant.1] The district court signed the Consent Judgment, thereby entering a final, appealable judgment of invalidity and noninfringement of Claim 9 of the '275 Patent. For the reasons explained below, the Consent Judgment is af­firmed in part, and vacated in part.

BACKGROUND

A. Factual Background

1. The '275 Patent

The '275 Patent, which issued on November 10, 1987, is directed to "[a] telephone system enabling prepayment for telephone calls." It was invented by an Israeli citizen, Zvi Kamil, and was assigned to Aerotel. The patent expired on November 10, 2005.

The "Background of the Invention" explains that, at the time the application was filed, it was "extremely difficult to make long distance calls from public pay-phones since it requires large amounts of [] coins – not ordinarily carried about – especially when touring or on a business trip." '275 Patent col. 1 ll. 39-42. The back­ground concludes with the statement that "there is a long felt need for a system which enables making telephone calls including local or toll calls conveniently, inexpen­sively and from any telephone." Id. at col. 1 ll. 54-57.

Generally speaking, the system described in the '275 Patent allows a customer to deposit a prepayment amount, either by cash or credit card payment, with a prepaid service provider. The prepaid amount is stored as a credit in the "special exchange, " which is the equipment that processes the prepaid calls. The customer is given: (1) a "special code" to access the stored balance; and (2) a number to dial into the "special exchange."

a. The Embodiments

The '275 Patent's specification discloses two embodi­ments. The first embodiment, which is illustrated in Figures 1 and 3, is a telephone system where the special exchange processes prepaid telephone calls from any available telephone. The second embodiment, which is illustrated in Figure 2, is a telephone system in which the special exchange processes prepaid telephone calls from dedicated public telephones.

Figure 1 is a flow chart depicting a customer's use of the prepaid telephone system from any private telephone:

IMAGE OMITTED

In this embodiment, a customer can use any available telephone to dial the "special central office" which ac­cesses the "special exchange" (Blocks 13 & 14). When the customer is connected to the special central office or exchange, "a special dial tone is sent from the special exchange to the calling station." '275 Patent col. 3 ll. 23-26. The customer then inputs: (1) the "special code" which provides access to that caller's prepaid amount; and (2) the telephone number of the party to be called (Block 17). When the code and credit are verified (Block 18), a normal dial tone is sent to the caller (Block 19) and the system dials the called party (Block 21).2 At Block 22, the "special exchange equipment provides an artificial or prerecorded voice announcement stating the amount of credit available and that the amount of credit is equiva­lent to so many minutes of talking time on the call being connected." '275 Patent col. 3 ll. 43-47.

After the call is connected, a "time and distance com­puting circuit [which] is shown as a peg counter, is put into service to provide information for timing the call against the available credit." '275 Patent col. 4 ll. 3-6. Information from the peg counter (Block 28) is sent to a comparator (Block 29) "to continuously determine whether the calling party's credit is sufficient to pay for the call." Id. at col 4 ll. 6-9. The call is disconnected if the balance is insufficient to continue the call or if the user terminates the call (Blocks 31 & 34). If there is credit remaining when the call is terminated, the updated prepaid balance is stored in the special exchange for future use.

The embodiment in Figure 2 is a telephone system in which the special exchange processes calls made from dedicated public phones. In this embodiment, the dedi­cated phone automatically connects directly to the special exchange without any dialing. Once connected to the special exchange, the caller inputs the special code and the telephone number of the called party. The special exchange validates the code and the credit, and then connects the caller to the party associated with the input­ted number.

b. Claim 9 of the '275 Patent

The '275 Patent has three independent claims: two method claims (Claims 1 and 23)3 and one apparatus claim (Claim 9). Although Aerotel initially asserted all three claims against Defendants, after the district court's claim construction, Aerotel abandoned Claims 1 and 23. As such, the only claim at issue in this appeal is Claim 9, which deals with a system for making telephone calls from "any available telephone station for prepaid custom­ers."

Claim 9 provides as follows:

A telephone system for facilitating telephone calls including toll calls from any available telephone station for prepaid customers, said system comprising:

(a) means for coupling a calling party station to a special exchange;

(b) memory means in said special exchange for storing special customer codes and credit information individual to each pre­paid customer;

(c) means for verifying said calling party re­sponsive to a code transmitted from the calling party's station to the special exchange when one of the codes matches the code in the memory means and the calling party has unused credit and;

(d) means for completing a call from said call­ing party station to a called station re­sponsive to said verification, said means for verifying including means for moni­toring the credit of the calling party during a completed call.

'275 Patent col. 7 ll. 26-44. The only claim terms at issue in this appeal appear in bold: (1) the "means for cou­pling;" and (2) the "means for monitoring the credit."

2. The Prosecution History

a. Original Prosecution

The '275 Patent application was filed on November 13, 1985. In an Office Action dated October 2, 1986, the PTO rejected Claims 1-23 under 35 U.S.C. § 112, ¶ 2, "as being indefinite for failing to particularly point out and distinctly claim the subject matter which applicant re­gards as the invention." Appendix ("A") 1272. With respect to Claim 10, which issued as Claim 9, the PTO found that it was unpatentable over two prior art refer­ences: Peterson and Gehalo. Specifically, the PTO noted that:

The difference between Peterson and the claimed invention concerns prepayment and credit moni­toring. Although Peterson mentions postpay tele­phone systems in his prior art discussion, his invention does not specifically mention prepay­ment and credit monitoring. It would therefore be obvious to supply the Peterson reference with the credit monitoring and prepayment features dis­closed in Gehalo since Gehalo is also a credit telephone which has the feature of making calls with­out coins or credit cards.

A1273.

In response, Aerotel filed an Amendment to the claim to add the limitation: "means for monitoring the credit of the calling party during a call." In the "Remarks" portion of the Amendment, Aerotel stated that:

[T]he present invention is concerned with issuing a valid special code to a calling party when a pre­payment amount is deposited. The prepayment amount is stored in a memory in a special ex­change that is called by the calling party when he wishes to make a telephone call to a called party. The calling party inputs his special code and the number of the called party.

Before the calling party is connected to the called party, the special code inputted by the call­ing party is validated in the sense that the system determines whether the special code inputted by the calling party is a valid special code. If this is the case, then the calling party is connected to the called party only if the current initial prepayment amount stored in the memory exceeds the mini­mum cost of a call to the inputted number. Be­cause the calling station and the called station are known, the minimum cost of a call can be com­puted beforehand. Thus, prior to making a con­nection, the system can determine whether the amount of the prepayment [] is sufficient to...

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