Cordance Corp. v. Amazon.Com Inc. And

• Decision Date: 23 July 2010
• Docket Number: Civil Action No. 06-491-MPT
• Citation: 727 F.Supp.2d 310
• Parties: CORDANCE CORPORATION, Plaintiff, v. AMAZON.COM, INC. and, Amazon Web Services, LLC, Defendants.
• Court: U.S. District Court — District of Delaware

727 F.Supp.2d 310

CORDANCE CORPORATION, Plaintiff,

v.AMAZON.COM, INC. and, Amazon Web Services, LLC, Defendants.

Civil Action No. 06-491-MPT.

United States District Court, D. Delaware.

July 23, 2010.

Steven J. Balick, Esquire, John G. Day, Esquire, and Tiffany Geyer Lydon, Esquire, Ashby & Geddes, Wilmington, DE, of Counsel Michael A. Albert, Esquire, Robert M. Abrahamsen, Esquire, and Jeffrey C. O'Neill, Esquire, Wolf, Greenfield & Sacks, P.C., Boston, MA, for Plaintiff Cordance Corporation.

Richard L. Horwitz, Esquire, David E. Moore, Esquire, Potter Anderson & Corroon LLP, Wilmington, DE, of Counsel Lynn H. Pasahow, Esquire, J. David Hadden, Esquire, Darren E. Donnelly, Esquire, Saina S. Shamilov, Esquire, and Ryan J. Marton, Esquire, Fenwick & West LLP, Mountain View, CA, for Defendant Amazon.com, Inc.

MEMORANDUM OPINION

MARY PAT THYNGE, United States Magistrate Judge.

I. PROCEDURAL BACKGROUND

This is a patent infringement case. Cordance Corporation ("Cordance") and Amazon.com, Inc. and Amazon Web Services, LLC (collectively, "Amazon") develop software and own patents pertaining to on-line internet-based transaction infrastructures.¹ On August 8, 2006, Cordance filed suit alleging that Amazon's trademarked "1-Click®" purchasing interface, featured throughout its website, infringed U.S. Patent No. 6,757,710 ("the '710 patent"). On September 7, 2006, Cordance filed its first amended complaint. On October 23, 2006 Amazon filed its answer asserting numerous counterclaims and defenses, including a counterclaim of patent infringement of its U.S. Patent No. 6,269,369 ("the '369 patent").² On November 11, 2007, Cordance filed its second amended complaint, which alleged that Amazon's information storage processes infringed U.S. Patent No. 6,044,205 ("the '205 patent") and that Amazon's systems for collecting, retrieving, and presenting product reviews and buyer and seller feedback infringe U.S. Patent Nos. 5,862,325 ("the '325 patent") and 6,088,717 ("the 717 patent").³ Subsequently, Cordance and Amazon stipulated to a dismissal of claims and counterclaimsrelating to infringement of Cordance's ' 205 patent and Amazon's ' 369 patent.⁴ As a result, by the time this case was tried, the patents in suit were Cordance's '325, 717, and 710 patents.

A jury trial commenced on August 3, 2009. On August 18, 2009, the jury reached a verdict, finding (1) Amazon does not infringe any of the asserted claims of the '325 and 717 patents or claims 2 and 9 of the 710 patent; (2) the asserted claims of the '325 and '717 patents are not invalid; (3) Amazon infringes claims 1, 3, 5, 7, and 8 of the 710 patent; and (4) claims 1, 2, 3, 5, 7, 8, and 9 of the 710 patent are invalid. The court entered judgment on September 9, 2009. On September 23, 2009, Cordance filed a renewed motion for judgment as a matter of law or, in the alternative, for a new trial. On February 22, 2010, the court granted Cordance judgment as a matter of law that, inter alia, claims 7 and 8 of the 710 patent are not invalid. ⁵ On March 18, 2010, Cordance filed a motion for permanent injunction or, in the alternative, imposition of an ongoing royalty.⁶ On April 23, 2010, Amazon filed its answer to Cordance's motion for equitable relief along with a motion to strike the declaration of Dr. Shamos submitted in support of Cordance's motion.⁷ Cordance's motion for equitable relief and Amazon's motion to strike the declaration of Dr. Shamos are addressed in a separate opinion. On May 26 and 27, 2010, a bench trial was held on Amazon's inequitable conduct and patent misuse defenses. On June 2, 2010, Amazon filed its opening brief on those issues.⁸ Cordance answered on June 9, 2010. ⁹ Amazon filed its reply on June 16, 2010.¹⁰ This is the court's decision on Amazon's claims that Cordance is guilty of inequitable conduct and should be precluded from enforcing the ' 710 patent under that doctrine and the doctrine of patent misuse.

II. INEQUITABLE CONDUCT

A. LEGAL STANDARD

Applicants for patents and their legal representatives owe a duty of candor, good faith, and honesty in their dealings with the United States Patent and Trademark Office ("PTO").¹¹ A breach of this duty constitutes inequitable conduct.¹² And if inequitable conduct is established, then the entire patent is rendered unenforceable.¹³

To successfully prove inequitable conduct, an accused infringer must present " 'evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO].' " ¹⁴A threshold level of each element-materiality and intent to deceive-must be proven by clear and convincing evidence. ¹⁵ Further, even if the requisite clear and convincing showing of both elements has been made, a court may still choose not to invalidate the challenged patent.¹⁶

The following is the standard for materiality: "information is material when a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent." ¹⁷ With regard to the deceptive intent prong, " 'materiality does not presume intent, which is a separate and essential component of inequitable conduct.' " ¹⁸ " '[T]he alleged conduct must not amount merely to the improper performance of, or omission of, an act one ought to have performed. Rather, clear and convincing evidence must prove that an applicant had the specific intent to ... mislead [ ] or deceiv[e] the PTO.' " ¹⁹ Such intent can be inferred from indirect and circumstantial evidence,²⁰ "[b]ut such evidence must still be clear and convincing, and inferences drawn from lesser evidence cannot satisfy the deceptive intent requirement." ²¹ Moreover, "the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard." ²²

A district court cannot find inequitable conduct unless threshold levels of both intent to deceive and materiality are established by clear and convincing evidence.²³ "Only after adequate showings are made as to both materiality and deceptiveintent may the district court look to the equities by weighing the facts underlying those showings." ²⁴ At this stage in a court's inequitable conduct analysis, the inverse relationship between materiality and intent to deceive comes into play, and a court facing a high level of materiality may find that inequitable conduct has been established despite a lower level showing of intent to deceive.²⁵ The Federal Circuit has explained:

At this second stage, ... the question is no longer whether materiality and/or intent to deceive were proven with evidence that is sufficiently clear and convincing. While the facts of materiality and intent to deceive must be proven by clear and convincing evidence, the district court must balance the substance of those now-proven facts and all the equities of the case to determine whether the severe penalty of unenforceability should be imposed. It is this balancing that is committed to the district court's discretion. ²⁶

B. FACTUAL BACKGROUND

The prosecution history of the '710 patent is relevant to Amazon's allegations of inequitable conduct. The '710 patent application was filed on February 5, 2002. The '710 patent is a continuation ²⁷ of U.S. Patent No. 6,345,288 filed on May 15, 2000, which is a continuation of the 717 patent filed on August 31, 1998, which is a continuation of the ' 325 patent filed on September 27, 1996, which is a continuation in part ²⁸ of the ' 205 patent filed on February 29, 1996.²⁹

In a final office action mailed February 28, 2003, the '710 patent application was rejected under 35 U.S.C. § 102(e) ³⁰ as being anticipated by Chelliah et al. (the"Chelliah patent"), U.S. Patent No. 5,710,887.³¹ In response to this office action, on May 6, 2003, the four then-pending ' 710 patent claims were amended, two claims were added, and the ' 710 patent inventor, Drummond Reed ("Reed"), filed a Rule 131 declaration ³² purportedly establishing that the Chelliah patent was not prior art to either method claimed in the ' 710 patent.³³ In his Rule 131 declaration (the "131 Declaration") Reed swore that he conceived of the two claimed methods prior to the August 29, 1995 effective date of the Chelliah patent and diligently worked toward reducing those methods to practice.³⁴ Attached as Appendix A to Reed's 131 declaration was a document entitled Access Object Network Disclosure Document (the "Conception Document") and dated November 1, 1993.³⁵

Because Amazon's allegations of inequitable conduct turn on relationships between representations in Reed's 131 Declaration and the Conception Document, the court reproduces, with some explication interspersed, select portions of these documents. In his 131 Declaration, Reed first declares that his Conception Document shows conception of each element of the '710 patent's two methods for completing online purchases, which he terms the "First Method" and the "Second Method." The 131 Declaration begins:

I, Drummond Reed, the inventor in the above-identified application [the ' 710 patent application], hereby declare as follows:

1. That prior to August 29, 1995, I conceived a computer-implemented method (referred to herein as "the First Method") comprising steps of: (a) providing customer data storing information for a customer usable to automatically complete an online purchase of an item from a seller; (b) providing the customer with information from the seller with respect to an item; (c) receiving from the customer an indication to initiate a purchase transaction for purchasing the item; (d) in response to the received indication, automatically completing the purchase of an item from the seller by accessing the customer data to retrieve the information and process the retrieved information so as to complete the purchase

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