Muniauction, Inc. v. Thomson Corp.

Decision Date14 July 2008
Docket NumberNo. 2007-1485.,2007-1485.
PartiesMUNIAUCTION, INC. (doing business as Grant Street Group), Plaintiff-Appellee, v. THOMSON CORPORATION (trading and doing business as Thomson Financial LLC and Thomson Financial Municipals Group) and I-Deal, LLC, Defendants-Appellants.
CourtU.S. Court of Appeals — Federal Circuit

Raymond P. Niro, Niro, Scavone, Haller & Niro, of Chicago, Illinois, argued for plaintiff-appellee. With him on the brief were John C. Janka and Sally Wiggins. Of counsel was Douglas M. Hall. Of counsel on the brief was Lisa Heinzerling, Georgetown University Law Center, of Washington, DC.

Richard L. Rainey, Covington & Burling LLP, of Washington, DC, argued for defendants-appellants. With him on the brief were Anthony Herman, and Scott C. Weidenfeller. Of counsel were Alissa K. Lipton and Peter A. Swanson.

Before GAJARSA, Circuit Judge, PLAGER, Senior Circuit Judge, and PROST, Circuit Judge.

GAJARSA, Circuit Judge.

This is a patent infringement case. Thomson Corporation and I-Deal, LLC (collectively "Thomson") appeal from a final judgment, after a jury trial, that the asserted claims of U.S. Patent No. 6,161,099 ("the '099 patent") are not obvious, that Thomson willfully infringed the asserted claims of the '099 patent, that Muniauction, Inc. is entitled to approximately $77 million for lost profits damages enhanced for Thomson's willful infringement, and that Thomson is permanently enjoined from continued infringement of the '099 patent. Muniauction, Inc. v. Thomson Corp., 502 F.Supp.2d 477 (W.D.Pa.2007). Because claims 1, 9, 14, 31, 36, and 56 of the '099 patent are obvious as a matter of law, the judgment of nonobviousness is reversed as to these claims. Similarly, because Thomson does not infringe the remaining asserted claims as a matter of law, the judgment of infringement is reversed, and the remainder of the final judgment is vacated.

BACKGROUND

The '099 patent is directed to electronic methods for conducting "original issuer auctions of financial instruments." '099 patent col. 2 ll. 49-50. Specifically, the '099 patent is directed to original issuer municipal bond auctions over an electronic network, e.g., the Internet, using a web browser. Id. at col. 1 ll. 13-15. In this type of auction, the municipality ("issuer") offers its bonds to underwriters ("bidders"), who typically bid on and purchase the entire bond offering, i.e., all-or-none bidding, and thereafter resell individual bonds to the public. Id. at col. 6 ll. 11-13. A bond offering may be a package of debt instruments consisting of bonds having different principle amounts and having different maturity dates. Id. at col. 6 ll. 19-22. A bidder submits a price and a related interest rate represented by a coupon for each of the bonds differentiated by a respective maturity date. Accordingly, the best bid is determined according to the true interest cost ("TIC") to the issuer based on the blended rates for each package of the aggregated submissions made by the bidder. Id. at col. 6 ll. 20-26, col. 9 ll. 4-55. In addition to all-or-none bidding, the '099 patent discloses maturity-by-maturity bidding by which a bidder may bid on less than the entire debt offering. Id. at col. 5 ll. 23-65, col. 13 ll. 31-33.

The '099 patent discusses many prior art electronic auction and trading systems, yet criticizes those systems as inapplicable to original issuer auctions of financial instruments. Id. at col. 2 ll. 49-60. The '099 patent also discusses the Parity® electronic bid submission system, developed by 21st Century Municipals, Inc. for use in municipal bond auctions. "The PARITY bid submission system allows bidders who have previously obtained and installed appropriate software to electronically submit bids in an auction over a computer network." Id. at col. 3 ll. 4-7. The '099 patent criticizes the Parity® system for three reasons. First, the prior art system requires bidders to obtain and install the Parity® software prior to participating in an auction over the computer network; second, the system "is designed to be used together with fax and other bid submission methods during an auction"; and third, the system operates as a sealed bid system in which the received bids are not evaluated and no feedback is provided to the bidders until the auction closes. Id. at col. 3 ll. 4-12.

Accordingly, the invention of the '099 patent provides an "integrated system on a single server" that allows issuers to run the auction and bidders to prepare and submit bids using a conventional web browser, without the use of other separate software. Id. at col. 5 ll. 13-28. The system of the '099 patent also allows issuers to monitor the progress of the auction and allows bidders to monitor their bid vis-à-vis the current best bid. Id. at col. 12 l. 60 to col. 13 l. 60. Claim 1 states:

In an electronic auction system including an issuer's computer having a display and at least one bidder's computer having an input device and a display, said bidder's computer being located remotely from said issuer's computer, said computers being coupled to at least one electronic network for communicating data messages between said computers, an electronic auctioning process for auctioning fixed income financial instruments comprising:

inputting data associated with at least one bid for at least one fixed income financial instrument into said bidder's computer via said input device;

automatically computing at least one interest cost value based at least in part on said inputted data, said automatically computed interest cost value specifying a rate representing borrowing cost associated with said at least one fixed income financial instrument;

submitting said bid by transmitting at least some of said inputted data from said bidder's computer over said at least one electronic network; and

communicating at least one message associated with said submitted bid to said issuer's computer over said at least one electronic network and displaying, on said issuer's computer display, information associated with said bid including said computed interest cost value wherein at least one of the inputting step, the automatically computing step, the submitting step, the communicating step and the displaying step is performed using a web browser.

Id. at col. 14 l. 41 to col. 15 l. 2.

The accused process has as its genesis the Parity® system discussed in the '099 patent. Originally introduced in 1992, Parity® allowed bidders using a modem to access bid calculation software on a central server over a proprietary computer network and input data to calculate a TIC for a given bid. Bidders could then submit a bid over the electronic network to a central server, which ordered the bids according to TICs and transmitted the bids to issuers' computers for display. In 1995, 21st Century Municipals modified Parity® to work with other bid calculation programs, including Thomson's BidComp software, originally introduced in 1988. In 1997, Thomson acquired Parity® from 21st Century Municipals and integrated the BidComp and Parity® products into a single system marketed as BidComp/Parity®. In 1998, Thomson modified BidComp/Parity® to allow issuers to view bids over the Internet using a web browser rather than over a proprietary computer network.

On June 1, 2001, Muniauction filed suit against Thomson, alleging that Thomson infringes method claims 1, 2, 9, 14, 18, 20, 24, 31, 32, 36, 40, 42, 46, and 56 of the '099 patent when it conducts auctions on its BidComp/Parity® system. After trial, a jury found that the asserted claims were not obvious and that Muniauction, Inc. was entitled to $38,482,008 in lost profits damages for Thomson's willful infringement. On October 20, 2006, Thomson filed a motion for judgment as a matter of law ("JMOL") or a new trial, asserting, inter alia, that the claims of the '099 patent were obvious and that Thomson did not infringe the claims under the appropriate standard for joint infringement. On April 30, 2007, the Supreme Court issued KSR International Co. v. Teleflex Inc., which rejected a rigid application of this court's teaching-suggestion-motivation test for obviousness. ___ U.S. ___, 127 S.Ct. 1727, 1739, 167 L.Ed.2d 705 (2007). The district court considered KSR, but denied Thomson's motion in all respects, enhanced the damages award to $76.9 million, awarded $7.7 million in pre-judgment interest, and granted a permanent injunction against Thomson. The district court entered a final judgment on July 30, 2007, and Thomson filed a timely notice of appeal on August 1, 2007. Thomson also sought a stay of the injunction pending appeal.

While the appeal was pending, this court issued two opinions relevant to issues presented by this case. First, on August 20, 2007, In re Seagate Technology, LLC changed the standard of willful infringement from one akin to negligence to that of objective recklessness. 497 F.3d 1360, 1371 (Fed.Cir.2007). Second, on September 20, 2007, BMC Resources, Inc. v. Paymentech, L.P. held that where steps of a method claim are performed by multiple parties, the entire method must be performed at the control or direction of the alleged direct infringer. 498 F.3d 1373, 1380-81 (Fed.Cir.2007). This court thus granted Thomson's motion for a stay of the injunction pending appeal, concluding that Thomson had shown a likelihood of success on the merits under BMC Resources. Muniauction, Inc. v. Thomson Corp., 07-1485, 2007 WL 2827915 (Fed.Cir. Sept. 28, 2007). We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1295(a).

DISCUSSION

The denial of a JMOL motion is "a procedural issue not unique to patent law, which we review under the law of the regional circuit where the appeal from the district court normally would lie." Riverwood Int'l Corp. v. R.A. Jones & Co., 324 F.3d 1346, 1352 (Fed.Cir.2003). Under Third Circuit law, "[w]e exercise plenary review of an order granting or denying a motion for judgment as a matter of...

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