Tradecard, Inc. v. S1 Corp., 03 Civ. 1468(AKH).
| Decision Date | 06 September 2007 |
| Docket Number | No. 03 Civ. 1468(AKH).,03 Civ. 1468(AKH). |
| Citation | 509 F.Supp.2d 304 |
| Parties | TRADECARD, INC., Plaintiff, v. S1 CORP., Bank of America Corp., and Bank of America, N.A., Defendants. |
| Court | U.S. District Court — Southern District of New York |
David D. Lee, Henry Woosun Park, Kelsey I. Nix, Willkie Farr & Gallagher LLP, New York, NY, for Plaintiff.
Frank E. Emory, Jr., Hunton & Williams LLP, Charlotte, NC, Seth Howard Ostrow, Brown Raysman Millstein Felder & Steiner, LLP, New York, NY, Holmes J. Hawkins, III, King & Spalding LLP, Atlanta, GA, for Plaintiff/Defendants.
A. Shane Nicols, King & Spalding LLP, Atlanta, GA, Keith E. Sharkin, David M. Viscomi, King & Spalding, Ryan Andrew Becker, Hunton & Williams, LLP, New York, NY, Anthony R. Foxx, Nash E. Long, III, Hunton & Williams, LLP, Charlotte, NC, for Defendants.
Following a jury trial of the issues of patent validity and infringement, and a verdict for Defendants on both issues, Plaintiff moves for a new trial and for judgment as a matter of law. I hold, for the reasons discussed in this Opinion, that the evidence I allowed to be heard, and the legal instructions I gave and refused to give, did not reflect legal error or cause unfairness in the trial, nor was the Jury's verdict seriously erroneous, or even erroneous. Therefore, I deny Plaintiff's motion for a new trial. Fed.R.Civ.P. 59(a). I hold also, for the reasons discussed in this opinion, that there was a legally sufficient evidentiary basis for the Jury's verdict and, therefore, I deny Plaintiff's motion for judgment as a matter of law. Fed. R.Civ.P. 50(b).
Plaintiff, TradeCard, Inc. ("TradeCard") acquired by assignment a patent for a computer system intended to automate the paperwork involved in the financing of international trade, and developed a business to license its system to importers and financing institutions. Defendant S 1 Corp. ("S 1") was in the business of developing software for banks, and was engaged by Bank of America, N.A. ("Bank of America") to improve Bank of America's software for processing letters of credit.1 S1, having developed such improvements through its own resources and using its own personnel, licensed the system it developed to Bank of America. Plaintiff filed this lawsuit against Bank of America and S1, alleging willful patent infringement and inducement to infringe, and sought compensatory and three-fold damages.
Plaintiff proceeded to trial on claims one, four and eight of its patent. The Jury held against the plaintiff and for the defendants, returning a verdict that none of the patent claims was valid or infringed. Plaintiff timely moved for a new trial based on charges of error in admitting evidence and in various of the instructions I gave and refused to give, and for judgment as a matter of law. I hold in this Opinion that both of Plaintiff's motions are without merit, and that the judgment entered on the Jury's verdict for the defendants should stand.
The purchase and sale of, and payment for, goods in international commercial transactions is paper-intensive, fraught with the possibility of dispute, and generally complex. The buyer's purchase could fail to coincide with the seller's sales order, and the confirmations of both might vary from each other's forms. The seller's shipment of goods, reflected in its invoice and bills of lading, might not conform to the buyer's specified requirements in its purchase order. The buyer may or may not wish to consider the discrepancy material, and may reject the goods as nonconforming, or might opt to accept the goods as substantially conforming or otherwise acceptable. Since the buyers and sellers live and transact business in different countries, and conduct themselves according to different economic and legal systems, resolution of conflicts can be difficult.
Payments for international commercial transactions generally involve networks of domestic and foreign banks. Since the seller will lose control of the goods it sells upon delivery of those goods to a carrier, the seller generally will demand or wish to assure payment before making delivery. The buyer will not wish to make payment, however, unless assured that the seller is making delivery of conforming, or otherwise satisfactory, merchandise. There are two principal modalities for structuring such transactions to accommodate the needs of the participants: The parties may establish an open account arrangement, or else employ letters of credit.
Buyers and sellers can establish a mutual, open account, whereby they resolve disputes by crediting or charging each other over the course of their relationship, or through a disputes-resolution procedure in their contract. This arrangement is particularly useful for parties that interact over a course of dealing with multiple transactions. However, when buyers and sellers are engaged in large, distinct, or non-repetitive transactions, a letter of credit typically is used to provide the necessary protections to both buyers and sellers. In either mode of proceeding, the international banking system customarily provides the interface and the financing. See Ronald J. Mann, The Role of Letters of Credit in Payment Transactions, 98 Mich. L.Rev. 2494, 2516-2519 (2000); Margaret L. Moses, Letters of Credit and the Insolvent Applicant A Recipe for Bad Faith Dishonor, 57 Ala. L.Rev. 31, 36 (2005); George P. Graham, Note, International Commercial Letters of Credit and Choice of Law So Whose Law Should Apply Anyway?, 47 Wayne L.Rev. 201, 201-06 (2001).
In a letter of credit transaction, two separate contracts are involved: a contract between the buyer and the seller, specifying the terms and conditions of the purchase and sale of specific merchandise; and a contract, or contracts, between the buyer, the buyer's bank, the seller's bank, and the seller, providing that the buyer's bank will commit funds to the seller's bank with instructions to pay the seller upon the seller's presentation of an invoice, bill of lading, and related shipping and insurance documents that conform precisely to the terms and conditions of both the letter of credit and the buyer's agreement with the seller. If the invoice and bills of lading thus conform, the banks must pay the seller regardless of defenses that the buyer may assert against the seller. See Alaska Textile Co. v. Chase Manhattan Bank, N.A. 982 F.2d 813, 815-16 (2d Cir. 1992) (collecting cases); Mennen v. J.P. Morgan & Co., Inc., 91 N.Y.2d 13, 20, 666 N.Y.S.2d 975, 689 N.E.2d 869 (N.Y.1997); Blonder & Co., Inc. v. Citibank, N.A., 28 A.D.3d 180, 808 N.Y.S.2d 214, 216 (N.Y.App.Div. 1st Dept.2006).
In an open account, the contractual relationship between the buyer and seller, and the course of dealing between them, govern their relationship. The parties may utilize the banking system or alternative financing institutions, for example, insurance or guarantee companies, to cause payments to be made against deliveries. Conforming documents can play a large role in determining if and when payments to the seller may be made, but the rigors of a letter of credit transaction are generally mitigated or avoided. The buyer and seller, to greater or lesser degree, depending on the character of their relationships, can make adjusting debits and credits to maintain the flow of goods and payments. See 1 Am.Jur.2d Accounts and Accounting § 4.
In 1993, Guy Tozzoli claimed to have invented a computer system that integrated and automated the numerous decision points involved in international purchases, sales and payments of goods and merchandise. He called his invention a "Full Service Trade System," and organized a company under that name to hold such rights as he might obtain. After years of proceedings, Tozzoli filed an application for what became U.S. Patent No. 6,151,588 (the '588 Patent") on February 9, 1998, and a patent issued on November 21, 2000. The 588 Patent Abstract.
The '588 patent has eight claims. The three independent claims, Claims 1, 4 and 8, were considered by the jury and were the subject of its verdict. They are, consequently, the subjects of Plaintiff's Motions.2 Claims 1, 4 and 8 follow, as I construed them by my Amended Order of June 2, 2004. See Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed.Cir. 1995).
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