Versata Software, Inc. v. Internet Brands, Inc.

• Decision Date: 09 October 2012
• Docket Number: Civil Action No. 2:08–cv–313–WCB.
• Parties: VERSATA SOFTWARE, INC., f/k/a Trilogy Software, Inc.; and Versata Development Group, Inc., f/k/a Trilogy Development Group, Inc., Plaintiffs, v. INTERNET BRANDS, INC., f/k/a Carsdirect.Com, Inc., Autodata Solutions Company, and Autodata Solutions, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Texas

902 F.Supp.2d 841

VERSATA SOFTWARE, INC., f/k/a Trilogy Software, Inc.; and Versata Development Group, Inc., f/k/a Trilogy Development Group, Inc., Plaintiffs,

v.INTERNET BRANDS, INC., f/k/a Carsdirect.Com, Inc., Autodata Solutions Company, and Autodata Solutions, Inc., Defendants.

Civil Action No. 2:08–cv–313–WCB.

United States District Court,

E.D. Texas,

Marshall Division.

Oct. 9, 2012.

Demetrios Anaipakos, Kinan Hab Romman, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing P.C., Houston, TX, Victoria Wicken, Scott Lamar Cole, Leah Bhimani Buratti, Laurie Lavigna Fitzgerald, Kristina Scurry Baehr, Kevin M. Kneupper, John Michael Shumaker, John Franklin Garvish, II, Joel Lance Thollander, McKool Smith, PC, Austin, TX, Samuel Franklin Baxter, McKool Smith, Marshall, TX, for Plaintiffs.

Harry Lee Gillam, Jr., Gillam & Smith, LLP, Melissa Richards Smith, Patrick A. Fraioli, Jr., Marshall, TX, David Bricker, Moldo Davidson Fraioli Seror & Sestanovich, Los Angeles, CA, Jeffrey Allen Tinker, Winstead PC, Dallas, TX, Andrew John Schumacher, Brian Lawrence King, James Gene Ruiz, Michael P. Adams, Winstead Sechrest & Minick, Austin, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

WILLIAM C. BRYSON, District Judge.

Before the Court are five post-trial motions filed by the plaintiffs and one filed by the defendants: (1) Versata's Motion to Alter or Amend Final Judgment Under Rule 59(e) (Dkt. No. 349); (2) Versata's Motion for Judgment as a Matter of Law on Invalidity and Infringement (Dkt. No. 350); (3) Versata's Motion for Judgment as a Matter of Law, or in the Alternative, New Trial on Autodata's Breach of Contract Claim Due to Lack of Injury (Dkt. No. 351); (4) Versata's Renewed Motion for Judgment as a Matter of Law Under Rule 50 or, in the Alternative, for New Trial Under Rule 59 or Remittitur on Damages (Dkt. No. 352); (5) Versata's Motion for Judgment as a Matter of Law on Liability for Trade Secrets and Breach of the Master Services Agreement (Dkt. No. 353); and (6) Defendants' Motion for Award of Attorney's Fees (Dkt. No. 348). For the following reasons, the five motions filed by the plaintiffs are all DENIED. The motion filed by the defendants is also DENIED.

I. Background

This long-running dispute between the plaintiffs (collectively “Versata”) and the defendants (collectively “Autodata”) centers around technology that permits persons who are shopping for automobiles to use the Internet to configure and compare different vehicles that are available for purchase. Both companies sell their software offerings to automobile manufacturers, such as Chrysler Corporation and Toyota Motor Corporation.

Prior to 2008, Versata had a contract with Chrysler to provide configuration and comparison software to be used on Chrysler's website. In that year, Chrysler terminated its contract with Versata and began using Autodata's software instead. Versata then filed this action, in which it accused Autodata of infringing U.S. Patent No. 7,130,821 (“the '821 patent”) as well as breaching a settlement agreement between the parties (a product of earlier litigation) and tortiously interfering with Versata's business relations with Chrysler.

Autodata responded that the '821 patent was invalid because it was anticipated by and rendered obvious in light of various prior art references, including certain Autodata software. Autodata also filed counterclaims in which it alleged that Versata had misappropriated Autodata's trade secrets and in so doing had breached two contracts that the parties had entered into in the late 1990s during a brief period of collaboration. Both parties asserted other claims as well, but those claims are not pertinent to the issues addressed here.

The case was tried to a jury in June 2012. After a week-long trial, the jury returned a verdict in favor of Autodata. With respect to the patent claims, the jury found that Autodata did not infringe the asserted claims of the ' 821 patent and that the asserted claims of the '821 patent were invalid on grounds of both anticipation and obviousness. The jury also found that Autodata did not breach the settlement agreement with Versata and did not tortiously interfere with Versata's prospective business relationship with Chrysler. With respect to the counterclaims, the jury found that Autodata had proved that Versata misappropriated Autodata's trade secrets, and it awarded damages in the amount of $2,000,000 on that claim. The jury also found that Versata had breached its contractual obligations to Autodata. On that claim, the jury awarded Autodata only nominal damages of $1. Autodata subsequently sought equitable relief from the Court based on the breach of contract verdict, but the Court denied the motion on the ground that Autodata had not shown any continuing injury that called for an exercise of the Court's equitable powers.

On Autodata's claim of inequitable conduct, which was tried to the Court, the Court ruled in favor of Versata, finding that the '821 patent was not unenforceable for inequitable conduct during prosecution. The Court then entered final judgment in accordance with the jury's verdict and the Court's inequitable conduct ruling ( See Dkt. No. 344) For purposes of taxing costs under 28 U.S.C. § 1920, the Court concluded that Autodata was the prevailing party on its misappropriation and breach of contract counterclaims as well as the claims of patent infringement and invalidity, whereas Versata was the prevailing party on the defendants' counterclaim of inequitable conduct. Accordingly, the Court entered an award of costs in favor of Autodata in the amount of two-thirds of its taxable costs.

Versata now seeks relief from the final judgment, moving on multiple grounds for judgment as a matter of law (“JMOL”), a new trial, an order of remittitur, and an amendment of the judgment. Versata's motions focus generally on four issues: the validity of the '821 patent; Versata's liability for trade secret misappropriation and breach of contract; the propriety of the damages awards on the misappropriation and breach of contract claims; and the Court's determination, for purposes of its award of costs, that Autodata was the prevailing party on its breach of contract claim.

II. DiscussionA. Patent Invalidity

In its first JMOL motion (Dkt. No. 350), Versata attacks the jury's finding that the '821 patent was invalid as both anticipated by, and obvious in light of, the prior art. Versata argues that the testimony of Autodata's expert, Dr. Stuart Stubblebine, was insufficiently detailed to support a finding of invalidity. In particular, Versata contends that Dr. Stubblebine offered only conclusory statements and failed to walk through the limitations of each of the claims and to explain how each limitation was present in the prior art. In addition, Versata asserts that Dr. Stubblebine misstated the law with respect to the relationship between independent and dependent claims.

In considering the invalidity issue, it is important to note that the asserted claims of the '821 patent are extremely broad and general in nature. Independent claim 1 recites a method for comparing products in which one computer sends a request regarding a particular product to a second computer and the second computer sends information back to the first computer that allows the first computer to display a configuration of that product. The first computer then sends a request to the second computer to generate a configuration of a second product that is comparable to the first product with respect to certain criteria, and the second computer sends back data that allows the first computer to display both products in a manner that allows comparison of the features of the two products. Neither claim 1 nor any of the other asserted claims is limited to a more specific algorithm; any computerized comparison system that operates in the broadly recited manner described above would infringe claim 1 of the '821 and, if in the prior art, would invalidate it.

This Court's review of the jury's verdict on anticipation under 35 U.S.C. § 102(a) is governed by the rule that anticipation “is a factual determination that is reviewed for substantial evidence when decided by a jury.” Koito Mfg. Co. v. Turn–Key–Tech, LLC, 381 F.3d 1142, 1149 (Fed.Cir.2004). The Court “must presume that the jury resolved any underlying factual dispute in favor of the verdict winner and leave such presumed finding undisturbed if it is supported by substantial evidence.” TGIP, Inc. v. AT & T Corp., 527 F.Supp.2d 561, 577 (E.D.Tex.2007), citing Tec Air, Inc. v. Denso Mfg. Mich., Inc., 192 F.3d 1353, 1359 (Fed.Cir.1999). When a court evaluates factual findings for substantial evidence, the “inquiry is whether a reasonable jury, given the record before it viewed as a whole, could have arrived at the conclusion it did.” Dawn Equip. Co. v. Ky. Farms, Inc., 140 F.3d 1009, 1014 (Fed.Cir.1998).

The Court concludes that Autodata presented sufficient evidence to support the jury's finding of anticipation as to all the claims of the '821 patent. Besides Dr. Stubblebine's testimony, Autodata elicited testimony on anticipation from Autodata employee Chris Wedermann, who demonstrated Autodata's AutoQuote Pro software and the manual for that software. As part of his presentation, Mr. Wedermann explained how the AutoQuote Pro software could be configured, consistent with the directions in the AutoQuote Pro manual, to be installed in a network environment, which would entail the use of multiple computers. Trial Tr. (June 14, AM session) 65–67. He also testified that Autodata implemented its technology in a web environment in a product that was sold to a customer in 1997. Id. at 67–69, 96–97, 105–08;see also Trial Tr. (June 13, PM session) 45–46, 126. Taken together, that evidence was sufficient to meet Autodata's burden to show invalidity by clear and convincing evidence. It is true that Dr. Stubblebine's testimony may have differed in...