In a May 8, 2012 ruling by the U.S. Court of Appeals for the Federal Circuit, Facebook Inc. was successful in showing invalidity of a patent on collaborative communication software owned by Leader Technologies, Inc. (Leader Technologies Inc. v. Facebook Inc., Fed. Cir., No. 2011-1366, 5/8/12).
The court affirmed findings that the patent owner offered a product covered by the patent for sale and in public use more than one year prior to applying for the patent, thus invalidating the patent under U.S. patent laws – the so-called “on-sale bar” to patenting.
At issue in the case was whether early versions of the software product that were sold embodied the patented technology (it was acknowledged that the software underwent several source code changes after the original version), when Facebook offered no evidence of such based on expert testimony, source code, or system schematics.
Leader Technologies Inc. is the developer of a software product named “Leader2Leader,” a web-based collaborative software product that uses their “LeaderBoard engine,” that was first offered for sale some time in 2001. Leader did not get around to filing a provisional patent application for the software until Dec. 11, 2002, and that proved to be its undoing. (U.S. Patent No. 7,139,761 eventually issued in 2006).
Inconsistent Testimony from Leader’s Founder
In 2008, Leader optimistically sued Facebook for patent infringement in the U.S. District Court for the District of Delaware, alleging that Facebook’s web site infringed Leader’s patent and that Leader was entitled to millions of dollars in damages. However, Leader encountered problems at trial stemming from inconsistent testimony provided by its founder. In both a deposition and a response to a written interrogatory from Facebook, founder Michael McKibben said that the ‘761 patent claims covered the LeaderBoard engine as offered in 2001-2002. However, at trial, McKibben back-pedaled, testifying before the jury that the earlier versions of LeaderBoard did not encompass the patented technology. Facebook made much of McKibben’s inconsistent deposition testimony before the jury.
The jury concluded that the ‘761 patent was invalid for being on sale and publicly used more than one year prior to the patent application filing date, nullifying Leader’s claim against Facebook. Leader appealed this finding to the Court of Appeals for the Federal Circuit, which has exclusive appellate jurisdiction in patent matters.
Facebook Offered No Evidence that the Software Sold Embodied the Patented Invention
Facebook offered no evidence, based on expert testimony, source code, or system schematics, that the early versions of the software product that were sold embodied the patented technology.
Leader’s position was that Facebook had to show by clear and convincing evidence that the earlier versions of the Leader2Leader software fell within the scope of the patent claims. Leader argued that the only evidence available to the jury was McKibben’s discredited testimony, and it could not be used as affirmative evidence that the earlier versions of the software were covered by the patent, and that the patent was therefore invalid under the on-sale bar. Writing for the court, Judge Alan D. Lourie, however, found that the following facts, when considered in the light of the contradictory testimony, provided “the minimum quantity of evidence to support the jury’s verdict”:
1. The interrogatory responses clearly indicated that the LeaderBoard engine “embodies” the asserted patent claims.
2. McKibben’s deposition testimony was that he “could not identify a single instance of Leader2Leader that did not fall within the scope of the ‘761 patents’ claims.”
3. A 2002 offer for sale by Leader described the product as “fully developed” and “operational.”
4. The co-inventor on the patent testified at trial that invention was conceived in 1999 and then Leader immediately started to implement the patented technology and completed the project within “a couple of years … [m]aybe three.”
The court therefore found that the record contained substantial evidence that the early version was covered by the patent. “At a minimum, McKibben’s lack of credibility fortifies that conclusion and provides an independent basis for disbelieving his factual assertions,” Judge Lourie stated. The court concluded that “the jury was entitled to disbelieve [McKibben's] transparently convenient assertion in light of all the evidence before them.” It therefore affirmed the lower court’s decision.
The Take-Away
Leader could have avoided all of this trouble, and possibly walked away with a judgment against Facebook worth millions of dollars, if they had simply filed their patent application sooner in the development process. Technology-driven companies need to keep their patent attorney involved in the product development cycle, so that patentable inventions can be timely identified, evaluated, and patents applied for before any commercial activities unintentionally cut off the ability to protect the company’s valuable R&D investment.
As we say at Ice Miller, It’s a Complex World. Be Advised.SM
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.