Not Even Close

Submitted by patentadmin on Thu, 12/30/2010 - 14:55

Sometimes a patent claim is drafted in such a way that, as a practical matter, it can’t be infringed. Without such direct infringement, there can be no indirect infringement, i.e. no contributory infringement, nor any inducement to infringe. Sometimes this annoying little detail escapes patentees eager to enforce their patents. Moreover, some patentees seem to confuse the possibility an item was used in an infringing manner with actual infringement. (PrivaCash, Inc. v. American Express Company et al.)

PrivaCash is the owner of a patent directed to a method of creating “an open-loop and untraceable means of making a purchase that simulates a cash transaction over the internet.” The only independent claim of the patent included the following steps:

a. distributing unfunded purchase cards to card outlets;
b. issuing the cards to cardholders at the outlets;
c. contacting the card issuer to fund and activate the cards; and
d. transacting a cardholder purchase at a retail establishment, wherein the retailer transmits the purchase amount and the card account number to the card issuer.

As might be expected, PrivaCash sued American Express for patent infringement, apparently on the basis of wishful thinking. American Express, recognizing a defective patent claim when it sees one, promptly moved for summary judgment of noninfringement. PrivaCash, not to be outdone, moved for summary judgment of infringement.

After ten pages of background and boilerplate, the judge got to the heart of the matter. “This case involves a method claim for which no single party performs all of the claimed steps or processes, including distributing and issuing the cards, contacting the card provider to activate the card and transacting a purchase.” OK, there’s no infringement. That could have been the end of the matter; but PrivaCash had alleged not only direct infringement but also induced infringement and contributory infringement, so the judge continued, “[i]ndirect infringement, whether inducement to infringe or contributory infringement, can only arise in the presence of direct infringement …”

OK, there’s no indirect infringement. That could have been the end of the matter; but PrivaCash had not produced any evidence of direct infringement. So the judge continued, “[h]ypothetical instances of direct infringement are insufficient … [and] unless the claim language only requires the capacity to perform a particular claim element … it is not enough to simply show that a product is capable of infringement; the patent owner must show evidence of specific instances of direct infringement … PrivaCash’s only evidence of infringement is testimony from its expert that the accused gift cards can be used in an infringing manner, not that gift card recipients used or were aware that they could use the accused cards in that way.”

So, that was it. The judge had driven a stake through the heart of that patent. He went on to note a few other flaws, but clearly that was overkill.

In the interest of fairness, we feel compelled to point out that the judge’s opinion was not without its own flaws. The judge cited a previous holding, “the mere sale of a product capable of substantial non-infringing uses does not constitute indirect infringement of a patent.” (emphasis added) In fact, the existence of substantial non-infringing uses of an item negates contributory infringement. And, in a footnote, the judge confused “direct” infringement with “literal” infringement (as differentiated from infringement under the doctrine of equivalents). Neither of these errors, however, alters the outcome of the case.

THE LESSON TO BE LEARNED: In order to prevail, a patentee must prove that someone actually infringed the patent-in-suit.

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