Netcraft Corp. v. eBay, Inc.

United States Court of Appeals for the Federal Circuit
2008-1263

NETCRAFT CORPORATION,

Plaintiff-Appellant,

v.

EBAY, INC. and PAYPAL, INC.,

Defendants-Appellees.

Frank E. Scherkenbach, Fish & Richardson P.C., of Boston, Massachusetts, argued
for plaintiff-appellant. With him on the brief were Robert E. Hillman and Craig R. Smith;
and Michael J. Kane and William R. Woodford, of Minneapolis, Minnesota.

Morgan Chu, Irell & Manella LLP, of Los Angeles, California, argued for defendants-
appellees. With him on the brief were Samuel K. Lu and C. Maclain Wells.

Appealed from: United States District Court for the Western District of Wisconsin

Chief Judge Barbara B. Crabb
 United States Court of Appeals for the Federal Circuit
2008-1263

NETCRAFT CORPORATION,

Plaintiff-Appellant,

v.

EBAY, INC. and PAYPAL, INC.,

Defendants-Appellees.

Appeals from the United States District Court for the Western District of Wisconsin in
case no. 3:07-CV-00254, Chief Judge Barbara B. Crabb.

__________________________

DECIDED: December 9, 2008
__________________________

Before BRYSON, LINN, and PROST, Circuit Judges.

PROST, Circuit Judge.

This is a patent infringement case involving internet billing methods. Plaintiff

Netcraft Corporation sued eBay, Inc. and PayPal, Inc. (collectively “Defendants”) for

infringement of two related patents: U.S. Patent Nos. 6,351,739 (“’739 Patent”) and

6,976,008 (“’008 Patent”). The district court construed a phrase that appears in both

patents, “providing a communications link through equipment of the third party,” to

require “providing customers with internet access.” Netcraft Corp. v. Ebay, Inc., No.

3:07-CV-00254, 2007 U.S. Dist. LEXIS 91806, at *2 (W.D. Wis. Dec. 10, 2007) (“Claim

Construction Order”). The parties agreed that Defendants do not provide internet

access to customers, and the district court therefore granted Defendants’ motion for
summary judgment of non-infringement. Because we agree with the district court’s

claim construction, we affirm.

I. BACKGROUND

The technology involved in this appeal generally relates to internet billing

methods. PayPal offers online payment services. eBay is the parent of PayPal, and

offers online auction services. Plaintiff Netcraft sued eBay and PayPal in the United

States District Court for the Western District of Wisconsin, alleging infringement of the

’739 and ’008 Patents (collectively “the asserted patents”).

The asserted patents are both entitled “Internet Billing Method.” They also both

claim priority to the same parent patent—U.S. Patent No. 5,794,221 (“’221 Patent”)—

and share a common specification. Both asserted patents are assigned to Netcraft.

Andrew Egendorf—the president of Netcraft—is the named inventor on both patents.

Representative Claim 1 of the ’739 Patent reads:

1. An Internet billing method for a plurality of customers and a plurality of
vendors of products or services for transactions over the Internet between
a purchasing customer of the plurality of customers and a selling vendor of
the plurality of vendors, wherein, for each purchase transaction, a
transaction amount is charged to the purchasing customer, and an amount
is remitted to the selling vendor, comprising the steps by a third party of:

a) establishing a billing agreement with the purchasing customer,
and a remitting agreement with the selling vendor, to bill the
purchasing customer, and to remit to the selling vendor, for
products and services purchased over the Internet by the
purchasing customer from the selling vendor;

b) providing a communications link through equipment of the third
party between the purchasing customer and the selling vendor
through which the purchasing customer obtains information from
the selling vendor with respect to a purchase of a product or service
by the purchasing customer from the selling vendor;

c) obtaining at least one billing authorization for the purchase;

2008-1263 2
 d) charging the transaction amount to the purchasing customer in
accordance with the billing agreement; and

e) remitting an amount related to the purchase to the selling vendor
in accordance with the remitting agreement.

’739 Patent col.7 ll.21-48 (emphasis added).

The phrase at issue in this appeal, “providing a communications link through

equipment of the third party,” appears in all asserted claims of both asserted patents.

Neither the term “communications link” nor the phrase “communications link through

equipment of the third party” is found in the parent ’221 Patent or the common

specification of the asserted patents.

In construing this phrase, the district court first addressed the asserted claims

themselves, noting that “the claim itself does not define ‘communications link’ the way

defendants propose.” Claim Construction Order at *3. While the district court reasoned

that the “lay understanding of ‘communications link’ is much broader than ‘internet

access,’” it recognized that “courts cannot look at the claims in isolation or at just the lay

understanding of them, but must consider the patent as a whole.” Id. The district court

noted that “the specification makes it unmistakably clear that the invention requires that

the third party provide internet access to the customer.” Id. at *4. It concluded that the

phrase “communications link” is the only part of the claim that could incorporate this

requirement, and construed the phrase “providing a communications link” as requiring

“providing customer access to the internet.” Id. In support of its construction, the

district court cited many portions of the common specification (including the Abstract

and the Summary of the Invention), and stated that “[i]n countless instances, the

specification refers to the third party as the ‘provider,’ which plaintiff conceded at the

claim construction hearing means ‘internet access provider.’” Id. at *5.

2008-1263 3
 The district court was unconvinced by Netcraft’s attempts to show that the

specification’s references to the provider connecting customers to the internet were just

particular embodiments, as opposed to describing the invention as a whole. Id. at *5-6.

It also rejected several claim differentiation arguments made by Netcraft. Id. at *6-9.

Finally, even though both parties advanced prosecution history arguments in support of

their respective claim construction positions, the district court determined that “it is

unnecessary to consider those arguments when the patent itself is clear.” Id. at *9.

Because the parties agreed that Defendants do not provide internet access to

customers, the district court granted Defendants’ motion for summary judgment of non-

infringement. Id. at 10.

Netcraft appealed. We have jurisdiction over this appeal pursuant to 28 U.S.C.

§ 1295.

II. DISCUSSION

This appeal involves a single question of claim construction. Precisely, we must

decide whether the district court erred in construing “providing a communications link

through equipment of the third party” to require that the third party provide customers

with internet access. Claim Construction Order at *2.

We review a district court’s claim construction de novo. Ortho-McNeil Pharm.,

Inc. v. Caraco Pharm. Labs., Ltd., 476 F.3d 1321, 1326 (Fed. Cir. 2007). As this court

explained in Phillips v. AWH Corp., “[i]t is a bedrock principle of patent law that the

claims of a patent define the invention to which the patentee is entitled the right to

exclude.” 415 F.3d 1303, 1312 (Fed. Cir. 2005) (quotations omitted). Claim terms are

generally construed in accordance with the ordinary and customary meaning they would

2008-1263 4
have to one of ordinary skill in the art. Id. at 1312-13. “[T]he person of ordinary skill in

the art is deemed to read the claim term not only in the context of the particular claim in

which the disputed term appears, but in the context of the entire patent, including the

specification.” Id. at 1313. In addition to considering the specification, courts should

consider the prosecution history of an asserted patent if it is in evidence. Id. at 1317.

“Although we have emphasized the importance of intrinsic evidence in claim

construction, we have also authorized district courts to rely on extrinsic evidence . . . .”

Id. That being said, “while extrinsic evidence can shed useful light on the relevant art,

we have explained that it is less significant than the intrinsic record in determining the

legally operative meaning of claim language.” Id. (quotations omitted). Mindful of these

principles, we turn to the phrase at issue in the present case—“providing a

communications link through equipment of the third party.”

On appeal, Netcraft maintains that the claim language itself does not support the

district court’s construction. It also argues that the specification does not support, and is

in fact inconsistent with, the district court’s claim construction and that the district court

erred by refusing to consider the prosecution history. We address these arguments in

turn.

With respect to the claim language, Netcraft argues that the ordinary meaning of

“communications link” is much broader than the district court’s construction, and that

neither the claim language nor ordinary meaning supports including a requirement that

the third party must provide internet access. Defendants respond that the actual phrase

construed by the district court was “providing a communications link through equipment

of the third party,” not simply “communications link,” and that read in light of the

2008-1263 5
specification this phrase must include a requirement that the third party provide internet

access.

The asserted claims themselves do not expressly indicate whether “providing a

communications link through equipment of the third party” requires that the third party

provide internet access. Indeed, the term “communications link” is never used in the

parent ’221 Patent or the common specification of the asserted patents. While the lay

meaning of “communications link” standing alone may be broader than “internet

access,” we are not construing this term standing alone. See Phillips, 415 F.3d at 1321

(“Properly viewed, the ‘ordinary meaning’ of a claim term is its meaning to the ordinary

artisan after reading the entire patent.”). In order to properly determine the ordinary

meaning of the entire phrase at issue in this case, we must consider the claim terms in

light of the entire patent. As explained further below, based on a reading of the

common specification in its entirety, along with the cited prosecution history, we

conclude that the claim limitation “providing a communications link through equipment of

the third party” requires providing customers with internet access.

Construing the phrase in dispute to require providing customers with internet

access is supported by the Summary of the Invention, which states:

The main object of the present invention is to create a new business
opportunity for telephone companies, cable television companies, existing
Internet access providers, and companies offering financial services by
creating a way for them to offer to their subscribers a method of securely
buying and selling goods and services of any value over the Internet.

Another object of the present invention is an Internet billing method which
is cost effective for transactions having transaction amounts ranging from
pennies to a few dollars.

Still another object of the present invention is to provide a secure method
of billing commercial transactions over the Internet.

2008-1263 6
 A further object of the present invention is an Internet billing method which
is simple to use from both the customer’s point of view and that of vendors
on the Internet.

Yet another object of the present invention is a billing method which can
be used by a large number of existing Internet users without requiring
major changes in how the users customarily behave and conduct
commercial transactions.

These and other objects of the present invention are achieved by an
Internet billing method in accordance with the present invention. A
provider establishes an agreement with a customer, and a second
agreement with a vendor, wherein the provider agrees with the customer
and the vendor to bill for products and services purchased over the
Internet by the customer from the vendor. Associated with the customer
agreement are one or more billing accounts to which purchases may be
charged. Associated with the vendor agreement are one or more methods
of remitting funds to the vendor. The provider creates access to the
Internet for the customer through the provider’s equipment. When the
customer orders a product or service over the Internet from the vendor,
the provider obtains transactional information transmitted between the
customer and the vendor including a transaction amount relating to the
ordered product or service and the provider then bills the transaction
amount to a customer billing account and remits a portion of the
transaction amount to the vendor.

’739 Patent col.1 l.61–col.2 l.34 (emphases added).

Netcraft argues that there is no “general rule that any use of ‘the present

invention’ in the specification automatically limits the claims, as Defendants seem to

believe.” Appellant’s Reply Br. 22; see also id. at 19 (“Defendants contend that the

case law supports the draconian result that any use of the phrase ‘present invention’

limits the claims to the embodiment described.”). We agree with Netcraft that use of the

phrase “the present invention” does not “automatically” limit the meaning of claim terms

in all circumstances, and that such language must be read in the context of the entire

specification and prosecution history. See Rambus Inc. v. Infineon Techs. AG, 318

F.3d 1081, 1094 (Fed. Cir. 2003). For the reasons below, however, we agree with the

district court that the common specification’s repeated use of the phrase “the present

2008-1263 7
invention” describes the invention as a whole, see Claim Construction Order at *6, and,

as will be discussed further below, that the prosecution history does not warrant a

contrary result.

The first two sentences of the Abstract also support the district court’s

construction. These sentences read: “An Internet billing method comprises

establishing an agreement between an Internet access provider and a customer . . . .

The provider creates access to the Internet for the customer.” ’739 Patent, at [57].

Netcraft attempts to minimize the significance of this language by noting that the

asserted patents’ Abstract is the same as the original Abstract in the parent ’221 Patent.

It submits that “[b]ecause the ’221 patent claims are directed to a third party that

provides Internet access to customers, the original Abstract naturally includes a

discussion of this aspect.” Appellant’s Reply Br. 17. According to Netcraft, “[t]his does

not mean . . . that every claim in the entire patent family should be limited to the

features of the common Abstract as Defendants suggest.” Id. at 17-18. Netcraft’s

arguments on this point, however, illustrate the following underlying problem with its

claim construction position: the common specification, including the Abstract,

consistently describes the invention in terms of a third party providing internet access to

customers.

While Netcraft concedes that “the third party in the [asserted] patents’ detailed

examples is an Internet access provider,” it claims that other embodiments do not

require that the third party provide customers with internet access. Id. at 16.

Specifically, Netcraft points to Figs. 2 and 3 of the asserted patents, and argues that the

use of the language “Connect Customer to Internet” in Fig. 2, step 12, should be

2008-1263 8
differentiated from the use of the language “Customer Connects to Internet” in Fig. 3,

step 22. Id. at 16-17. Thus, Netcraft claims that the difference in language between

Fig. 2, step 12, and Fig. 3, step 22, “expressly demonstrates that the invention does not

require providing Internet access to the customer.” Id. at 17. We disagree.

There is no language in the specification, much less express language, indicating

that the words “Customer Connects to Internet” used in Fig. 3, step 22, were meant to

disclose an alternative embodiment not requiring that the third party provide internet

access to customers. In fact, there are other differences between Figs. 2 and 3,

including steps 11 and 21 respectively, which more clearly differentiate the two

methods. Additionally, we note that the specification appears to describe the methods

shown in Figs. 2 and 3 in context of the system illustrated in Fig. 1. See ’739 Patent

col.5 ll.58-66. In that context, while the specification indicates that certain vendors may

access the internet directly using their own equipment, the only way for customers to

access the internet is through the equipment of the provider. Accordingly, we reject

Netcraft’s arguments that the specification includes additional embodiments that do not

involve the provision of internet access to customers by the third party.

Moreover, as Defendants argue, the district court’s construction is further

supported by the language of the phrase at issue, which requires that the

“communications link” be provided “through equipment of the third party.” The common

specification consistently uses the term “equipment” in reference to equipment that

enables internet access. For example, the Summary of the Invention states that “[t]he

provider creates access to the Internet for the customer through the provider’s

equipment.” ’739 Patent col.2 ll.26-28; see also id. col.1 ll.23-26 (“These providers

2008-1263 9
invest in the equipment needed to provide access to the Internet for subscribers who

pay the providers a fee for the access.”); id. col.1 ll.30-35 (“[A] party desiring to connect

to the Internet by means of a provider typically connects via a modem over a telephone

network to the provider’s equipment which then connects the party, through the

provider’s equipment, to the Internet.”); id. col.3 ll.6-10 (“Once the prearrangements

have been completed, using the provider’s service to connect to the Internet typically

involves calling a telephone number of the provider and being automatically connected

through the provider’s equipment to the Internet.”).

Turning to Claim 6 of the ’739 Patent, Netcraft makes several claim differentiation

arguments. Claim 6 of the ’739 Patent reads: “The method according to claim 1, 2, 3,

4, or 5, wherein the third party is an Internet access provider, a cable television

company, a telephone company, or a company offering financial services.” Netcraft

argues that “if claim 1 were truly limited to third parties that provide Internet access,

claim 6 would be redundant in listing an ‘Internet access provider’ as a possible third

party.” Appellant’s Br. 17. It also argues that within claim 6 the differentiation between

internet access providers and the other possible third parties (i.e., a cable television

company, a telephone company, or a company offering financial services) is

inconsistent with requiring that all third parties provide internet access.

As the district court observed, however, in several locations the specification

contemplates the possibility that other companies, including cable television and

telephone companies, will provide customers with internet access. Claim Construction

Order at *7-8 (citing ’739 Patent col.1 ll.29-30, col.2 ll.64-65). Additionally, as the district

court noted, the following portion of the Summary of the Invention distinguishes

2008-1263 10
“existing” internet access providers from other entities who may also provide internet

access: “The main object of the present invention is to create a new business

opportunity for telephone companies, cable television companies, existing Internet

access providers, and companies offering financial services . . . .” Id. at *8-9 (quoting

’739 Patent col.1 ll.61-64). We agree with the district court that this passage suggests

that the “new business opportunity” for companies, including financial services

companies, involves the provision of internet access. 1 Id. at *9. Thus, we are not

persuaded by Netcraft’s claim differentiation arguments.

In addition, Netcraft attributes significance to the omission of financial services

companies from the following portion of the specification: “Such providers can be, for

example, companies whose only business is to offer connection to the Internet,

companies which offer on-line computer services, one of which is connection to the

Internet, cable television companies, or telephone companies.” ’739 Patent col.2 ll.61-

65. As the district court determined, however, “[a]lthough the patent does not include

financial service companies in its lists of examples of internet access providers, e.g.,

’739 pat., col. 2, Ins. 61-65, that does not mean that such companies cannot be

providers. An invention is not limited to its examples.” Claim Construction Order at *8.

1
Furthermore, even if we agreed with Netcraft that the district court’s claim
construction led to some redundancy, that alone would not necessarily warrant a
different result in this case. While claim differentiation may be helpful in some cases, it
is just one of many tools used by courts in the analysis of claim terms. See, e.g.,
Nystrom v. Trex Co., 424 F.3d 1136, 1142-43 (Fed. Cir. 2005) (construing the term
“board” to mean a “piece of elongated construction material made from wood cut from a
log,” even though principles of claim differentiation suggested that the term “board”
should not be limited to wood cut from a log).

2008-1263 11
 Accordingly, we agree with the district court that the claims read in light of the

entire specification indicate that “providing a communications link through equipment of

the third party” requires providing customers with internet access. Our inquiry does not

end here, however, as we still must consider the parties’ arguments based on the

prosecution history. See Phillips, 415 F.3d at 1317 (stating that, in addition to

considering the specification, courts should also consider the prosecution history of an

asserted patent, if it is in evidence).

The parties offer conflicting explanations of the respective prosecution histories

of both asserted patents and several related patents. Netcraft, for example, argues that

the following portion of the ’739 Patent’s prosecution history supports its claim

construction position:

Claim 31 is the only independent claim and recites an Internet billing
method wherein “a communications link through equipment of the third
party” is provided “between the purchasing customer and the selling
vendor” (claim 31(b)). This link can be made, for example, by the third
party re-sending data it receives from the customer or from the vendor to
the other party, or by the third party hosting on its equipment an Internet
presence of the vendor (e.g., a World-Wide-Web site of the vendor or an
e-mail address of the vendor).

J.A. 119. Netcraft maintains that the parenthetical reference to examples of websites

and email demonstrate ways to make a communications link that do not require that the

third party provide internet access.

Defendants respond that these “are not alternative embodiments, but optional

additional functions. The method of providing a customer with access to the Internet

and these additional functions (web page hosting and email) are not mutually exclusive.”

Appellees’ Br. 54. They submit that the following portion of the prosecution history of

the ’221 Patent confirms that these examples are optional additional functions, as

2008-1263 12
opposed to alternatives: “[t]he present invention, by contrast, does not require the use

of E-mail (because the Internet access provider is connected to the customer by a

dedicated line), although E-mail may be used, if desired.” J.A. 1505.

Defendants also argue that the prosecution history of the ’008 Patent supports

the district court’s construction. Specifically, Defendants submit that, during prosecution

of the ’008 Patent, Netcraft sought claims with the limitation “providing a

communications link over the Internet,” J.A. 1247 (emphasis added), but the Examiner

rejected these claims in light of the prior art, J.A. 1253. Then, the Examiner allowed the

claims after Netcraft changed the limitation to “providing a communications link through

equipment of the third party.” J.A. 1266 (emphasis added). Thus, Defendants argue

that Netcraft’s claim construction position must be rejected because the construction of

the phrases “through equipment of the third party” and “over the Internet” must differ.

Appellees’ Br. 56. Additionally, Defendants point to the following statements, made in

response to a rejection in light of U.S. Patent No. 5,826,241 (“Stein reference”) during

prosecution of the ’739 Patent, in support of the district court’s construction:

Applicant respectfully submits that Stein et al neither discloses nor
suggests providing a system for allowing access to the Internet.

Specifically, the Stein et al system . . . assumes that the users 14 (buyers
and sellers) are already connected to the Internet . . . there is no
disclosure . . . that suggests that Stein et al will provide access to the
Internet. . . . There is never a connection of a user to the Internet through
the payment system 10.

J.A. 1235.

We have considered the cited prosecution history and conclude that it lacks the

clarity of the specification regarding the meaning of the claim terms at issue here, thus

rendering it less useful for claim construction purposes. See Phillips, 415 F.3d at 1317

2008-1263 13
(“[B]ecause the prosecution history represents an ongoing negotiation between the PTO

and the applicant, rather than the final product of that negotiation, it often lacks the

clarity of the specification and thus is less useful for claim construction purposes.”). For

example, when the discussion of the Stein reference is read in context with the

Examiner’s prior statements, it is not entirely clear whether that discussion was meant

to characterize the present invention as requiring the provision of internet access, or

whether it was meant to simply refute the Examiner’s prior assumption that the Stein

reference involves the provision of internet access. Similarly, considered in context of

all of the cited prosecution history, it is unclear whether the website and email

parenthetical examples are optional functions provided in addition to internet access, or

whether they are offered as alternatives to the provision of internet access. 2

In sum, we conclude that the portions of the prosecution history cited by the

parties are not particularly helpful to either party’s claim construction position. Thus,

while we agree with Netcraft that the district court should have considered the

prosecution history, its failure to do so was harmless error here because we reach the

same result having considered it. 3 See Claim Construction Order at *9 (concluding that

2
Likewise, we have considered, but are not persuaded by either party’s
arguments based on the prosecution histories of the related patents.
3
Finally, we reject Netcraft’s request that we rely on extrinsic evidence in
the present case. Netcraft claims that prior to suit eBay “considered partnering with
Netcraft, and clearly indicated to Mr. Egendorf that it was interested only in the ’739 and
’008 patents, and not interested in the patents where the claims were limited to third
parties providing Internet access.” Appellant’s Br. 24. Defendants respond, however,
that they “never stated that the patents-in-suit cover entities not providing access to the
Internet and, in fact, all of the documents to which Netcraft cites are communications
from Netcraft to eBay.” Appellees’ Br. 43. Nevertheless, even if we assume that
Netcraft’s factual description is correct, we would still conclude that it is insufficient to
overcome the claim meaning discernable from the intrinsic record here. See Phillips,

2008-1263 14
it was unnecessary to consider the prosecution history because the patent itself is

clear).

III. CONCLUSION

Because we conclude that the phrase “providing a communications link through

equipment of the third party” requires providing customers with internet access, we

affirm the district court’s grant of Defendants’ motion for summary judgment of non-

infringement.

AFFIRMED

415 F.3d at 1319 (“In sum, extrinsic evidence may be useful to the court, but it is
unlikely to result in a reliable interpretation of patent claim scope unless considered in
the context of the intrinsic evidence.”).

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