United States Court of Appeals
for the Federal Circuit
__________________________
ADVANCED SOFTWARE DESIGN CORPORATION
AND CALIN A. SANDRU,
Plaintiffs-Appellants,
v.
FISERV, INC.,
Defendant/Cross Appellant.
__________________________
2009-1585, 2010-1011
__________________________
Appeals from the United States District Court for the
Eastern District of Missouri in case No. 07-CV-0185,
Judge Catherine D. Perry.
___________________________
Decided: June 2, 2011
___________________________
KEITH A. RABENBERG, Senniger Powers LLP, of St.
Louis, Missouri, argued for plaintiffs-appellants. With
him on the brief was MICHAEL J. HARTLEY.
W. THOMAS MCGOUGH, JR., Reed Smith LLP, of Pitts-
burgh, Pennsylvania, argued for defendant/cross appel-
lant. With him on the brief were BRIAN D. ROCHE,
MICHAEL M. GEOFFREY and MICHAEL P. BREGENZER, of
Chicago, Illinois.
ADVANCED SOFTWARE v. FISERV 2
__________________________
Before BRYSON, DYK, and PROST, Circuit Judges.
BRYSON, Circuit Judge.
Advanced Software Design Corporation appeals from
a summary judgment of noninfringement in a patent case
on appeal from the United States District Court for the
Eastern District of Missouri. The court held that check-
security products sold by defendant Fiserv, Inc., did not
infringe Advanced Software’s patent on a method and
system for guarding against check fraud and forgery.
Advanced Software also seeks review of a separate claim
construction ruling by the district court and of the court’s
denial of its motion to amend its complaint. Fiserv cross-
appeals the district court’s denial of its motion for sum-
mary judgment of invalidity. We reverse in part and
vacate in part on infringement, reverse on claim construc-
tion, affirm the denial of Advanced Software’s motion to
amend its complaint, and dismiss the cross-appeal on
invalidity.
I
Advanced Software and Fiserv offer competing prod-
ucts for preventing check fraud and forgery. The products
generally work by encrypting selected information on a
check, such as the name of the payee or the amount of the
check, and printing the encrypted information on the
check. When someone attempts to cash a protected check,
the products validate the check by decrypting the en-
crypted information and comparing it to the correspond-
ing unencrypted information that has been entered on the
check. If the decrypted information does not match the
3 ADVANCED SOFTWARE v. FISERV
selected unencrypted information on the check, the check
is deemed fraudulent or forged and will not be cashed.
Advanced Software owns exclusive rights to three
patents on check-security technology using “key-based”
cryptography. Those three patents stem from the same
application and have identical written descriptions. The
first of the three, U.S. Patent No. 6,233,340 (“the ’340
patent”), contains method claims covering the three steps
of encrypting, printing, and validating checks, as well as
system claims that cover the components used to print
and validate checks. The second patent, U.S. Patent No.
6,549,624 (“the ’624 patent”) also contains three-step
method claims, but the claims cover a different type of
validating step. The method of the ’624 patent conducts
validation by decrypting the encrypted information that is
printed on the check and comparing the decrypted infor-
mation to the selected information that is entered on the
check. The method of the ’340 patent conducts validation
by encrypting selected information that is entered on the
check and comparing that encrypted information to the
encrypted information previously printed on the check.
Thus, the ’624 patent compares plaintext (unencrypted
information) while the ’340 patent compares ciphertext
(encrypted information). In addition, the claims of the
’624 patent are limited to so-called “public key” encryption
schemes, i.e., systems that use two encryption keys, one of
which can be made public without practically compromis-
ing the security of the other. Advanced Software’s third
patent is U.S. Patent No. 6,792,110 (“the ’110 patent”).
The scope of the claims of that patent is the subject of this
appeal.
Advanced Software contacted Fiserv in 2002 to com-
plain that Fiserv’s check-security product, known as
“Secure Seal,” infringed Advanced Software’s patent
ADVANCED SOFTWARE v. FISERV 4
rights. After licensing negotiations failed to resolve the
dispute, Advanced Software filed this action in January
2007. Although Advanced Software initially asserted all
three of its related patents against Fiserv, it learned that
Secure Seal did not compare ciphertext to validate checks
and therefore could not infringe the ’340 patent. Accord-
ingly, it submitted infringement contentions for only the
’624 and ’110 patents. After a claim construction hearing,
the district court construed terms from those two patents.
Shortly after the district court issued its claim construc-
tion order, Advanced Software learned that Secure Seal
did not use a public key encryption scheme and thus could
not infringe the ’624 patent. Advanced Software therefore
moved to dismiss those infringement claims that were
based on the ’624 patent.
Advanced Software also moved to amend its com-
plaint to add a claim of unfair competition. Advanced
Software alleged that Fiserv had made false statements
about the superiority of its encryption scheme and that it
had discovered the falsity of Fiserv’s representations only
during discovery. The court denied Advanced Software’s
motion on the ground that it came too late and that
Advanced Software could have discovered the details
regarding the encryption scheme used in Secure Seal
much earlier in the discovery process.
The parties filed cross-motions for summary judgment
on infringement and invalidity of the asserted claims of
the ’110 patent. The district court granted Fiserv’s nonin-
fringement motion, but it denied Fiserv’s invalidity mo-
tion on the ground that Advanced Software had pointed to
genuine issues of material fact on that issue. The district
court then dismissed Fiserv’s invalidity counterclaim
without prejudice and entered a final judgment of nonin-
fringement.
5 ADVANCED SOFTWARE v. FISERV
II
The district court issued summary judgment of nonin-
fringement on two grounds. First, it construed the as-
serted claims of the ’110 patent as requiring all three
steps (encrypting, printing, and validating) to be practiced
by the accused infringer. Because Fiserv did not direct or
control the encrypting or printing steps, the court con-
cluded that there could be no direct infringement under
this court’s decisions in BMC Resources, Inc. v. Paymen-
tech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), and Muniauc-
tion, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir.
2008). Second, the district court issued summary judg-
ment rejecting Advanced Software’s induced infringement
claims because, in its view, Advanced Software had no
evidence regarding Fiserv’s actual knowledge or state of
mind. We reverse on the first ground and vacate on the
second ground. We also reject Fiserv’s alternative
grounds for affirming the judgment of noninfringement.
A
The district court construed the asserted claims of the
’110 patent to require that the accused infringer practice
all of the steps alluded to in the asserted claims, not just
the validation step. Claims 1 and 9 are representative of
the asserted claims:
1. A process of validating a negotiable financial
instrument made by a payor, in which selected in-
formation found on the financial instrument
which varies for each instantiation of the financial
instrument made by the same payor is encrypted
in combination with key information not found on
the financial instrument to generate a control
code which is printed on the financial instrument
ADVANCED SOFTWARE v. FISERV 6
along with the selected information, the process
comprising:
reading the selected information from the fi-
nancial instrument; and one of
(i) decrypting the control code to thereby
obtain decrypted information whereby the
cheque validator may refuse to honour the
financial instrument if the selected infor-
mation found on the financial instrument
does not match the decrypted information,
and
(ii) re-encrypting the selected information
as presented on the financial instrument
to re-obtain a second control code,
whereby the cheque validator may refuse
to honour the financial instrument if the
second control code does not match the
control code printed on the financial in-
strument.
9. A system for validating the authenticity of
selected information found on a negotiable finan-
cial instrument, wherein the selected information
varies for each instantiation of the financial in-
strument presented by the same payor, and
wherein the selected information is encrypted in
combination with key information not found on
the financial instrument to generate a control
code which is printed on the financial instrument
along with the selected information, the system
comprising:
7 ADVANCED SOFTWARE v. FISERV
a scanner for reading the selected information
and the control code from the financial instru-
ment;
and a data processing device programmed to
(i) decrypt the control code and generate
decrypted information for comparison
against the selected information found on
the financial instrument and for generat-
ing a signal in response to the equality
thereof, or,
(ii) re-encrypt the selected information as
found on the financial instrument to re-
obtain a second control code and for gen-
erating a signal in response to the quality
of the control code found on the financial
instrument against the second control
code.
The parties agreed that the preamble’s encrypting
and printing steps limit the claims. They disagreed,
however, on whether the steps must be performed by the
accused infringer. Advanced Software contended that the
encrypting and printing steps merely describe the envi-
ronment in which the accused infringer must practice the
validating limitation. Fiserv argued that the preamble
steps must be performed by the accused infringer. The
district court adopted Fiserv’s construction based on the
view that the preamble steps are necessary to define a
structurally complete invention. Because Fiserv does not
encrypt or print checks, the district court held that Fiserv
could not directly infringe.
ADVANCED SOFTWARE v. FISERV 8
In that ruling, the district court did not distinguish
between using method claim 1 and system claim 9. Cf.
NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282,
1317 (Fed. Cir. 2005). The district court also did not
analyze the difference between making and using a
claimed system under 35 U.S.C. § 271(a), a distinction
addressed by our recent decision in Centillion Data Sys-
tems, LLC v. Qwest Communications International, Inc.,
631 F.3d 1279 (Fed. Cir. 2011). Because the district court
did not address those issues and the parties do not raise
them as grounds for decision of this appeal, 1 we do not
address the possible consequences of the distinction
between those two types of claims for purposes of this
case. We consider only whether Fiserv could “use” the
claimed inventions by validating checks with Secure Seal
or using a system comprising a scanner and a computer
running Secure Seal to validate checks.
Our recent decision in Uniloc USA, Inc. v. Microsoft
Corp., 632 F.3d 1292 (Fed. Cir. 2011), helps resolve that
question. That case involved a claim to a “remote regis-
tration station incorporating remote licensee unique ID
generating means, said station forming part of a registra-
tion system . . . including local licensee unique ID gener-
ating means . . . .” Id. at 1297 (emphasis removed).
Microsoft argued that it did not directly infringe that
1 Advanced Software addresses the difference be-
tween system and method claims when it argues that
system claims cannot be construed to contain steps. We
need not resolve that question because we construe the
preamble steps of system claim 9 to merely define the
financial instrument that the claimed system validates.
For infringement purposes, the preamble steps need not
be performed by the system or the party that uses the
system.
9 ADVANCED SOFTWARE v. FISERV
claim because it did not “use” a “local licensee unique ID
generating means.” Id. at 1308. Although its customers
used such a means, Microsoft contended that there could
be no direct infringement under BMC and Muniauction.
This court disagreed, holding that Uniloc’s claim, which
recited the “remote registration station incorporating
remote licensee unique ID generating means,” was di-
rected to the actions of a single party. We held that the
remainder of the claim, “said station forming part of a
registration system . . . including local licensee unique ID
generating means,” only “define[d] the environment in
which that [remote] registration station must function.”
Id. at 1309.
Like the claim in Uniloc, the claims at issue in this
case contain preambles that define the environment in
which an accused infringer must act or describe capabili-
ties that an accused device must have. Representative
claim 1 recites a “process for validating a negotiable
financial instrument” comprising reading information
from the check and decrypting or re-encrypting to validate
the check. Fiserv therefore could “use” the method of
claim 1 by validating checks even though it does not
encrypt and print them. It would infringe the method of
claim 1, however, only by validating checks that have
been encrypted and printed in accordance with steps
described in the preamble.
Similarly, representative claim 9 recites a “system for
validating . . . a negotiable financial instrument . . .
comprising: a scanner . . . and a data processing device
programmed [to validate by decrypting or re-encrypting].”
Although a patented system is “used” when a party “con-
trols the system as a whole and obtains benefit from it,”
Centillion, 631 F.3d at 1285, the system of claim 9 does
not include an encrypting computer or printer. Fiserv
ADVANCED SOFTWARE v. FISERV 10
therefore could infringe simply by controlling the scanner
and the decrypting computer. 2
Fiserv contends that the analysis in Uniloc does not
apply to this case because the issue in this case is
“whether the preambles . . . include steps to be performed,
or whether the preambles merely describe the financial
instrument on which the claimed process and system
operates.” Fiserv argues that the preamble steps in the
asserted claim do not “merely describe the financial
instrument” because the phrases “in which selected
information . . . is encrypted [and then] printed” and
“wherein the selected information is encrypted [and then]
printed” modify the terms “process” and “system,” respec-
tively, not the term “financial instrument.”
We disagree with Fiserv’s framing of the issue. There
is no reason why a preamble cannot describe a financial
instrument in terms of the steps required to create it, and
that is exactly what the preambles of the asserted claims
do. Although the terms “in which” and “wherein” set off
the limitations on the claim environments less clearly
than the language in Uniloc, it remains the case that the
asserted claims of the ’110 patent recite a process or
system for validating checks, not for encrypting and
printing them.
Citing our decision in Bicon, Inc. v. Straumann Co.,
441 F.3d 945, 952 (Fed. Cir. 2006), Fiserv contends that in
2 Because Fiserv allegedly uses the claimed system
to validate checks that have been encrypted and printed
in accordance with the preamble steps, we do not consider
whether Fiserv could infringe by using the claimed sys-
tem for another purpose. Cf. 5 Donald S. Chisum, Chi-
sum on Patents § 16.02[4][c] (2010).
11 ADVANCED SOFTWARE v. FISERV
construing the claims we cannot consider their purpose.
Fiserv relies on a statement from that case that
“[p]reamble language that merely states the purpose or
intended use of an invention is generally not treated as
limiting the scope of the claim.” Fiserv’s argument misin-
terprets the meaning of that passage from Bicon. Al-
though it is true that preamble language that states the
purpose of an invention is generally not regarded as
setting forth an additional limitation to a claim, in this
case we are not construing the preamble’s statement of
purpose to add a limitation to the claim. Rather, we are
looking to the statement of purpose to distinguish be-
tween those limitations that describe the environment in
which a claim operates from the limitations that must be
performed by an accused infringer.
Fiserv also attempts to support its construction by in-
voking arguments that bear on whether the preamble to a
claim is to be treated as a claim limitation. Specifically,
Fiserv contends that the preamble steps provide an
antecedent basis for terms in the body of the claims, that
dependent claims limit the preamble steps, that the
specification describes the “invention” as including the
preamble steps, and that the prosecution history shows
that the examiner understood the preamble steps to be
limiting. None of those arguments are relevant here.
Advanced Software agrees that the preamble is limiting,
but it argues that the preamble simply defines the envi-
ronment in which an infringing act must be performed or
describes the capabilities an infringing system must have.
Fiserv offers no reason why the antecedent basis, depend-
ent claims, specification, or prosecution history would
affect Advanced Software’s theory that the preamble steps
limit only the claimed environment, not the claimed
method or system.
ADVANCED SOFTWARE v. FISERV 12
Finally, Fiserv contends that, early in the litigation,
Advanced Software represented that the claims required
the performance of all three steps. Fiserv argues that
Advanced Software did not adopt its current position until
it filed its reply brief on its motion for summary judgment
of infringement before the district court. Such a “last-
minute change of position,” in Fiserv’s view, is “persua-
sive evidence” that Advanced Software’s current position
is incorrect. However, Advanced Software’s original
position was describing the scope of the ’624 patent and
the ’110 patent collectively. Because the claims of the
’624 patent covered all three steps, we do not consider
Advanced Software’s general description of the invention
in both the ’624 and ’110 patent to be persuasive evidence
as to whether it regarded the preamble steps in the ’110
patent claims as doing more than limiting the environ-
ment in which the validating step must be performed or
describing the capabilities the validating system must
have. Notably, Fiserv does not contend that Advanced
Software waived the right to assert its current position.
Indeed, Fiserv could not make such an argument, because
Advanced Software set forth its position in a timely
fashion in response to Fiserv’s noninfringement argu-
ments.
B
The district court also entered summary judgment of
noninfringement on Advanced Software’s theory that
Fiserv induced its bank customers to infringe by selling
Secure Seal to them. Advanced Software raised that
theory of infringement in its complaint, but it did not
raise inducement as a theory of infringement when it
submitted its infringement contentions in response to the
district court’s scheduling order. The district court ex-
13 ADVANCED SOFTWARE v. FISERV
plained its decision to enter summary judgment on that
theory in the following way:
Advanced Software has presented no evidence and
has made no effort to build a case showing Fis-
erv’s actual knowledge or state of mind regarding
infringement. Advanced Software did not raise
induced infringement in its infringement conten-
tions, and makes only a minimal argument on the
subject in its supplemental brief. To allow Ad-
vanced Software to change course now and pro-
ceed to trial on a completely new theory of
infringement would be grossly inequitable.
The district court’s decision on the inducement issue
appears to be based on two grounds: Advanced Software’s
failure to raise its inducement theory on a timely basis
and the absence of evidence as to Fiserv’s state of mind.
From the district court’s comments on the inducement
issue, we are unsure whether the court regarded the two
grounds it cited for entering summary judgment—
untimeliness and an insufficient evidentiary showing—to
be independent grounds for its judgment. As to the latter,
however, Advanced Software proffered evidence that
Fiserv knew of the ’110 patent and instructed its bank
customers about how to use Secure Seal to validate
checks. That evidence is sufficient to create a genuine
issue of material fact as to whether Fiserv had the requi-
site specific intent to induce infringement. See DSU Med.
Corp. v. JMS Co., 471 F.3d 1293, 1305-06 (Fed. Cir. 2006)
(en banc).
On appeal, Fiserv does not contend that Advanced
Software lacked sufficient evidence as to Fiserv’s state of
mind. Instead, Fiserv argues that Advanced Software
had no evidence of direct infringement by Fiserv’s cus-
ADVANCED SOFTWARE v. FISERV 14
tomers. Advanced Software, however, offered evidence
that Fiserv sold its validating software to banks and
helped them install it. The district court did not consider
whether that evidence would be sufficient circumstantial
evidence of direct infringement, see Lucent Techs., Inc. v.
Gateway, Inc., 580 F.3d 1301, 1318-19 (Fed. Cir. 2009),
and we elect not to consider the sufficiency of the evidence
for the first time on appeal. Accordingly, we vacate the
court’s summary judgment ruling on the inducement
issue to allow the court to consider the sufficiency of
Advanced Software’s evidence on direct infringement and
address whether summary judgment as to inducement is
warranted solely based on Advanced Software’s failure to
raise that issue on a timely basis.
C
Fiserv contends there are four alternative grounds for
affirming the judgment of noninfringement. We find none
of them persuasive. First, Fiserv contends that checks
protected by Secure Seal lack “control codes” because they
contain images of vertical and horizontal lines as opposed
to binary strings of 1s and 0s. The district court con-
strued “control code” as the “end product of the encryption
process that is then printed on the check.” Fiserv argues
that Secure Seal images are not the end product of the
encryption process because the end product of encryption
is “actually a binary string of 1s and 0s.” We disagree;
the end product of the encryption process is encrypted
information or ciphertext, however it may be represented.
There is no dispute that Secure Seal images represent
ciphertext.
Fiserv also contends that the doctrine of claim differ-
entiation requires a distinction between a “control code”
in claim 1 and “machine-readable characters correspond-
15 ADVANCED SOFTWARE v. FISERV
ing to the control code” in claim 6. It argues that Secure
Seal images are “machine-readable characters,” and
therefore cannot be the “control code” required in claim 1.
The problem with that argument is that Fiserv’s proposed
example of a “control code,” a binary string of 1s and 0s,
would still be machine readable through optical character
recognition. We therefore conclude that, absent better
evidence about the meaning of “machine-readable charac-
ters” in the ’110 patent, the doctrine of claim differentia-
tion does not shed much light on the meaning of “control
code.”
Second, Fiserv contends that Secure Seal does not use
“key information,” because its encryption process does not
apply “key information” in the encrypting step. The
district court construed “key information” as “a piece of
information that is used with a cryptographic algorithm
to encrypt and/or decrypt the selected information,
whereas the cryptographic algorithm can be widely dis-
tributed without compromising security.” Advanced
Software alleges that Secure Seal uses a “permutation
key” that satisfies the “key information” limitation.
Fiserv responds that the “permutation key” is not used in
the alleged encryption process, which is a “bitwise exclu-
sive-OR (‘XOR’) operation using a pseudorandom binary
keystream.” We disagree with Fiserv. Although the
permutation key in the Secure Seal system is applied to
the selected information before the XOR operation, the
permutation key is still information that is “used with”
the overall cryptographic algorithm. Advanced Software
has therefore provided sufficient evidence to create a
genuine issue of material fact as to whether the “permu-
tation key” satisfies the “key information” limitation.
Moreover, Fiserv’s construction would not read on the
preferred embodiment, which does not apply key informa-
tion in the encrypting step. Instead, the preferred em-
ADVANCED SOFTWARE v. FISERV 16
bodiment first concatenates the key information and
selected information (i.e., places that information end-to-
end) and then encrypts the combination by dividing the
concatenated information by a specially chosen polyno-
mial known as a “Chebyshov polynomial.” Although
Fiserv may ultimately be able to resolve its interpretation
of the claim with the preferred embodiment of the ’110
patent, it has not presented us with any such resolution,
and thus we cannot accept that argument as an alterna-
tive ground for affirmance.
Third, Fiserv contends that Secure Seal does not sat-
isfy the encryption limitation because Advanced Software
has asserted that Secure Seal’s “encryption algorithm
supposedly must be kept secret.” Fiserv argues that
Advanced Software’s position conflicts with the construc-
tion of “key information,” stating that “the cryptographic
algorithm can be widely distributed without compromis-
ing security.” There is at least a genuine issue of material
fact as to that issue because Fiserv has repeatedly repre-
sented that its encryption algorithm can be widely dis-
tributed without compromising security. Fiserv does not
even take the opposite position in its brief. Instead, it
limits itself to repeating Advanced Software’s allegation
that the Secure Seal algorithm must be kept secret.
Fourth, Fiserv contends that it does not actually vali-
date checks, because Secure Seal does not provide the
functionality necessary to refuse to honor a check. The
method of validating in claim 1 recites decrypting the
ciphertext on the check “whereby the cheque validator
may refuse to honour the financial instrument” if the
decrypted information does not match the selected infor-
mation on the check. The system for validating recited in
claim 9 refers to “generating a signal in response to the
equality” of selected information and decrypted informa-
17 ADVANCED SOFTWARE v. FISERV
tion. Fiserv contends that Secure Seal does not allow its
users to refuse to honor a financial instrument and does
not generate a signal representing the equality of selected
information and decrypted information. Based on the
testimony of a Fiserv employee about how the Secure Seal
system operates when it is installed in a bank, however,
we conclude there is at least a genuine issue of material
fact as to that question.
III
Prior to entering summary judgment, the district
court construed the phrase “encrypted in combination
with key information” in the preamble of the asserted
claims to require a two-step encryption algorithm in
which (1) selected information from the check is mathe-
matically combined with the encryption key, and (2) that
combination is encrypted. Although the court’s construc-
tion did not play a role in the summary judgment of
noninfringement, Advanced Software has raised the issue
on appeal, arguing that the court improperly read a
limitation from the preferred embodiment into the claims.
Fiserv contends that the construction is justified by the
claim language, the specification, and the prosecution
history. Because this issue may become important during
the proceedings on remand, we address it now in the
interest of judicial economy.
Before the district court’s claim construction, Ad-
vanced Software submitted infringement contentions
based on the ’624 patent and the ’110 patent. The claims
of those patents use different language with respect to the
limitation at issue. The ’624 patent recites “encrypting a
combination of the selected information and [the key],”
while the ’110 patent recites “selected information . . .
encrypted in combination with key information.” Fiserv
ADVANCED SOFTWARE v. FISERV 18
asserts that Advanced Software stipulated that those
limitations should be construed to have the same meaning
despite “minor” differences in language. Advanced Soft-
ware contends that it did not so stipulate, but instead
sought a similar broad construction for both patents. As
evidence of the purported stipulation, Fiserv points to the
joint claim construction chart. That chart, however,
supports Advanced Software’s contention that it sought
the same broad construction for both patents, not that it
agreed that the construction should be the same even if
the court adopted a narrow construction for the ’624
patent. Because the ’624 patent has been dismissed from
the case, we do not address the proper construction of
that patent’s language. Instead, we limit our review to
the construction of the phrase “selected information . . .
encrypted in combination with key information” in the
’110 patent.
We disagree with the district court’s construction of
that phase. Unlike the ’340 and ’624 patents, which recite
“encrypting a combination of the selected information and
[the key],” the ’110 patent recites “selected information . .
. encrypted in combination with key information.” On its
face, that phrase means that selected information on the
check and key information are combined through the
encryption process. Fiserv argues that Advanced Soft-
ware’s construction would read the “in combination”
language out of the claim. In other words, Fiserv con-
tends there is no meaningful difference between “selected
information . . . encrypted in combination with key infor-
mation” and “selected information . . . encrypted with key
information.” We disagree. The “in combination” lan-
guage is necessary to explain that the selected informa-
tion and key are combined through the encryption
process. Otherwise, the claim would appear to mean that
the encryption is performed with the key, not with the
19 ADVANCED SOFTWARE v. FISERV
encryption algorithm. A key is a necessary input to the
claimed encryption algorithm, but it is not the algorithm
itself. For example, the RSA encryption algorithm, re-
ferred to in the specification of the ’110 patent, encrypts
information by mathematically combining plaintext and a
public key. The keys can change depending on several
factors, but the algorithm remains the same.
Fiserv contends that its proposed two-stage construc-
tion is required by the specification, but as support for its
construction Fiserv repeatedly cites to language discuss-
ing particular preferred embodiments. Fiserv asserts
that the language it cites refers to the invention as a
whole, not just to preferred embodiments, because the
language comes from the Summary of the Invention
portion of the ’110 patent specification. However, each of
the portions of the Summary to which Fiserv refers is
from a paragraph that discusses a particular embodiment.
See ’110 patent, col. 3, ll. 45-58; col. 4, ll. 12-20. Those
portions of the specification are therefore most naturally
interpreted as being limited to embodiments of the inven-
tion.
We conclude that the specification supports Advanced
Software’s construction because it contains language
describing an encryption algorithm lacking the first
combining step:
To produce the encrypted control code (“ECC”), an
encryption algorithm mathematically combines
pre-selected information about the cheque, such
as the monetary value of the cheque, with one of
more encryption keys. The result of the mathe-
matical operation(s) is the ECC.
ADVANCED SOFTWARE v. FISERV 20
’110 patent, col. 6, ll. 20-25. Fiserv contends that the
quoted language is not helpful because it does not discuss
the “encrypted in combination with” limitation. That
argument, however, applies with equal force to Fiserv’s
specification citations because the phrase “encrypted in
combination with” does not appear anywhere in the
specification. Nonetheless, the quoted language from the
specification supports the broader construction because it
specifically describes an encryption algorithm that com-
bines selected information and keys without describing an
initial combining step.
Fiserv also contends that the prosecution history of
the ’340 patent supports the district court’s two-step
construction of the disputed language. Given the differ-
ence in the pertinent claim language, the prosecution
history of the ’340 patent is of little use in construing the
pertinent portion of the ’110 patent claims. In any event,
Fiserv’s characterization of the prosecution history of the
’340 patent is not persuasive. Fiserv contends that the
examiner’s characterization of a prior art patent to
Chapman shows that the examiner understood the ’340
patent to require a two-step encryption process. That
characterization follows:
Chapman does not explicitly teach encrypting the
encryption key along with the selected informa-
tion A to be printed on the check as a first control
code. However, Official Notice can herein be taken
that it is very old and very well known in the art
of cryptography to utilize an encryption algorithm
in which the encryption "key" is incorporated into
the end result of the algorithm. It is very old and
very well known in the art as well, to utilize a
(practicably) irreversible encryption algorithm
21 ADVANCED SOFTWARE v. FISERV
which operates on inputted data and a 'key' so as
to produce such a result.
Fiserv emphasizes the first sentence of that passage,
contending that “encrypting the encryption key along
with the selected information” describes the two-step
process of first combining the encryption key and selected
information and then encrypting the combination. How-
ever, we see no reason why that phrase must be inter-
preted as describing the two-step process. In fact, after
describing the limitation that is missing from Chapman,
the examiner observed that the limitation was well-
known in the field because encryption algorithms existed
“in which the encryption ‘key’ is incorporated into the end
result of the algorithm.” Advanced Software’s proposed
construction would still require the key to be incorporated
into the end result of the algorithm. It just would not
require that the combination occur prior to encryption.
We therefore construe “selected information . . . encrypted
in combination with key information” to mean that the
encryption algorithm combines the selected information
and the key information to create the control code.
IV
Advanced Software also appeals the district court’s
denial of its motion to amend its complaint to add a
Lanham Act count for false advertising. Before litigation,
Fiserv had allegedly represented to the banking industry
that Secure Seal used two distinct encryption algorithms,
one of which used public keys. Advanced Software sought
Fiserv’s source code during discovery, but it did not obtain
the complete source code until October 2008. On January
8, 2009, after attorney discussions about the source code,
Fiserv changed its representation to declare that Secure
Seal used only one encryption algorithm that did not use
ADVANCED SOFTWARE v. FISERV 22
changeable public keys. A little more than a month after
that change in Fiserv’s position, Advanced Software
moved to amend the pleadings to assert a Lanham Act
claim based on Fiserv’s advertisements, which stated that
Secure Seal was more secure than other barcode systems
(such as Advanced Software’s system). The district court
denied the motion because the deadline for amendments
under the court’s initial case management order had
passed and, in the court’s view, Advanced Software had
not provided any “legitimate reason” for the delay.
We review the denial of a motion to amend by apply-
ing regional circuit law. Kalman v. Berlyn Corp., 914
F.2d 1473, 1480 (Fed. Cir. 1990). The Eighth Circuit
reviews the denial of such a motion for an abuse of discre-
tion. O’Neil v. Simplicity, Inc., 574 F.3d 501, 505 (8th Cir.
2009). “An abuse of discretion occurs where the district
court fails to consider an important factor, gives signifi-
cant weight to an irrelevant or improper factor, or com-
mits a clear error of judgment in weighing those factors.”
Gen. Motors Corp. v. Harry Brown’s, LLC, 563 F.3d 312,
316 (8th Cir. 2009).
The parties disagree about which standard the dis-
trict court should have applied in evaluating the motion.
Advanced Software contends that the motion to amend
should have been evaluated under the liberal standard of
Federal Rule of Civil Procedure 15(a)(2). Fiserv contends
that Rule 15(a)(2) does not govern because the motion to
amend was filed after the deadline set by the district
court. Accordingly, Fiserv argues that the more stringent
“good cause” standard of Rule 16(b) applies to this case.
See Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 716
(8th Cir. 2008).
23 ADVANCED SOFTWARE v. FISERV
Advanced Software contends that its motion to amend
did not violate the district court’s scheduling order be-
cause that order was limited to jurisdictional issues
involving the Federal Reserve banks that were previously
named as defendants in the case. 3 The district court
disagreed with that characterization of its scheduling
order. The court explained that although the “order
related mainly to jurisdictional issues, it also adopted the
parties’ proposal for a deadline for amendment of plead-
ings apart from the jurisdictional dispute.” That interpre-
tation of the order is not inconsistent with the language of
the order; some of the scheduling directives in the order
were explicitly limited to jurisdictional issues, while other
directives (including the directive setting forth the dead-
line for amendment of pleadings) lacked an explicit limi-
tation. Because the district court’s interpretation of its
own orders is reviewable only for abuse of discretion, In re
Dial Bus. Forms, Inc., 341 F.3d 738, 744 (8th Cir. 2003),
we adopt the district court’s interpretation and therefore
conclude that the good cause standard of Rule 16(b)
governs the district court’s denial of Advanced Software’s
motion to amend.
Under the good cause standard, the threshold inquiry
is whether the movant has been diligent. See Sherman,
532 F.3d at 717. The district court found that Advanced
Software unduly delayed seeking to amend because it
“had ample time to conduct discovery and to have [its]
experts analyze defendant’s product.” Advanced Software
contends that it was not aware that Secure Seal lacked
public key encryption until Fiserv’s attorney so admitted
on January 8, 2009. At that point, Advanced Software
3 The district court dismissed the Federal Reserve
banks under 28 U.S.C. § 1498(a).
ADVANCED SOFTWARE v. FISERV 24
had had access to the source code for only about four
months. Nonetheless, Advanced Software does not ex-
plain what occurred during that four-month period that
the district court focused on. We therefore cannot con-
clude that district court abused its discretion by failing to
consider an important factor, or that the court committed
a clear error of judgment in determining that Advanced
Software had not shown good cause for that four-month
delay. Accordingly, we affirm the district court’s denial of
Advanced Software’s motion to amend.
V
Fiserv has filed a cross-appeal challenging the district
court’s denial of its summary judgment motion on obvi-
ousness and anticipation (but not the court’s order of
dismissal of its invalidity counterclaim without prejudice).
We lack jurisdiction over the cross-appeal because “[t]he
final judgment rule prohibits a party from appealing a
district court’s denial of a motion for summary judgment.”
Lermer Germany GmbH v. Lermer Corp., 94 F.3d 1575,
1576 (Fed. Cir. 1996). The Supreme Court has explained
that appellate courts lack jurisdiction over the denial of a
motion for a summary judgment based on disputed issues
of fact because such a denial “does not settle or even
tentatively decide anything about the merits of the claim.”
Switz. Cheese Ass’n, Inc. v. E. Horne’s Mkt., Inc., 385 U.S.
23, 25 (1966). Because there has been no final determina-
tion on the merits of Fiserv’s invalidity counterclaim, we
have no jurisdiction to address that claim.
Each party shall bear its own costs for this appeal.
AFFIRMED IN PART, REVERSED IN PART,
VACATED IN PART, DISMISSED IN PART AND
REMANDED