United States Court of Appeals for the Federal Circuit
2007-1565
NET MONEYIN, INC.,
Plaintiff-Appellant,
v.
VERISIGN, INC.,
Defendant-Appellee,
and
EPROCESSING NETWORK,
Defendant-Appellee,
and
BANKCARD CENTER, INC., WEBTRANZ, VALIDPAY.COM, INC.,
ORDERBUTTON.NET, INC., SECUREPAY.COM, INC., GLOBILL.COM LLC,
IB HOLDING COMPANY, LTD., E-COMMERCE EXCHANGE LLC, ITRANSACT.COM
INFOSPACE, INC., CITIBANK, and ELECTRONIC PAYMENT PROCESSING, INC.,
Defendants.
William A. Birdwell, Davis Wright Tremaine LLP, of Portland, Oregon, argued for
plaintiff-appellant. With him on the brief was Timothy R. Volpert. Of counsel on the
brief was Allen Field, Law Office of Allen Field, of Portland, Oregon.
J. Michael Jakes, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, of
Washington, DC, argued for defendants-appellees. With him on the brief for Verisign,
Inc., were Thomas W. Winland and Scott A. Herbst, of Palo Alto, California.
Corby R. Vowell, Goldstein, Faucett & Prebeg, LLP, of Houston, Texas, for
defendant-appellee EProcessing Network.
Appealed from: United States District Court for the District of Arizona
Judge Raner C. Collins
United States Court of Appeals for the Federal Circuit
2007-1565
NET MONEYIN, INC.,
Plaintiff-Appellant,
v.
VERISIGN, INC.,
Defendant-Appellee,
and
EPROCESSING NETWORK,
Defendant-Appellee,
and
BANKCARD CENTER, INC., WEBTRANZ, VALIDPAY.COM, INC.,
ORDERBUTTON.NET, INC., SECUREPAY.COM, INC., GLOBILL.COM LLC, IB
HOLDING COMPANY, LTD., E-COMMERCE EXCHANGE LLC, ITRANSACT.COM
INFOSPACE, INC., CITIBANK, and ELECTRONIC PAYMENT PROCESSING, INC.,
Defendants.
Appeal from the United States District Court for the District of Arizona in case no. 01-
CV-441, Judge Raner C. Collins.
__________________________
DECIDED: October 20, 2008
__________________________
Before LINN, CLEVENGER, and MOORE, Circuit Judges.
LINN, Circuit Judge.
Net MoneyIN, Inc. (“NMI”) appeals from a final judgment of the United States
District Court for the District of Arizona, which held the asserted claims of U.S. Patents
No. 5,822,737 (“the ’737 patent”) and No. 5,963,917 (“the ’917 patent”) invalid. NMI
also appeals from the district court’s denial of its motion for leave to amend its complaint
to assert a claim for inducement of infringement. Because the district court correctly
found claims 1, 13, and 14 of the ’737 patent and claim 1 of the ’917 patent, which
contain limitations in means-plus-function format, invalid under 35 U.S.C. § 112 ¶ 2 as
lacking corresponding structure, we affirm that portion of the judgment. Because the
district court did not abuse its discretion in denying NMI’s motion to amend, we also
affirm that ruling. Because the district court applied an incorrect standard of law in
finding claim 23 of the ’737 patent invalid as anticipated under 35 U.S.C. § 102(a),
however, we reverse the grant of summary judgment of anticipation. Thus, we affirm-in-
part, reverse-in-part, and remand for proceedings consistent with this opinion.
I. BACKGROUND
This case involves systems for processing credit card transactions over the
Internet and for addressing security concerns not present in direct retail transactions. In
the early days of Internet commerce, merchants recognized that one key to the success
of Internet sales would be the ability to provide customers with assurances of security in
the processing of financial transactions over the Internet using credit cards, bank
accounts, and other means of electronic payment. Responding to that need, the
industry investigated encryption techniques and architectures to protect sensitive data.
One such effort is reflected in a 1995 working document entitled “Internet Keyed
Payments Protocol (“the iKP reference”), published by the Internet Engineering Task
Force and IBM. That document sets forth standards on “how payments may be
accomplished efficiently, reliably[,] and securely.” J.A. at 1375. The iKP reference
explains that its goal was “to enable Internet-based secure electronic payments while
2007-1565 2
utilizing the existing financial infrastructure for payment authorization and clearance.
The intent is to avoid completely, or at least minimize, changes to the existing financial
infrastructure outside the Internet.” Id. To that end, the iKP reference suggests two
standard models, or protocols. 1
In the first protocol, (1) the customer selects one or more items to purchase from
the merchant’s website; (2) the customer sends credit card information to the merchant;
(3) the merchant sends the credit card information and amount of the purchase to the
merchant’s bank; (4) the merchant’s bank seeks authorization for the purchase from the
issuing bank over the existing banking network; and (5) the merchant’s bank notifies the
merchant (but not the customer) of transaction approval. See id. at 1381 (flow
diagram); Appellant’s Br. at 7.
In the second protocol, (1) the customer selects one or more items to purchase
on the merchant’s website; (2) the customer sends an authorization request, along with
its credit card information and the amount of the purchase, to the merchant’s bank; (3)
the merchant’s bank seeks authorization from the issuing bank over the existing
banking network; (4) the merchant’s bank notifies the customer of transaction approval;
and (5) the customer sends the authorization response to the merchant. See J.A. at
1342, 1394; Appellant’s Br. at 8-9.
Unsatisfied with the early approaches taken by others, Mark Ogram, an inventor
and patent attorney, set out to create a new payment model to remedy what he
1
As illustrated by our colloquy with counsel at oral argument, it is not clear
whether the payment models disclosed in the iKP reference are mutually exclusive.
Viewing the facts in the light most favorable to NMI, however, as we must do at this
stage in the proceedings, the reference is properly construed to show two mutually
exclusive payment models.
2007-1565 3
perceived as two deficiencies in the prior art protocols: “the fact that the customer had
to send confidential information over the Internet to an unknown merchant; and the fact
that credit card issuers imposed onerous financial requirements on merchants.”
Appellant’s Br. at 10. Ogram’s idea was to add a fifth entity, a “payment processing” or
“financial processing” entity, to supplement the conventional model with four entities: the
customer, merchant, merchant’s bank, and issuing bank. According to Ogram, the new
financial processing entity would: “(1) receive credit card account information and an
amount to be charged from the customer when the customer placed the order; (2) seek
authorization from the card issuer over the existing banking network; and (3) notify both
the customer and the merchant of authorization.” Id.
On February 5, 1996, Ogram filed a patent application directed to a payment
model utilizing a financial processing entity. He formed NMI shortly thereafter to
implement the model as a business for processing credit card transactions over the
Internet. Ogram’s patent application resulted in the ’737 and ’917 patents, both of which
are assigned to NMI. Claim 1 of the ’737 patent is illustrative of the invention claimed:
1. A financial transaction system comprising:
a) a first bank computer containing financial data therein, said
financial data including customer account numbers and available
credit data, said first bank computer including means for generating
an authorization indicia in response to queries containing a
customer account number and amount;
b) a merchant computer containing promotional data;
c) a customer computer being linked with said merchant
computer and receiving said promotional data; and,
d) a financial processing computer remote from said merchant
computer and having means for:
1) receiving customer account data and amount data
from said customer computer,
2) querying said first bank computer with said customer
account data and said amount data,
2007-1565 4
3) receiving an authorization indicia from said first bank
computer,
4) communicating a self-generated transaction indicia to
said customer computer, and,
5) communicating the self-generated transaction indicia
to said merchant computer.
According to their abstracts, the ’737 and ’917 patents relate to “[a]n automated
payment system particularly suited for purchases over a distributed computer network
such as the Internet.”
In 2001, NMI filed suit for infringement of the ’737 and ’917 patents against a
number of parties alleged to compete in the Internet credit card processing field,
including VeriSign, Inc. and eProcessing Network (collectively, “VeriSign”). Following a
claim construction hearing, the district court construed a number of terms in dispute.
Net MoneyIN, Inc. v. VeriSign, Inc., No. 01-CV-441 (D. Ariz. Oct. 18, 2005) (“Claim
Construction Decision”). As part of its construction of the claim terms, the district court
invalidated claims 1, 13, and 14 of the ’737 patent and claim 1 of the ’917 patent, which
contain limitations in means-plus-function format, as lacking corresponding structure
and thus indefinite under 35 U.S.C. § 112 ¶ 2.
Following construction of the claims, the district court entertained two motions for
summary judgment that are relevant to this appeal. First, VeriSign moved for summary
judgment that it did not induce infringement of NMI’s patents. In response to that
motion, NMI moved for leave to amend its complaint to add a claim for inducement of
infringement. The district court granted VeriSign’s motion for summary judgment and
denied NMI’s motion for leave to amend. Net MoneyIN, Inc. v. VeriSign, Inc., No. 01-
CV-441 (D. Ariz. June 8, 2006) (“Amendment Decision”). Second, VeriSign moved for
summary judgment of invalidity, arguing that the iKP reference anticipated claim 23 of
2007-1565 5
the ’737 patent under 35 U.S.C. § 102(a). The district court granted VeriSign’s motion.
Net MoneyIN, Inc. v. VeriSign, Inc., No. 01-CV-441 (D. Ariz. July 13, 2007) (“Summary
Judgment Decision”). The district court then entered final judgment in favor of VeriSign.
NMI timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
II. DISCUSSION
A. Standard of Review
Claim construction is a question of law, Markman v. Westview Instruments, Inc.,
52 F.3d 967, 970-71 (Fed. Cir. 1995) (en banc), aff’d, 517 U.S. 370 (1996), over which
we exercise plenary review. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1456
(Fed. Cir. 1998) (en banc). Indefiniteness under 35 U.S.C. § 112 ¶ 2 is also a question
of law subject to plenary review. SmithKline Beecham Corp. v. Apotex Corp., 403 F.3d
1331, 1338 (Fed. Cir. 2005).
We review a grant of summary judgment de novo, reapplying the standard that
the district court employed. Rodime PLC v. Seagate Tech., Inc., 174 F.3d 1294, 1301
(Fed. Cir. 1999). Drawing all reasonable inferences in favor of the nonmovant,
“[s]ummary judgment is appropriate only when ‘there is no genuine issue as to any
material fact and . . . the moving party is entitled to a judgment as a matter of law.’” Id.
(quoting Fed. R. Civ. P. 56(c)).
The denial of a motion to amend is a procedural question not unique to patent
law and thus is reviewed under the law of the regional circuit. Kalman v. Berlyn Corp.,
914 F.2d 1473, 1480 (Fed. Cir. 1990). In the Ninth Circuit, the denial of a motion to
amend is reviewed for abuse of discretion. Chappel v. Lab. Corp. of Am., 232 F.3d 719,
725 (9th Cir. 2000).
2007-1565 6
B. Analysis
1. Indefiniteness
The district court concluded that claims 1, 13, and 14 of the ’737 patent and claim
1 of the ’917 patent were indefinite under 35 U.S.C. § 112 ¶ 2, and thus invalid.
Because each of these patents raises different issues, we address them separately.
a. the ’737 patent
Claim 1 of the ’737 patent recites a financial transaction system comprising,
among other things, “a first bank computer containing financial data therein, said
financial data including customer account numbers and available credit data, said first
bank computer including means for generating an authorization indicia in response to
queries containing a customer account number and amount” (emphasis added). 2 The
district court construed the generating means element in claim 1 as a means-plus-
function element. The parties agreed that the function of the claimed means was
“generating an authorization indicia in response to queries containing a customer
account number and amount.” The district court found, however, that the specification
failed to disclose any corresponding structure to perform the claimed function.
Accordingly, it deemed the claim invalid under 35 U.S.C. § 112 ¶ 2.
NMI argues that the generating means element is not a means-plus-function
element under 35 U.S.C. § 112 ¶ 6 “because the claim itself discloses sufficient
structure which performs the function of ‘generating an authorization indicia in response
to queries containing a customer account number and amount.’” Appellant’s Br. at 21
2
NMI does not make arguments with respect to claims 13 or 14, which
contain language similar to that in claim 1. We view this as a concession that these
claims rise or fall with claim 1.
2007-1565 7
(emphasis omitted). Alternatively, NMI contends that if the generating means claim
element is properly construed as a means-plus-function element, then the specification
recites sufficient structure to make the claim definite. VeriSign counters that the district
court correctly concluded both that the claim does not recite sufficient structure to rebut
the means-plus-function presumption and that the specification contains insufficient
structure to perform the claimed function.
Section 112, paragraph 6, of title 35 provides that:
An element of a claim for a combination may be expressed as a means or
step for performing a specified function without the recital of structure,
material, or acts in support thereof, and such claim shall be construed to
cover the corresponding structure, material, or acts described in the
specification and equivalents thereof.
A claim element that contains the word “means” and recites a function is presumed to
be drafted in means-plus-function format under 35 U.S.C. § 112 ¶ 6. Envirco Corp. v.
Clestra Cleanroom, Inc., 209 F.3d 1360, 1364 (Fed. Cir. 2000). The presumption is
rebutted, however, “if the claim itself recites sufficient structure to perform the claimed
function.” Id.; see also Sage Prods., Inc. v. Devon Indus., Inc., 126 F.3d 1420, 1427-28
(Fed. Cir. 1997) (“[W]here a claim recites a function, but then goes on to elaborate
sufficient structure, material, or acts within the claim itself to perform entirely the recited
function, the claim is not in means-plus-function format.”).
We first address NMI’s contention that the presumption triggered by the presence
of the word “means” in claim 1 is rebutted by the recitation of sufficient structure for
performing entirely the recited function of “generating an authorization indicia.” NMI
contends that the language, “first bank computer containing financial data therein, said
financial data including customer account numbers and available credit data, said first
bank computer . . . generating an authorization indicia in response to queries containing
2007-1565 8
a customer account number and amount,” is sufficient structure to rebut the means-
plus-function presumption. NMI argues that an ordinary artisan would understand the
“bank computer” “to be a commonly known structure for generating authorization indicia
in response to queries containing a custom account number and amount.” Appellant’s
Br. at 21, 22. VeriSign responds that the claim does not recite sufficient structure to
rebut the presumption “because of the wide variety of types and classes of computers in
existence, each being configurable in a variety of different ways using many different
programming languages.” Appellees’ Br. at 28 (internal quotation marks and citations
omitted).
We agree with VeriSign that the recitation in claim 1 of the “bank computer” is not
sufficient to rebut the means-plus-function presumption. The bank computer is not
linked in the claim as the “means” for generating an authorization indicia. Rather, the
bank computer is recited as “including” those means. NMI’s argument that the first bank
computer constitutes sufficient structure would require the first bank computer to include
a first bank computer, which is both redundant and illogical. Because the claimed
generating means is a subset of the bank computer, there must be a recitation of
structure that is a component of the bank computer to rebut the presumption. The claim
contains no such recitation. As a result, the district court correctly concluded that the
presumption of means-plus-function treatment had not been overcome.
Having concluded that the generating means recited in claim 1 is drafted in
means-plus-function format, we turn to whether the specification includes a disclosure
of structure sufficient to accomplish the recited function. NMI argues that “the
specification does disclose a ‘bank computer’ and this Court’s precedents do not require
2007-1565 9
a description of the ‘internal structure’ of the ‘bank computer.’” Appellant’s Br. at 27
(emphasis omitted); see also id. at 31 (“Here, claim 1(a) itself states that the ‘bank
computer’ contains ‘financial data’ including ‘customer account numbers and available
credit data.’ A person skilled in the art would know that such a computer would be
programmed to compare account data and amount data to those data structures and
generate an authorization indicia if credit were available.”). VeriSign counters that the
district court correctly determined that the ’737 patent specification fails to disclose the
“structure corresponding to what, in the claimed first bank computer, performs the
claimed generating function.” Appellees’ Br. at 51 (internal quotation marks omitted).
A patent applicant who employs means-plus-function language “must set forth in
the specification an adequate disclosure showing what is meant by that language. If an
applicant fails to set forth an adequate disclosure, the applicant has in effect failed to
particularly point out and distinctly claim the invention as required by the second
paragraph of section 112.” In re Donaldson Co., 16 F.3d 1189, 1195 (Fed. Cir. 1994)
(en banc). To avoid purely functional claiming in cases involving computer-
implemented inventions, we have “consistently required that the structure disclosed in
the specification be more than simply a general purpose computer or microprocessor.”
Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 521 F.3d 1328, 1333 (Fed. Cir.
2008). “Because general purpose computers can be programmed to perform very
different tasks in very different ways, simply disclosing a computer as the structure
designated to perform a particular function does not limit the scope of the claim to ‘the
corresponding structure, material, or acts’ that perform the function, as required by
section 112 paragraph 6.” Id. “Thus, in a means-plus-function claim ‘in which the
2007-1565 10
disclosed structure is a computer, or microprocessor, programmed to carry out an
algorithm, the disclosed structure is not the general purpose computer, but rather the
special purpose computer programmed to perform the disclosed algorithm.’” Id.
(quoting WMS Gaming, Inc. v. Int’l Game Tech., 184 F.3d 1339, 1349 (Fed. Cir. 1999)).
Consequently, a means-plus-function claim element for which the only disclosed
structure is a general purpose computer is invalid if the specification fails to disclose an
algorithm for performing the claimed function. See id. at 1337-38.
There is no dispute in this case that the specification fails to disclose an
algorithm by which a general purpose bank computer “generat[es] an authorization
indicia.” 3 As a result, the district court correctly concluded that claims 1, 13, and 14 are
indefinite under 35 U.S.C. § 112 ¶ 2. We therefore affirm that part of the judgment.
b. the ’917 patent
Claim 1 of the ’917 patent recites a financial transaction system comprising,
among other things, “a financial processing computer . . . having automatic means
responsive to [the] order for . . . receiving customer account data and amount data from
[the] customer computer and [the] merchant computer.” The parties do not dispute the
district court’s construction of this claim element as a means-plus-function element.
The parties do dispute, however, the nature of the function. The district court construed
the function as “the financial processing computer receives both the customer account
data and amount data from both the customer computer and the merchant computer.”
3
At oral argument, counsel for NMI conceded that “[t]here is nothing in the
written description that expressly states what is going on inside that bank computer.”
Oral Arg. at 20:10-20:15, available at http://oralarguments.cafc.uscourts.gov/mp3/2007-
1565.mp3.
2007-1565 11
Claim Construction Decision at 11. NMI argues that the district court’s construction of
the function is erroneous. According to NMI, the ordinary meaning of the claim
language requires that the function be construed more broadly: “[I]n response to an
order, the financial processing computer: (1) receives customer account data from the
customer computer, the merchant computer, or both; and (2) it also receives amount
data from the customer computer, the merchant computer, or both.” Appellant’s Br. at
46-47. VeriSign counters that the district court correctly construed the function
according to the ordinary meaning of the claim language.
The language of the function at issue was construed by the district court as
specifying that both the amount data and the account data must come from both the
customer computer and the merchant computer. That construction comports with and is
fully supported by the language of the claim itself. NMI argues that the function is
subject to a different construction, which would permit the amount data and the account
data to come from the merchant computer, the customer computer, or both. The
problem with NMI’s proffered construction, however, is that it is different from, and
broader in scope than, the construction it asserted in the district court. See J.A. at 1046
(arguing to the district court that “the meaning of this element is: ‘the financial
processing computer receives the customer account data from the customer computer
and the amount data from the merchant computer via the customer computer’”). This is
not merely a new argument in support of a previously presented construction, but
instead is a new and more expansive construction, which may not properly be asserted
on appeal. See Interactive Gift Express, Inc. v. Compuserve Inc., 256 F.3d 1323, 1347
(Fed. Cir. 2001). Because NMI’s new construction is not proper on appeal, and
2007-1565 12
because we see no basis on which to overturn the district court’s construction, that
construction is affirmed.
NMI concedes that under the district court’s construction, no structure is
disclosed in the specification to perform the claimed function. Appellant’s Br. at 46. As
a result, the claim is indefinite under 35 U.S.C. § 112 ¶ 2. See Donaldson, 16 F.3d at
1195. Consequently, we affirm the district court’s determination that claim 1 of the ’917
patent is invalid.
2. Anticipation
Claim 23 of the ’737 patent recites an Internet payment system comprising five
“links”:
a) a first link between a customer computer and a vending
computer for communicating promotional information from said vending
computer to said customer computer;
b) a second link, initiated by said customer computer, between
said customer computer and a payment processing computer, remote
from said vending computer, for communicating credit card information
and amount from said customer computer to said payment processing
computer;
c) a third link, initiated by said payment processing computer
with a credit card server computer for communicating said credit card
information and said amount from said payment processing computer to
said credit card server computer, and for communicating, in response, an
authorization indicia from said credit card server computer to said
payment processing computer; []
d) a fourth link between said payment processing computer and
said customer computer for communicating a transactional indicia[;]
* * *
[e)] a fifth link between the payment processing computer and
said vending computer for communicating said transactional indicia.
The district court, after finding all five of these links in the iKP reference, albeit in two
separate disclosed examples, concluded that claim 23 was anticipated under 35 U.S.C.
§ 102(a) and therefore invalid. Specifically, the district court concluded:
2007-1565 13
All of the limitations of claim 23 can be found within the iKP reference. A
simple combination would produce the system described in claim 23 of the
’737 patent. That no specific example within iKP contains all five links
does not preclude a finding of anticipation.
Summary Judgment Decision at 3. NMI contends that the district court’s combination of
two disclosed examples in order to find all elements of the claim was erroneous. 4
VeriSign responds that the district court did not improperly rearrange the links in the iKP
reference, but rather “merely relied on various express teachings from a single
document that together completely disclose the five claimed links.” Appellees’ Br. at 61.
Under VeriSign’s theory, this was sufficient to establish anticipation, because all that is
required is “that the four corners of a single, prior art document describe every element
of the claimed invention.” Id. at 61-62 (quoting Xerox Corp. v. 3Com Corp., 458 F.3d
1310, 1322 (Fed. Cir. 2006)). We disagree with VeriSign, and take this opportunity to
clarify what a reference must show in order to anticipate a claimed invention.
Section 102(a) provides that an issued patent is invalid if “the invention [therein]
was . . . described in a printed publication . . . before the invention thereof by the
applicant.” Section 102 embodies the concept of novelty—if a device or process has
been previously invented (and disclosed to the public), then it is not new, and therefore
the claimed invention is “anticipated” by the prior invention. As we have stated
numerous times (language on which VeriSign relies), in order to demonstrate
anticipation, the proponent must show “that the four corners of a single, prior art
document describe every element of the claimed invention.” Xerox, 458 F.3d at 1322
(quoting Advanced Display Sys., Inc. v. Kent State Univ., 212 F.3d 1272, 1282 (Fed.
4
Because it is on this ground that we decide this issue, we do not reach
NMI’s alternative grounds for reversing the district court’s anticipation conclusion.
2007-1565 14
Cir. 2000)). This statement embodies the requirement in section 102 that the
anticipating invention be “described in a printed publication,” and is, of course,
unimpeachable. But it does not tell the whole story. Because the hallmark of
anticipation is prior invention, the prior art reference—in order to anticipate under 35
U.S.C. § 102—must not only disclose all elements of the claim within the four corners of
the document, but must also disclose those elements “arranged as in the claim.”
Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1548 (Fed. Cir. 1983). 5
The meaning of the expression “arranged as in the claim” is readily understood in
relation to claims drawn to things such as ingredients mixed in some claimed order. In
such instances, a reference that discloses all of the claimed ingredients, but not in the
order claimed, would not anticipate, because the reference would be missing any
disclosure of the limitations of the claimed invention “arranged as in the claim.” But the
“arranged as in the claim” requirement is not limited to such a narrow set of “order of
limitations” claims. Rather, our precedent informs that the “arranged as in the claim”
requirement applies to all claims and refers to the need for an anticipatory reference to
show all of the limitations of the claims arranged or combined in the same way as
5
VeriSign points to language in Glaxo Group Ltd. v. Apotex, Inc., 376 F.3d
1339, 1348 (Fed. Cir. 2004), on which the district court relied, which states: “Apotex is
of course correct that anticipation requires that all limitations of the claimed invention
are described in a single reference, rather than a single example in the reference.” This
does not say what VeriSign wishes it did, nor could it. This language, when read in
context, stands for the unremarkable proposition that courts are not constrained to
proceed example-by-example when reviewing an allegedly anticipating prior art
reference. Rather, the court must, while looking at the reference as a whole, conclude
whether or not that reference discloses all elements of the claimed invention arranged
as in the claim.
2007-1565 15
recited in the claims, not merely in a particular order. The test is thus more accurately
understood to mean “arranged or combined in the same way as in the claim.”
For example, in Lindemann Maschinenfabrik GmbH v. American Hoist & Derrick
Co., 730 F.2d 1452 (Fed. Cir. 1984), we reviewed a district court’s determination that a
patent directed to a hydraulic scrap shearing machine was anticipated by a prior patent
directed to a method for shearing spent nuclear fuel bundles. Because the district court
had “treated the claims as mere catalogs of separate parts, in disregard of the part-to-
part relationships set forth in the claims and that give the claims their meaning,” we
reversed. Id. at 1459. Although the prior art reference could be said to contain all of the
elements of the claimed invention, it did not anticipate under 35 U.S.C. § 102 because it
“disclose[d] an entirely different device, composed of parts distinct from those of the
claimed invention, and operating in a different way to process different material
differently.” Id. at 1458. The reference thus was deficient because it did not disclose
the elements of the claimed invention “arranged as in the claim” as required by 35
U.S.C. § 102. Id.
In Ecolochem, Inc. v. Southern California Edison Co., 227 F.3d 1361 (Fed. Cir.
2000), we reviewed a district court’s decision that a prior art reference directed to
“Saving Energy by Catalytic Reduction of Oxygen in Feedwater” anticipated a claim
reciting the use of hydrazine with a mixed resin bed to deoxygenate water. In finding
that the reference anticipated the claim, the district court considered a figure and
accompanying text, which taught the use of hydrogen with a mixed bed to deoxygenate
water, in conjunction with a separate passage discussing deoxygenating water with,
among other things, hydrazine. Id. at 1369. We reversed. After determining that the
2007-1565 16
relevant figure and accompanying text described only the use of hydrogen to
deoxygenate water, we concluded that the reference could not anticipate the claimed
invention because there was no link between that figure and the general discussion of
hydrazine as a deoxygenating agent. Id. In other words, we concluded that although
the reference taught all elements of the claim, it did not contain a discussion suggesting
or linking hydrazine with the mixed bed in the figure, and thus did not show the invention
arranged as in the claim.
Recently, in Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323 (Fed. Cir. 2008),
we reversed a district court’s denial of a motion for judgment as a matter of law because
the jury could not have reasonably concluded that the prior art reference relating to the
Videotex architecture did not anticipate the claimed invention directed to systems and
methods for scheduling transmission of database tiers on demand at varying repetition
rates. Although the anticipation issue dealt largely with the interpretation of the prior art
reference, id. at 1335-37, we reemphasized the importance of the requirement that the
reference describe not only the elements of the claimed invention, but also that it
describe those elements “arranged as in the claim”:
To anticipate a claim, a single prior art reference must expressly or
inherently disclose each claim limitation. . . . But disclosure of each
element is not quite enough—this court has long held that “[a]nticipation
requires the presence in a single prior art disclosure of all elements of a
claimed invention arranged as in the claim.”
Id. at 1334 (quoting Connell, 722 F.2d at 1548). In all of these cases, the prior art
reference had to show the claimed invention arranged or combined in the same way as
recited in the claim in order to anticipate. We thus hold that unless a reference
discloses within the four corners of the document not only all of the limitations claimed
but also all of the limitations arranged or combined in the same way as recited in the
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claim, it cannot be said to prove prior invention of the thing claimed and, thus, cannot
anticipate under 35 U.S.C. § 102.
Here, the iKP reference discloses two separate protocols for processing an
Internet credit card transaction. Neither of these protocols contains all five links
arranged or combined in the same way as claimed in the ’737 patent. Thus, although
the iKP reference might anticipate a claim directed to either of the two protocols
disclosed, it cannot anticipate the system of claim 23. The district court was wrong to
conclude otherwise.
The district court was also wrong to combine parts of the separate protocols
shown in the iKP reference in concluding that claim 23 was anticipated. Granted, there
may be only slight differences between the protocols disclosed in the iKP reference and
the system of claim 23. But differences between the prior art reference and a claimed
invention, however slight, invoke the question of obviousness, not anticipation. See 35
U.S.C. § 103(a) (“A patent may not be obtained though the invention is not identically
disclosed or described as set forth in section 102 of this title, if the differences between
the subject matter sought to be patented and the prior art are such that the subject
matter as a whole would have been obvious at the time the invention was made to a
person having ordinary skill in the art to which said subject matter pertains.” (emphasis
added)); see also In re Arkley, 455 F.2d 586, 587 (CCPA 1972) (“[R]ejections under 35
U.S.C. § 102 are proper only when the claimed subject matter is identically disclosed or
described in the prior art.” (emphasis and internal quotation marks omitted)). Thus, it is
not enough that the prior art reference discloses part of the claimed invention, which an
ordinary artisan might supplement to make the whole, or that it includes multiple, distinct
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teachings that the artisan might somehow combine to achieve the claimed invention.
See Arkley, 455 F.2d at 587 (“[T]he [prior art] reference must clearly and unequivocally
disclose the claimed [invention] or direct those skilled in the art to the [invention] without
any need for picking, choosing, and combining various disclosures not directly related to
each other by the teachings of the cited reference.”).
Because the parties do not contend that the iKP reference discloses all of the
limitations recited in claim 1 arranged or combined in the same way as in the claim, and
because it was error for the district court to find anticipation by combining different parts
of the separate protocols in the iKP reference simply because they were found within
the four corners of the document, we reverse the district court’s grant of summary
judgment of invalidity.
3. Motion to Amend
During the course of this litigation, NMI filed a Second Amended Complaint in
which it clarified that it was asserting, among other things, a claim for inducement of
infringement under 35 U.S.C. § 271(b). In a Third Amended Complaint filed in August
2003, however, NMI abandoned its claim for inducement of infringement, stating that it
had “elected not to assert a cause of action for inducement.” In answering NMI’s Third
Amended Complaint, although some of the defendants reasserted counterclaims for
declaratory judgment of noninfringement by inducement, VeriSign did not. J.A. at 1251.
In May 2005, VeriSign moved for partial summary judgment on inducement of
infringement. In response, NMI moved, pursuant to Federal Rule of Civil Procedure
15(b), for leave to file a Fourth Amended Complaint to add a claim for inducement of
infringement. According to NMI, VeriSign had consented to litigate the issue by moving
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for summary judgment on that basis. The district court granted VeriSign’s motion for
partial summary judgment and denied NMI’s motion to amend.
NMI argues that the district court abused its discretion by denying the motion to
amend. According to NMI, the district court had no discretion to deny amendment
under Rule 15(b) because VeriSign consented to litigate the issue. VeriSign argues
that, while it did seek partial summary judgment on the issue of inducement, it did so on
the ground of waiver, not on the merits. Thus, according to VeriSign, it was within the
district court’s discretion to deny amendment.
A district court generally enjoys broad discretion when assessing the propriety of
a motion to amend. See Chappel, 232 F.3d at 725. It does not enjoy such discretion,
however, and amendment is mandatory, when an issue is tried with the express or
implied consent of the parties. See Fed. R. Civ. P. 15(b) (“When an issue not raised by
the pleadings is tried by the parties’ express or implied consent, it must be treated in all
respects as if raised in the pleadings.”); cf. Wallin v. Fuller, 476 F.2d 1204, 1210 (5th
Cir. 1973) (“Amendment is thus not merely discretionary but mandatory in such a
case.”).
Thus, the first issue we must address is whether VeriSign consented, either
expressly or impliedly, to litigate inducement. We agree with the district court that it did
not. VeriSign’s motion for partial summary judgment stated, in pertinent part,
NMI’s failure to assert any claim of contributory infringement under
Section 271(c) in its Third Amended Complaint, its express disavowal in
that pleading of any claim of inducement under Section 271(b), its failure
to disclose any indirect infringement theories or supporting evidence in its
Supplemental Disclosure to VeriSign, and its failure to disclose any
evidence that would establish indirect infringement, including its failure to
identify any alleged direct infringer or any acts by VeriSign alleged to
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constitute contributory infringement, compels entry of partial summary
judgment in favor of VeriSign.
J.A. at 7330. This is not an attempt by VeriSign to litigate induced infringement on the
merits. Given NMI’s repeated amendment of its complaint, including its history of
dropping inducement claims only to later add them, as well as VeriSign’s understanding
that NMI planned to resurrect the claim at trial, it is apparent that VeriSign’s motion was
made to foreclose NMI’s ability to later raise inducement (again). Notably, this is
precisely how the district court construed NMI’s motion:
Plaintiff uses the argument that by filing [a] motion for summary judgment
on this issue, the Defendants are consenting to its litigation. This is not
the case. Defendants are merely attempting to formally discharge this
theory as a claim (as has already been indicated by Plaintiffs counsel) so
that the case can be focused on the theory of direct infringement.
Amendment Decision at 7. Thus, the district court was not without discretion to deny
the requested amendment.
The question thus becomes whether the district court’s denial of the motion was
an abuse of that discretion. In denying the motion, the district court observed that NMI
was requesting leave “to amend [its] Complaint for a fourth time in order to allege a
claim (inducement of infringement) which [it] ha[s] expressly disavowed, twenty months
after the deadline to amend pleadings and four months after the close of discovery.” Id.
at 6-7. It also observed that granting NMI’s motion would result in “extreme delay,” id.
at 10, and severe prejudice to VeriSign, id. at 11. Under these circumstances, we
cannot find that the district court’s denial was an abuse of discretion. See Chappel, 232
F.3d at 725-26 (“A district court acts within its discretion to deny leave to amend when
amendment would be futile, when it would cause undue prejudice to the defendant, or
when it is sought in bad faith.”).
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III. CONCLUSION
For the foregoing reasons, we AFFIRM-IN-PART, REVERSE-IN-PART, and
REMAND for proceedings consistent with this opinion.
COSTS
No costs.
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