DCT
2:18-cv-11792
Shar Products Co v. Landmark Technology LLC
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Shar Products Company (Michigan)
- Defendant: Landmark Technology, LLC (Delaware)
- Plaintiff’s Counsel: Bodman PLC
- Case Identification: 2:18-cv-11792, E.D. Mich., 06/06/2018
- Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Michigan because a substantial part of the events giving rise to the claim, including the receipt of Defendant's demand letter, occurred in the district, and Defendant has had purposeful contacts with the Plaintiff in Michigan.
- Core Dispute: Plaintiff seeks a declaratory judgment that it does not infringe Defendant's patent covering an automated transaction processing system, and that the patent is invalid, following receipt of a demand letter from the Defendant.
- Technical Context: The technology relates to automated systems for conducting business or financial transactions, such as e-commerce or loan applications, via remote terminals that interact with a central processing system.
- Key Procedural History: The complaint highlights an extensive prosecution and post-grant history for the asserted patent. The patent owner allegedly made narrowing arguments during prosecution to overcome obviousness rejections, characterizing the invention as involving "on-site" terminal intelligence and "forward-chaining" logic. The complaint further notes that the patent survived two separate ex parte reexaminations, during which the patent owner and the USPTO examiner allegedly reinforced a narrow construction of a key claim term as requiring "forward chaining" performed at the remote terminal. Plaintiff also notes that Defendant is a non-practicing entity with a history of asserting the patent against numerous companies.
Case Timeline
| Date | Event |
|---|---|
| 1984-05-24 | '319 Patent Earliest Priority Date |
| 1994-11-30 | '270 Application (leading to '319 Patent) filed |
| 1995-10-17 | Applicant filed amendment in '270 Application |
| 1996-06-27 | Applicant filed Appeal Brief to the BPAI |
| 2000-09-27 | BPAI reversed examiner's rejection |
| 2001-09-11 | '319 Patent Issued |
| 2003-05-05 | First ex parte reexamination requested |
| 2007-07-17 | First Reexamination Certificate issued |
| 2012-09-14 | Second ex parte reexamination requested |
| 2013-01-09 | Second Reexamination Certificate issued |
| 2018-04-20 | Defendant sent Demand Letter to Plaintiff |
| 2018-06-06 | Complaint for Declaratory Judgment filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 6,289,319 - "Automatic Business and Financial Transaction Processing System," issued September 11, 2001
The Invention Explained
- Problem Addressed: The patent describes traditional loan application processing as a labor-intensive business that requires significant paperwork and time from loan officers, much of which is spent on applicants who ultimately fail to qualify for a loan ('319 Patent, col. 1:23-32, 47-51).
- The Patented Solution: The invention is a system that automates these transactions using a network of remote, self-service terminals linked to a central processor at a financial institution and to a credit reporting service ('319 Patent, col. 1:62-65). The terminal presents a "fictitious loan officer" on-screen to guide an applicant through an "interactive series of questions and answers," automatically retrieves credit data, and makes an on-site creditworthiness determination without human intervention from the institution ('319 Patent, col. 2:1-8).
- Technical Importance: The technology sought to provide an "economical means for screening loan applications" by standardizing credit reporting, reducing paperwork, and automating complex financial interactions at remote locations ('319 Patent, col. 1:45-46, 52-56).
Key Claims at a Glance
- The complaint focuses on the patent's single independent claim, Claim 1 (Compl. ¶34). Plaintiff seeks a declaration of non-infringement of any claim of the '319 Patent (Compl. ¶61).
- Independent Claim 1 recites a multi-component system comprising:
- A "central processor" programmed to process inquiries and orders, which includes "means for receiving" and "means for retrievably storing" information.
- "at least one terminal at each of said remote sites" which is remotely linked to the central processor.
- The "terminal" itself comprises numerous components, including a "video screen" and various "means-plus-function" elements for data handling, user input, and output.
- A key terminal component is a "means for controlling...including means for fetching additional inquiring sequences in response to a plurality of said data entered...and in response to information received from said central processor".
III. The Accused Instrumentality
Product Identification
- Plaintiff’s e-commerce website, www.sharmusic.com, and the associated back-end system used to process online orders (Compl. ¶36).
Functionality and Market Context
- The complaint characterizes the accused website as a "simple menu driven website" that allows customers to interact with "rigid, pre-ordained menus" to select and order products (Compl. ¶36).
- The system operates using software licensed from a third party, JDA Software Group, Inc., and is hosted on a third-party web server farm (Compl. ¶¶36-37). Plaintiff states that it "does not own, operate, or host its own web servers" (Compl. ¶37).
- The complaint alleges that the customer's own computer or mobile device acts as the interface to the website, and that Plaintiff does not own or control these devices (Compl. ¶¶36, 38).
IV. Analysis of Infringement Allegations
The complaint seeks a declaratory judgment of non-infringement. The following table summarizes Plaintiff's description of its system's functionality as it relates to key limitations of the asserted patent claim. No probative visual evidence provided in complaint.
- '319 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| a "central processor" programmed and connected to process a variety of inquiries and orders | Plaintiff's system uses a third-party hosted web server farm that communicates with its "back office" computers to process orders. | ¶37 | col. 6:9-12 |
| "at least one terminal at each of said remote sites" including a data processor and operational sequencing lists | The complaint contends this element corresponds to the end-user's personal computer or mobile device, which Plaintiff does not own, operate, or control. | ¶38 | col. 6:18-21 |
| said terminal further comprising... "means for fetching additional inquiring sequences" in response to...data entered...and...information received from said central processor | The website is described as a "simple menu driven website" with "rigid, pre-ordained menus" that does not utilize "dynamic and sophisticated forward chaining analysis." | ¶¶36, 38 | col. 6:46-56 |
- Identified Points of Contention:
- Scope Questions: A central dispute concerns the definition of "terminal." The case raises the question of whether a customer's personal computer or mobile device, which Plaintiff does not control, can satisfy the "terminal" limitation for the purposes of holding Plaintiff directly liable for infringement of the system claim (Compl. ¶38).
- Technical Questions: A key technical question is whether the operation of Plaintiff's "simple menu driven website" (Compl. ¶36) performs the function of the "means for fetching additional inquiring sequences." The complaint argues that prosecution history has limited this function to a "dynamic and sophisticated forward chaining analysis" performed at the terminal, a capability Plaintiff asserts its system lacks (Compl. ¶35, 38).
V. Key Claim Terms for Construction
The Term: "means for fetching additional inquiring sequences in response to a plurality of said data entered through said means for entering and in response to information received from said central processor"
Context and Importance: This means-plus-function limitation appears to be the crux of the technical non-infringement dispute. Practitioners may focus on this term because the complaint alleges that the patent owner repeatedly and explicitly characterized the corresponding function during prosecution and reexamination to overcome prior art, potentially creating a significant prosecution history estoppel that narrows its scope (Compl. ¶¶22-26, 32-33).
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The patent specification describes an "interactive sequence of inquiries and answers" ('319 Patent, col. 2:2-3) and a system that guides a user through a process based on their inputs ('319 Patent, FIG. 4). A party could argue this supports a broader construction covering any system that presents subsequent options based on a user's prior selections.
- Evidence for a Narrower Interpretation: The complaint alleges the patent owner distinguished the invention from prior art by arguing for a "novel capability... to make on-site decisions" and create a "highly individualized, unique, 'one-of-a-kind' question and answer presentation" (Compl. ¶22). More pointedly, the complaint cites the second reexamination file history, where the USPTO examiner allegedly stated that the term requires the function of "'forward chaining'... as characterized by the Patent Owner" (Compl. ¶32).
The Term: "at least one terminal at each of said remote sites"
Context and Importance: The construction of "terminal" is critical to determining direct infringement. If the "terminal" is the customer's end-user device, as Defendant's infringement theory appears to require, it raises the question of whether Plaintiff "uses" the full claimed system under 35 U.S.C. § 271(a), as Plaintiff asserts it does not own or control those devices (Compl. ¶38).
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The claim language recites terminals at "remote sites" ('319 Patent, col. 6:18), which could be interpreted broadly to mean any location where a user accesses the system.
- Evidence for a Narrower Interpretation: The patent's description of a system for "banking institutions to make their services available" ('319 Patent, col. 1:19-20) and the depiction of distinct "Terminal A" and "Terminal B" units in FIG. 1 could suggest that the "terminal" is a dedicated piece of hardware, like a kiosk, provided as part of an integrated system, rather than a user's general-purpose computer.
VI. Other Allegations
- Indirect Infringement: Plaintiff seeks a declaration of non-liability for any induced or contributory infringement (Compl. ¶61). The complaint asserts that Plaintiff lacked knowledge of the '319 Patent prior to receiving the demand letter (Compl. ¶17), a necessary element for pre-suit indirect infringement. It also argues that since no direct infringement occurs by either Plaintiff or its customers, no indirect infringement is possible (Compl. ¶61).
- Willful Infringement: As a declaratory judgment action, willfulness is not directly at issue. However, the complaint notes the receipt of a demand letter accusing Plaintiff of infringement, which establishes pre-suit knowledge of the patent (Compl. ¶13).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of claim construction constrained by prosecution history: Can the "means for fetching additional inquiring sequences," which the patent owner and the USPTO allegedly defined during reexamination to require "forward chaining" performed at the terminal, be construed to cover Plaintiff's e-commerce site, which is described as a "simple menu driven website" with "rigid, pre-ordained menus"?
- A key question for infringement liability will be one of control and use: Does a customer's privately-owned computer or mobile device constitute the claimed "terminal," and if so, can Plaintiff be held to "use" the entire patented system under 35 U.S.C. § 271(a) when it does not own or control what it contends is a critical component of the claimed invention?
- A fundamental validity challenge will be one of patent eligibility: Are the claims of the '319 Patent, which are directed to a system for automating business and financial transactions, invalid under 35 U.S.C. § 101 as being directed to an abstract idea without a sufficient inventive concept, particularly in light of their early priority date and the evolution of § 101 jurisprudence?