DCT
1:11-cv-00137
Union Properties LLC v. Stampscom Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Union Properties LLC (Texas)
- Defendant: Stamps.com, Inc. (Delaware)
- Plaintiff’s Counsel: Willi Law Firm, P.C.
- Case Identification: 1:11-cv-00137, W.D. Tex., 04/28/2011
- Venue Allegations: Plaintiff alleges venue is proper in the Western District of Texas because Defendant conducts continuous business in the district, derives substantial revenue from services provided there, and has advertised and sold the allegedly falsely marked products within the district.
- Core Dispute: Plaintiff brings this qui tam action on behalf of the United States, alleging that Defendant has engaged in false patent marking under 35 U.S.C. § 292 by marking its NetStamps label sheets, software, and online services with numerous inapplicable patents with the intent to deceive the public and thwart competition.
- Technical Context: The technology at issue involves PC-based postage systems, which allow users to purchase and print valid U.S. postage from a standard computer and printer, and the consumable label sheets used with these systems.
- Key Procedural History: The complaint alleges that Defendant was well aware of the scope of the patents at issue due to prior infringement litigation it initiated against a third party, Endicia, Inc. Additionally, the complaint notes that Defendant was previously sued in December 2010 by another party, Patent Management Foundation, LLC, for falsely marking its software and CDs with several of the same patents at issue in this case. These allegations of prior litigation are central to Plaintiff's claim of an intent to deceive.
Case Timeline
| Date | Event |
|---|---|
| 1996-04-23 | U.S. Patent No. 5,510,992 Issued |
| 1997-10-28 | U.S. Patent No. 5,682,318 Issued |
| 2010-12-XX | Patent Management Foundation, LLC sues Stamps.com for false marking |
| 2011-02-25 | Stamps.com served with a prior false marking complaint |
| 2011-04-28 | Complaint Filing Date |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 5,510,992
- Patent Identification: U.S. Patent No. 5,510,992 (“System and Method for Automatically Printing Postage on Mail”), issued April 23, 1996.
- The Invention Explained:
- Problem Addressed: The patent’s background section describes the inefficiency and expense of conventional postage meters, which required businesses to physically take the meter to a Post Office for replenishment, leading to downtime and inconvenience (’992 Patent, col. 1:15-24, col. 1:40-48).
- The Patented Solution: The invention is a processor-based system for printing postage that uses a removable "touch memory utility" (TMU) button to store postage credit (’992 Patent, Abstract). A user purchases postage credit at a Post Office, which is loaded onto the TMU; the user then couples the TMU to a home or office computer system, which reads the postage balance, calculates the required postage for a piece of mail, deducts that amount from the TMU, and prints a meter stamp using a standard printer (’992 Patent, col. 4:51–5:15; Fig. 1).
- Technical Importance: The complaint characterizes this as "the pioneer patent in the field of PC postage," representing a shift from dedicated hardware meters to software-driven solutions on general-purpose computers (Compl. ¶83).
- Key Claims at a Glance:
- The complaint alleges non-coverage of independent claims 1, 5, 9, 19, and 29 (Compl. ¶82).
- Independent Claim 1, a system claim, includes the following essential elements:
- A general purpose processor-based system for printing a postage meter stamp.
- "means for reading" a total amount of postage from a TMU button removably coupled to the system.
- "means controlled by a...processor for handshaking" with the TMU button to read data and verify authorization.
- "means for automatically calculating" a correct amount of postage.
- "means for automatically deducting" said correct amount from the total amount.
- "means for formatting data" to be sent to a printer.
U.S. Patent No. 5,682,318
- Patent Identification: U.S. Patent No. 5,682,318 (“System and Method for Storing Postage in a Computer System”), issued October 28, 1997.
- The Invention Explained:
- Problem Addressed: As a continuation of the technology in the ’992 Patent, the ’318 Patent addresses the need for a method to replenish a user's postage account remotely, without physically taking a memory device to a Post Office (’318 Patent, Abstract).
- The Patented Solution: The patent describes a computer program product stored on a computer-readable medium. This product includes a "postage means" for storing postage data locally on a computer's storage and a "coupling means" for connecting the computer system to a remote system (such as a post office) to increase the amount of stored postage (’318 Patent, col. 27:1-17; Claim 1). This facilitates the on-line purchasing of postage.
- Technical Importance: The claims "focus on remote replenishment of a customer’s postage account," a foundational concept for modern internet-based postage services (Compl. ¶111).
- Key Claims at a Glance:
- The complaint alleges non-coverage of independent claims 1, 11, 21, and 29 (Compl. ¶110).
- Independent Claim 1, a computer program product claim, includes these essential elements:
- A computer program product having a computer readable storage medium with computer program logic recorded thereon.
- A computer program stored in the medium comprising:
- "postage means for storing postage data" in a general purpose storage means.
- "coupling means for coupling" the general purpose computer system to a remote computer system to increase the amount of postage stored.
Multi-Patent Capsule: U.S. Patent No. 5,717,597
- Patent Identification: U.S. Patent No. 5,717,597 (“System and Method for Printing Personalized Postage Indicia on Greeting Cards”), issued February 10, 1998 (Compl. ¶135).
- Technology Synopsis: The patent discloses a system for printing postage that integrates a document-generating program (e.g., for greeting cards) with a separate postage-generating program. The system allows for the creation of personalized postage indicia on a label or envelope (Compl. ¶136).
- Asserted Claims (for non-coverage): Independent claims 1, 11, 20, 28, and 34 (Compl. ¶135).
- Accused Features: The complaint alleges that NetStamps Label Sheets (Product Nos. SDC-1705, SDC-1706, and SDC-1800) are falsely marked with the ’597 Patent (Compl. ¶134).
III. The Accused Instrumentality
- Product Identification: The complaint asserts false marking against several product categories: NetStamps Label Sheets, Shipping Label Sheets, Mailing Label Sheets, Stamps.com Software, and Stamps.com On-Line (Compl. ¶¶ 8, 32, 36, 44, 58). The analysis for Counts 1 and 2 focuses specifically on NetStamps Label Sheets, product numbers SDC-1705, SDC-1706, and SDC-1800 (Compl. ¶¶ 81, 109).
- Functionality and Market Context: The NetStamps Label Sheets are physical, consumable sheets of paper with adhesive labels (Compl. ¶85). They are used in conjunction with Defendant's software to print postage indicia. The complaint alleges Stamps.com is the "leading provider of Internet-based postage solutions" with over 400,000 monthly subscribers, targeting small businesses and home offices (Compl. ¶60). A summary table in the complaint provides a visual cross-reference of which patents are allegedly marked on which product families (Compl. ¶31).
IV. Analysis of Infringement Allegations
The complaint alleges non-coverage of the claims by the accused products as the basis for its false marking counts.
'992 Patent Non-Coverage Allegations
| Claim Element (from Independent Claim 1) | Alleged Non-Covering Functionality of NetStamps Label Sheets | Complaint Citation | Patent Citation |
|---|---|---|---|
| A general purpose processor-based system for printing a postage meter stamp with a desired amount of postage onto a piece of mail... | A NetStamps Label Sheet is a physical sheet of labels, not a "general purpose processor-based system" (Compl. ¶85). | ¶85 | '992 Patent, col. 4:51-54 |
| means for reading a total amount of postage from a TMU button removably coupled to said system; | The label sheet does not possess any means for reading data from a TMU button (Compl. ¶85). | ¶85 | '992 Patent, col. 6:3-6 |
| means controlled by a particular general purpose processor for handshaking with said TMU button to read data...and verifying that said button is authorized... | The label sheet lacks any processor or means for handshaking or verification (Compl. ¶85). | ¶85 | '992 Patent, col. 6:7-14 |
| means for automatically calculating a correct amount of postage for said piece of mail... | The label sheet is a passive medium and does not contain any means for calculating postage (Compl. ¶85). | ¶85 | '992 Patent, col. 6:15-19 |
'318 Patent Non-Coverage Allegations
| Claim Element (from Independent Claim 1) | Alleged Non-Covering Functionality of NetStamps Label Sheets | Complaint Citation | Patent Citation |
|---|---|---|---|
| A computer program product having a computer readable medium having computer program logic recorded thereon for printing a postage indicia... | A NetStamps Label Sheet is a physical sheet of labels, not a "computer program product" with recorded logic (Compl. ¶113). | ¶113 | '318 Patent, col. 27:1-6 |
| postage means for storing postage data indicating a total amount of postage in the general purpose storage means... | The label sheet is a consumable paper product and does not contain any means for storing postage data (Compl. ¶113). | ¶113 | '318 Patent, col. 27:9-13 |
| coupling means for coupling the general purpose computer system to a remote computer system...to increase the amount of postage stored... | The label sheet contains no means for coupling computer systems or facilitating data transfer (Compl. ¶113). | ¶113 | '318 Patent, col. 27:14-17 |
- Identified Points of Contention:
- Categorical Mismatch: A primary question for the court will be whether a passive, consumable product like a label sheet can be considered an embodiment of claims directed to a "system" or a "computer program product." The complaint alleges a fundamental mismatch between the claimed invention (an active, processing system) and the marked article (a passive sheet of labels) (Compl. ¶¶ 85, 113).
- Scope of "Article": Several asserted claims are method claims (e.g., Claim 5 of the ’992 Patent; Claim 29 of the ’318 Patent). The complaint raises the legal question of whether a method claim can ever cover a physical "article" for the purposes of the false marking statute, 35 U.S.C. § 292 (Compl. ¶¶ 87, 119).
V. Key Claim Terms for Construction
- The Term: "A general purpose processor-based system" (from the preamble of Claim 1 of the ’992 Patent).
- Context and Importance: The definition of "system" is central to the dispute. The complaint's theory rests on the premise that a NetStamps Label Sheet is not itself the claimed "system." Practitioners may focus on this term because Defendant could argue that the label sheet is an integral and necessary component of the overall patented system, thereby justifying the marking.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation (potentially favoring Defendant): The patent specification may describe the use of specific labels in conjunction with the processor and software, which could be argued to incorporate the labels as part of the overall "system" for printing postage (’992 Patent, col. 1:59–62).
- Evidence for a Narrower Interpretation (potentially favoring Plaintiff): The body of claim 1 recites active functional elements such as "means for reading," "means controlled by a...processor," and "means for automatically calculating" (’992 Patent, col. 20:5-19). This language suggests the "system" is the active computational and electronic hardware, not the passive paper medium upon which postage is printed.
VI. Other Allegations
- Intent to Deceive: The complaint alleges that Defendant's false marking was done with the "intent to deceive to public into believing that the products are and/or were patented and to thwart competition" (Compl. ¶107). The factual bases alleged for this intent include:
- Defendant's sophistication as a leading provider of internet postage and its experience in patent litigation (Compl. ¶¶ 60-62).
- Defendant's knowledge of the patent scope from its prior infringement litigation against Endicia, Inc., involving the same patents (Compl. ¶¶ 99, 125).
- Defendant's knowledge from being sued for false marking on some of the same patents in a prior lawsuit filed by Patent Management Foundation, LLC v. Stampscom Inc in December 2010 (Compl. ¶100).
- Defendant's continuation of marking the products even after being served with the original complaint in the present case, which explicitly identified the alleged false marking (Compl. ¶¶ 101-102).
- Defendant's inconsistent marking practices, where it allegedly does not mark "substantially identical" label sheets with the same patents, suggesting a deliberate and targeted marking strategy rather than a comprehensive system-based one (Compl. ¶104).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of categorical scope: can a passive, consumable product like a paper label sheet be considered an "article" covered by patent claims directed to a "general purpose processor-based system" or a "computer program product"? The resolution may depend on whether the court views the label sheet as a standalone product or as an indispensable component of a larger patented system.
- A key evidentiary question will be one of scienter: given the multiple prior lawsuits that allegedly put Stamps.com on notice of the scope of the patents-in-suit, and its alleged inconsistent marking of similar products, what level of proof will be required to demonstrate that the alleged false marking was done with the specific "intent to deceive the public" as required by 35 U.S.C. § 292?