IP Law Daily, PATENT—Fed. Cir.: claim construction error was harmless in non-infringement decision favoring Microsoft, Google, (Nov 6, 2014)

By Mark Engstrom, J.D.

A federal district court’s erroneous construction of the claim term “auction” was a harmless error in its analysis of a patent infringement claim that Walker Digital had asserted against Microsoft and Google, companies that allegedly infringed a patent that described the automation of proxy bidding in online auctions, the U.S. Court of Appeals for the Federal Circuit has ruled (Walker Digital, LLC v. Microsoft Corp., November 6, 2014, Lourie, A.). The district court’s judgment of non-infringement was affirmed.

Background. Walker Digital sued Microsoft and Google for the infringement of U.S. Patent No. 7,801,802, which described a system and method of automating proxy bids in online auctions. The district court construed the claim term “auction” to mean: “a public or private sale in which goods or services of a seller may be sold to a bidder through a bidding process. An auction consists of one sale” (emphasis added).” The district court reasoned that, if an “auction” involved multiple sales, the claimed method would not function as intended because the proxy—placing a bid “according to an amount of time left in the auction”—could bid against itself (or on an item that was already sold).

In addition, the district court found that the specification’s limited list of things that were needed to process a bid—namely, an indication of the auction, the bidder, and the bid price—supported a single-sale construction. If “auction” contemplated multiple sales, the court explained, more information would be needed to determine which item the bidder desired.

After the district court issued its claim construction order, the parties stipulated to a judgment of non-infringement. Walker Digital appealed from that judgment and challenged the court’s construction of “auction.”

Appeal. Walker Digital argued that the district court had erred by limiting the term “auction” to only one sale. According to Walker Digital, the broad definition that was provided in the specification was controlling, and the claims, the remainder of the specification, and the file history did not limit “auction” to one sale. Instead, the specification “repeatedly refer[red] to auctions in which multiple goods or services [we]re auctioned,” and the claim term “auction” assumed its understood meaning from the art as “not limited to one sale.” Walker Digital further argued that the district court had incorrectly limited the plain meaning of “auction” based on an unjustified belief that the claimed method would not function properly if the term included a multi-sale event.

The Federal Circuit agreed with Walker Digital. According to the Federal Circuit, the district court had incorrectly limited “auction” to a single sale. The term should have been given its ordinary and customary meaning, which included a multi-sale event. Indeed, the parties and the district court had agreed that the plain meaning of “auction” involved any number of sales.

In addition, neither the claim language nor the specification and file history limited “auction” to a single sale. Significantly, Walker Digital did not clearly and unmistakably disavow, during patent prosecution, an “auction” that involved multiple sales, and the patent specification did not limit the term to a single sale.

Contrary to the district court’s findings, the patented method still functioned as claimed, even if an “auction” involved multiple sales, according to the Federal Circuit. As the district court had properly found, the parties, having agreed to construe “highest bid in the auction,” therefore agreed that, “in the context of the highest bid, the bid must be for the particular item being sold in that auction. Claims must be interpreted consistently so the term ‘time left in the auction’ must likewise be interpreted as the time remaining to place bids for the item.” The time limitation thus applied on an item-by-item basis.

The Federal Circuit noted that “Figure 8” of the patent application supported that finding because the “item identifier” indicated a start time and an end time for the sale of a particular item. Consequently, for the method to function properly, the bid needed to be placed according to the amount of time that remained for the sale of a particular item, not according to the time that remained for the larger, multi-sale auction. The district court’s concerns about a proxy bidding against itself (or for an item already sold) were thus not compelling.

For those reasons, the Federal Circuit concluded that the district court had incorrectly limited the claim term “auction” to only one sale. Because the intrinsic record did not limit “auction” in that way, the Federal Circuit modified the district court’s claim construction and construed “auction” to mean “a public or private sale in which goods or services of a seller may be sold to a bidder through a bidding process.”

Nevertheless, the Federal Circuit determined that the district court’s erroneous claim construction was harmless error because the defendants’ products did not infringe, even under the Federal Circuit’s modified claim construction. As the district court had noted, the claimed method functioned on an item-by-item basis, with each proxy placing a bid according to an amount of time that remained to place bids for the item. The defendants’ auctions, however, were “instantaneous,” with the larger auction system operating continuously; they did not function according to any “time remaining” limitation regarding individual items.

Because the accused products did not infringe the patent in suit under the modified claim construction, the district court’s judgment of non-infringement was affirmed.

The case is No. 2013-1584.

Attorneys: Marc A. Fenster (Russ, August & Kabat) for Walker Digital, LLC. Michael J. Malecek (Kaye Scholer LLP) for Microsoft Corporation and Google Inc.

Companies: Walker Digital, LLC; Microsoft Corporation; Google, Inc.

Cases: Patent FedCir