Federal Circuit finds Covenant Not to Sue Divests Court of Jurisdiction Where Basis of Declaratory Judgment Was Invalidity

In Dow Jones & Company, Inc. and Dow Jones Reuters Business Interactive, LLC v. Ablaise LTD. and General Inventions Institute A, Inc., Docket No. 09-1524 (Fed. Cir. May 28, 2010), Ablaise LTD. (Ablaise) owns U.S. Patent No. 6,961,737 (the ‘737 patent) and No. 6,295,530 (the ‘530 patent).  Both patents claim methods for a Web server to send individualized content and formatting instructions in the form of Web pages that are generated on the fly in response to user preference information encoded in the user’s HTTP request for the specific Web page.

In 2006, Ablaise accused Dow Jones & Company,  Inc. (Dow) of infringing its ‘737 and ‘530 patents and simultaneously offering Dow a licensing agreement.  Dow refused, and sued saying both patents were invalid and not infringed.  Abliase counterclaimed for infringement on both patents.  The district court rejected Abliase’s motion to dismiss Dow Jones’ invalidity claim against the ‘530 patent and found the ‘737 patent as invalid due to obviousness in view of U.S. Patent No. 5,675,507 (“Bobo”) and the general knowledge in the field.

On appeal, the Federal Circuit first addressed whether a supposed covenant offered by Abliase, in which Abliase agreed not to sue Dow for infringement of the ‘530 patent, was sufficient to divest the district of subject matter jurisdiction over the declaratory judgment of invalidity.  The District Court noted that since Super Sack Manufacturing Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1060 *(Fed. Cir. 1995), a covenant not to sue for patent infringement divests the trial court of subject matter jurisdiction over claims that the patent is invalid, because the covenant eliminates any case or controversy between the parties. Intellectual Prop. Dev., Inc. v. TCI Cablevision of Calif., Inc., 248 F.3d 1333, 1342.

The District Court found the rule in Super Sack Manufacturing Corp. to be inapplicable for “sound prudential reasons,” and for “reasons of the efficient utilization of the litigation resources of both bench and bar.” Dow Jones & Co., Inc. v. Ablaise Ltd., 583 F. Supp. 2d 41, 44 (D.D.C. 2008).  The district court held that the two patents were close enough to be part of the same “case or controversy” under 28 U.S.C. 1367.  However, the Court of Appeals held that the district courts holding was contrary to jurisprudence, which remained valid after MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).  Thus, the covenant therefore extinguished any current or future case or controversy between the parties, and divested the district court of subject matter jurisdiction. Thus, the summary judgment for invalidity as to the ‘530 patent was reversed.

The second issue was whether the district court correctly granted Dow’s motion for summary judgment of invalidity on the ‘737 patent on the grounds that the asserted claims were obvious under 35 U.S.C 103.

In finding that ‘737 patent was obvious, the District Court rejected two of Abliase’s main arguments: that the combination of the HTML align image tag and the Bobo reference did not provide the same content in different formats; and that the there was a level of market skepticism with regards to the incorporation of the Bobo and HTML tags.

The District Court found that the ‘737 patent, which involved a modification incorporating location changing HTML tags into the Bobo prior art reference would have been straightforward and obvious to anyone of ordinary skill.  Any person of ordinary skill would have been aware that HTML tags affect content location on a Web page.  The Federal Circuit affirmed.  Specifically, the Federal Circuit noted that Ablaise admitted that “an artisan of ordinary skill would have been aware that HTML tags affect content location on a Web page” and that the incorporation of such into the Bobo reference  would have been straightforward.  Further, there was evidence of market need to include personalization features such that there was evidence of a reason to make the combination.

With regards to the second argument, the Federal Circuit also affirmed the District Court as none of the evidence that Ablaise provided addressed actual skepticism by outside parties concerning the invention of dynamically generated personalized web pages.  Thus, the secondary indicia of nonobviousness relied upon by Ablaise did not overcome the evidence of obviousness relied upon by the District Court in finding the ‘737 patent obvious.

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