Federal Circuit Appeal Decision in Versata Software v. SAP

A detailed discussion of the Versata v. SAP litigation and a timeline was provided in my earlier post.  I reported that there are three actions related to this dispute:  one in the PTAB, one in the Eastern District of Virginia, and one in the Federal Circuit.  On May 1, 2013, the Federal Circuit affirmed the lower court jury decision on infringement and damages awards and vacated part of the trial court’s permanent injunction and remanded for further proceedings based on the opinion.

SAP claimed the trial court’s failure to grant a JMOL of noninfringement of the ’350 Patent was two-fold error. It argued that its software cannot infringe because the software is not capable of performing customer and product hierarchies without added computer instructions. Further, it claimed that the software does not use “denormalized mnumbers” in its pricing tables.  However, the Federal Circuit found no reversible error by the trial court.

SAP argued that the code it shipped was not infringing.  It argued that the claim language “computer instructions capable of” and “computer instructions causing a computer to implement” are not directed to source code and that this language requires that the software, as shipped, contain computer instructions to perform the claimed functionality.  SAP asserted that the expert’s data setup added new computer instructions to its software, thereby changing and modifying a noninfringing product into an infringing product.  The Court disagreed:

SAP misinterprets the claim language. The only claim construction affecting these terms was the stipulated construction of “computer instructions to implement” which the parties agreed means “computer instructions causing a computer to implement.” It does not appear that SAP requested any claim construction of the term “computer instructions,” much less a construction that limits the phrase to exclude source code or require that the patented function be “existing as shipped” in the computer instructions. SAP cannot now collaterally attack the claim construction it has agreed to. Function Media L.L.C. v. Google Inc., 708 F.3d 1310, 1321–22 (Fed. Cir. 2013) (noting a party may not object to a claim construction it proposed or agreed to); Lazare Kaplan Int’l, Inc. v. Photoscribe Techs., Inc., 628 F.3d 1359, 1376 (Fed. Cir. 2010) (“As we have repeatedly explained, litigants waive their right to present new claim construction disputes if they are raised for the first time after trial.”) (internal quotation omitted).

Whether “computer instructions” can include source code thus becomes a pure factual issue. Versata’s expert testified that the source code is a computer instruction. He then presented evidence that the code, without modification, was designed to provide the claimed functionality. SAP cross-examined the expert, but the jury ultimately chose to credit the expert’s testimony and documentary evidence. SAP has not met the high standard needed to disregard the jury’s fact-finding function on this issue. See Bagby Elevator Co. v. Schindler Elevator Corp., 609 F.3d 768, 773 (5th Cir. 2010) (giving great deference to the jury’s findings and verdict); Agrizap, Inc. v. Woodstream Corp., 520 F.3d 1337, 1342–43 (Fed. Cir. 2008) (stating that this court owes the jury great deference in its role as the factfinder).

The Court also rejected the argument that its software does not use denormalized numbers in its pricing tables:

Again, sufficient evidence supports the jury’s verdict. Versata’s expert testified that SAP’s software contains numbers without “fixed units.” The numbers can assume a different meaning depending on which pricing operation is being performed by the software.

The Court did not find reversible error concerning the damages awards, but did remand the injunction to the trial court for correction of the injunction, stating:

SAP should be able to provide maintenance or additional seats for prior customers of its infringing products, so long as the maintenance or the additional seat does not involve, or allow access to, the enjoined capability.

Of course, the PTAB has yet to decide on the matter before it which is limited to 35 U.S.C.  101 issues.  It will be interesting to see what happens next.

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