EDUARDO C. ROBRENO, District Judge.
Plaintiff Frontline Technologies, Inc. ("Plaintiff") filed this patent infringement and breach of contract action against Defendant CRS, Inc. ("Defendant") over a technology that facilitates replacement of absent workers with substitute workers. Plaintiff avers that Defendant's SubFinder
Currently pending before the Court is Defendant's invalidity, and various contract claims. For the reasons set forth below, the Court will deny Defendant's Motion.
Plaintiff alleges patent infringement of its '151 patent that claims a labor database wherein customers access a website to post worker absences for which substitutes are needed. Id. ¶¶ 9, 12. Plaintiff's product practicing the claimed invention is called "Aesop." Id. ¶ 9. Substitutes access Aesop to search for posted worker absences and to commit to filling vacancies. Id. Users access Aesop via the Internet using a web interface or via a telephone interactive voice response ("IVR") system. Id.
On January 6, 2004, the U.S. Patent and Trademark Office ("PTO") issued the '151 patent for the substitute worker technology. Id. ¶ 12. The '151 patent claims priority of filing date to U.S. Patent No. 6,334,133 ("the '133 patent"). Plaintiff is the assignee and owner of the '151 patent. Second Am. Compl. ¶ 13. In February 2004, Frontline Data, Plaintiff's predecessor, filed a patent infringement suit against Defendant. Frontline Data and Defendant reached a settlement agreement in November 2004 whereby Frontline Data agreed to license its technology to Defendant in return for royalties. Id. ¶¶ 15-16.
Plaintiff alleges Defendant failed to pay royalties pursuant to the limited licensing agreement ("License Agreement"). Id. ¶¶ 18-23. In particular, and relevant here, the License Agreement required a fee on gross revenues from the sale of "Licensed Products and Services." License Agreement ¶ 3.1, Am. Compl. Ex. B, ECF No. 29-2. The agreement defines "Licensed Products and Services" as those products that would "infringe an unexpired, valid, and enforceable claim" of the '133 patent or '151 patent. Id. ¶ 1.1. After an audit in 2007, Plaintiff determined that Defendant failed to pay the proper royalties under the License Agreement. Specifically, Plaintiff alleged that Defendant failed to account for sales where a substitute teacher used a telephone to fill a wanted position. Defendant contended that the License Agreement did not cover such uses because they did not infringe either the '133 patent or '151 patent. Plaintiff disagreed, terminated the License Agreement, and filed the instant lawsuit on June 18, 2007. See Compl., ECF No. 1.
On August 8, 2007, the PTO granted an ex parte reexamination of claims 3 through 13 of the '151 patent. Second Am. Compl. ¶ 28. Accordingly, the Court placed the action in suspense on November 19, 2007. Order, Nov. 19, 2007, ECF No. 15. During the PTO reexamination, claims 14 through 55 were added to the '151 patent and claims 3, 6, 9, and 14 through 55 were listed in the reexamination certificate as patentable.
On September 30, 2008, during the '151 patent reexamination period, the PTO issued U.S. Patent No. 7,430,519 ("the '519 patent"), titled "Substitute Fulfillment System," a continuation-in-part of the '151 patent, to Roland R. Thompson, Michael S. Blackstone, and Ralph Julius. Am. Compl.
On January 14, 2010, Plaintiff filed an Amended Complaint, which alleges three counts against Defendant.
On February 3, 2010, Defendant filed an Amended Answer and Counterclaims ("Answer") that raises various affirmative defenses and counterclaims, states that Plaintiff has breached the License Agreement, and denies all claims for infringement of the '151 and '519 patents.
On February 23, 2010, Plaintiff filed an amended reply denying Defendant's counterclaims and asserting various affirmative defenses.
On February 8, 2011, the Court issued an order and accompanying memorandum construing certain disputed claim terms. Order, Feb. 8, 2011, ECF No. 56; Mem. Op., Feb. 8, 2011, ECF No. 55. The parties continued with discovery.
On August 12, 2011, Plaintiff granted Defendant a Covenant Not to Sue on the '519 patent. Mot. to Dismiss Ex. A, Aug. 15, 2011, ECF No. 66-1. On August 15, 2011, Plaintiff filed a Motion to Dismiss Counterclaims III and IV and a Motion to Amend the Complaint. Id. On September 1, 2011, Defendant opposed the Motion to Dismiss. Opp'n, Sept. 1, 2011, ECF No. 67. On December 23, 2011, 833 F.Supp.2d 480 (E.D.Pa.2011), the Court issued an order and accompany memorandum granting Plaintiff's Motion to Dismiss and granting Plaintiff leave to amend its Amended Complaint.
On November 21, 2011, Defendant filed a Motion for Summary Judgment on the issues of non-infringement, priority date, invalidity, and most favored nations defense. ECF No. 77. Plaintiff responded in opposition. ECF No. 89. Defendant filed a reply. ECF No. 91. The motion is now fully briefed and ripe for disposition.
Summary judgment is appropriate if there are no genuine disputes of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(a). "A motion for summary judgment will not be defeated by `the mere existence' of some disputed facts, but will be denied when there is a genuine issue of material fact." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir.2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A fact is "material" if proof of its existence or non-existence might affect the outcome of the litigation, and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
In undertaking this analysis, the court views the facts in the light most favorable to the non-moving party. "After making all reasonable inferences in the nonmoving party's favor, there is a genuine issue of material fact if a reasonable jury could find for the nonmoving party." Pignataro v. Port Auth. of N.Y. & N.J., 593 F.3d 265, 268 (3d Cir.2010) (citing Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997)). While the moving party bears the initial burden of showing the absence of a genuine dispute of material fact, meeting this obligation shifts the burden to the non-moving party who must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250, 106 S.Ct. 2505.
Defendant moves for summary judgment on non-infringement, filing date priority, invalidity for failure to meet the written description requirement, and on application of the most favored nations clause in the License Agreement. The Court addresses each in turn and will deny Defendant's Motion on each issue.
Defendant first moves for summary judgment on its counterclaim of non-infringement of the asserted claims of the '151 patent: claims 3, 6, 7, 16, 24, and 33.
Patent infringement occurs when "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent." 35 U.S.C. § 271(a) (2006). One can also be liable for inducing another to infringe. Id. § 271(b). A court's analysis of patent infringement is a well-established two-step process: (1) the meanings of disputed claims are construed; and (2) the allegedly infringing device is compared to the claims as construed. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed.Cir. 1995), aff'd, 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996); Wavetronix L.L.C. v. EIS Elec. Integrated Sys., 573 F.3d 1343, 1354 (Fed.Cir.2009). In this case, the Court already construed the meaning of the disputed claims. Thus, the Court now moves to step two.
"Patent infringement occurs when a device... that is literally covered by the claims or is equivalent to the claimed subject matter, is made, used, or sold, without the authorization of the patent holder, during the term of the patent." Multiform Desiccants, Inc. v. Medzam, Ltd., 133 F.3d 1473, 1476 (Fed.Cir.1998). "Infringement requires that every limitation of a claim be met in the accused structure either exactly or by an equivalent."
Defendant contends that its SubFinder products do not infringe independent claims 3 and 6 of the '151 patent.
'151 Patent Reexamination Certificate col.1 ll.28-52.
Id. col.1 l.53-col.2 l.17.
In its Motion, Defendant only argues that its SubFinder products do not meet the limitations contained in the final clause of claims 3 and 6. Specifically, Defendant argues that all of its accused SubFinder products do not automatically secure a position in response to receiving an acceptance, as required under the Court's claim construction of the asserted claims of the '151 patent. Defendant also argues that SubFinder versions 5.9-5.11 do not secure a position "in response to" receiving an acceptance.
Briefly, the record reflects that the all SubFinder products alleged to infringe the '151 patent operate as follows. A substitute must first log in to the SubFinder product to view any positions available. Pl.'s Memo. in Opp'n to Def.'s Mot. for Summ. J. 10, ECF No. 89 [hereinafter Pl.'s Br.]. In all SubFinder products, once absences are known, a substitute may request to view all jobs that are suitable for that substitute that is, those jobs for which the substitute is qualified. Id. Once SubFinder returns a list of suitable jobs, the substitute then may review this listing and select to view additional job details. Id. Once a substitute views the additional details, in versions 5.7 and 5.8, the substitute has the following three options: "Reject Job," "Accept Job," and "Don't Accept Job." Id. at 11. In versions 5.9-5.11, the substitute has the following three options: "Yes," "No," and "Return to Available Jobs." Id. The substitute then selects an option and either proceeds to accept that job or continues searching to find a job suitable to the substitute.
Defendant argues that all of its SubFinder systems do not automatically secure the substitute the position as required by claims 3 and 6. Defendant explains that in the Court's claim construction, it construed the term "securing" as used in claims 3 and 6 of the '151 patent as "automatically securing." See Order 2, Feb. 8, 2011, ECF No. 56.
Id. Therefore, Defendant argues that its SubFinder versions 5.7 and 5.8 do not automatically secure the substitute the position. Similarly, Defendant argues that its SubFinder versions 5.9-5.11 perform all of the same validations as versions 5.7 and 5.8, but also perform an additional nine validations. Failure of any of these validations prevents the substitute from securing the position and therefore does not automatically secure the substitute position.
Plaintiff, on the other hand, argues that all SubFinder versions automatically secure a substitute position notwithstanding their further validations. In all SubFinder versions, Plaintiff agrees that once a substitute clicks either "Accept Job" or "Yes," SubFinder validates that substitute is eligible to accept that particular position. Pl.'s Br. at 10-11. In addition to this validation, which may take several steps, however, all SubFinder versions then update the SubFinder database of available jobs to indicate that the particular job the substitute accepted is now filled. See Reiss Decl. 33-34, Pl.'s Br. Ex. 1. Then, SubFinder sends a confirmation message to the substitute. Id. Once this update occurs, the database lists the job as "filled," the job will not be listed as available, and any other substitutes that may have been viewing the job at the same time will be unable to accept that same job. Id.
With these facts, Plaintiff argues that all SubFinder versions automatically secure the posted position within the meaning of claims 3 and 6. Specifically, Plaintiff argues that the "`automatically securing' is satisfied in SubFinder when, in response to receiving the input from the `Accept Job' (versions 5.7 and 5.8) or `Yes' button (versions 5.9-5.11), the Job table in the SubFinder database is updated to indicate that the particular job is filled." Pl.'s Br. 15. According to Plaintiff's expert, Steven Reiss, the updating of the Job database permanently removes the job from consideration by other substitutes. Reiss Decl. ¶ 48, Pl.'s Br. Ex. 1.B. This removal is done without any consideration of other substitutes for the job. Therefore, Plaintiff argues that while SubFinder does indeed perform several validations before a substitute receives confirmation that he or she was awarded the position, none of these validations concern whether some other substitute should receive the position. Therefore, the validations do not bring SubFinder outside of the claim language.
The Court finds that the grant of summary judgment revolves around the claim term "automatically securing" and whether this term encompasses SubFinder's post-acceptance validations. Defendant concedes that if "automatically securing" does encompass post-acceptance validations, that there are conflicting facts as to whether Defendant's SubFinder products meet the claim limitations in claims 3 and 6. See Def.'s Reply Memo. in Supp. of Mot. for Summ. J. 4, ECF No. 92 [hereinafter Def.'s Reply Br.]. Accordingly, the disposition of Defendant's Motion revolves around the proper construction of the claim term "automatically securing." In this regard, although the Court reviewed the parties' initial claim construction briefs, opposition briefs, reply briefs, held oral argument, and ruled upon the parties' disputed claim constructions, the Court finds that some
The parties' previously submitted the following competing constructions of the terms "acceptance" and "securing":
Terms & Patent(s) Plaintiff Frontline's Proposed Defendant CRS's Proposed
Construction Construction
(1) acceptance No construction necessary. "an expression by the substitute
worker agreeing to fill a
position and resulting in an
automatic securing of the position
when the electronic acceptance
is received without
further processing for fulfillment
of the same position or
further selection review"
'151 Patent (Claims 3, 6, 7,
16, 24, and 33)
(5) securing, in response to No construction necessary. "automatically electronically
receiving the acceptance halting further processing for
from the worker ... the securing the fulfillment of the same
comprising halting, position by other substitute
at the one or more computers, workers upon electronic receipt
further processing to of an acceptance from
fulfill the posted position the substitute worker and
with any other substitute filling the posted position
worker with said substitute worker
without further selection review"
'151 Patent (Claims 3, 6, 7,
16, 24, and 33)
During claim construction, the Court declined to construe the term "acceptance." The Court addressed Defendant's concerns when construing "securing, in response to receiving the acceptance from the worker... the securing comprising halting, at the one or more computers, further processing to fulfill the posted position with any other substitute worker" by adding the word "automatically" before "securing." Frontline Placement Techs., Inc. v. CRS, Inc., 824 F.Supp.2d 602, 612 (E.D.Pa.2011).
Defendant's present construction of the term "automatically securing" mirrors its proposed construction during claim construction, a proposed construction that the
Defendant's construction of "automatically securing" centers on Plaintiff's statements during the reexamination of the '151 patent. During that reexamination, the PTO initially rejected claims 3 and 6 as unpatentable in light of Mitsuoka. In pertinent part, Mitsuoka disclosed an Internet-based contractor placement method. See '914 Patent col.2 ll.18-25. Relevant here, the method in Mitsuoka required the contractor to apply for an offered position, out of a listing of available positions, by clicking "Apply." Id. col.9 ll.7-8. Thereafter, a computer program would select the appropriate contractor out of the pool of contractors that applied. Id. col.9 ll.30-31. Once that occurred, the contractor would be awarded the position. Id. col.9 ll.35-39.
In attempting to overcome Mitsuoka, Plaintiff explained that in the '151 patent the acceptance of a position was different from clicking "Apply" in Mitsuoka because it is the "receipt of an acceptance in the claimed system [that] results in an automatic securing of the position." Response to Office Action 34, Feb. 18, 2009, Def.'s Br. on Meaning of Disputed Claim Terms Ex. 10, ECF No. 41. In contrast, before any securing of the position in Mitsuoka, a contractor selector program ran and selected a contractor. Put another way, in Mitsuoka contractors could apply for positions and then the computer system selected the contractor best qualified for the position. But, the '151 patent does not require any selection from a pool of candidates. Once a substitute accepts an offered position, and that position is secured, it is no longer available to any other substitute.
The '151 patent's prosecution history makes clear, as the Court recognized in its claim construction, that the '151 patent requires automatic securing of a position to the extent that once a substitute accepts a position from a listing of opportunities, there is no further selection from a pool of candidates by the system. The Court did not limit the claims to include Defendant's proposed construction that would prevent no additional processing of a particular substitute's acceptance before the securing occurred. Indeed, the prosecution history supports the Court's conclusion. Plaintiff explained, "[W]hen acceptance is received from the substitute worker on an Internet communication link, the posted position is substantially immediately secured to the substitute worker." Id. at 35 (emphasis added); see also id. ("[T]he system of the claim is configured so that the decision of filling a position is made by the substitute
Given this construction of "automatically securing," there is a genuine dispute of material fact whether the SubFinder products automatically secure a substitute position. The parties agree that all SubFinder products perform some processing after a substitute clicks "Accept" or "Yes" to a posted available position. Therefore, under the Court's construction, this processing does not necessarily render all SubFinder products not infringed. Indeed, the parties provide conflicting expert declarations on whether such processing results in an automatic securing. Compare Reiss Decl. 30-38, Pl.'s Br. Ex. 1.A, with Parmet Decl. ¶¶ 84-88, Def.'s Br. Ex. 6.B.
Defendant makes a further non-infringement argument that SubFinder versions 5.9-5.11 do not "secur[e] in response to receiving the acceptance from the substitute worker." See, e.g., '151 Patent Reexamination Certificate col.1 ll.45-46 (emphasis added). Defendant contends, and Plaintiff concedes, that SubFinder versions 5.9-5.11 have the ability to "lock" a "job for a particular substitute and prevent[] all other substitutes from viewing that particular job details webpage." Def.'s Br. 42. This lock also prevents any other substitute from accepting a particular job. The lock is set for a specific length of time. Once the timer runs, if the substitute fails to either click "Yes," "No," or "Return to Jobs," the job is unlocked and other substitutes may accept the job. Defendant contends claims 3 and 6 require a halting of further processing to be in response to an acceptance. Therefore, because the halting, by way of the lock in SubFinder versions 5.9-5.11, occurs as soon as a substitute views the details for a position the halting is not "in response" to an acceptance, but occurs before acceptance, once a substitute views the details of a particular position. Thus, SubFinder versions 5.9-5.11 do not infringe the '151 patent.
Plaintiff argues that Defendant's non-infringement theory is not relevant here
Defendant correctly points out that the final clause of claims 3 and 6, as relevant to its theory of non-infringement, requires two events to occur "in response to receiving the acceptance from the substitute worker": "(1) securing the posted position for the substitute worker who selected the posted position; and (2) halting further processing to fulfill the posted position with any other substitute." Def.'s Reply Br. 5. Defendant fails to recognize that SubFinder's locking feature does not necessarily prevent both of these events from occurring. The parties do not dispute that the locking feature halts, at least temporarily, further processing to fulfill the posted position with any other substitute. This initial halting is not in response to receiving an acceptance, but only occurs when a substitute views the details of a particular position. If the substitute then accepts the position, and SubFinder validates this acceptance, the parties do not dispute that at that time the Job table in the SubFinder database is updated to indicate the position is filled and that position is then permanently removed from the job pool.
Therefore, Defendant's motion turns on the whether the initial halting precludes finding that SubFinder versions 5.9-5.11 infringe claims 3 and 6 of the '151 patent because that halting occurs before a substitute actually accepts the position. Furthermore, when viewed through the lens of a single substitute, the question is really whether there are two haltings of further processing or whether there is one halting. That is, either the first halting is before the securing and is temporary, and the second halting is in response to the securing and is permanent, or there is one halting. With the former, the first halting would not preclude infringement because the second halting still occurs. See Gillette Co. v. Energizer Holdings, Inc., 405 F.3d 1367, 1371-72 (Fed.Cir.2005) (explaining that when claim language uses phrase "comprising," "[t]he addition of elements not recited in the claim cannot defeat infringement"). With the latter, the temporary halting becomes permanent once acceptance is received, but there was only one halting and this was not in response to receiving an acceptance because the halting continued even through the time when the database is updated. If this is the case, SubFinder versions 5.9-5.11 could not infringe the '151 patent.
Under the facts of this case, the Court will deny Defendant's Motion for Summary Judgment. Plaintiff and Defendant's experts dispute whether the lock amounts to a halting within the meaning of the '151 patent. Compare, Reiss Decl. ¶¶ 59-63, Pl.'s Br. Ex. 1.B, with Parmet Decl. ¶¶ 20.3, 49.2, 80.2, 89, 92, Def.'s Br. Ex. 6.B. The parties never submitted "halting" for construction. Therefore, the term receives its plain and ordinary meaning. Cf. Thorner v. Sony Computer Entm't Am.
Defendant also moves for summary judgment on the filing date priority of the '151 patent. Defendant contends that the '151 patent is not entitled to the filing date of the '133 patent because the '133 patent specification does not adequately disclose claims 3 and 6 of the '151 patent.
A patent application may be deemed filed as of the date of an earlier patent application so long as the invention claimed in the later invention is fully disclosed, pursuant to 35 U.S.C. § 112, in the earlier application. See 35 U.S.C. § 120 (2006) ("An application for patent for an invention disclosed in the manner provided by the first paragraph of section 112 of this title in an application previously filed in the United States ... shall have the same effect, as to such invention, as though filed on the date of the prior application...."). In turn, § 112 provides, in pertinent part:
Id. § 112. This "written description" requirement is satisfied if the specification of the patent "`allow[s] persons of ordinary skill in the art to recognize that [the inventor] invented what is claimed.'" Crown Packaging Tech., Inc. v. Ball Metal Beverage Container Corp., 635 F.3d 1373, 1380 (Fed.Cir.2011) (alterations in original) (quoting Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed.Cir.2010) (en banc)). In this regard, the written description "must `reasonably convey[] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.'" Id. (alternation in original) (quoting Ariad, 598 F.3d at 1351 (internal quotation marks omitted)). "Possession means `possession as shown in the disclosure' and `requires an objective inquiry into the four corners of the specification from the perspective of a person of ordinary skill in the art.'" Id. (quoting Ariad, 598 F.3d at 1351).
When attempting to show that a patent is not entitled to an earlier filing date, an alleged infringer will attempt to show that the earlier filed patent's specification does not provide an adequate written description to support the later patent's claims. The initial burden is upon the alleged infringer to put forth evidence
Defendant argues that the following language from claims 3 and 6 in the '151 patent fails to find support in the '133 patent specification:
'151 Patent Reexamination Certificate col.1 ll.34-40, col.2 ll.1-6. Specifically, Defendant argues, relying upon Mr. Parmet's expert declaration, the '133 patent omits any mention of the "organization worksite location" and fails to disclose that "any information indicating directly or indirectly an organization worksite location for the respective positions" is provided "on a website"; or provided as part of the "generating and posting" of a list of available positions. See id. col.1 ll.34-40. Defendant also argues that even assuming the '133 patent specification does disclose the posting on a website of worksite location information, the specification does not disclose that this information both directly and indirectly provides the organization worksite location for the respective position as required by the claims.
Plaintiff responds, through the expert declaration of Edward Yourdon, that the '133 patent specification does adequately disclose all of the elements in claims 3 and 6 of the '151 patent. Specifically, Mr. Yourdon disagrees with Mr. Parmet and explains that the language within the specification discloses that the listing of opportunities is provided to a substitute on a website, and this listing contains the location of the school. Mr. Yourdon admits that the phrase "organization worksite location" is absent from the '133 patent specification, but that the worksite location, as a school name, is disclosed. Moreover, Plaintiff argues that the '133 patent discloses three reports that may be downloaded from a website and provided to replacement workers. These reports provide information such as school name. Plaintiff also argues that the '133 patent does disclose that this information both directly and indirectly indicates the worksite location. In this regard, Plaintiff argues
In this case, there is a genuine dispute of material fact as to whether the '133 patent specification supports claims 3 and 6 of the '151 patent. Written description can be satisfied with "words, structures, figures, diagrams, formulas, etc." Lockwood v. Am. Airlines, Inc., 107 F.3d 1565, 1572 (Fed.Cir.1997). The claims of a patent do not require "in haec verba support" in the specification. Lampi Corp. v. Am. Power Prods. Inc., 228 F.3d 1365, 1378 (Fed.Cir.2000). The key inquiry is whether the disclosure "reasonably conveys" to one of ordinary skill in the art "that the inventor had possession at that time of the later claimed subject matter." Id. This disclosure may be either express or inherent. Inherent disclosure requires that the missing descriptive matter is "`necessarily present in the thing described in the reference, and that it would be so recognized by persons of ordinary skill.'" In re Robertson, 169 F.3d 743, 745 (Fed.Cir.1999) (quoting Cont'l Can Co. U.S.A., Inc. v. Monsanto Co., 948 F.2d 1264, 1268 (Fed.Cir.1991)). That said, possession means that the inventor actually invented it, not that it would have been obvious to do so based upon the specification. See Lockwood, 107 F.3d at 1572.
In pertinent part, the '133 patent specification provides as follows. The '133 patent generally describes an automated substitute fulfillment system that will allow an organization to fill substitute positions and have those substitutes work within the organization on a temporary basis without any personal interaction between the organization and the substitute to secure such a position. See '133 Patent col.4 l.36-col.5 l.23. The '133 patent specification provides that the claimed invention includes a "substitute fulfillment database" and that this database includes "classroom location information." Id. col.8 ll.16-40. The database also includes a variety of other information, including the "school name." See id. fig. 6. The goal of this database is for it to contain "the information needed to perform substitute fulfillment for a particular organization." Id. col.8 ll.55-57. The specification also provides, "using the information in the [substitute fulfillment] database 34, the server may also generate a listing of opportunities for replacement workers 22 and make the listing available through a web site interface." Id. col.10 ll.32-35.
The parties' experts disagree on whether the '133 specification adequately discloses claims 3 and 6 of the '151 patent. Defendant's expert, Mr. Parmet, explained that the above language does not disclose an adequate written description because it does not explain what information is actually disclosed within that listing of opportunities. See Parmet Decl. ¶ 105, Def.'s Br. Ex. 6.B. Plaintiff's expert disagrees. Mr. Yourdon declares that to one of ordinary skill in the art, the specification shows that the listing of opportunities includes information within the substitute fulfillment database. This database includes school information. Thus, while it does not use the phrase "organization worksite location," the school name and classroom location within the database demonstrate that the patentee possessed the matter claimed in the '151 patent. Yourdon Decl. ¶ 119, Pl.'s Br. Ex. 2.B. Moreover, Mr. Yourdon also declares that this school information directly and indirectly provides the worksite location. Id. ¶ 123.
With respect to Defendant's argument that the '133 patent specification does not disclose that the worksite location is directly and indirectly provided to a substitute worker, the Court finds that a reasonable jury could conclude the '133 patent specification is to the contrary. Defendant seems to concede that a school name would constitute indirect location information, and that Plaintiff explained as much within the prosecution of the '151 patent. See Def.'s Reply Br. 12-13. As to direct worksite location, the specification provides that the substitute database includes classroom location, school data, and also that the database can include any information "needed to perform substitute fulfillment for a particular organization."'133 Patent col.8 ll.56-57. A reasonable jury could view this information as showing direct worksite location — that is, "a specific location for the substitute to report." Response to Office Action 30, Feb. 18, 2009, Def.'s Br. on Meaning of Disputed Claim Terms Ex. 10.
Finally, Defendant makes much of the fact that the specification discloses a "web site interface," and this is not the equivalent of a website as claimed in the '151 patent. Mr. Yourdon, who has a degree in computer science, explained that "mak[ing]
Defendant also moves for summary judgment on invalidity of the asserted claims of the '151 patent. In particular, Defendant argues that the asserted claims of the '151 patent are invalid for failing to satisfy the written description requirement of § 112. Defendant argues that the written description in the '151 patent adds nothing to the written description within the '133 patent. Indeed, Defendant provides no additional argument other than its argument that the '151 patent should not be given the filing date of the '133 patent. Thus, for the reasons set forth above, the Court will also deny Defendant's Motion for Summary Judgment on invalidity.
Lastly, Defendant moves for summary judgment on its fifth defense of unclean hands, six defense of wrongful termination, counterclaim of a declaration of no breach of contract (Counterclaim V), counterclaim of wrongful contract termination by Plaintiff (Counterclaim VI), and a counterclaim of breach of contract under the most favored nations provision (Counterclaim VII). For all of these defenses and counterclaims, Defendant's sole argument is that Plaintiff failed to honor the most favored nations provision within the License Agreement.
The most favored nations ("MFN") provision in the License Agreement provides:
License Agreement ¶ 3.3, Am. Compl. Ex. B.
Defendant moves for summary judgment related to this provision by arguing that Plaintiff breached the MFN provision by not limiting Defendant's royalty obligation to $50,000. Therefore, Plaintiff's decision to terminate the License Agreement because Defendant did not pay sufficient royalties was wrongful. Specifically, Defendant argues that Plaintiff entered into a licensing agreement related to both the '133 and '151 patents with eSchool, a competitor of both Plaintiff and Defendant, on April 12, 2005. That licensing agreement was not for a running royalty rate, but a lump-sum payment of $50,000. Thus, Defendant contends that under the MFN provision, it was entitled to the benefit of this lump sum royalty rate so long as the two license agreements were materially similar. As to this point, Defendant, through its expert Walter Bratic, argues that the terms of the eSchool license agreement are materially similar to the License Agreement between Plaintiff and Defendant. Therefore, Defendant contends that by March 31, 2007, the end of the last quarter before Plaintiff terminated the License Agreement, it had made cumulative payments to Plaintiff in the amount $109,012, much greater than the $50,000 it should have owed Plaintiff had the MFN been honored. Accordingly, it could not have breached the License Agreement for failure to pay sufficient royalties.
Plaintiff contends that before it entered into the eSchool license agreement, Defendant materially breached the License Agreement by not paying Plaintiff sufficient royalties. Therefore, it excused Plaintiff of its duty under the MFN provision. Plaintiff also argues that there is a genuine dispute of material fact as to whether the eSchool license agreement and the License Agreement in this case are materially similar. Plaintiff also argues that Defendant should now be estopped from alleging a violation of the MFN provision because Defendant knew that the eSchool license agreement contained no rolling royalty. Therefore, as Defendant continued to pay the agreed-upon royalty in the License Agreement without invoking the MFN provision, it cannot now assert the MFN provision as a defense in this case.
The Court will deny Defendant's Motion for Summary Judgment on all counterclaims related to the MFN provision. There is a genuine dispute of material fact as to whether Defendant materially breached the License Agreement before Plaintiff entered into the eSchool license agreement. Under Pennsylvania law, which governs the License Agreement, see License Agreement ¶ 9.1, Am. Compl. Ex. B, a material breach requires proof of the following elements:
Int'l Diamond Imps., Ltd. v. Singularity Clark, L.P., 40 A.3d 1261, 1271 (Pa.Super. Ct.2012). If there was a material breach, the law in Pennsylvania excuses the non-breaching party from performing any remaining duties under a contract. Id. This would mean that if Defendant did indeed materially breach the License Agreement before Plaintiff entered into the eSchool license agreement, Plaintiff would be excused from its duty under the MFN provision, even if Plaintiff was unaware of this breach at that time. See Coll. Point Boat Corp. v. United States, 267 U.S. 12, 15-16, 45 S.Ct. 199, 69 L.Ed. 490 (1925); 14 Richard A. Lord, Williston on Contracts § 43:12 (4th ed.1999); Restatement (Second) of Contracts § 237 cmt. c (1981).
In this regard, Plaintiff argues that before it entered into the eSchool license agreement, Defendant had failed to comply with the 8-percent royalty. This non-compliance, specifically that Defendant only paid Plaintiff $11,989 in the first quarter of 2005, but Defendant owed Plaintiff $52,126, amounted to a material breach of the License Agreement before Plaintiff entered into the eSchool license agreement.
With respect to those royalty payments, Defendant concedes, for purposes of summary judgment, that it did not fulfill its obligation under the License Agreement. Whether such a breach is material is a question for the jury. See Int'l Diamond, 40 A.3d at 1272 (explaining under Pennsylvania law whether breach is material is fact question generally left to jury). Defendant offers no argument that such a failure to pay royalties would not be a material breach of contract. Indeed, failure to pay royalties due may be a material breach. See, e.g., IGEN Int'l Inc. v. Roche Diagnostics GmbH, 335 F.3d 303, 314-15 (4th Cir.2003). Accordingly, the Court will deny summary judgment.
For the reasons set forth above, the Court will deny Defendant's Motion for Summary Judgment. An appropriate order will follow.
Plaintiff is on less sure footing with this argument. The '133 patent does provide examples for reports that include school location. See '151 Patent fig. 12. Yet, the '133 patent only provides that those reports are made available to "any parties designated by the client 56 as `need-to-know' parties 14, 50."'133 Patent col.9 ll.33-34. The potential substitute is referred to in the patent using reference number 22. Therefore, the Figure 12 reports do not appear to support Mr. Yourdon's conclusion that those reports, which arguably include worksite location, are produced to potential substitutes as required by claims. Nonetheless, the Court need not decide whether Figure 12 supports the written description requirement because it finds that other portions of the specification provide sufficient basis that a reasonable jury could conclude that the '133 patent adequately discloses claims 3 and 6 of the '151 patent.
