Case No. 2011-1027 (Lourie, Bryson, Linn) (nonprecedential)
Seems like this is the summer of “the specification can limit claims in several ways” at the Federal Circuit. The nonprecedential case Privacash v. American Express continues this theme by illustrating how disclosure in the specification of an advantage or effect of “the invention” can limit claims to embodiments that achieve the stated advantage or effect. As discussed below, I’m not 100% confident the panel got this one correct, even accepting the limitations from the specification.
Privacash appealed a summary judgment of noninfringement of Patent 7,328,181 from the Eastern District of New York. The ‘181 patent claims a method of distributing and issuing a purchase card that “is a bearer instrument having an associated account number issued by a major branded credit card organization, an expiration date and a non-personalized cardholder name selected by the purchase card provider printed thereon.” The purchase card lacks any information identifying the purchaser, which, as described in the ‘181 patent, permits unrestricted and anonymous use of the card by anyone bearing it. The District Court construed the recited “bearer instrument” as excluding cards that could be cancelled or reported stolen by their owners, because this would prevent unrestricted use of the card by a non-owner bearer (i.e., someone who found or stole the card) and undermine the anonymity of the card by requiring the lawful owner to identify himself to the issuer to report the card stolen. As such, American Express gift cards, which permit their purchasers to report them stolen, did not infringe the District Court’s construction.
The Federal Circuit agreed, based on the 1) plain meaning of the term “bearer instrument” and 2) the specification’s statements about the anonymous, unrestricted utility of the bearer card. As for the plain meaning, the Federal Circuit looked to dictionary definitions, stating:
The patent’s use of the term “bearer instrument” is consistent with the usual meaning given to “bearer bonds” or “bearer securities” by financial dictionaries. Proof of ownership for a “bearer security” is “possession of the security certificate.” Oxford University Press, A Dictionary of Finance and Banking 42 (Jonathan Law ed., 4th ed. 2008). That feature “enables such bonds to be transferred from one person to another without registration” and allows owners to “preserve their anonymity.” Id. In the case of “bearer bonds” or “coupon bonds,” possession denotes ownership, “so whoever presents the coupon is entitled to the interest.” John Downes & Jordan Elliot Goodman, Dictionary of Finance and Investment Terms 58, 149 (7th ed. 2006).
As for the specification’s statements, the panel observed the patent specification stated that “the present invention relates generally . . . to a method of transacting an anonymous purchase,” and such anonymity was provided by a purchasing card – “in other words, each purchasing card 40 is a ‘bearer card’ which means it is as good as cash,” such that if the consumer loses or misplaces the card, “it may be used up to the limit available on the card by anyone in possession of the card. In this way, the purchasing card provides a means for preserving the anonymity of the purchaser in future purchases made over the Internet.” (‘181 patent specification) In the words of the panel, this disclosure indicated that while “legal title to a ‘bearer instrument’ may not always transfer with possession, the possessor of a ‘bearer instrument’ effectively owns the instrument due to the lack of ownership registration. That characteristic is vital to the primary advantage of the invention — anonymity.”
Privacash argued that checks, when made out to “cash” or “bearer,” are “bearer instruments” within the claim’s usage of the term. Checks, under the UCC, can always be cancelled by their lawful drafter, so “bearer instrument” must include instruments that can be cancelled like the Amex cards, even if the purchasing card presented as an example in the specification could not be. The panel disagreed, finding that checks made out to “bearer” or “cash” were nowhere defined in the UCC as “bearer instruments.” Thus:
American Express proffered evidence demonstrating that it is able to deactivate its gift cards in response to requests from rightful card owners. Upon contacting American Express, the owner is required to provide the gift card account number and other identifying information to establish that he is the card’s true owner. Privacash has failed to submit any evidence indicating that American Express is able to achieve that functionality without compromising anonymity. Thus, the available evidence indicates that American Express does not treat possession of the gift card as proof of ownership. We therefore conclude that the district court properly entered summary judgment of noninfringement.
OK, before discussing practice lessons, for me, Privacash is a much closer case than the nonprecedential opinion suggests. I do not think that the plain meaning of “bearer instrument” excludes instruments that can, in some circumstances, be cancelled or stopped like checks made out to bearer. Checks are negotiable instruments, and a negotiable instrument made out to a bearer is fairly called a bearer instrument (as many different sources actually do), which can be paid upon mere presentment without showing of ownership. Because any check, even one made to bearer, can be cancelled/stopped by its account owner and because checks made out to bearer are “bearer instruments,” for me, the plain meaning of “bearer instrument” includes things subject to cancellation. So I’m not convinced that the opinion is well-supported by the plain meaning of “bearer instrument” as excluding the voidable AmEx cards.
I feel like the claim construction and opinion instead rests on the limitations in the specification like, the purchasing card is “as good as cash” and “should the consumer lose or misplace the purchasing card 40, it may be used up to the limit available on the card by anyone in possession of the card.” Because the AmEx gift card has the ability to be cancelled when lost, it won’t always be possible to use the AmEx gift card “up to the limit” by its possessor. On the other hand, the specification says “may,” and the AmEx Gift Card “may” be used up to its limit available by anyone in possession of it, if its owner does not cancel it. So I’m not even confident that these statements of the specification, even if read literally into the claim, prevents the claim from reading on an AmEx gift card. To me, it appears the panel added in that the possibility of using the card up to its limit available exists because the card can’t be reported lost or stolen – something the specification never states explicitly. (Also – I’m not sure of the mechanics, but can AmEx cards be cancelled by anyone who has the information on the card itself, including non-owner possessors? If so, then the recited “purchaser cards” can equally be cancelled by a non-owner possessor destroying the card, right? This would further undercut any “ability to cancel” distinction between the claimed purchasing card and the accused AmEx gift card.) I also don’t buy the panel’s suggestion that loss of anonymity distinguishes the “purchasing card” and the AmEx gift card. The specification clearly indicates that anonymity is achieved with respect to vendors being paid by the purchasing card, not the seller/issuer of the purchasing card (who would anyway know the buyer’s identity if purchased with a credit card or through the online verification process disclosed in the specification). An AmEx gift card preserves the same anonymity of its users with respect to vendors being paid with the AmEx gift card.
Enough of my opinions on the decision’s correctness. The case reaffirms several lessons from previous Lourie-panels that limitations from the specification can be read into the claims. First off, don’t do what Privacash did here. Don’t state what “the invention is” or describe terms in the specification that track to claim terms as part of the “invention.” Instead, always describe examples as “example embodiments” and try to offer as many variations or options as possible when describing individual elements of embodiments that track to claim terms. Privacash just describes a single purchasing card system as something that is in accordance with its invention, without any exemplary broadening to show the described system wasn’t the only thing being claimed. Also, when describing advantages, effects, problems overcome, etc. do so in connection with example embodiments, not as “effects achieved by the present invention.” For example, Privacash should have said something like “under some circumstances, example embodiments may permit users to retain anonymity at vendors where example purchase cards are used” or “other example embodiments may permit an example purchase card to be used like cash if so desired” and “these and other effects, described below or not, may be achieved by some example embodiments” at a single point in its specification and then omitted such effects when describing example embodiments in particular. I’m not a big supporter of reading limitations from the specification into claims absent an explicit redefinition or disclaimer, but I haven’t been able to get too riled up over this case (or Cal-Car or Eon-Net; on the other hand, Retractable does bother me a little) when the patents are not drafted to avoid such limitation.
On a final note, Privacash is perhaps also interesting as an example of a case dealing with a business method – a distribution and utilization scheme for financial instruments through retailers – without any mention of subject matter ineligibility under § 101. This business method patent is perhaps an example of something that would be subject to enhanced post-issue review under the pending Leahy-Smith America Invents Act.