Court guts E-Data patent
By Paul Festa
Staff Writer, CNET NEWS.COM
May 18, 1998, 5:40 p.m. PT
In a decision hailed by online software vendors, a
federal judge has stopped a closely watched patent
lawsuit in its tracks.
The lawsuit, brought by e-commerce firm E-Data
against dozens of companies, claimed that a patent
belonging to E-Data covered many systems of
ordering software online.
E-Data accused defendants including CompuServe,
Intuit, and Broderbund of infringing on its patent. If
the court had agreed with E-Data's interpretation of
the patent, E-Data would have been entitled to a
royalty for Internet software sales.
But in her sternly worded decision, U.S. District
Judge Barbara Jones narrowed the scope of the
patent to such a degree that the defendants expect
summary judgments in their favor.
"In an obvious attempt to expand the scope of its
patent beyond that which was intended, plaintiff
implausibly asserts that its patent covers certain
uses of the Internet and World Wide Web, and
applies to certain CD-ROM applications," wrote
Judge Jones in her decision. "It is abundantly clear
to the court, however, that the [patent does] not
support plaintiff's broad interpretation."
Jones said the patent, known as the Freeny patent
after the original owner from whom E-Data bought
it, covered only a kiosk-type vending apparatus in
a retail setting where users could choose selections
to be downloaded onto a blank CD or tape.
"From what I understand, the judge said that you
have to be sitting in a retail store for the patent to
apply," said E-Data counsel David Fink, who had
not yet read the decision. "If someone is
blindfolded and operating a computer, they would
have to inquire whether they were sitting in a living
room or a retail store to determine if they were
infringing on the patent. I think that is humorous."
Humorous or not, the judge's focus on the location
of the software purchaser means the patent does
not apply to systems in which the consumer
downloads software from his or her home
computer.
Defendants hailed the decision as a victory for the
online software industry and a blow against
frivolous patent lawsuits.
"We are very happy with the ruling, and we think
that the court properly construed the patent," said
David McIntyre, senior counsel at Fenwick &
West, the firm representing Broderbund, Intuit, and
other defendants. "We hope this sends a message
to the patent holders who hope to extend their
patents beyond their proper boundaries."
The E-Data lawsuit is not the only patent
infringement suit in the software industry to falter in
recent weeks. Earlier this month, a judge threw out
patent claims brought by Wang against Netscape
Communications and America Online for various
features of the companies' Internet browsers.
While Jones's decision eviscerates E-Data's claims
against software vendors, the case is not over yet.
Defendants and observers say it is likely that the
narrowed definition of the patent will result in
E-Data's claims being dismissed, and two parallel
cases in Connecticut are on hold pending the
resolution of the New York case.
The defendants of the three pending suits are not
the only parties relieved by Jones's ruling.
"E-Data sent 25,000 businesses letters saying,
'We're going to sue you when we're done with
CompuServe and the rest,'" said Tim O'Hearn, an
attorney with Jones Day, which represents
CompuServe in the matter. "There were a whole lot
of people who were watching this closely who had
received those letters."
Some firms have chosen to license E-Data's
technology rather than fight a patent claim. Those
companies include IBM, VocalTec, and Adobe.
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