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April 24, 2014

SAP v. Versata: First Covered Business Method Patent Trial and Appeal Board Trial Tests New AIA (America Invents Act) Trial Provisions

The first ever covered business method patent review stems from a patent litigation between Versata and SAP over two Versata patents relating to pricing products in mulitlevel product and organizational groups.  The district court action began in 2007 when Versata sued SAP for alleged infringement of its U.S. Patent Nos. 6,553,350 and 5,878,400 (Versata Software, Inc v. SAP America, Inc., No. 2:07-cv-00153 (E.D. Tex)).

A first jury trial was held in 2009, and a second jury trial was held in 2011.  In the first trial, the jury found both patents directly infringed and inducement of infringement of one claim of the ’350 patent.  Shortly after the first trial, the Court granted JMOL of noninfringement of the ’400 patent.  A second trial was held on the ’350 patent and a jury found the ’350 patent infringed, resulting in a $392 million judgment and an injunction dated September 9, 2011 (stayed pending appeal).

SAP filed its petition for covered business method patent review on the first day it was available via the AIA:  September 16, 2012.  The petition included grounds for challenging the ’350 patent under 35 USC §§ 101, 112, and 102.

About a month later, SAP filed a notice of appeal of the district court decision in the Federal Circuit (filed on October 11, 2011).  Briefing was completed some months later, and oral arguments were held on February 4, 2013.  About a month before the oral arguments (January 9, 2013), the PTAB instituted trial on the challenges under 35 USC §§ 101 and 102, but declined review on the challenges under 35 USC § 112.  So as of January, 2013, the dispute was being pursued both in the Federal Circuit and in the PTAB.

Based on a series of communications between the parties and the PTAB, SAP agreed to drop its challenge under 35 USC § 102 in exchange for an expedited trial on its challenges under 35 USC § 101.  That trial is scheduled for Wednesday April 17, 2013, where both parties will get an hour to present their arguments concerning 35 USC § 101.

Versata took one further action to challenge the covered business method review by suing the PTO in the Eastern District of Virginia on March 13, 2013.  Versata Development Group, Inc. v. Rea, 1:13-cv-00328-GBL-IDD (E.D. VA).  Versata alleges that the ’350 patent is not a covered business method patent, and therefore the PTO violated its statutory authority by institution of the review proceeding.  Versata also alleges that the PTO has no authority to entertain challenges to the claims of the ’350 patent under 35 USC § 101, and that the PTO exceeded its statutory authority by institution of the review proceeding on this ground.

So there is a race to final decision between the district court action and the PTAB proceeding, and Versata’s suit of the PTO may drive the final outcome.  Johann von Goethe was quoted as saying “Every second is of infinite value.”  Perhaps that is more true than ever for SAP and Versata.  It will be interesting to see how this story unfolds in the months to come.

© 2014 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

About the Author

Shareholder

Timothy Bianchi is a patent attorney with bachelor's and master's degrees in electrical engineering. He advises businesses in domestic and international patenting, reexamination, opinions, licensing and enforcement. Tim's patent experience includes electronics, software, medical devices, telecommunications, e-commerce, digital electronics, digital signal processing, computer security, embedded processor designs, hearing aids, network hardware and software, wireless signaling, and RFID. He represents a variety of large and small companies. Tim has engineering experience from...

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