Addressing the issue of obviousness of patents directed to Internet-based software, the U.S. Court of Appeals for the Federal Circuit reversed a district court’s finding of non-obviousness, reasoning that performing previously known methods through an internet web browser is obvious.  Soverain Software LLC v. Newegg Inc., Case No. 11-1009 (Fed. Cir., Jan. 22, 2013) (Newman, J.).

The dispute arose from three patents directed to software system entitled “Transact” which facilitates electronic commerce or “e-Commerce.”  Individuals who purchase products online are familiar with this technology wherein a merchant’s products are offered and purchased online through computers interconnected by a network.  Upon acquiring the Transact software and patents, plaintiff Soverain sued Newegg and several other online retailers for patent infringement.  While the other online retailers took paid-up licenses to the patents, Newegg refused to pay a license. 

At the close of evidence, the district court removed the question of obviousness from the jury citing insufficient evidence and then found that the claims were not obvious.  The jury found Newegg liable for infringement of two of the three patents, but not liable for infringement of the third.  The district court subsequently granted Soverain’s motion for judgment as a matter of law (JMOL) of infringement of the third patent.  Newegg appealed.

On appeal, the Federal Circuit upheld the district court’s decision to remove the obviousness question from jury consideration.  Under KSR, the Court concluded that although both sides had presented witnesses and evidence on obviousness, removing the obviousness question from the jury was proper since the content of the prior art, the scope of the patent claims and the level of ordinary skill in the art were not in material dispute.  The Federal Circuit, however, reversed the district court’s decision of non-obviousness in view of the evidence presented by Newegg, finding that each disputed claim element was disclosed by the prior art. 

Soverain argued that the asserted claims were not obvious because its product, Transact, was adapted for use on the internet, while Newegg’s cited prior art either pre-dated the internet or otherwise operated on a pre-internet network.  The Federal Circuit rejected this argument, reasoning that conducting previously known methods through an internet web browser is obvious since it amounts to no more than applying the use of the internet to existing electronic processes at a time when to do so was commonplace.  Accordingly, the Court concluded that routine incorporation of internet technology into existing processes can be considered an obvious modification of a prior art reference.