Patent Claim Covering Both an Apparatus and a Method for Using that Apparatus is Invalid for Indefiniteness

Plaintiff-appellant IPXL Holdings, L.L.C. (“IPXL”) holds a patent for an “electronic fund transfer or transaction system” that stores user information, displays that information to the user in a single screen, and allows the user to select a transaction. The goal of the patented system is to allow users to execute financial transactions in fewer steps.

Defendant-appellee Amazon.com, Inc. (“Amazon”) uses a “1-Click system” that enables users to purchase goods on its website. The system allows customers who have previously stored information, including credit card numbers and shipping addresses, to place an order without having to re-enter the stored information.
In January 2004, IPXL filed suit against Amazon, alleging that Amazon’s “1-Click system” infringed five claims of IPXL’s patent. The U.S. District Court for the Eastern District of Virginia granted summary judgment for Amazon and held that the first four claims were anticipated (ie, not novel) – and therefore invalid under 35 U.S.C. § 102 – because a prior patent had disclosed the claims. The district court also held that the fifth claim was indefinite – and therefore invalid under 35 U.S.C. § 112 – because it claimed both a system and a method for using that system. In addition, the district court held that Amazon’s 1-Click system did not infringe any of plaintiff’s asserted claims. Finally, finding the case to be “exceptional” under 35 U.S.C. § 285, the district court required that IPXL pay Amazon for attorney’s fees and costs totaling over $1.6 million.

IPXL appealed the district court’s ruling, arguing that the first four claims were not anticipated by a prior patent, that the fifth claim was not indefinite, and that the award of attorney’s fees was improper because Amazon was late in filing its motion to recover the fees. After hearing the case, the U.S. Court of Appeals for the Federal Circuit held that the district court correctly found that the first four claims were anticipated.

With regard to the fifth claim in dispute, the Federal Circuit noted that whether a single claim covering both an apparatus and a method for using that apparatus is invalid was an issue of first impression before the Court. The Federal Circuit cited a 1990 decision of the Board of Patent Appeals and Interfereneces (“Board”) of the U.S. Patent and Trademark Office (“PTO”) which “made it clear that reciting both an apparatus and a method of using that apparatus renders a claim indefinite” under 35 U.S.C. § 112(2). In summarizing that decision, the Federal Circuit stated that the Board had “correctly surmised that, as a result of the combination of two separate statutory classes of invention, a manufacturer or seller of the claimed apparatus would not know from the claim whether it might also be liable for contributory infringement because a buyer or user of the apparatus later performs the claimed method of using the apparatus.” In particular, the Federal Circuit agreed with the Board’s holding that such a claim “is not sufficiently precise to provide competitors with an accurate determination of the ‘metes and bounds’ of protection involved” and is “ambiguous and properly rejected” under 35 U.S.C. § 112(2). Ex parte Lyell, 17 USPQ2d 1548, 1550-51 (BPAI 1990). The Federal Circuit also observed that this rule is “well recognized” and has been incorporated into the PTO’s Manual of Patent Examination Procedure. Thus, because the claim recites both a system and a method for using that system, the Federal Circuit held that the claim is invalid under 35 U.S.C. § 112(2).

Finally, the Federal Circuit agreed with IPXL that Amazon did not file a timely request for attorney’s fees under Federal Rule of Civil Procedure 54, and the court accordingly reversed the order granting attorney’s fees.