Fed. Circ. Clears Facebook In Patent Row With Tech Co. (Law360)

By Scott Flaherty

The Federal Circuit on Tuesday cleared Facebook Inc. of allegations that it infringed a networking patent held by Leader Technologies Inc., finding the patent was invalid because Leader created a product based on it too long before applying to protect the technology.

The ruling upholds a verdict from a 2010 jury that found Leader's U.S. Patent Number 7,139,761 was invalid because the company made a software product called Leader2Leader — which relied on the patented data storage and sharing technology — before filing its application with the U.S. Patent and Trademark Office, and sold the product more than a year before the application was approved.

U.S. Circuit Judge Alan D. Lourie, who penned the opinion for the unanimous appeals panel, struck down Leader's argument that Facebook had not shown that a version of the software sold before Dec. 10, 2002 — a year before Leader's application was approved by USPTO — relied on the technology later protected by the '761 patent.

"We recognize that, as a general matter, a computer scientist can easily modify and change software code and that two versions of the same software product may function differently," the judge said. "But, in this case, Leader fails to point to any contemporaneous evidence in the record that indicates that the [Leader2Leader software] that existed prior to the critical date was substantively different from the post-critical-date software."

On appeal, Leader didn't dispute the date of its sale of Leader2Leader but argued that Facebook had not produced "clear and convincing" evidence that the version of the product sold before the December 2002 cutoff date relied on the claims asserted in the '761 patent, the appellate court said. But the court was not compelled by Leader's argument and said the legal record was clear enough to back Facebook's claims.

"The record contains legally sufficient evidence linking the pre-critical-date software to the software that Leader admitted fell within the scope of the asserted claims," the court said. "Facebook relied almost exclusively on Leader's own admissions to prove invalidity, and those documents, on their face, do not support Leader's position."

A Facebook spokesman, Andrew Noyes, said Tuesday the company was happy with the court's decision.

"We are pleased that the appeals court has affirmed the district court's verdict and confirmed that Leader's patent is invalid," Noyes said.

An attorney for Leader did not immediately respond to a request for comment.

Leader first sued in 2008, alleging that Facebook infringed the '761 patent, which covers technology for managing and storing electronic information.

A jury issued a split verdict in the case in July 2010, saying Facebook infringed the patent and that it was not invalid on grounds of obviousness or anticipation. The jury ultimately ruled, however, that the patents were invalid based on the company's production of the Leader2Leader software before filing with the USPTO to apply for patent protection.

The circuit court's Tuesday decision affirms the jury's verdict finding the patent invalid.

The patent-in-suit is U.S. Patent Number 7,139,761.

Judges Alan D. Lourie, Kimberly A. Moore and Evan J. Wallach sat on the panel for the Federal Circuit.

Leader is represented by Daryl L. Joseffer and Adam Conrad of King & Spalding LLP and Paul J. Andre and Lisa Kobialka of Kramer Levin Naftalis & Frankel LLP.

Facebook is represented by Thomas G. Hungar, William G. Jenks and Michael F. Murray of Gibson Dunn & Crutcher LLP and Michael Rhodes, Heidi L. Keefe and Mark R. Weinstein of Cooley LLP.

The case is Leader Technologies Inc. v. Facebook Inc., case number 2011-1366, in the U.S. Court of Appeals for the Federal Circuit.

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