The opinion of the court was delivered by: Judith M. Barzilay, Judge*fn1
A. The Technology Described in the Patents
1. "Managing one or more floor brokers"
2. "Current-status information"
3. "Current-status information" in the Transmitting, Calculating, and Displaying Steps
7. "Transmitting" and "Transmitting . . . from [one device] to [another device]"
3. "Each of said data packets containing said information"
5. "A data structure stored in each of said [first and second] computer-readable memories"
2. "Whereby a cross trade is executed"
This is an action for patent infringement brought by Plaintiff Papyrus Technology Corp. ("Papyrus") against Defendant New York Stock Exchange, Inc. ("NYSE"). The parties appear before the court following NYSE's January 2005 request for a Markman Hearing. On December 18 and 19, 2007, the court held a Markman Hearing when the parties each gave a technology demonstration and presented their proposed constructions of the claim elements at issue.*fn2 The court now construes disputed terms in Claim 1 of U.S. Patent No. 5,774,877, Claims 1 and 8 of U.S. Patent No. 5,797,002, and Claim 1 of U.S. Patent No. 6,768,981. See U.S. Patent No. 5,774,877 (issued June 30, 1998) ("the '877 Patent"); U.S. Patent No. 5,797,002 (issued Aug. 18, 1998) ("the '002 Patent"); U.S. Patent No. 6,768,981 (issued July 27, 2004) ("the '981 Patent").
Papyrus filed suit against NYSE in January 2004, alleging infringement of the '877 Patent, the '002 Patent, U.S. Patent No. 5,915,245, and U.S. Patent No. 6,539,362 B2. See U.S. Patent No. 5,915,245 (issued June 22, 1999) ("the '245 Patent"); U.S. Patent No. 6,539,362 B2 (issued Mar. 25, 2003) ("the '362 Patent"). In March 2004, NYSE denied Papyrus's allegation and counterclaimed for a judgment of invalidity, non-infringement, and unenforceability of the '877, '002, '245, and '362 Patents, as well as for a declaration that there had been no breach of contract.
Papyrus filed a supplemental complaint in September 2004 alleging infringement of the '981 Patent. Following the conclusion of fact discovery in January 2005 and expert discovery in March 2005, the parties stipulated to the dismissal with prejudice of all claims relating to the '245 and '362 patents. See Stipulation and Order of Dismissal, Papyrus Tech. Corp. v. N.Y. Stock Exch., No. 04 CV 00625 (S.D.N.Y. argued Dec. 18, 2007) (No. 68). At issue are the remaining three patents.
While conducting discovery, NYSE requested a Markman Hearing in January 2005. To determine whether a Markman Hearing would be necessary, the court ordered the parties to brief the claim-construction issues, which they completed in May 2005.*fn3 The court held a two-day Markman Hearing in December 2007 regarding the disputed claim terms in the '877, '002, and '981 Patents. This order follows.
In a patent infringement action, the court applies a two-step process to determine whether infringement has occurred.*fn4 See Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1115 (Fed. Cir. 2004) (citing Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc), aff'd, 517 U.S. 370 (1996)). The court must (1) determine the meaning and scope of the disputed patent claims, and (2) compare the properly construed claims to the accused device to determine whether there is infringement. Id. at 1115.
"[T]he construction of a patent, including terms of art within its claim, is exclusively within the province of the court." Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996); see Aqua Prod., Inc. v. Intex Recreation Corp., No. 06 CV 1746, 2007 WL 1686518, at *2 (S.D.N.Y. June 5, 2007). The court may utilize intrinsic and extrinsic evidence for guidance when construing a claim. See Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582-83 (Fed. Cir. 1996). The court must "look first to the intrinsic evidence of record, i.e., the patent itself, including the claims, the specification and, if in evidence, the prosecution history." Id. at 1582; Markman, 52 F.3d at 979. Intrinsic evidence is "the most significant source of the legally operative meaning of disputed claim language," Vitronics Corp., 90 F.3d at 1582, because the patentee has chosen that language "to particularly point[ ] out and distinctly claim[ ] the subject matter which the patentee regards as his invention." Innova/Pure Water, Inc., 381 F.3d at 1116 (quotations omitted).
In general, claim terms are given their ordinary and customary meaning, i.e., the "meaning that the term would have to a person of ordinary skill in the art in question . . . as of the effective filing date of the patent application." Phillips, 415 F.3d at 1313. A "person of ordinary skill in the art is deemed to read the claim term not only in the context of the particular claim in which the disputed term appears, but in the context of the entire patent, including the specification." Id.
After the court considers the meaning of the claim terms, it must then review the specification to determine whether the patentee has used the terms in a manner inconsistent with their customary meaning. See Markman, 52 F.3d at 979. The specification is usually dispositive and "the single best guide to the meaning of a disputed term." Vitronics Corp., 90 F.3d at 1582; see Phillips, 415 F.3d at 1315-16. Although the specification is crucial to claim construction, the court must not read claims restrictively "unless the patentee has demonstrated a clear intention to limit the claim scope using 'words or expressions of manifest exclusion or restriction.'" Innova/Pure Water, Inc., 381 F.3d at 1117. Patentees may limit the scope of their claims, as they are free to use new terms or old terms with a different meaning than they ordinarily have in the particular art. See id. at 1116-17. However, any new or special definition given to a word must be clearly defined or implied somewhere in the specification so that anyone of ordinary skill in the art would know of the change from the original meaning of the term. See id. at 1117; Markman, 52 F.3d at 980.
Finally, the court may also consider the patent's prosecution history. Markman, 52 F.3d at 980. The prosecution history is an important piece of intrinsic evidence in claim construction as its represents the public record of proceedings in the Patent and Trademark Office ("PTO"). See id.; Phillips, 415 F.3d at 1317. The prosecution history "consists of the complete record of the proceedings before the PTO and includes the prior art cited during the examination of the patent." Phillips, 415 F.3d at 1317. It demonstrates how the inventor and the PTO understood the meaning of the patent at the time of the proceedings. See id. However, as the prosecution history "represents an ongoing negotiation between the PTO and the applicant," and not the final product of the negotiation, "it often lacks the clarity of the specification and thus is less useful for claim construction purposes." Id. Nevertheless, the prosecution history often narrows the claim scope by "demonstrating how the inventor understood the invention and whether the inventor limited the invention in the course of prosecution . . . ." Id.
In claim construction, courts are also authorized to utilize extrinsic evidence, which includes any evidence that is outside of the particular patent and its prosecution history, such as expert testimony, treatises and dictionaries. See Markman, 52 F.3d at 980. Although the court may relay on these sources to guide the claim construction, it must evaluate them within the context of the more authoritative intrinsic evidence. See Phillips, 415 F.3d at 1319. As a result, where "the public record unambiguously describes the scope of the patented invention, reliance on any extrinsic evidence is improper." Vitronics Corp., 90 F.3d at 1583. Moreover, because the public is entitled to rely on the public record, the court may not allow it to be altered by extrinsic evidence introduced at trial. See id.; Markman, 52 F.3d at 980-81; Southwall Tech., Inc. v. Cardinal IG Co., 54 F.3d 1570, 1576 (Fed. Cir. 1995). Extrinsic evidence, therefore, "may be used only to help the court come to the proper understanding of the claims [and] may not be used to vary or contradict the claim language." Vitronics Corp., 90 F.3d at 1584.
A. The Technology Described in the Patents
Although three individual patents are at issue in the current litigation, the '877, '002 and '981, they all share the same drawings and similar specifications. The specifications of the patents-in-suit describe a wireless system capable of processing the basic instructions handled by brokers on the floor of the exchange, including "quotation requests and quotations," "orders and executions, including a series of partial executions against a common, larger order," and "memos between the floor broker and a booth clerk or another floor broker." '877 Patent col.6 ll.34-37; see Pl. Tech. Demonstration ("TD") at 26. Papyrus's invention sets out a system which not only allowed communication between any booth clerk's computer and any broker's hand held device (HHD), but also allowed inter-HHD communication between brokers or a broker and a specialist, thereby bypassing the booth clerk's computer entirely. See Pl. TD at 28. More specifically, the invention allows the booth clerk to view the computer screen and monitor the progress of the brokers on the floor by "reviewing status information about the various stages of the quotes and orders and the leaves quantity for each order." Pl. TD at 37. The computer displays some information identifying the progression of a communication, thereby allowing the booth clerk "to know whether the broker has received and is working [on] the quote request or order." Pl. TD at 39. Additionally, the display contains status information "concerning the number of shares still needed to fill an order," which helps the clerk "assess a broker's workload by understanding how close the broker is to filling the pending orders." Pl. TD at 40.
Both the '002 and the '981 Patents explain methods which work in conjunction with the invention taught by the '877 Patent. In the '002 Patent, Papyrus explained the organizational arrangement known as a "data structure" that the device uses to process and keep track of the data packets comprising instructions. In particular, the preferred embodiment provides a pseudocode which defines the data structure and includes fields such as sequence number, transaction type, communication stage, stock being traded, buy or sell designation, quantity, and execution sequence number. Pl. TD at 63-64. The '981 Patent in turn discloses a method for executing a cross-trade in which the broker selects compatible orders -- which are sorted and displayed so that the possible cross can be seen easily -- and crosses them using the execution entry screen. Pl. TD at 55-59.
At issue in this case are Claim 1 of the '877 Patent, Claims 1 and 8 of the '002 Patent, and Claim 1 of the '981 Patent. The court will address the disputed language of each claim in turn.
Papyrus and NYSE contest the meaning of seven terms or elements in Claim 1 of the '877 Patent, which teaches "a method of managing the activities of one or more floor brokers situated on the floor of an exchange . . . ." '877 Patent Abstract. The method uses "a programmed computer to compare a relative number of instructions having a pending status that have been delegated to the floor brokers and find the floor broker having comparatively few pending instructions." Id. In its entirety, Claim 1 recites:
1. A method for managing one or more floor brokers situated on the floor of an exchange, comprising the steps of: providing each floor broker with a two-way communications device; transmitting an instruction from a programmed computer operated by an operator to the two-way communications device provided to a floor broker, the instruction being selected from the group consisting of quotations requests, quotations, orders, partial executions, and executions; transmitting from each two-way communication device to the programmed computer current-status information concerning any transmitting instructions; calculating at the programmed computer a remaining quantity of unfilled orders to fill using current-status information transmitted to the programmed computer; automatically and simultaneously displaying at the programmed computer in real time the current status information of at least a portion of the delegated instructions received from each two-way communication device; and selecting a floor broker to whom a further instruction is to be transmitted.
'877 Patent col.32 ll.25-48.
1. "Managing One or More Floor Brokers"
The first disputed element is the phrase "managing one or more floor brokers," which appears in the preamble of Claim 1. '877 Patent col.32 l.25. In general, a preamble is an introductory statement which precedes, and does not limit, the body of the claim. See Allen Eng'g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1346 (Fed. Cir. 2002). "[I]f the body of the claim sets out the complete invention, and the preamble is not necessary to give life, meaning and vitality to the claim, then the preamble is of no significance to claim construction because it cannot be said to constitute or explain a claim limitation." Altiris, Inc. v. Symantec Corp., 318 F.3d 1363, 1371 (Fed. Cir. 2003). Furthermore, a preamble is not limiting "where a patentee defines a structurally complete invention in the claim body and uses the preamble only to state a purpose or intended use for the invention." Poly-Am., L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303, 1310 (Fed. Cir. 2004) (quotations & citation omitted).
Alternately, "the preamble is regarded as limiting if it recites essential structure that is important to the invention or necessary to give meaning to the claim." Bicon, Inc. v. Straumann Co., 441 F.3d 945, 952 (Fed. Cir. 2006). As a result, "when the limitations in the body of the claim rely upon and derive antecedent basis from the preamble, then the preamble may act as a necessary component of the claimed invention." Id., 441 F.3d at 952 (quotations & citation omitted). In determining whether the preamble constitutes a claim limitation, the court reviews the entire patent "to gain an understanding of what the inventors actually invented and intended to encompass by the claim." Poly-Am., L.P., 383 F.3d at 1309.
Papyrus contends that the preamble does not constitute a claim limitation because (a) the preamble does not recite essential structure or give life to the claim, (b) the six steps in the body of the claim define a fully operational method, and (c) deletion of the phrase would have no effect on the subsequent steps. Pl. Reply Br. 2-3. In the alternative, Papyrus asks the court to construe the phrase as "exercising care in assigning instructions to floor brokers." Pl. Proposed Claim Const. Order ("PCCO") 2. Specifically, Papyrus argues that the method enables the operator to determine which broker has the capacity to carry out the next order. Markman Hr'g Tr. vol. 1 at 79, Papyrus Tech. Corp. v. N.Y. Stock Exch., No. 04 Civ. 00625 (S.D.N.Y. argued Dec. 18, 2007) ("Markman Hr'g Tr."). Further, Papyrus emphasizes that the calculating and displaying steps are the essential components of the claim, as they determine the information used by the booth clerk and make the information viewable at the programmed computer. Markman Hr'g Tr. vol. 1 at 84; Pl. Markman Hr'g Slide Presentation ("MHSP") vol. 1 at 8.*fn5
Without this information, the booth clerk is unable to exercise his or her "judgment and discretion" in distributing new orders and quote requests. See '877 Patent col.9 ll.27-33. Crucially, the booth clerk does not direct or control how a floor broker handles a new order or quote request. Pl. MHSP vol. 1 at 16.
In contrast, NYSE argues that the preamble constitutes a claim limitation and should be construed as "monitoring floor brokers' activities on the trading floor, and directing or controlling their workload." Def. PCCO 1-2. According to NYSE, the preamble limits the claim because Papyrus explicitly relied upon it during the patent prosecution. Def. Reply Br. 4; see In re Cruciferous Sprout Litigation, 301 F.3d 1343, 1347 (Fed. Cir. 2002) ("Clear reliance on the preamble during prosecution to distinguish the claimed invention from the prior art may indicate that the preamble is a claim limitation . . . ."). NYSE alleges that the April 23, 1997 patent amendment demonstrates Papyrus's reliance on the preamble to differentiate the invention from the Sisley et al. ("Sisley") patent during prosecution. See Amendment in Application Serial No. 08/309,377 (Apr. 23, 1997), Pl. App. Ex. 8 at 176, 178-79. NYSE also suggests that because the claims in the '877 Patent "are nothing more than ...