by Audrey Millemann

In Net MoneyIN, Inc. v. Verisign, Inc., 545 F.3d 1359 (Fed. Cir. 2008), the Federal Circuit Court of Appeals clarified the test for anticipation under 35 U.S.C. §102(a).

The patents in the case covered systems for conducting credit card transactions over the internet. The existing systems involve four different entities: a customer, the issuing bank for the customer’s credit card, a merchant, and the merchant’s bank. The inventor developed his system in response to two problems with the existing systems. First, the existing systems required prospective purchasers to send their confidential credit card information to an unknown merchant over the Internet. Second, in the existing systems, the banks that had issued the customers’ credit cards imposed stringent requirements on merchants.

The inventor created a system that added a fifth entity, a payment processing entity. This entity interacted with the other four entities to avoid the problems of the existing systems. The inventor obtained two patents for his system and formed a company, Net MoneyIN, Inc. (“NMI”) to process Internet credit card transactions.

In 2001, NMI sued Verisign and another defendant for infringement of its patents. The district court in the District of Arizona performed claim construction and invalidated several claims of the patents. The defendants then moved for summary judgment of invalidity of another claim of one of the patents, claim 23, under section 102(a). The defendants relied upon a prior art document published by the Internet Engineering Task Force and IBM (known as the iKP reference) which discussed two different models for processing credit card transactions on the Internet. The district court granted the defendants’ motion, stating:

“All of the limitations of claim 23 can be found within the iKP reference. A simple combination would produce the system described in claim 23 of the ‘737 patent. That no specific example within iKP contains all five links does not preclude a finding of anticipation.”
Net MoneyIN, supra, at 1369.

NMI appealed. NMI argued that the district court was not permitted to combine parts of the two different models described in the prior art reference to find all the elements of claim 23. The defendants argued that anticipation required only that all of the elements of claim 23 be present in a single document.

The Federal Circuit reversed. The court agreed that a claim is anticipated if “the four corners of a single, prior art document describe every element of the claimed invention,” but explained, at 1369:

“But it does not tell the whole story. Because the hallmark of anticipation is prior invention, the prior art reference – in order to anticipate under 35 U.S.C. §102 – must not only disclose all elements of the claim within the four corners of the document, but must also disclose those elements ‘arranged as in the claim.’ [Citation omitted.]”

The court then discussed the meaning of the phrase “arranged as in the claim.” For example, a claim that required several ingredients to be mixed in a specific order would not be anticipated by a prior art reference that disclosed all of the ingredients but not the order. “[A]n anticipatory reference [must] show all of the limitations of the claims arranged or combined in the same way as recited in the claims, not merely in a particular order. The test is thus more accurately understood to mean ‘arranged or combined in the same way as in the claim.’” Id. at 1370.

The court discussed several of its prior decisions that addressed this issue. In Lindemann Maschinenfabrik GnbH v. American Hoist & Derrick Co., 730 F.2d 1452 (Fed. Cir. 1984), the court held that a claim to a shearing machine was not anticipated by a prior art reference that contained all of the elements of the claimed machine “because it ‘disclosed an entirely different device, composed of parts distinct from those of the claimed invention, and operating in a different way to process different material differently.’” Net MoneyIN, supra, at 1370.

In Ecolochem, Inc. v. Southern California Edison Co., 227 F.3d 1361 (Fed. Cir. 2000), the court held that a claim to a method for deoxygenating water was not anticipated by a prior art reference that included a figure and text on the grounds that:

“[T]here was no link between that figure and the general discussion of hydrazine as a deoxygenating agent. Id. In other words, we concluded that although the reference taught all elements of the claim, it did not contain a discussion suggesting or linking hydrazine with the mixed bed in the figure, and thus did not show the invention arranged as in the claim.

In summarizing its position the court stated, at 1371:
“In all of these cases, the prior art reference had to show the claimed invention arranged or combined in the same way as recited in the claim in order to anticipate. We thus hold that unless a reference discloses within the four corners of the document not only all of the limitations claimed but also all of the limitations arranged or combined in the same way as recited in the claim, it cannot be said to prove prior invention of the thing claimed, and, thus, cannot anticipate under 35 U.S.C. §102.”

In analyzing the iKP prior art reference asserted by Verisign, the court found that neither of the two models disclosed in the reference contained all of the elements of NMI’s claim 23 arranged or combined as in claim 23. Id. at 1371. The district court had improperly combined parts of the two different models of the prior art reference to find claim 23 anticipated. Id. The court noted that if the differences between the claim and the models disclosed in the reference were slight, the claim might have been obvious under 35 U.S.C. §103(a), but it was not anticipated. Id. According to the court:

"The prior art reference must clearly and unequivocally disclose the claimed invention or direct those skilled in the art to the invention without any need for picking, choosing, and combining various disclosures not directly related to each other by the teachings of the cited reference.", quoting In re Arkley, 455 F.2d 586 (CCPA 1972).

Because the district court had erroneously found claim 23 to be anticipated, the appellate court reversed the grant of summary judgment.