Monday, February 12, 2007

A Confusing, Convoluted Victory for DataTreasury

DataTreasury Corp. scored a victory of sorts before the U.S. Court of Appeals for the Federal Circuit, announcing today that the appellate court affirmed a lower court's ruling dismissing DataTreasury's patent infringement case against Electronic Data Systems Corp. (EDS). That's right -- the court dismissed DataTreasury's suit against EDS and DataTreasury counts that as a victory. Here's why:

DataTreasury holds several patents which purport to cover the process of storing and sharing images of checks over the internet. The company claims that its patents are integral to the implementation of Check 21 -- the recently enacted law which allows banks to clear checks by sending images of the documents to each other rather than the paper itself. DataTreasury has made quite a name for itself by suing lots of banks and financial service providers for patent infringement. JPMorgan Chase, Citibank, Bank One, Wells Fargo, Zions, First Data, RDM, NetDeposit and, of course, EDS have all received a summons from DataTreasury. Even more surprising than the fact that this little company would take on the big dogs is how successful its strategy has been. Many of the defendants, including the normally ferocious rottweiler JPMorgan Chase, have settled with DataTreasury and even more corporations have lined up to pay licensing fees in order to avoid litigation.

So what explains DataTreasury's jubilation at having its case against EDS thrown out? You need to know one other fact. DataTreasury actually had two lawsuits against EDS going at the same time. The case that was dismissed was filed in Federal District Court for the Northern District of Texas (N.D.Tx). The second case was filed in Federal District Court for the Eastern District of Texas (E.D.Tx). Northern? Eastern? Does it really make a difference? You bet it does. Plaintiffs who file patent infringement suits in the E.D.Tx win more often than plaintiffs in any other Federal court in the country. If it has to be sued for patent infringement, EDS wants to be in any court other than the Eastern District. When the judge in the N.D.Tx dismissed the case before him in favor of the case in the E.D.Tx, EDS quickly appealed to the Federal Circuit. By affirming the Northern District decision, the appellate court is forcing EDS to proceed in the hostile Eastern District.

To further complicate matters, we should recognize that many commentators believe the DataTreasury patents are invalid and unenforceable. To be patentable, an innovation must be "novel" and "nonobvious." In other words, it should be something new and surprising and not an old idea or something that immediately pops to mind. Sending images of documents over the internet is not a particularly earth shattering break through, even if the documents are checks. Further, earlier patents and industry publications suggest that DataTreasury didn't come up with the process first. Critics of DataTreasury got a major boost in December 2006 when the Patent and Trademark Office (PTO), following a reexamination of DataTreasury's primary check imaging patent, concluded that it failed to meet the standards for patent protection. DataTreasury vowed to appeal the decision.

Barring a successful appeal to the Supreme Court, DataTreasury’s case against EDS will go forward in the Eastern District of Texas where the juries rarely fail to enforce a patent. It will be interesting to see what they do with a patent that even the PTO agrees isn’t valid.

15 comments:

Unknown said...

Your reports "that many commentators believe the DataTreasury patents are invalid and unenforceable" is not only innacurate but also calls into question the authors motives. About the only commentary relecting such are those who haven't read the patents or individuals with an agenda, usually current defendants or their counsel. Take a look at the latest info from the USPTO office action (their final report to be released shortly) and you will likely find a very different picture than the one painted here. In addition, one truely interested in the disposition of this IP and "the facts and merit" would only have to look at the millions of pages of prior art submitted to the court by JPMorgan Chase to quickly realize some people don't mind doing their homework before making half hazzard generalizations or settlements! Perhaps Arthur Koestler said it best, "The more original a discovery, the more obvious it seems afterwards".

Stephen T. Middlebrook said...

Sorry, but I stand by the statement that many commentators have suggested the DataTreasury patents are invalid. A quick Google search comes up with the following sources:

http://www.nytimes.com/2004/12/25/business/25patent.html?pagewanted=2&ei=5090&en=ae2c34eb6062948d&ex=1261630800&partner=rssuserland


http://271patent.blogspot.com/2005/01/one-to-watch-datatreasury-corp.html

http://271patent.blogspot.com/2005/08/and-speaking-of-datatreasury.html


http://www.greensheet.com/PriorIssues-/050702-/6.htm

http://www.digitaltransactions.net/newsstory.cfm?newsid=636

http://www.reiresearch.com/public/2427.cfm

As far as bias goes, all I can say is that it is hard to judge the bias of a poster who doesn't identify himself.

Cheers

PatentHawk said...
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PatentHawk said...

News taken from Remote Deposit Capture on 1/27/07:

Back in December, A Patent examiner rejected all the claims relating to one of DataTreasury's key patents. Many would argue this opinion could lead to eventual invalidation of DataTreasury's patents.

Interestingly, on January 23 2007, Diebold announced they had agreed to license the DataTreasury Patents. Diebold joins a list of ever-growing companies who have decided to settle and/or license these patents from DataTreasury. This list includes JPMorgan Chase, RDM, NetDeposit and others.

Here's the latest news: In January, representatives from DataTreasury met with the USPTO to discuss the previous mentioned rejections (which were set in motion by a challenge from First Data Corp.). A summary of this meeting produced by the USPTO not only seems to reject the argument of prior art in the challenge, but also now provides DataTreasury the opportunity to refine and add additional detail to the claims in their patents.

***As far as the above Google results from the commentators, notice the dates on those comments; much has changed from 12/2004-12/2006.

V

PAROUT said...

Patent Office Validates a DataTreasury Image Exchange Patent.
This sure makes DataTreasury's patents look more valid.


http://webmail.hargray.com/Redirect/www.digitaltransactions.net/newsstory.cfm?newsid=1441

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