My colleague Daniel Farris and I co-wrote this post.  Daniel is a part of my retail patent litigation team with strong technical experience related to internet and computer-based technologies.

Thanks to the Federal Circuit’s recent In re Staats decision, a favored patent troll tactic has just been strengthened.  Retailers are all too familiar with the tendency of patent trolls to take extremely broad positions regarding the scope of their often old and out-dated patents.  One prime example of this is on display in SFA Systems v., et al. (E.D. Tex.).  SFA is asserting two patents covering essentially the same technology.  The older of the two, U.S. Patent No. 6,067,525, was filed in 1995, and is described in the abstract as:

A salesforce automation system which integrates computerized intelligent automated salesperson support for multiple phases of the sales process. Various subsystems may be provided to facilitate the sales process which may include pre-sales lead generation, maximize time spent with the customer, effectively manage an order, ensure customer satisfaction, and retain the customer for future sales.

SFA has asserted this patent against retailers ranging from Talbots, Kate Spade, and New York & Co., to TigerDirect and, and from Dick’s Sporting Goods and GNC to PetSmart and Dollar Tree Stores.  The basis of SFA’s claims is that these retailers all operate e-commerce websites that display related products to a consumer when he or she selects a product of interest (essentially, the “you might also like” or “people who bought X also bought Y” functionality).  In other words, SFA is asserting that a patent from 1995 that describes a system to assist salespeople in managing lead generation and customer contact, in fact, covers present day e-commerce techniques driven by relational databases and web application software.

Unfortunately, the overbroad allegations in SFA are not unique.  SFA is reading from a standard patent troll playbook, and the Federal Circuit’s In re Staats decision will only increase the level of uncertainty in determining the scope of a patent’s claims.  In re Staats deals with a seldom used procedure for correcting errors in an issued patent that is likely about to become more common.  The Patent Act allows patentees to file a reissue application related to a patent after issuance.  If the reissue application is filed within two years of the patent’s issuance, the patentee can potentially broaden the claims of the original patent.

The Federal Circuit’s In re Staats decision addressed this two year limitation on reissue patents and came to a potentially harmful conclusion.  The case involved a patent owned by Apple, Inc., in which a broadening reissue application was filed within the two year limitation period.  Two additional reissue applications were filed, well after the two year period.  The latest was filed eight years after the patent issued, and addressed claims/elements not at issue in the first reissue applications.  The USPTO denied the later-filed reissue applications on the basis that they were untimely.  Apple appealed.

The Federal Circuit held that, so long as a reissue application seeking to broaden claims is filed within two years of a patent’s issuance, the patentee may file any number of subsequent broadening applications during the 20 year term of the patent, even if the subsequent reissue applications relate to elements totally unrelated to the first-filed reissue application.  The decision allows trolls who file a re-issue application within two years of issuance to preserve the opportunity to seek broadening reissues for the entire life of the patent.  The ruling has ramifications for retailers at every stage of a case.

Any information about its accused system that a retailer shares with a troll could be used to shape a reissue application — assuming the patent is within the two-year period or that a reissue was sought during the period.  That means that sharing information in settlement discussions without a full-blown Protective Order becomes much more dangerous and complex.  And during litigation, the confidentiality terms of the Protective Order and the prosecution bar become even more critical.  Additionally, checking the patent’s history for any reissue applications must now be a threshold inquiry in almost every case.

Initially, In re Staats makes an already uncertain area more so for retailers trying to simply determine what sort of operations and systems are permissible, and which may be viewed as infringing.  For a retailer hit with a demand letter from a patent troll, confidentiality related to the retailer’s systems, and any information shared with a troll in an attempt to settle without litigation, becomes critical.  Retailers may put themselves at risk if they disclose information in hopes of avoiding suit, only to find a patent troll using the information to broaden claims via reissue later.  Finally, for matters subject to litigation, a prosecution bar extending to the patent troll’s litigation counsel becomes even more important, for the same reasons.