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Leader’s Patent Claims Invalidated in Lawsuit Against Facebook

In 2008, Leader Technologies,Inc. (“Leader”) sued Facebook, Inc. (“Facebook”) in the U.S. Federal District Court in Delaware, alleging infringement of certain claims contained in U.S. Patent 7,139,761 (“Patent ‘761”), filed on December 10, 2003.  Leader is a computer software company whose main product, called Leader2Leader, allows users on a network to communicate and collaborate by managing data, using metadata, on a large scale through “boards” that are accessible through an Internet browser and appear as a webpage.  Leader alleges this software is covered by the ‘761 Patent.

The District Court’s jury found that Leader made public use of and offered for sale the claimed invention more than one year before the priority date (i.e. before December 10, 2002), and concluded that the claims asserted in the suit were invalid.  The District Court upheld the jury’s decision, and Leader appealed the decision to the U.S. Court of Appeals for the Federal Circuit.  The central issue in the appeal was whether Leader2Leader, which was publicly used and on sale prior to December 10, 2002, contained the technology described in the asserted claims, thereby invalidating those claims.

Facebook presented evidence showing that Leader showed Leader2Leader to various prospective clients at least as early as January 2002, making representations that the software was “fully developed” and “flawless.”  Facebook put Leader’s founder, Michael McKibben, on the stand during trial, who testified that “he ’vividly remember[ed]’ that the patented technology was not incorporated into the Leader2Leader® product ‘until days before’ the December11, 2002 filing of the provisional patent application.”  This testimony was “inconsistent,” however, with testimony McKibben gave in a deposition held before trial where he said, “[t]hat was a long time ago.  I – I can’t point back to a specific point.”  The District Court found that these representations sufficiently showed that Leader2Leader incorporated the asserted technology at the time it was offered for sale.

In the appeal, Leader argued that Facebook did not offer any evidence to prove that Leader2Leader actually contained the asserted invention at the time it was offered for sale.  Thus, Leader argued, Facebook failed as a matter of law to prove invalidity by clear and convincing evidence.  Facebook responded that the finding of the District Court was proper because the evidence presented, as a whole, was sufficient to make this conclusion.

The Federal Circuit agreed with Facebook’s argument, finding “Leader fails to point to any contemporaneous evidence in the record that indicates that the Leader2Leader® . . . engine that existed prior to the critical date was substantively different from the post-critical date software; indeed the evidence points in the opposite direction.”  The Federal Circuit upheld the District Court findings, and Leader’s claims were deemed invalid.

It is very important that a software developer fully document the chronological history of the development and marketing of its software.   Failing to do so can lead to a very costly loss of intellectual property rights, as Leader suffered here.  Even more importantly, make sure your organization talks with an attorney before marketing your product for sale to make sure that your marketing attempts don’t start the clock on statutory bars to patentability.

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