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Case Summary

BRITISH TELECOMMUNICATIONS PLC v. PRODIGY COMMUNICATIONS CORPORATION
Court	United States District Court for the Southern District of New York
Full case name	BRITISH TELECOMMUNICATIONS PLC, Plaintiff v. PRODIGY COMMUNICATIONS CORPORATION, Defendant
Decided	August 22, 2002
Citations	189 F.Supp.2d 101 (2002), 217 F.Supp.2d 399 (2002).
Court membership
Judge sitting	Colleen McMahon

British Telecom sued Prodigy Communications Corporation ("Prodigy"), the eldest Internet Service Provider (ISP) in the U.S.A, for patent infringement on December 13, 2000 with so called the Sargent Patent (U.S. patent 4,873,662 ) that it believed covered the hyperlink technology, which is one of the building block of the World Wide Web. Prodigy submitted a motion for summary judgement arguing that neither it does not infringe the Sargent patent nor the Sargent patent itself is valid. To resolve this case, US District court conducted through analysis on terms specified in claims of the Sargent patent and analyzed if the patent covers the hyperlink technology. The court decided that there are no disputed issues of material fact in this case, since the Sargent patent is by no means the same as internet and Web-based technology, and, therefore, granted Prodigy's request for summary judgement. British Telecom lost this case.

Background

Factual background

British Telecommunications Plc ("British Telecom" or "BT") is one of the largest global telecommunications service companies headquartered in London, United Kingdom and has operations in more than 170 countries. It is the world' oldest telecommunication company whose origins date back to 1850s when the first commercial telecommunication services companies in U.K were merged and branded as British Telecommunications as a part of the General Post Office. Now, British Telecommunications plc (BT) is a wholly owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group. Among 4 largest divisions of BT group are BT Retail, BT Wholesale,Openreach, and BT Global Services, each of which provides services to satisfy the needs of different customers - the individual, the small business or the multinational corporation.

The Sargent Patent (U.S. Patent 4,873,662 ) was granted by USPTO in 1977, after going through 13-years-long prosecution history. It describes a system in which multiple users, each located at a remote terminal, can have access to data stored at a central computer. A user at a remote terminal can access information stored in central computer via telephone network. Information is stored and transmitted in form of blocks, where each block is comprised of two parts: first portion includes information that is for display, second, not intended for display, contains the complete addresses of other blocks of information that are linked to the current display page.

Prodigy Communications Corporation ("Prodigy") is a Internet Service Provider company ("ISP") originally headquartered in New York until 2000, and now in Texas. Prodigy was founded on February 13, 1984 as a joint venture between broadcaster CBS, computer manufacturer IBM, and retailer Sears, Roebuck and Company. At the early stage of its business, it pioneered Internet Portal (Web Portal) - a single site offering news, weather, sports, communication with other members mostly via email and so on. As the emergence of the Internet and the World Wide Web threatened to leave Prodigy behind, however, Prodigy turned its direction to be the first of the early-generation dialup services to offer full access to the World Wide Web and to offer Web page hosting to its members in 1994. Two years later, the company retooled itself as a true ISP, making its main offering Internet access branded as Prodigy Internet. By 1990 it was the second-largest online service provider, with 465,000 subscribers trailing only CompuServe's 600,000.

Procedural background

In June 2000, BT sent letters to Prodigy and 16 other Internet Service Providers, asking them to pay licensing fee for BT's hyperlink patent. All of them refused BT's suggestion. As licensing the Sargent patent became impossible, in December 2000, BT sued Prodigy for patent infringement to the United States District Court, S.D. New York.BT's such action surprised many people working in internet service sectors as well as internet users, because internet service providers and users were expected to pay significant amount of royalties to BT if it won the lawsuit. Opponents of BT expressed concerns that there are too many problems in BT's patent to be a threat. They also urged that the patent had never been valid, due to prior art by both Douglas Engelbart and Ted Nelson's Project Xanadu. However, BT continued to argue that not only Prodigy had directly infringed the Sargent patent, but also it had contributed for internet service users to indirectly infringe BT's patent and even actively induced users to do that.

To determine whether Prodigy indeed infringe BT's Sargent Patent, the court separated the patent trials into two phases: Markman hearing constitutes the first phase, and the actual infringement analysis follows. Markman hearing is a commonly used procedure in which the proper construction of disputed terms are determined. After the opinion and order following Markman hearing on 13 March, 2002, the court conducted the actual infringement analysis.

Court decision

Markman hearing: Patent claim analysis

Simply, Markman hearing is a process putting the complicated words of the patent claim into plain English to clarify facts upon which infringement and invalidity analysis should significantly hinge. Since British Telecom filed suit against Prodigy for patent infringement on December 2000, BT reduced the number of asserted claims from seven to five on June 22, 2001, and then from five to four on January 18, 2002. Thus, the court conducted Markman hearing only on the claim 3,5,6 and 7 of the Sargent patent.

To briefly introduce the clarified terms through Markman hearing that stand at the core of disputes in the infringement analysis, the court confirmed that the central computer means is a central computer fixed in one location at which every available information that users at remote terminal can have access to is stored.

Also, the meaning of the term regarding blocks of information was clarified. Each block has the first portion and the second portion, where these portions are separable, contiguous, and co-stored sub units.That means that the portions are stored together, and they are stored next to each other, yet they can be separated from each other. The first portion include information component that is intended for display, while the second portion contains the complete address for each of the other blocks of information referenced in the first portion and other information to influence the display or reduce the complexity of communication.

Lastly, the court concluded that the complete address that the second portion of a block of information includes should be a physical, non-virtual address from which the next requested blocks of information are called up without reference to other information.

(I hereby summarize three main disputed terms in the Sargent patent claims that are directly relevant to the infringement analysis. You can reference the Markman hearing in this case if you are interested in the overall clarifying process.)

Patent infringement analysis

Does internet have a central Computer?

The district court said that the internet service Prodigy provides does not infringe the Sargent patent, because internet has no "central computer". Unlike the way described in the Sargent patent that requested information is all stored in a hub called central computer and is sent from central computer to a remote terminal, internet is a network system by which different computer are linked together so that one can find desired information from any other computers it is connected to. In other words, the way internet works is just the opposite of a digital information storage system having a central computer.

Does internet contain "blocks of information?"

The court found no evidence that internet contains blocks of information in which information is separated into two separable portions. HTML code is a primary language of World Wide Web and of the Prodigy internet service. As one can see in the following example of HTML code suggested by the court, HTML code does not use blocks.

document.write (HTML Cache-Array[34]; target=' —top'>Yahoo! profits meet forecasts

Rather, each URL address adjacent to each image or phase for display. In other words, the 'first portion' solely for display and the 'second portion' intended to provide address are intermingled here. Therefore, internet does not transmit information as the Sargent patent describes.

Does Prodigy's Web service include "complete addresses?"

Again, the court judged in favor of Prodigy, saying that Prodigy internet service does not include the complete address. Uniform Resources Locator Standard ( "URL") that uniquely name the location of resources require additional information to in order to pull up a web page from web server. More specifically, when a user requests a information, web browser the user is using first obtains the IP address of the server where the corresponding information resides and then accesses to the external DNS server to get the desired information. Thus, the way internet find the location of requested information is not complete as specified in the Sargent patent.

Holdings

To summarize, the court found three problems from BT's arguments. First, internet itself does not infringe the Sargent patent, because internet has no "central computer." Since Prodigy does not directly infringe BT's patent, Prodigy cannot be liable for contributory infringement and active inducement as well. Second, the web pages stored in Prodigy's web server contain neither "blocks of information" nor "complete addresses", which is another reason BT's argument fails.

In conclusion, the court judged that there are no disputed issues of material facts, since the Sargent patent is by no means the same as the Web technology use by Internet Service Providers including Prodigy. Thus, the court granted Prodigy's motion for summary judgement that Prodigy didn't infringe BT's patent.

See also

Lando, Peter R. "Business Method Patents: Update Post State Street". Texas Intellectual Property Law Journal. 9 Tex. Intell. Prop. L. J. 403 (2000-2001).

Easton, Eric B. (Spring,2001). "ARTICLE: Current Developments in Cyberspace". University of Baltimore Intellectual Property Law Journal. {{cite web}}: Check date values in: |date= (help)