VERSATA SOFTWARE, INC. v. SAP AMERICA, INC.
`Cite as 758 F.Supp.2d 389 (E.D.Tex. 2010)
`
`389
`
`F. Joint and Several Liability
`
`Because Viewpointe was not found to
`infringe, as discussed in Section III.D.,
`above, Viewpointe is not jointly and sever(cid:173)
`ally liable for the jury's finding of damages
`for joint infringement by U.S. Bank and
`Viewpointe. Similarly, Viewpointe is not
`jointly and severally liable for the jury's
`fmding of willfulness. Viewpointe's motion
`should therefore be GRANTED as to joint
`and several liability. This mling applies
`only to Phase I.
`
`G. Release
`
`Viewpointe incorporates in its motion
`the Renewed Motion of the Phase I Defen(cid:173)
`dants for Judgment as a Matter of Law
`that, as a Matter of Judicial Estoppel,
`They Have Been Released from Liability
`to Plaintiff DataTreasury for the Claims
`Tried in Phase I (Dkt. No. 2125). The
`Court resolves this issue by separate Or(cid:173)
`der on that co-pending motion.
`
`VERSATA SOFTWARE, INC., et al.
`
`v.
`
`SAP AMERICA, INC. and SAP, AG.
`
`Case No. 2:07-CV-153-CE.
`
`United States District Court,
`E.D. Texas,
`Marshall Division.
`
`Dec. 21, 2010.
`
`Background: In action for infringement
`of patents directed to product configura(cid:173)
`tion and pricing software, competitor flled
`claim of inequitable conduct.
`
`Holding: The District Court, Charles Ev(cid:173)
`eringham IV, United States Magistrate
`Judge, held that patent owner did not
`intentionally fail to disclose material infor(cid:173)
`mation to Patent and Trademark Office
`(PTO) during prosecution, and thus pat(cid:173)
`ents were not unenforceable for inequita(cid:173)
`ble conduct.
`
`IV. CONCLUSION
`
`Claim denied.
`
`The Renewed Joinder and Motion of
`Viewpointe for Judgment as a Matter of
`Law (Dkt. No. 2124) is hereby GRANTED
`IN PART and DENIED IN PART. Spe(cid:173)
`cifically, Viewpointe's motion is hereby
`GRANTED as to infringement, GRANT(cid:173)
`ED as to willfulness, and GRANTED as to
`joint and several liability. These rulings
`apply only to Phase I. To whatever extent
`not granted herein, Viewpointe's motion is
`hereby DENIED.
`
`IT IS SO ORDERED.
`
`1. Patents e->97.8
`A patent may be rendered unenforce(cid:173)
`able for inequitable conduct if an applicant,
`with intent to mislead or deceive the exam(cid:173)
`iner, fails to disclose material information
`or submits materially false information to
`the PTO during prosecution. 37 C.F.R.
`§ 1.56(a).
`
`2. Patents e->97.13
`A party may show inequitable conduct
`by producing clear and convincing evi(cid:173)
`dence of (1) material prior art, (2) knowl(cid:173)
`edge chargeable to the patent applicant of
`prior art and its materiality, and (3) the
`applicant's failure to disclose the prior art
`to the Patent and Trademark Office (PTO)
`with intent to mislead.
`
`VERSATA EXHIBIT 2062
`SAP v. VERSATA
`CASE CBM2012-00001
`
`

`
`390
`
`758 FEDERAL SUPPLEMENT, 2d SERIES
`
`3. Patents O97.9
`information withheld
`Materiality of
`during patent prosecution, for purposes of
`claim alleging invalidity due to inequitable
`conduct, embraces any information that a
`reasonable examiner would substantially
`likely consider
`important
`in deciding
`whether to allow an application to issue as
`a patent.
`
`4. Patents O97.9
`Information concealed from the Pat-
`ent and Trademark Office (PTO) may be
`material, for purposes of claim alleging
`invalidity due to inequitable conduct, even
`though it would not invalidate the patent.
`
`5. Patents O97.9
`A withheld otherwise material prior
`art reference is not material for the pur-
`poses of inequitable conduct if it is merely
`cumulative to that information considered
`by the examiner.
`
`6. Patents O314(5)
`The scope and content of prior art and
`what the prior art teaches are questions of
`fact.
`
`7. Patents O97.10
`Inequitable conduct requires not in-
`tent to withhold, but rather intent to de-
`ceive patent examiner.
`
`8. Patents O97.13
`Intent to deceive, for purposes of
`claim alleging invalidity due to inequitable
`conduct, cannot be inferred simply from
`patentee’s decision to withhold prior art
`reference from Patent and Trademark Of-
`fice (PTO) examiner where the reasons
`given for the withholding are plausible.
`
`9. Patents O97.13
`A
`finding that particular conduct
`amounts to ‘‘gross negligence’’ does not of
`itself justify an inference of intent to de-
`ceive, for purposes of claim alleging patent
`invalidity due to inequitable conduct; the
`
`involved conduct, viewed in light of all the
`evidence, including evidence indicative of
`good faith, must indicate sufficient culpa-
`bility to require a finding of intent to
`deceive.
`
`10. Patents O97.13
`The party asserting inequitable con-
`duct must prove a threshold level of mate-
`riality and intent by clear and convincing
`evidence.
`
`11. Patents O97.12
`Competitor failed to establish inventor
`of patents directed to product configura-
`tion and pricing software had knowledge of
`details of hierarchical structure employed
`by competitor’s prior art system at time
`inventor submitted his applications to Pat-
`ent and Trademark Office (PTO), as re-
`quired to establish that inventor’s failure
`to disclose competitor’s system to PTO
`during prosecution of his applications con-
`stituted inequitable conduct.
`
`12. Patents O97.9
`Competitor failed to establish its hier-
`archical system for pricing software, as it
`existed prior to filing of inventor’s applica-
`tion for patents directed to product config-
`uration and pricing software, was material
`to patentability of inventor’s invention, as
`required to establish that inventor’s failure
`to disclose competitor’s system to Patent
`and Trademark Office (PTO) during prose-
`cution of his applications constituted ineq-
`uitable conduct.
`
`13. Patents O97.9
`Competitor failed to establish inventor
`of patents directed to product configura-
`tion and pricing software subjectively ap-
`preciated materiality of competitor’s use of
`hierarchies in its pricing software system,
`as required to establish that inventor’s fail-
`ure to disclose competitor’s system to Pat-
`ent and Trademark Office (PTO) during
`
`

`
`VERSATA SOFTWARE, INC. v. SAP AMERICA, INC.
`Cite as 758 F.Supp.2d 389 (E.D.Tex. 2010)
`
`391
`
`prosecution of his applications constituted
`inequitable conduct.
`
`14. Patents O97.12
`to demonstrate
`Competitor
`failed
`what material knowledge the
`inventor
`withheld from Patent and Trademark Of-
`fice (PTO) regarding competitor’s hierar-
`chical system for pricing software at time
`inventor’s application for product configu-
`ration and pricing software was prosecut-
`ed, as required to establish that inventor’s
`failure to disclose competitor’s system to
`PTO constituted inequitable conduct.
`
`15. Patents O97.12
`Competitor failed to establish that in-
`ventor of patents directed to product con-
`figuration and pricing software intentional-
`ly, and with intent to deceive, withheld
`information about competitor’s hierarchical
`system for pricing software from Patent
`and Trademark Office (PTO) during prose-
`cution of his applications, as required to
`establish that inventor’s failure to disclose
`competitor’s system to PTO constituted in-
`equitable conduct.
`
`Patents O328(2)
`5,878,400, 6,553,350. Valid.
`
`Samuel Franklin Baxter, McKool Smith,
`Marshall, TX, Douglas Carleton Edwards,
`Joel Lance Thollander, John Michael Shu-
`maker, Joshua Wright Budwin, Kevin M.
`Kneupper, Laurie Lavigna Fitzgerald, Mi-
`chael Steven Perez, Peter John Ayers,
`Scott Lamar Cole, Steven John Pollinger,
`McKool Smith, James Norman Willi, Willi
`Law Firm, Austin, TX, Theodore Steven-
`son, III, McKool Smith, Dallas, TX, for
`Versata Software, Inc., et al.
`
`Robert William Schroeder, III, Nicholas
`H. Patton, Patton Tidwell & Schroeder,
`LLP, Texarkana, TX, Aaron R. Hand, Ali-
`son L. Maddeford, Lloyd R. Day, Jr., Wil-
`liam P. Nelson, Howrey LLP, East Palo
`Alto, CA, Anna M. Ison, Quinn Emanuel
`Urquhart & Sullivan, Redwood Shores,
`CA, Benjamin Charles Elacqua, Fish &
`Richardson P.C., Houston, TX, David W.
`Price, James R. Batchelder, Lauren N.
`Robinson, Mario Moore, Paul S. Grewal,
`Sriranga Veeraraghavan, Day Casebeer
`Madrid & Batchelder LLP, Susan M.
`Krumplitsch, Victoria Smith, Jonathan D.
`Marshall, Howrey LLP, Cupertino, CA, J
`Michael Jakes, Michael Andre Morin, Fin-
`negan Henderson Farabow Garrett &
`Dunner, Washington, DC, John E. Gart-
`man, John W. Thornburgh, Justin M.
`Barnes, Fish & Richardson, San Diego,
`CA, Justin Kurt Truelove, Truelove Law
`Firm, Marshall, TX, Patricia L. Peden,
`Law Offices of Patricia L. Peden, Emery-
`ville, CA, Robert Christopher Bunt, Rob-
`ert M. Parker, Parker, Bunt & Ainsworth,
`P.C., Tyler, TX, for SAP America, Inc. and
`SAP, AG.
`
`MEMORANDUM OPINION
`AND ORDER
`
`CHARLES EVERINGHAM IV, United
`States Magistrate Judge.
`Before the Court is Defendants SAP
`America, Inc. and SAP, AG’s (‘‘SAP’s’’)
`claim of inequitable conduct. The Court
`conducted a bench trial on April 27, 2010
`on SAP’s claim of inequitable conduct and
`the parties submitted briefing supporting
`their positions prior to the trial. (Dkt.
`Nos. 352, 358, 367, 371). For the following
`reasons, the Court DENIES Defendants’
`claim of inequitable conduct on the 8400
`and 8350 patents.1
`
`1. The patents at issue in SAP’s inequitable
`conduct claim are U.S. Patent Nos. 5,878,400
`
`(‘‘the 8400 patent’’) and 6,553,350 B2 (‘‘the
`8350 patent’’). Both list Thomas J. Carter as
`
`

`
`392
`
`758 FEDERAL SUPPLEMENT, 2d SERIES
`
`I. BACKGROUND
`Trial in this case occurred between Au-
`gust 17–26, 2009 on patent infringement
`claims raised by Plaintiffs 2 against SAP
`based on the 8400 and 8350 patents. The
`jury returned a verdict that SAP directly
`infringed claims 26, 28, and 29 of the 8350
`patent, induced and contributed to in-
`fringement of claim 29 of the 8350 patent,
`and directly infringed claims 31, 35, and 36
`of the 8400 patent. (Dkt. No. 318). SAP
`raised an invalidity issue, alleging that the
`asserted claims of the 8400 and 8350 pat-
`ents are invalid for failure to disclose the
`inventor’s best mode, but the jury found
`SAP failed to prove its contention by clear
`and convincing evidence. The Jury award-
`ed $138,641,000.00 in damages. After the
`jury trial, the parties submitted briefing
`on SAP’s claims of inequitable conduct and
`the Court conducted a bench trial on April
`27, 2010.
`
`II. LEGAL STANDARDS
`[1, 2]
`‘‘A patent may be rendered un-
`enforceable for inequitable conduct if an
`applicant, with intent to mislead or deceive
`the examiner, fails to disclose material in-
`formation or submits materially false infor-
`mation to the PTO during prosecution.’’
`Digital Control, Inc. v. Charles Mach.
`Works, 437 F.3d 1309, 1313 (Fed.Cir.2006);
`see also 37 C.F.R. § 1.56(a) (‘‘Each individ-
`ual associated with the filing and prosecu-
`tion of a patent application has a duty of
`candor and good faith in dealing with the
`Office, which includes a duty to disclose to
`
`the inventor and share a common specifica-
`tion.
`
`2. Plaintiffs in this case include Versata Soft-
`ware, Inc., f/k/a Trilogy Software, Inc., Ver-
`sata Development Group, Inc., f/k/a Trilogy
`Development Group, Inc., and Versata Com-
`puter Industry Solutions, Inc., f/k/a Trilogy
`Computer Industry Solutions, Inc. The Court
`will refer to these entities collectively as
`‘‘Versata.’’
`
`the Office all information known to that
`individual to be material to patentability as
`defined in this section.’’). Thus, ‘‘[a] party
`may show inequitable conduct by produc-
`ing clear and convincing evidence of (1)
`material prior art, (2) knowledge charge-
`able to the patent applicant of prior art
`and its materiality, and (3) the applicant’s
`failure to disclose the prior art to the PTO
`with intent to mislead.’’ Avid Identifica-
`tion Systems, Inc. v. Crystal Import Corp.,
`603 F.3d 967, 972 (Fed.Cir.2010).3
`
`[3–9] The materiality of information
`withheld during prosecution may be
`judged by the ‘‘reasonable examiner’’ stan-
`dard. See Digital Control, 437 F.3d at
`1316. That is, ‘‘[m]ateriality TTT embraces
`any information that a reasonable examin-
`er would substantially likely consider im-
`portant in deciding whether to allow an
`application to issue as a patent.’’ Akron
`Polymer Container Corp. v. Exxel Con-
`tainer, Inc., 148 F.3d 1380, 1382 (Fed.Cir.
`1998) (citations omitted); see Avid, 603
`F.3d at 972.
` Moreover,
`‘‘[i]nformation
`concealed from the PTO may be material
`even though it would not invalidate the
`patent.’’ Li Second Family Ltd. Partner-
`ship v. Toshiba Corp., 231 F.3d 1373, 1380
`(Fed.Cir.2000). ‘‘However, a withheld oth-
`erwise material prior art reference is not
`material for the purposes of inequitable
`conduct if it is merely cumulative to that
`information considered by the examiner.’’
`Digital Control, 437 F.3d at 1319. ‘‘[T]he
`scope and content of prior art and what
`
`3. The Federal Circuit has recently signaled
`that it may modify or clarify the standards on
`inequitable conduct, including whether the
`standard should be tied to fraud or unclean
`hands, the appropriate standard for materiali-
`ty, and when it is proper to infer intent from
`materiality. See Therasense, Inc. v. Becton,
`Dickinson and Co., 374 Fed.Appx. 35 (Fed.
`Cir.2010).
`
`

`
`VERSATA SOFTWARE, INC. v. SAP AMERICA, INC.
`Cite as 758 F.Supp.2d 389 (E.D.Tex. 2010)
`
`393
`
`the prior art teaches are questions of fact.’’
`Id.
`‘‘[T]he facts in inequitable conduct
`cases rarely, if ever, include direct evi-
`dence of admitted deceitful conduct.’’ Ak-
`ron Polymer, 148 F.3d at 1384. ‘‘The in-
`tent element of the offense is thus in the
`main proven by inferences drawn from
`facts, with the collection of inferences per-
`mitting a confident judgment that deceit
`has occurred.’’ Id. ‘‘However, inequitable
`conduct requires not intent to withhold,
`but rather intent to deceive. Intent to
`deceive cannot be inferred simply from the
`decision to withhold the reference where
`the reasons given for the withholding are
`plausible.’’ Dayco Products, Inc. v. Total
`Containment, Inc., 329 F.3d 1358, 1367
`(Fed.Cir.2003).
` In addition,
`‘‘a finding
`that particular conduct amounts to ‘gross
`negligence’ does not of itself justify an
`inference of intent to deceive; the involved
`conduct, viewed in light of all the evidence,
`including evidence indicative of good faith,
`must indicate sufficient culpability to re-
`quire a finding of
`intent to deceive.’’
`Kingsdown Med. Consultants, Ltd. v. Hol-
`lister Inc., 863 F.2d 867, 876 (Fed.Cir.
`1988) (en banc in relevant part).
`
`[10]
`‘‘The party asserting inequitable
`conduct must prove a threshold level of
`materiality and intent by clear and con-
`vincing evidence.’’ Digital Control, 437
`F.3d at 1313. ‘‘Only after adequate show-
`ings are made as to both materiality and
`deceptive intent may the district court look
`to the equities by weighing the facts un-
`derlying those showings.’’ Star Scientific,
`Inc. v. R.J. Reynolds Tobacco Co., et al.,
`537 F.3d 1357, 1367 (Fed.Cir.2008). ‘‘The
`court must then determine whether the
`questioned conduct amounts to inequitable
`conduct by balancing the levels of materi-
`ality and intent, ‘with a greater showing of
`one factor allowing a lesser showing of the
`other.’ ’’ Digital Control, 437 F.3d at 1313
`(quoting Union Pac. Res. Co. v. Chesa-
`
`peake Energy Corp., 236 F.3d 684, 693
`(Fed.Cir.2001)).
`
`III. DISCUSSION
`
`A. Factual Background
`In April 2007, Versata initiated this liti-
`gation by asserting the 8400 and 8350 pat-
`ents (among others) against SAP. During
`the course of litigation, SAP discovered
`that the inventor of the 8400 and 8350
`patents, Thomas Carter, was familiar with
`SAP’s R/3 2.2 product at the time the
`application that led to the 8400 and 8350
`patents was filed. Specifically, Mr. Carter
`was studying R/3 2.2 to make a ‘‘bridge’’ to
`allow conversion of customer pricing infor-
`mation from R/3 2.2 to Versata’s pricing
`program. Mr. Carter’s work, which oc-
`curred prior to and contemporaneously
`with the filing of his patent application,
`involved exporting the pricing information
`from SAP’s systems as a ‘‘flat file’’ and
`then reading that information into his sys-
`tem. For different customers who used
`different features in their SAP pricing sys-
`tem, Mr. Carter had to expand his
`‘‘bridge’’ to cover a wider range of fea-
`tures. Trilogy did not have access to its
`own SAP installation, but instead had to
`use an installation owned by another com-
`pany called ICS.
`In the specification of his application,
`Mr. Carter described a hierarchical access
`system and explained that the R/3 system
`lacked that feature.
` Additionally, Mr.
`Carter explained that the prior art R/3
`system lacked ‘‘denormalized tables.’’ The
`hierarchical access system was fundamen-
`tal to the invention, as it allowed the re-
`trieval of pricing information with far few-
`er accesses and a much smaller system of
`tables. As a result, pricing quotes could
`be generated at a customer site using a
`laptop computer rather than at the central
`office using a mainframe computer. Nei-
`ther R/3 nor any other prior art pricing
`
`

`
`394
`
`758 FEDERAL SUPPLEMENT, 2d SERIES
`
`system allowed the efficient access of hier-
`archical customer and product pricing in-
`formation.
`During prosecution, the examiner found
`several references where customer and/or
`product hierarchies were used in pricing
`applications. Mr. Carter distinguished his
`invention over the prior art, in part, by
`describing how his invention employed and
`accessed hierarchies of product and cus-
`tomer groups. Among those references
`was an article by Mark Parenti that dis-
`closes a software package that employs
`‘‘hierarchies’’ of item and customer dis-
`counts to determine pricing. According to
`Defendants’ expert, the techniques de-
`scribed in Parenti are similar to those used
`by the prior art R/3 system to determine
`pricing.
`
`B. SAP’s Inequitable Conduct Claim
`To prevail on its claim of inequitable
`conduct, SAP must prove by clear and
`convincing evidence that Mr. Carter knew
`of the hierarchical structure employed by
`SAP’s prior art R/3 system at the time
`that he made representations to the patent
`office and subjectively appreciated the ma-
`teriality of this information. Additionally,
`SAP must prove that R/3’s system is not
`cumulative of the art of record, and that
`Mr. Carter subjectively appreciated that
`R/3 was not cumulative. Further, SAP
`must prove that Mr. Carter intentionally
`decided to withhold information about R/3
`from the patent office for the specific pur-
`pose of deceiving it.
`1. Mr. Carter’s Knowledge
`of SAP’s R/3 2.2
`[11] SAP relies on five documents and
`Mr. Carter’s attempt to
`‘‘bridge’’ SAP
`pricing data into SC Pricer pricing data to
`prove Mr. Carter had knowledge of SAP’s
`use of hierarchies in pricing at the time
`the patent was filed. These documents
`and Mr. Carter’s testimony on his ‘‘bridge’’
`
`between SC Pricer and SAP’s R/3 do not
`support such a conclusion.
`
`The first document SAP relies on is an
`overview of SAP pricing prepared by ICS
`for use in converting SAP pricing data.
`(Dkt. No. 352–19). The record indicates
`ICS provided this document to Mr. Carter
`in August of 1995. The document shows a
`graphic of an SAP screen where conditions
`HI01 and HI02, named ‘‘hierarchy’’ and
`‘‘hierarchie/material’’ are available but un-
`used. The document makes no other ref-
`erence to hierarchies or these condition
`fields. The document contains a table con-
`templating future features to add to the
`interface product, and no mention is made
`of hierarchies. This document, containing
`only the words ‘‘hierarchy’’ and ‘‘hierar-
`chie,’’ without any context, cannot support
`SAP’s assertion that Mr. Carter had de-
`tailed knowledge of product or customer
`group hierarchies in R/3.
`
`The second document SAP relies on is a
`‘‘price scenario specification’’ prepared by
`ICS for Versata’s SAP interface product in
`or around April of 1996. (Dkt. No. 352–
`22). This document indicates that SAP’s
`pricing database utilized two fields corre-
`sponding with the HI01 and HI02 condi-
`tions. Despite the names of these fields,
`their existence in R/3 did not denote the
`existence of product or group hierarchies.
`The HI01 and HI02 fields could be used as
`conditions in pricing, but, according to the
`document, were arbitrary fields and did
`not create or represent actual hierarchies.
`(Dkt. No. 352–22, p. 7). Merely using the
`word ‘‘hierarchy’’ to name a field in a
`database does not create product and cus-
`tomer group hierarchies. This document
`thus cannot support SAP’s assertion that
`Mr. Carter had detailed knowledge of
`product or customer group hierarchies in
`R/3.
`
`

`
`VERSATA SOFTWARE, INC. v. SAP AMERICA, INC.
`Cite as 758 F.Supp.2d 389 (E.D.Tex. 2010)
`
`395
`
`The third document SAP relies on is an
`undated spreadsheet generated by Mr.
`Carter at some time in 1996. (Dkt. No.
`352–24). The second page of the docu-
`ment indicates that Mr. Carter was aware
`of some hierarchy techniques SAP’s cus-
`tomers used in R/3, but did not yet know
`how to address them. Id. at 3. Contrary
`to SAP’s assertion that Mr. Carter had
`sufficient knowledge to determine the ma-
`teriality of R/3’s use of hierarchies, this
`document indicates he was still grappling
`with how R/3’s hierarchy implementation
`worked and how to convert a simple three
`level product hierarchy to his SC Pricer
`system. This document thus cannot sup-
`port SAP’s assertion that Mr. Carter had
`detailed knowledge of product or customer
`group hierarchies in R/3.
`
`The fourth document SAP relies on is
`an email chain containing an email from
`Sameer Dholakia to Bryan Rollins and
`Mr. Carter sent in February of 1996.
`(Dkt. No. 352–25). This document indi-
`cates that it was receiving conflicting in-
`formation from its customers regarding
`the capabilities of SAP’s R/3. This docu-
`ment evidences a lack of knowledge of
`SAP’s treatment of product or customer
`group hierarchies in R/3 at Versata during
`the period in question.
`
`The fifth document SAP relies on is an
`email that appears to be from an SAP user
`group mailing list. (Dkt. No. 352–26, p.
`38). While the document discusses hier-
`archies, it discloses no hierarchy function-
`ality in R/3. Rather, it discloses a work-
`around for the lack of hierarchy functional-
`ity in R/3. The user here must enter data
`containing the hierarchy information in a
`separate field then use special database
`commands to select groups by performing
`operations on that field. This document
`thus cannot evidence knowledge of product
`and customer group hierarchies in R/3.
`
`At the bench trial on inequitable con-
`duct, the Court heard testimony that Mr.
`Carter used a ‘‘flat file’’ generated from
`SAP’s R/3 pricing by a third party. While
`SAP claims the data in its R/3 system was
`being organized in a hierarchy, the data
`Mr. Carter dealt with was not organized in
`a hierarchy. Mr. Carter knew enough of
`the function of SAP’s R/3 2.2 to read data
`out of a flat file and into his own data
`structure and then reproduce a compatible
`flat file to read back into the R/3 system.
`Mr. Carter was not attempting to reverse
`engineer SAP’s system, and the record
`does not suggest that he had complete
`knowledge of SAP’s inner workings. At
`trial, Mr. Carter also explained that he
`was implementing new functionality into
`his ‘‘bridge’’ program as new customers
`required different SAP fields be converted
`into SC Pricer. His conversion program
`was piecemeal, and SAP presented no evi-
`dence that Mr. Carter successfully trans-
`lated the ‘‘hierarchy’’ fields of the R/3 flat
`file into a hierarchical structure within SC
`Pricer.
`Although Mr. Carter unquestionably
`knew of R/3 2.2, and knew its records
`could contain fields called ‘‘hierarchies,’’
`SAP has failed to produce sufficient evi-
`dence to show that Mr. Carter knew the
`details of R/3’s alleged hierarchical struc-
`ture sufficient to distinguish it from hierar-
`chical structures described in the art of
`record. Further, the evidence indicates
`that Mr. Carter believed the pricing tables
`used by SAP grew exponentially with the
`number of features offered and required a
`mainframe computer for operation. Be-
`cause his pricing system did not suffer
`from those limitations, he reasonably be-
`lieved it differed in structure from SAP’s
`R/3 2.2. The evidence at trial revealed
`that SAP changed its system and adopted
`the hierarchical access feature described in
`the patents in 1998, well after the priority
`date of the 8400 and 8350 patents. Accord-
`
`

`
`396
`
`758 FEDERAL SUPPLEMENT, 2d SERIES
`
`ingly, the Court finds it unlikely that Mr.
`Carter possessed knowledge of hierarchies
`in the R/3 2.2 system sufficient to make
`the detailed disclosure to the patent office
`that SAP claims would have been proper.
`2. Materiality of R/3 2.2
`[12] SAP has failed to show that its
`R/3 2.2 system, as it existed prior to the
`filing of application to which the 8350 and
`8400 patents claim priority, was material to
`patentability. While the R/3 system was a
`pricing software system that used hier-
`archies of customer and product groups,
`the Parenti reference also disclosed a pric-
`ing software system that used hierarchies
`of customer and product groups. SAP
`contends that Parenti makes no such dis-
`closure, but clearly misreads the reference.
`Parenti discloses the use of hierarchies for
`customer, item, and linked customer-item
`pricing and discounts. (Dkt. No. 358–55,
`p. 3). The description of the Parenti sys-
`tem closely follows the background section
`of the 8400 and 8350 patents, as well as the
`vivid description at trial of customer issues
`with SAP’s R/3 2.2 system that were ad-
`dressed by the improvements offered by
`SC Pricer during the time period when the
`patents-in-suit were filed and prosecuted.
`See 8/17/2009 Dholakia PM Tr. 105:24–
`116:19, Dkt. No. 331. SAP has failed to
`support its contention that its R/3 system
`would have been material to patentability,
`has offered no expert testimony on the
`materiality of R/3 over Parenti, and did
`not assert any theories of invalidity at trial
`that used its prior art R/3 system as a
`reference for either anticipation or obvi-
`ousness.
`
`3. Mr. Carter’s Subjective Apprecia-
`tion of the Materiality of SAP’s
`use of Hierarchies
`[13] SAP’s use of pricing hierarchies,
`or at least what Mr. Carter knew of it, was
`cumulative of Parenti. SAP claims Paren-
`
`ti’s disclosure of hierarchies is limited by
`its relatively sparse description of its im-
`plementation of hierarchies, but SAP has
`failed to demonstrate to the Court that its
`own use of hierarchies was any more rele-
`vant to the claims at issue. Additionally,
`even if SAP’s R/3 had more sophisticated
`hierarchy functionality than that contem-
`plated by Parenti, SAP has failed to dem-
`onstrate that Mr. Carter knew of that
`more sophisticated functionality. At best,
`SAP has established that Mr. Carter could
`have known that SAP used hierarchies,
`which is exactly what Parenti disclosed.
`Additionally, SAP, with the benefit of
`complete knowledge of the prior art R/3
`system, hindsight and incentive to invali-
`date, did not assert its prior art R/3 2.2
`system against the 8400 or 8350 patents.
`If R/3 system were non-cumulative and
`material to patentability, the Court would
`expect SAP to argue for invalidity by an-
`ticipation and obviousness. Instead, SAP
`made no summary judgment challenge to
`the validity of the 8400 or 8350 patents and
`only advanced a best mode attack at trial.
`When the stakes were highest, SAP did
`not believe its prior art system was mate-
`rial to patentability. If SAP, with com-
`plete knowledge of its prior art system,
`hindsight, and incentive to find anticipato-
`ry references did not deem its system
`material to the validity of the 8400 or 8350
`patents, Mr. Carter, with very little infor-
`mation about R/3, could not be expected to
`appreciate
`the possible materiality of
`SAP’s system over the similar systems
`asserted by the patent office.
`4. Mr. Carter’s Withholding
`of Information
`[14] SAP has also failed to demon-
`strate what material knowledge Mr. Car-
`ter had of R/3 that he withheld. Product
`and customer groups in software pricing
`applications was already part of the art of
`record through Parenti, so to prevail, SAP
`
`

`
`VERSATA SOFTWARE, INC. v. SAP AMERICA, INC.
`Cite as 758 F.Supp.2d 389 (E.D.Tex. 2010)
`
`397
`
`must produce evidence of some other
`knowledge of R/3 that Mr. Carter pos-
`sessed and withheld that was material to
`patentability. SAP has provided no such
`evidence, and merely asserted that prior
`art R/3 is more similar to the claims than
`Parenti. The Court finds this argument
`unpersuasive.
`SAP also asserts that Mr. Carter’s dis-
`closure of R/3 in the specification of his
`patent application was part of a carefully
`crafted scheme to conceal R/3 from the
`patent office. The Court finds this argu-
`ment similarly unavailing. Mr. Carter dis-
`closed R/3 in the background section of his
`patent application in characterizing prior
`art pricing architectures, and SAP does
`not dispute any of the characterizations
`made there. SAP claims Mr. Carter knew
`of hierarchies in R/3, but has failed to
`demonstrate that he knew any more of
`SAP’s hierarchies than was disclosed by
`Parenti and the patent application. The
`notion that Mr. Carter, who the evidence
`shows was struggling to understand and
`‘‘bridge’’ data to and from R/3, anticipated
`the rejections at issue, understood some as
`yet undisclosed distinction between R/3
`and the art that would later be asserted by
`the patent office and conspired with his
`attorney to conceal that distinction strains
`credibility.
`SAP has failed to provide a document
`that Mr. Carter possessed that he should
`have disclosed, and what evidence SAP has
`produced regarding Mr. Carter’s knowl-
`edge of hierarchies in R/3 does not provide
`sufficient detail for meaningful disclosure
`to the patent office. Mr. Carter was work-
`ing to understand SAP’s data without the
`assistance of SAP, without direct access to
`an SAP system, and without any SAP doc-
`umentation. Given that product and cus-
`tomer group hierarchies in a software pric-
`ing application are already in the art of
`record through Parenti, SAP must produce
`
`some evidence of knowledge of SAP’s R/3
`that Mr. Carter withheld beyond the mere
`existence of a database field titled ‘‘hier-
`archies’’ in SAP’s pricing system. SAP
`has failed to do so.
`
`5. Deceptive Intent
`
`[15] SAP offers no evidence of decep-
`tive intent by Mr. Carter, but asks the
`Court to infer deceptive intent from his
`actions. The Court finds no suggestion of
`deception from any of the actions SAP
`complains about. The far more likely in-
`ference, based on the record, is that Mr.
`Carter lacked the knowledge of SAP’s R/3
`system to distinguish it over Parenti, un-
`derstand that it may be material to patent-
`ability, and intelligently disclose it to the
`patent office.
`
`The next most likely inference, based on
`the record, is that Mr. Carter failed to
`remember what he did know of hierarchies
`in SAP’s R/3 system. The record indicates
`that hierarchies in SAP’s pricing system
`were at best a minor part of Mr. Carter’s
`bridge project. SAP could produce only a
`handful of documents that mentioned hier-
`archies in SAP over the year surrounding
`Mr. Carter’s application date, and only one
`that addressed hierarchies in any detail.
`SAP’s evidence indicates that bridging the
`hierarchy data was not a priority and Mr.
`Carter’s notes indicate that he likely did
`not understand how SAP’s hierarchies
`were implemented, if they were hierarch-
`ies at all. One of the documents SAP
`advances as evidence of Mr. Carter’s
`knowledge, received after the filing date of
`Mr. Carter’s application, is a forward of a
`mailing list response suggesting a worka-
`round for the lack of hierarchy functionali-
`ty in SAP. If Mr. Carter knew of hier-
`archies in SAP’s pricing functionality, any
`failure to disclose that to the patent office
`was more likely the result of innocent ne-
`glect than deceptive intent.
`
`

`
`398
`
`758 FEDERAL SUPPLEMENT, 2d SERIES
`
`IV. CONCLUSION
`Having found that SAP has not met its
`burden of proving inequitable conduct by
`clear and convincing evidence, the Court
`concludes that Versata did not commit in-
`equitable conduct toward the PTO. The
`court therefore finds that the 8400 and 8350
`patents are enforceable and DENIES
`SAP’s affirmative defense and counter-
`claim of inequitable conduct.
`
`,
`
`
`
`
`
`Eugene BLACKMON, Plaintiff,
`
`v.
`KUKUA, et al., Defendants.
`
`Civil Action No. C–08–273.
`
`United States District Court,
`S.D. Texas,
`Corpus Christi Division.
`
`Dec. 2, 2010.
`Background: State prisoner brought civil
`rights action against prison officials, alleg-
`ing his exposure to excessive heat violated
`his Eighth Amendment rights. Defendants
`moved for summary judgment.
`Holdings: The District Court, Janis Gra-
`ham Jack, J., held that:
`(1) prisoner’s claim for injunctive relief
`was moot;
`(2) genuine issue of material fact as to
`whether conditions during prisoner’s
`incarceration constituted a denial of
`the minimal civilized measure of life’s
`ne