Ropes & Gray Secures Key Federal Circuit Ruling for RouteOne in Patent Litigation

A Ropes & Gray team has secured a key Federal Circuit ruling for client RouteOne in its prolonged eight-year patent litigation with DealerTrack over a computer-aided system that facilitates financing transactions between car dealers and lenders. On January 20, the Federal Circuit affirmed a 2009 summary judgment ruling by U.S. District Judge Andrew Guilford of the Central District of California, which held that DealerTrack’s ’427 patent was invalid due to a failure to claim patentable subject matter under the Bilski standard.

The Federal Circuit disagreed with DealerTrack’s primary argument that the “computer-aided” limitation in the preamble sufficiently limited the claims to an application of the idea. The Court stated that “[n]either DealerTrack nor any other entity is entitled to wholly preempt the clearinghouse concept.” “The ruling marks the first Federal Circuit decision to invalidate under Bilski a patent claim which expressly recites the use of a computer to perform the claimed method,” said Laurence S. Rogers, a partner in Ropes & Gray’s Intellectual Property Group who led the winning team.

RouteOne, of Farmington Hills, Michigan, operates a web-based credit application management system used by automotive dealers to send buyers’ credit applications to banks and other finance sources. RouteOne was established by the financing arms of Ford Motor Company, Toyota, General Motors and Chrysler. The patent case dates back to January 2004 when DealerTrack sued RouteOne in New York for the alleged infringement of two patents. In 2006, DealerTrack re-filed the suit in California, adding a third patent and defendant Finance Express. DealerTrack was seeking damages in excess of $70 million.

In October 2008, Ropes & Gray secured two summary judgment wins with respect to two of the patents at issue (the court held the asserted claims of one patent invalid and found that RouteOne had not infringed a second patent). Then in July 2009, Judge Guilford granted summary judgment in favor of RouteOne concerning DealterTrack’s third patent (the ’427 patent). The district court’s July 2009 ruling was one of the first cases in which a federal court had invalidated a patent claim based on the “machine” prong of the “machine-or-transformation” test of Bilski.

In addition to holding the ’427 patent invalid, the Federal Circuit also made several rulings with respect to DealerTrack’s ’841 patent. The appeals court reversed the lower court’s ruling that denied RouteOne’s motion for summary judgment with respect to three “means-plus-function” claims. The Federal Circuit agreed with RouteOne that those three claims were invalid for failure of the patent to disclose any computer algorithm structure for implementing the claimed means. The Court also vacated the district court’s summary judgment ruling of noninfringement with respect to the remaining four claims based on claim construction, and remanded the infringement question back to the district court.

New York IP litigation partner Laurence S. Rogers led the Ropes & Gray team on the appeal.