Retailers cheer end of patent challenge

Online software retailers are celebrating the dismissal of a patent infringement lawsuit that challenged companies who sell software that can be downloaded over the Internet.

Connecticut-based E-Data agreed to drop the suit last month, nearly a year after suffering a stinging setback in federal court in New York City. A federal appeals court could reinstate the action, however, and attorneys on opposite sides of the matter disagreed about how likely such a move would be.

E-Data filed the suit in 1995, naming more than a dozen companies doing business on the Internet, including Broderbund, Intuit, and Compuserve. E-Data claimed that a patent it bought covering purchases using an electronic kiosk covered the sale of software and information over the Internet. The list of defendants was whittled down to nine after a number companies agreed to confidential settlements.

E-commerce companies closely watched the suit because it broadly construed a patent that was issued before Internet business was contemplated. They worried that other companies might be encouraged to follow E-Data's example if it won.

U.S. District Judge Barbara Jones issued a ruling last year that interpreted the patent much more narrowly than E-Data had. Last month, E-Data agreed that based on the ruling, none of the remaining defendants infringed the patent. The agreement means that unless a federal appeals court reverses Jones's ruling, the case--and a companion case that is on hold in Connecticut--will be permanently dismissed.

"It's going to be difficult for [E-Data] to obtain a reversal," said David McIntyre, a Fenwick & West attorney defending Intuit and Broderbund. He said that Jones's April, 1998 ruling spelled out five elements that all must be present to back E-Data's claim. If the U.S. Court of Appeals for the Federal Circuit allows even one of the elements to stand, he explained, E-Data will not be able to reinstate its case.

E-Data "has to hit a home run for the appeal to make any difference," added Carl Oppedahl, a lawyer with Oppedahl & Larson, which represented another defendant in the case.

E-Data, however, is not conceding defeat. "I'm cautiously optimistic about the chances of success on appeal," said Albert Jacobs, an attorney for E-Data at Graham & James.