Friday, May 23, 2008
The order came nine days after a three-judge panel heard the appeal. The court upheld the August 2007 U. S. District Court for the Eastern District of Texas ruling invalidating the patent because "it is obvious and anticipated," stated Judge Leonard Davis, in the Memorandum Opinion and Order. "The patent-in-suit, simply put, is a computerized method for securing debt with future credit card receivables.
"While the patent inventor, Barbara Johnson, [an AdvanceMe board member and stock holder] implemented an aggressive marketing and business development program that brought this financing method to widespread use, she did not invent a new business method. Rather, Johnson built on long-established prior art, packaged the idea in a new way, and marketed it."
Davis further stated that AdvanceMe has presented "insufficient evidence that clearly and convincingly shows that any defendant was aware of the '281 patent before filing suit, and thus, the court finds that neither defendant willfully infringed the '281 patent."
AdvanceMe, a provider of merchant cash advance services, filed lawsuits in November 2005 against RapidPay LLC, Reach Financial LLC, Merchant Money Tree Inc., Business Capital Corp., First Funds LLC and Fast Transact Inc. (doing business as Simple Cash). AdvanceMe claimed direct or indirect infringement of its U.S. Patent No. 6,941,281 – also known as Patent 281 – issued in September 2005.
Business Capital, First Funds, Fast Transact and RapidPay all settled out of court for undisclosed terms.
Mark Lorimer, AdvanceMe's Chief Marketing Officer, said having the company's patent invalidated was like losing a winning lottery ticket. "The lawsuits were filed initially because the Patent and Trade Office decided to grant us a patent on what we thought was a novel, patentable business process. The PTO doesn't grant a lot of them, so when they issued our patent we went out to enforce it.
"The lower court found that indeed the patent had been violated, but they found that the patent should not have been issued by the U.S. Patent Office in the first place. Now, according to the court of appeals, we have no enforceable patent, so we're just going to continue what we have been doing for 10 years," Lorimer said.
Lorimer, who remained confident about his company's future, said any further appeals would be up to the company's board of directors. "The impact on our business is going to be zero," Lorimer said. "Since we lost the case [last summer] our merchant accounts have increased by 33 percent, our profits by 40 percent, and we've signed $140 million worth of new credit facilities.
"We had not operated our business with an enforceable patent before. If the courts had found for us, we could have created some additional licensing royalties. But I don't see it having any adverse impact on our business. We're moving forward."
The lower court in Texas ruled that Johnson's work exhibited excellent entrepreneurship but does not entitle AdvanceMe to a legal monopoly on this method of business financing. "Rather, AdvanceMe must continue to compete in the marketplace for its share of the market, which will benefit the economy and consumers as a whole," Davis said.
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