For more than a year, Emergis Inc. has been seeking royalties and bringing lawsuits alleging infringement of its U.S. Patent No. 6,044,362. In an important ruling in Emergis Technologies, Inc. v. Cable One, Inc. (D. Kan.), a federal district court in Kansas has defined – and limited – the scope of Emergis's patent. The '362 Patent relates generally to a system for electronic presentment and payment of invoices. Emergis has filed sixteen {?} lawsuits across the country claiming infringement of the '362 Patent and has sent numerous letters offering licenses.
One important aspect of the '362 Patent is its requirement that a customer send payment instructions “directly” to an invoicer. Emergis had proposed a broad construction of that requirement, arguing that even systems in which the invoicer uses a third-party service provider fall within the scope of the claim. In the Kansas case, Emergis argued that the "directly" requirement should be interpreted to mean that "the customer communicates payment instructions to the invoicer without reliance upon a third party acting independently from the invoicer." The defendant argued that the "directly" requirement should be construed to mean that "the customer communicates payment instructions to the invoicer without reliance upon or through a third party service provider."
The Kansas court rejected the Emergis argument, ruling that all claims of the '362 Patent require that "the customer communicates payment instructions to the invoicer without reliance upon or through a third party service provider." The Kansas court's decision is not technically binding on other federal district courts, but is likely to be followed by them. Thus, unless Emergis succeeds in reversing this ruling on appeal, Emergis's '362 Patent will not apply to systems in which a customer sends payment instructions to a third party service provider, rather than "directly" to an invoicer.
The Kansas court also rejected another of Emergis’s aggressive interpretations of the patent, this one relating to the '362 Patent’s requirement that the "payment instructions include at least a customer invoice account number and an associated customer payment account." Emergis argued that "customer invoice account number" should be construed to mean a "number or other identifier associated with the customer's account," in other words, an account number, instead of an invoice number, as the defendant argued. The Kansas court again rejected Emergis's arguments, and thus the '362 Patent claims all require that the "customer payment instructions" include an "invoice number."
The Kansas court's ruling deals only with claim construction, and not the question of whether the Cable One system infringes the '362 Patent as construed by the Court. We would expect that Cable One will move for a summary judgment of noninfringement in the near future. That motion is likely to be granted, at which time the Court's ruling would be appealable to the Federal Circuit.
In another case, Emergis Technologies, Inc. v. Otter Tail Corporation (D. Minn.), the defendant Otter Tail has moved for summary judgment of noninfringement. Otter Tail's motion asks the Court to dismiss Emergis's lawsuit because, in the system used by Otter Tail, the customer transmits payment instructions only to a third party service provider, and those payment instructions are never sent to Otter Tail, the invoicer. The hearing on Otter Tail's motion is scheduled for October 5, 2006.