Aerotel, Ltd. v. Telco Group, Inc.

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
__________________________
AEROTEL, LTD.,
Plaintiff-Appellant,
v.
TELCO GROUP, INC., STI PHONECARD, INC., STI
PREPAID DISTRIBUTORS, INC. AND SAMER
TAWFIK,
Defendants-Appellees,
and
RADIANT TELECOM, INC., INTELLIGENT
SWITCHING & SOFTWARE, LLC, AND NTERA
HOLDINGS, INC.,
Defendants-Appellees,
And
9278 COMMUNICATIONS, INC., 9278
DISTRIBUTORS, INC., SAJID KAPADIA, AND NTSE
COMMUNICATIONS, INC.,
Defendants.
__________________________
2010-1515
__________________________
Appeal from the United States District Court for the
Southern District of New York in Case No. 04-CV-10292,
Judge Richard J. Holwell
AEROTEL LTD v. TELCO GROUP 2
_________________________
Decided: July 26, 2011
_________________________
DENNIS M. FLAHERTY, Ostrager Chong Flaherty &
Broitman, P.C., of New York, New York, argued for plain-
tiff-appellant. With him on the brief was GLENN F.
OSTRAGER. Of counsel on the brief was JEANNE C. CURTIS,
Ropes & Gray, LLP, of New York, New York.
ROBERT T. MALDONADO, Cooper & Dunham, LLP, of
New York, New York, argued for all defendants-appellees.
With him on the brief for Telco Group, Inc., et al, were
WILLIAM E. PELTON and TONIA A. SAYOUR. Of counsel
was JOHN C. CAREY, Carey, Rodriguez, Greenberg & Paul,
LLP, of Miami, Florida, for defendants-appellees Radiant
Telecom, Inc., et al.
__________________________
Before RADER, Chief Judge, LINN and O’MALLEY, Circuit
Judges.
O’MALLEY, Circuit Judge.
In this patent case, Aerotel, Ltd. (“Aerotel”) appeals
from a Consent Judgment in which the parties agreed
that, based on the district court’s claim construction
order, Claim 9 of U.S. Patent No. 4,706,275 (“the ‘275
Patent”) is invalid and not infringed by any Defendant. 1
1 Aerotel asserted infringement against three
groups of Defendants: (1) Telco Group, Inc., STI Phone-
card, Inc., STI Prepaid Distributors, Inc., and Samer
Tawfik (referred to collectively as “Telco”); (2) Radiant
Telecom, Inc., Intelligent Switching & Software, LLC, and
NTERA Holdings, Inc. (“the Radiant Defendants”); and
(3) 9278 Communications, Inc., 9278 Distributors, Inc.,
3 AEROTEL LTD v. TELCO GROUP
The district court signed the Consent Judgment, thereby
entering a final, appealable judgment of invalidity and
noninfringement of Claim 9 of the ‘275 Patent. For the
reasons explained below, the Consent Judgment is af-
firmed in part, and vacated in part.
BACKGROUND
A. Factual Background
1. The ‘275 Patent
The ‘275 Patent, which issued on November 10, 1987,
is directed to “[a] telephone system enabling prepayment
for telephone calls.” It was invented by an Israeli citizen,
Zvi Kamil, and was assigned to Aerotel. The patent
expired on November 10, 2005.
The “Background of the Invention” explains that, at
the time the application was filed, it was “extremely
difficult to make long distance calls from public pay-
phones since it requires large amounts of [] coins – not
ordinarily carried about – especially when touring or on a
business trip.” ‘275 Patent col. 1 ll. 39-42. The back-
ground concludes with the statement that “there is a long
felt need for a system which enables making telephone
Sajid Kapadia, and NTSE Communications, Inc. (“the
9278 Defendants”). In the proceedings below, Aerotel and
the 9278 Defendants entered into a settlement agreement
and submitted a stipulated order of dismissal which the
district court entered on August 16, 2010. As such, al-
though they are named in the case caption, the 9278
Defendants are not parties to this appeal. On December
22, 2010, the Radiant Defendants filed a Notice of Joinder
indicating that they join Telco’s Answer Brief and request
that the court affirm the district court’s claim construc-
tion and consent judgment. Given this posture, and for
ease of reference, we refer to Defendants-Appellees collec-
tively as Telco.
AEROTEL LTD v. TELCO GROUP 4
calls including local or toll calls conveniently, inexpen-
sively and from any telephone.” Id. at col. 1 ll. 54-57.
Generally speaking, the system described in the ‘275
Patent allows a customer to deposit a prepayment
amount, either by cash or credit card payment, with a
prepaid service provider. The prepaid amount is stored as
a credit in the “special exchange,” which is the equipment
that processes the prepaid calls. The customer is given:
(1) a “special code” to access the stored balance; and (2) a
number to dial into the “special exchange.”
a. The Embodiments
The ‘275 Patent’s specification discloses two embodi-
ments. The first embodiment, which is illustrated in
Figures 1 and 3, is a telephone system where the special
exchange processes prepaid telephone calls from any
available telephone. The second embodiment, which is
illustrated in Figure 2, is a telephone system in which the
special exchange processes prepaid telephone calls from
dedicated public telephones.
Figure 1 is a flow chart depicting a customer’s use of
the prepaid telephone system from any private telephone:
5 AEROTEL LTD v. TELCO GROUP
In this embodiment, a customer can use any available
telephone to dial the “special central office” which ac-
cesses the “special exchange” (Blocks 13 & 14). When the
customer is connected to the special central office or
exchange, “a special dial tone is sent from the special
AEROTEL LTD v. TELCO GROUP 6
exchange to the calling station.” ‘275 Patent col. 3 ll. 23-
26. The customer then inputs: (1) the “special code” which
provides access to that caller’s prepaid amount; and
(2) the telephone number of the party to be called (Block
17). When the code and credit are verified (Block 18), a
normal dial tone is sent to the caller (Block 19) and the
system dials the called party (Block 21). 2 At Block 22, the
“special exchange equipment provides an artificial or
prerecorded voice announcement stating the amount of
credit available and that the amount of credit is equiva-
lent to so many minutes of talking time on the call being
connected.” ‘275 Patent col. 3 ll. 43-47.
After the call is connected, a “time and distance com-
puting circuit [which] is shown as a peg counter, is put
into service to provide information for timing the call
against the available credit.” ‘275 Patent col. 4 ll. 3-6.
Information from the peg counter (Block 28) is sent to a
comparator (Block 29) “to continuously determine
whether the calling party’s credit is sufficient to pay for
the call.” Id. at col 4 ll. 6-9. The call is disconnected if the
balance is insufficient to continue the call or if the user
terminates the call (Blocks 31 & 34). If there is credit
remaining when the call is terminated, the updated
prepaid balance is stored in the special exchange for
future use.
The embodiment in Figure 2 is a telephone system in
which the special exchange processes calls made from
dedicated public phones. In this embodiment, the dedi-
cated phone automatically connects directly to the special
exchange without any dialing. Once connected to the
2 The written description provides that “[t]he call-
ing party’s predialed numbers are transmitted as indi-
cated at block 21. Of course the system can be arranged
so that the calling party dials the called party responsive
to receipt of regular dial tone.” ‘275 Patent col. 3 ll. 39-42.
7 AEROTEL LTD v. TELCO GROUP
special exchange, the caller inputs the special code and
the telephone number of the called party. The special
exchange validates the code and the credit, and then
connects the caller to the party associated with the input-
ted number.
b. Claim 9 of the ‘275 Patent
The ‘275 Patent has three independent claims: two
method claims (Claims 1 and 23) 3 and one apparatus
claim (Claim 9). Although Aerotel initially asserted all
three claims against Defendants, after the district court’s
claim construction, Aerotel abandoned Claims 1 and 23.
As such, the only claim at issue in this appeal is Claim 9,
which deals with a system for making telephone calls
from “any available telephone station for prepaid custom-
ers.”
Claim 9 provides as follows:
A telephone system for facilitating telephone
calls including toll calls from any available
telephone station for prepaid customers, said
system comprising:
(a) means for coupling a calling party
station to a special exchange;
(b) memory means in said special exchange
for storing special customer codes and
credit information individual to each pre-
paid customer;
(c) means for verifying said calling party re-
sponsive to a code transmitted from the
calling party’s station to the special ex-
3 Claim 1 recites “[a] unique method for making
telephone calls from any available telephone.” Claim 23
is directed to “[a] method for making telephone calls.”
AEROTEL LTD v. TELCO GROUP 8
change when one of the codes matches the
code in the memory means and the calling
party has unused credit and;
(d) means for completing a call from said call-
ing party station to a called station re-
sponsive to said verification, said means
for verifying including means for moni-
toring the credit of the calling party
during a completed call.
‘275 Patent col. 7 ll. 26-44. The only claim terms at issue
in this appeal appear in bold: (1) the “means for cou-
pling;” and (2) the “means for monitoring the credit.”
2. The Prosecution History
a. Original Prosecution
The ‘275 Patent application was filed on November
13, 1985. In an Office Action dated October 2, 1986, the
PTO rejected Claims 1-23 under 35 U.S.C. § 112, ¶ 2, “as
being indefinite for failing to particularly point out and
distinctly claim the subject matter which applicant re-
gards as the invention.” Appendix (“A”) 1272. With
respect to Claim 10, which issued as Claim 9, the PTO
found that it was unpatentable over two prior art refer-
ences: Peterson and Gehalo. Specifically, the PTO noted
that:
The difference between Peterson and the claimed
invention concerns prepayment and credit moni-
toring. Although Peterson mentions postpay tele-
phone systems in his prior art discussion, his
invention does not specifically mention prepay-
ment and credit monitoring. It would therefore be
obvious to supply the Peterson reference with the
credit monitoring and prepayment features dis-
closed in Gehalo since Gehalo is also a credit tele-
9 AEROTEL LTD v. TELCO GROUP
phone which has the feature of making calls with-
out coins or credit cards.
A1273.
In response, Aerotel filed an Amendment to the claim
to add the limitation: “means for monitoring the credit of
the calling party during a call.” In the “Remarks” portion
of the Amendment, Aerotel stated that:
[T]he present invention is concerned with issuing
a valid special code to a calling party when a pre-
payment amount is deposited. The prepayment
amount is stored in a memory in a special ex-
change that is called by the calling party when he
wishes to make a telephone call to a called party.
The calling party inputs his special code and the
number of the called party.
Before the calling party is connected to the
called party, the special code inputted by the call-
ing party is validated in the sense that the system
determines whether the special code inputted by
the calling party is a valid special code. If this is
the case, then the calling party is connected to the
called party only if the current initial prepayment
amount stored in the memory exceeds the mini-
mum cost of a call to the inputted number. Be-
cause the calling station and the called station are
known, the minimum cost of a call can be com-
puted beforehand. Thus, prior to making a con-
nection, the system can determine whether the
amount of the prepayment [] is sufficient to cover
the minimum cost of the call.
A761-62.
In response to the examiner’s rejection, Aerotel ex-
plained that the Peterson prior art reference claims “a
AEROTEL LTD v. TELCO GROUP 10
system for providing coin-free service for certain unre-
stricted numbers from pay stations connected to coin
trucks.” A763. Aerotel distinguished Peterson on
grounds that it “neither shows, describes, nor suggests
the use of prepayments to obtain a special code. No
special central exchange is provided with equipment to
monitor the remaining prepayment during a call made
using the special code.” Id.Aerotel next distinguished the Gehalo prior art refer-
ence on grounds that it “discloses a special pay station
equipped with a reader for reading credit cards. The so-
called ‘credit information’ is read and stored in an account
number against which calls are credited.” Id. Aerotel
argued that Gehalo failed to teach use of a special ex-
change and did not involve “monitoring of any prepay-
ment since no prepayment is involved in this reference.”
A764. Accordingly, Aerotel argued that Claim 10 should
not have been rejected as anticipated by Gehalo because
Gehalo did not “provide any way in which to monitor
credit information that includes the amount remaining of
a prepayment.” A764-65.
b. Reexaminations
The ‘275 Patent has undergone two consolidated reex-
aminations. In both instances, the PTO confirmed the
patentability of all claims of the ‘275 Patent and Reex-
amination Certificates were issued without any amend-
ments.
The first reexamination was a consolidation of three
separate requests by third parties. Specifically, on De-
cember 20, 2000, the PTO indicated that it intended to
reject Claims 1-23 of the ‘275 Patent as being obvious or
anticipated by various patents. In response, Aerotel
argued that the prior art references do not teach calling
from “any available telephone” as provided in Claim 9.
11 AEROTEL LTD v. TELCO GROUP
And, according to Aerotel, since none of the prior art
references included a “special exchange,” they could not
teach “coupling a calling party station to a special ex-
change,” as provided in claim 9. Id.During an interview with the examiner in 2001,
Aerotel presented a PowerPoint slide describing the
prepaid telephone system. In the series of slides, Aerotel
depicted a dial counting down the remaining credit from
$5 to $3 to $0. The final slide showed a scenario where
the special exchange disconnected the call because the
prepayment amount of $5 equaled the running cost of the
call ($5).
On December 16, 2002, the Examiner issued a Notice
of Intent to Issue Reexamination Certificate. In the
Notice, the Examiner stated, in relevant part, that:
The prior art of record fails to teach a unique
method for making telephone calls from any
available telephone . . . storing the prepayment
amount in a memory in a special exchange . . .
monitoring the prepayment amount less deduc-
tions for the running cost of the call; and discon-
necting the call when the prepayment amount has
been spent as claimed in claim 1.
A485-86. Accordingly, the PTO issued a Reexamination
Certificate on April 8, 2003.
On April 13, 2005, the PTO issued a second Office Ac-
tion, in which the examiner proposed to hold certain
claims, including Claim 9, unpatentable as obvious over
the prior art. Aerotel submitted a lengthy response, and
AEROTEL LTD v. TELCO GROUP 12
the PTO again confirmed the ‘275 Patent’s validity in a
Reexamination Certificate dated June 27, 2006. 4
B. The District Court Proceedings
On December 29, 2004, Aerotel filed suit against De-
fendants alleging infringement of the ‘275 Patent. 5 In a
Second Amended Complaint dated June 22, 2006, Aerotel
alleged that the Defendants infringed the ‘275 Patent by
using, offering to sell, selling, and inducing others to use,
offer, and sell, products and services related to prepaid
telephone calling cards which are covered by one or more
claims of the ‘275 Patent. The Defendants denied in-
fringement and asserted several affirmative defenses,
including noninfringement and invalidity, but, signifi-
cantly, did not present any counterclaims.
4 The second Reexamination Certificate was issued
after the ‘275 Patent expired in November 2005.
5 In December 2007, Aerotel brought similar claims
against T-Mobile in the Western District of Washington,
Case No. C07-1957-JLR (“the Washington Action”). In
the Washington Action, Aerotel alleged infringement only
of Claim 23 of the ‘ 275 Patent. The court held a Mark-
man hearing on October 9, 2009 and issued a claim con-
struction order on December 23, 2009. The parties
appealed the claim construction to this court, and, on
December 20, 2010, this court issued an order affirming
the district court’s claim construction with respect to
Claim 23. Aerotel, Ltd. v. T-Mobile USA, Inc., No. 2010-
1179, 2010 U.S. App. LEXIS 25835 (Fed. Cir. Dec. 20,
2010). In that order, the court focused solely on step (d) of
Claim 23: “inputting a special code and the number of the
called party.” The court did not address any language in
Claim 23 that overlaps with terms used in Claim 9. As
such, the court’s prior order does not affect the issues
raised in this appeal.
13 AEROTEL LTD v. TELCO GROUP
1. Claim Construction
On November 12 and 13, 2008, the district court con-
ducted a Markman hearing. The parties sought claim
construction of Claims 1, 9, and 23. Although the parties
had retained experts to testify and had exchanged expert
reports on claim construction issues, they agreed not to
present any expert testimony to the court during the
hearing.
In their Joint Claim Chart, the parties submitted,
among others, the following proposed constructions:
Claim 9 Aerotel Telco
(a) means for The function “cou- The function of
coupling a pling” means that “means for cou-
calling party signals can be sent pling” is “connect-
station to a from the calling party ing a telephone
special station to the special used by a user to a
exchange exchange. special exchange.”
The structure corre- The corresponding
sponding to the structure that
“means for coupling” performs the
is the regular tele- function is not
phone system. disclosed in the
patent specifica-
tion.
(d) means for The function “moni- The function of
monitoring toring the credit” “means for moni-
the credit of includes monitoring toring” is “keeping
the calling by time which is track of the differ-
party during converted to money ence between the
a completed or monitoring by time prepayment
call which is a function of amount less
deductions for the
AEROTEL LTD v. TELCO GROUP 14
money. running cost of the
call.”
The structure corre-
sponding to the The patent specifi-
“means for monitor- cation does not
ing” includes a com- disclose the corre-
puter programmed to sponding structure
monitor time which is for performing this
a function of money function.
(e.g., a talking time
or time cutoff), a
counter for timing the
call, and a compara-
tor for comparing the
call duration to the
time cutoff. An
alternative structure
is a computer pro-
grammed to monitor
time which is con-
verted to money and
then determine
whether there is
credit remaining.
Although it is not entirely clear from the record, the
parties ultimately reached some agreement regarding the
scope of the structure for the “means for coupling.” Spe-
cifically, at the Markman hearing, counsel for Aerotel
informed the court that Telco “agreed that there is no
dispute regarding the structures of the means for coupling
and the means for completing a call.” A1626. Aerotel
represented that Telco “adopt[s] Aerotel’s position that
the means for coupling the structure is the regular tele-
phone system and the means for completing a call.” Id. at
1626-27.
15 AEROTEL LTD v. TELCO GROUP
On May 13, 2010, the court issued its Claim Construc-
tion Order. Aerotel, Ltd v. Telco Group, Inc., No. 1:04-cv-
10292, 2010 U.S. Dist. LEXIS 47266 (S.D.N.Y. May 13,
2010) (“Claim Construction Order”). With respect to
Claim 1’s use of the word “monitoring” in the “monitoring
the prepayment amount less deductions for the running
cost of the call” limitation, the court found that the claim
and the specification “expressly call for comparison of
money.” Id. at *55.
Based on the parties’ representations at the Markman
hearing, the district court noted that “the parties are in
agreement that the ‘calling party station’ of claim 9
means ‘any available telephone.’” Id. at *71-72. Accord-
ingly, the court found that “a means for coupling the
calling party station to a special exchange is simply a
means of connecting a telephone to a special exchange.”
Id. at *72. The court found, however, that the patent is
silent with respect to the corresponding structure that
performs the coupling function. Although Aerotel argued
that the “specification states that the structure corre-
sponding to the ‘means for coupling’ is the regular tele-
phone system,” the court found that nothing in Aerotel’s
citations to the specification stated “which structure
provides the means for coupling.” Id. at *72-73. The
court concluded, therefore, that the function of the means
for coupling is “connecting a telephone to a special ex-
change” but that the patent “does not recite a structure
for performing that function.” Id. at *73.
Despite Aerotel’s arguments to the contrary, the court
found that the claim element “means for monitoring the
credit of the calling party” was limited to monitoring
based on money, rather than monitoring based on time.
In reaching this conclusion, the court noted that, “[o]f
course, that credit is the result of a computation involving
time and the cost-per-time of the call, but that computa-
AEROTEL LTD v. TELCO GROUP 16
tion would occur within one of the corresponding struc-
tures and the ultimate purpose of the monitoring is the
eventual comparison with credit.” Id. at *76. Accord-
ingly, the court found that the “credit” is “simply the
amount of money in the calling party’s account. Thus the
function of ‘monitoring the credit’ is comparing the
amount of money in the calling party’s account with the
cost of the call.” Id. at *77. The court further found that
the corresponding structure for the “means for monitor-
ing” “is a comparator, which makes use of information
from a time and distance computing circuit.” Id.
2. Consent Judgment and Settlement
Agreement
Based on the district court’s May 13, 2010 claim con-
struction order, the parties entered into a Consent Judg-
ment that Claim 9 is invalid and not infringed by any
Defendant. The parties also entered into a settlement
agreement which provided for dismissal with prejudice of
Aerotel’s claims for infringement of Claims 1-8 and 10-23
of the ‘275 Patent.
In the Consent Judgment, the parties agreed that the
Claim Construction Order “shall not have any res judi-
cata, collateral estoppel or other preclusive effect with
respect to any claim of Aerotel, Ltd. against any third
party or any defendant not a party to the Settlement
Agreement.” It also provided that the Consent Judgment
“does not operate as a waiver of any right of any party to
appeal this Court’s Claim Construction Order as applied
to Claim 9.”
The district court signed the Consent Judgment,
thereby entering a final, appealable judgment of invalid-
ity and non-infringement on Claim 9 of the ‘275 Patent.
Aerotel timely appealed to this court. We have jurisdic-
tion pursuant to 28 U.S.C. § 1295(a)(1).
17 AEROTEL LTD v. TELCO GROUP
DISCUSSION
Where, as here, the parties stipulate to noninfringe-
ment and invalidity after a claim construction ruling, the
court “need only address the district court’s construction
of the claims.” See Altiris, Inc. v. Symantec Corp., 318
F.3d 1363, 1368 (Fed. Cir. 2003). We review claim con-
struction de novo. Cybor Corp. v. FAS Techs., Inc., 138
F.3d 1448, 1456 (Fed. Cir. 1998) (en banc). To interpret
the claims, we look first to the intrinsic evidence in the
record, including the claim language, the written descrip-
tion, and the prosecution history. Vitronics Corp. v.
Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996).
Although it is less significant than intrinsic evidence, a
court can consider extrinsic evidence in the record, which
“consists of all evidence external to the patent and prose-
cution history, including expert and inventor testimony,
dictionaries, and learned treatises.” Phillips v. AWH
Corp., 415 F.3d 1303, 1317 (Fed. Cir. 2005) (en banc)
(citation omitted).
Aerotel’s appeal is focused solely on two claim limita-
tions in Claim 9: (1) “means for coupling a calling party
station to a special exchange;” and (2) “means for monitor-
ing the credit of the calling party.” The parties agree that
these terms are means-plus-function limitations which
are governed by 35 U.S.C. § 112, ¶ 6. Section 112, ¶ 6
provides that: “[a]n element in a claim for a combination
may be expressed as a means or step for performing a
specified function without the recital of structure . . . in
support thereof, and such claim shall be construed to
cover the corresponding structure . . . described in the
specification and equivalents thereof.”
Claim construction of a means-plus-function limita-
tion involves two steps. First, the court must identify the
claimed function. Applied Med. Res. Corp. v. United
AEROTEL LTD v. TELCO GROUP 18
States Surgical Corp., 448 F.3d 1324, 1332 (Fed. Cir.
2006). Second, the court must identify the corresponding
structure that performs the recited function. Id. “A
district court’s identification of the function and corre-
sponding structure of a means-plus-function limitation is
[] reviewed de novo.” JVW Enterprises, Inc. v. Interact
Accessories, Inc., 424 F.3d 1324, 1329 (Fed. Cir. 2005)
(citing ACTV, Inc. v. Walt Disney Co., 346 F.3d 1082, 1087
(Fed. Cir. 2003)).
The parties agree that the Consent Judgment must
stand unless this court disagrees with the district court’s
construction of: (1) the function and structure for the
“means for monitoring the credit;” and (2) the structure
for the “means for coupling.” 6 We address each limitation
in turn. Because we agree with the district court’s con-
struction of the “means for monitoring the credit,” the
Consent Judgment is affirmed as it relates to nonin-
fringement. For the reasons discussed below, however,
we vacate the portion of the Consent Judgment finding
Claim 9 invalid as indefinite.
A. “Means for Monitoring the Credit”
Claim 9 describes a “means for monitoring the credit
of the calling party during a completed call.” With respect
to the “means for monitoring,” the district court found
that: (1) the function is “comparing the amount of money
6 At oral argument, counsel for Aerotel noted that:
“Aerotel needs to win on both issues on appeal so if you
rule against us on either one then we lose.” Oral Argu-
ment at 14:00, available at
http://www.cafc.uscourts.gov/oral-argument-
recordings/2010-1515/all. Similarly, Telco’s brief ex-
plained that, if the court agrees with the district court’s
construction on either the “means for coupling” or the
“means for monitoring the credit,” then the Consent
Judgment must be affirmed. Appellees’ Br. at 19.
19 AEROTEL LTD v. TELCO GROUP
in the calling party’s account with the cost of the call;”
and (2) the corresponding structure “is a comparator,
which makes use of information from a time and distance
computing circuit.” Claim Construction Order, 2010 U.S.
Dist. LEXIS 47266 at *77. On appeal, the parties dis-
agree as to both the function and the structure of the
“means for monitoring.” For the reasons explained below,
we agree with, and thus affirm, the district court’s claim
construction.
1. Function
Consistent with its interpretation of “monitoring” in
Claim 1, the district court found that the “‘credit’ that is
ultimately monitored is unambiguously monetary.”
Claim Construction Order, 2010 U.S. Dist. LEXIS 47266at *76. Recognizing that “credit is the result of a compu-
tation involving time and the cost-per-time of the call,”
the court noted that the “ultimate purpose of the monitor-
ing is the eventual comparison with credit.” Id. Accord-
ingly, the court found that the function of “monitoring the
credit” is “comparing the amount of money in the calling
party’s account with the cost of the call.” Id. at *76-77. 7
Aerotel argues that the function of the “means for
monitoring” is either “monitoring by time which is con-
verted to money” or “monitoring by time which is a func-
7 In reaching this conclusion, the court rejected
Telco’s proposed construction, which replaced the word
“credit” with the phrase “prepayment amount,” a phrase
used in other instances in the patent. The court was
unwilling to conclude that the inventor intended to use
“prepayment amount” in place of the word “credit,” when
he had used “prepayment amount” elsewhere in the
patent. Notably, however, in its Reply Brief, Aerotel
states that “the term ‘remaining prepayment amount’ is
simply a synonym for the term ‘credit.’” Appellant’s Reply
at 16 n.1.
AEROTEL LTD v. TELCO GROUP 20
tion of money.” It also argues that the word “compare” is
nowhere in Claim 9, and thus the district court should not
have construed “means for monitoring” to mean compar-
ing. According to Aerotel, the district court ignored
language in the ‘275 Patent that is broad enough to
encompass monitoring by money units as well as monitor-
ing by time.
In response, Telco argues that the patent does not dis-
close monitoring by time. Specifically, Telco argues that:
(1) none of the claims recite monitoring time; (2) the term
“credit” is used throughout the specification to mean
money; and (3) the prosecution history confirms that the
patent discloses monitoring of money, not time. We find
Telco’s arguments well-taken.
a. The Patent Claims and Specification
We begin our claim construction by examining the
language of the claims. The claims, however, “must be
read in view of the specification, of which they are a part.”
Markman v. Westview Instruments, Inc., 52 F.3d 967, 979
(Fed. Cir. 1995) (en banc). The specification “is always
highly relevant to the claim construction analysis” and “is
the single best guide to the meaning of a disputed term.”
Phillips, 415 F.3d at 1315 (quoting Vitronics, 90 F.3d at
1582).
The plain language of Claim 9 recites a “means for
monitoring the credit of the calling party during a com-
pleted call.” Nothing in the language of the claim specifi-
cally provides for monitoring by time. And, as Telco
points out, Aerotel consistently used language associated
with monetary units in conjunction with the word “moni-
toring” in Claims 1 and 23 of the patent:
• Claim 1: “monitoring the prepayment amount
less deductions for the running cost of the call;”
21 AEROTEL LTD v. TELCO GROUP
• Claim 23: “monitoring the running cost of the
call.”
Telco next argues that the word “credit” is used
throughout the specification to mean money. For exam-
ple, the specification discloses that:
• “The amount paid is credited to the acquirer for
use against future telephone calls. The credited
amount is stored in a memory at the special cen-
tral office along with the special code.” ‘275 Pat-
ent col. 3 ll. 12-16 (emphasis added).
• “[T]he special exchange equipment provides an
artificial or prerecorded voice announcement
stating the amount of credit available and that
the amount of credit is equivalent to so many
minutes of talking time on the call being con-
nected.” Id. at col. 3 ll. 43-47 (emphasis added).
• “The information from the peg counter is sent to
a comparator 29 to continuously determine
whether the calling party’s credit is sufficient to
pay for the call. When the credit equals the used
time rate the call is automatically ended by the
computer as indicated by the block 31.” Id. at col.
4 ll. 6-11 (emphasis added).
On appeal, Aerotel argues that the district court’s
claim construction is based on a misinterpretation of
Figure 1, which, according to Aerotel, shows that the
credit can be monitored using units of time. In relevant
part, Figure 1 shows a series of steps, including the
following:
AEROTEL LTD v. TELCO GROUP 22
According to Aerotel, Figure 1 and its corresponding
written description show that the comparator (29) re-
ceives information from the peg counter, which counts the
call duration and Block 23, labeled “preset time according
to money & distance,” which is the “number of minutes of
talking time corresponding to the credit available.”
Therefore, Aerotel argues, “the comparator 29 is compar-
ing the call duration to the available talking time, thereby
monitoring the credit during the call.” Appellant’s Brief
at 40.
Aerotel further argues that the ‘275 Patent teaches
two ways of “monitoring” a prepaid call, and in “both
cases, the call is timed.” 8 It submits that, in Figure 1,
8 Aerotel cites to the declaration of its technical ex-
pert, Richard Chandler, for an opinion as evidence of how
a person of ordinary skill in the art of telecommunications
would construe the term “monitoring.” The parties did
not present expert testimony during the Markman Hear-
ing and the district court did not consider extrinsic evi-
dence. On appeal, Aerotel argues that this court should
nonetheless consider the Chandler Declaration, which
was submitted in the proceedings below as an exhibit
attached to an attorney declaration in support of Aerotel’s
claim construction briefing. Notably, Chandler’s Declara-
23 AEROTEL LTD v. TELCO GROUP
“before the call is connected the calling party’s credit
balance is converted to an available talking time (i.e., a
preset number of units, e.g., minutes of talking time).” Id.
at 41. Then during the call, the peg counter “measures
the duration of the call by counting, which count is com-
pared to the available talking time.” Id. According to
Aerotel, the service provider can disconnect the call when
the user runs out of talking time. Aerotel also points to
the embodiment shown in Figure 2 and argues that the
call is also timed in that embodiment. Specifically,
Aerotel contends that “the time rate of the call is used to
compute (i.e. calculate) the cost of the call, which is then
subtracted from the credit balance during the call.”
Appellant’s Br. at 41.
In response, Telco argues that the system determines
available talk time for announcement purposes only. We
agree. The specification provides that, in one embodi-
ment:
an artificial or prerecorded voice announcement
stat[es] the amount of credit available and that
the amount of credit is equivalent to so many
minutes of talking time on the call being con-
nected. This announcement is actively shown at
block 22. The announcement is made according to
the charge rate for the distance between calling
and called parties shown at block 23.
‘275 Patent col. 3 ll. 44-51. As the district court found
with respect to Claim 1, the voice announcement “involves
tion is directed to Claims 1, 2, 8 and 23 of the ‘275 Patent
– not Claim 9. Nothing contained therein specifically
addresses the limitation at issue here: “means for moni-
toring the credit.” In any event, because the weight of the
intrinsic evidence contradicts Aerotel’s characterization of
Chandler’s declaration, we do not find its arguments
based on extrinsic evidence persuasive.
AEROTEL LTD v. TELCO GROUP 24
the prepaid exchange’s user interface; it has nothing to do
with how the system monitors calls.” Claim Construction
Order, 2010 U.S. Dist. LEXIS 47266 at *57. Based on the
specification, we agree with Telco that: (1) this an-
nouncement is not part of the monitoring process, particu-
larly given its placement in the flow chart depicted in
Figure 1 (off to the side of the vertical sequence); and
(2) nothing in the patent describes monitoring the an-
nounced talk time.
The specification states that the peg counter “pro-
vide[s] information for timing the call against the avail-
able credit” and that “information from the peg counter is
sent to a comparator 29 to continuously determine
whether the calling party’s credit is sufficient to pay for the
call. When the credit equals the used time rate the call is
automatically ended by the computer.” ‘275 Patent col. 4
ll. 6-11 (emphasis added). Based on this language, which
uses the term “credit” in the context of payment, the
credit monitored is monetary. As the district court cor-
rectly notes, although the credit “is the result of a compu-
tation involving time and the cost-per-time of the call,”
the “ultimate purpose of the monitoring is the eventual
comparison with credit.” Claim Construction Order, 2010
U.S. Dist. LEXIS 47266 at *76. Accordingly, we agree
with the district court that the “credit” is the “amount of
money in the calling party’s account” and that “monitor-
ing the credit” involves comparing the amount of money
in the account to the cost of the call.
b. The Prosecution History
The prosecution history also supports the district
court’s conclusion that the monitoring set forth in Claim 9
is monitoring by money. See Phillips, 415 F.3d at 1317
(“[T]he prosecution history can often inform the meaning
of the claim language by demonstrating how the inventor
25 AEROTEL LTD v. TELCO GROUP
understood the invention and whether the inventor lim-
ited the invention in the course of prosecution, making
the claim scope narrower than it would otherwise be.”).
As previously discussed, in an Office Action dated October
2, 1986, the PTO rejected Claim 10 (which issued as
Claim 9) as unpatentable over the Peterson and Gehalo
prior art references. In response, Aerotel added the
limitation “means for monitoring the credit of the calling
party during a call.” In the “Remarks” portion of its
response to the Office Action, Aerotel specifically distin-
guished Peterson on grounds that, unlike the ‘275 Patent,
“[n]o special central exchange is provided with equipment
to monitor the remaining prepayment during a call made
using the special code.” A763. Aerotel also distinguished
the Gehalo prior art reference on grounds that Gehalo did
not involve prepayment and thus did not “provide any
way in which to monitor credit information that includes
the amount remaining of a prepayment.” Id. at 764-65.
These statements make clear that the credit monitored by
Claim 9 is the remaining prepayment amount, which is a
monetary unit.
Even more pointedly, during reexamination, Aerotel
presented a PowerPoint slide describing the prepaid
telephone system. In the series of slides, Aerotel showed
a stove-top type dial counting down the remaining mone-
tary credit from $5 to $3 to $0. As Telco correctly notes,
the dial demonstrates that the system monitors the
prepayment amount, not time. Accordingly, the prosecu-
tion history confirms our conclusion that the district court
correctly construed the phrase “monitoring the credit” to
include monitoring by money, not by time.
2. Structure
Finally, Aerotel argues that the structure correspond-
ing to the means for monitoring is a comparator which
AEROTEL LTD v. TELCO GROUP 26
makes use of information from a peg counter and a circuit
that computes the preset time limit. In response, Telco
submits that the district court correctly identified the
structure as the comparator, which compares the remain-
ing credit with the cost of the call. We agree.
The specification provides that:
the normal time and distance computing circuit is
shown as a peg counter, is put into service to pro-
vide information for timing the call against the
available credit. The information from the peg
counter is sent to a comparator 29 to continuously
determine whether the calling party’s credit is
sufficient to pay for the call.
‘275 Patent col. 4 ll. 3-9. Based on this language, the
district court correctly concluded that the corresponding
structure for the “means for monitoring” is “a comparator,
which makes use of information from a time and distance
computing circuit” (i.e. the peg counter). As Telco argues,
it is the comparator which compares the cost of the call to
the amount of money in the calling party’s account.
Because the specification is clear that the corresponding
structure is the comparator and that the comparator
compares monetary credit to the monetary cost of the call,
we affirm the district court’s construction.
B. “Means for Coupling”
Because we agree with the district court’s construc-
tion of the “means for monitoring the credit,” we affirm
the portion of the Consent Judgment finding that Claim 9
is not infringed. Where, as here, the defendants raised
invalidity only as an affirmative defense, and not in the
form of a counterclaim, 9 it is ordinarily not necessary for
9 In the Consent Judgment, the parties agreed that
Defendants “Telco Group, Inc., STI Phonecard, Inc., STI
27 AEROTEL LTD v. TELCO GROUP
this court to address validity once it has found nonin-
fringement. See Solomon Techs., Inc. v. Int’l Trade
Comm., 524 F.3d 1310, 1319 (Fed. Cir. 2008) (noting that,
where invalidity is asserted as a counterclaim, “the ques-
tion of validity does not become moot when there has been
a determination of noninfringement” but where invalidity
is raised as an affirmative defense “it is not necessary for
the reviewing court to address the validity issue”) (cita-
tions omitted); see also Hill-Rom Co., Inc. v. Kinetic Con-
cepts, Inc., 209 F.3d 1337, 1344 (Fed. Cir. 2000) (finding
no need “to vacate the district court’s validity ruling or
address that ruling on the merits” where the invalidity
issue was raised only as an affirmative defense and the
court’s judgment did not include any reference to the
issue of validity). Because the parties entered into a
Consent Judgment that specifically finds Claim 9 invalid
for indefiniteness – a conclusion which this court finds is
not well-taken – we vacate that portion of the Consent
Judgment and explain our reasons for doing so.
The district court’s construction of the “means for
coupling” was the sole basis for the parties’ stipulation
that Claim 9 is invalid as indefinite. With respect to the
“means for coupling,” the district court concluded that:
(1) the function is “connecting a telephone to a special
exchange;” and (2) the ‘275 Patent does not recite a corre-
sponding structure for that function. Although the par-
ties agree with the district court’s conclusion as to the
function of the “means for coupling,” they disagree as to
the corresponding structure. Accordingly, the issue before
the court is whether the specification includes disclosure
of a structure sufficient to perform the recited function.
Prepaid Distributors & Co., Ntera Holdings, Inc., Radiant
Telecom, Inc., and Samer Tawfik filed Answers to the
Second Amended Complaint without counterclaims.” A2.
AEROTEL LTD v. TELCO GROUP 28
Aerotel argues that, at the Markman hearing, the
parties “stipulated that the structure corresponding to the
coupling function was the regular telephone system.”
Appellant’s Br. at 35. According to Aerotel, since neither
party disputed that the patent disclosed a corresponding
structure, the court should not have reached a contrary
conclusion.
Although Telco concedes that the parties “reached an
agreement as to the structure for the ‘means for coupling’
on the last day of the Markman hearing,” it notes that the
“issue was alive and in dispute at all times before that,
including during the Markman briefing period.” Appel-
lees’ Br. at 48 n.15. And, according to Telco, even where
parties stipulate as to the structure of a means-plus-
function claim term, if the district court finds that the
structure is not disclosed, it is not bound by that stipula-
tion.
The evidence in the record regarding the parties’
stipulation is somewhat unclear. Although counsel for
Aerotel informed the district court that the parties had
reached an agreement, there is no written stipulation in
the record, and it appears that there may have been some
confusion about the precise nature of the stipulation. 10
10 In the Claim Construction Order, the court char-
acterizes the stipulation as an agreement between the
parties that the “‘calling party station’ of claim 9 means
‘any available telephone.’” Claim Construction Order,
2010 U.S. Dist. LEXIS 47266 at *71-72. Based on this
agreement, the court found that “a means for coupling the
calling party station to a special exchange is simply a
means of connecting a telephone to a special exchange.”
Id. at *72. The court found, however, that the patent is
silent with respect to the corresponding structure that
performs the coupling function. In other words, it seems
that the district court interpreted the parties’ verbal
stipulation as an agreement regarding what was being
29 AEROTEL LTD v. TELCO GROUP
Setting aside the issue of whether the parties stipu-
lated to the corresponding structure for the “means for
coupling,” Aerotel argues that a person of ordinary skill in
telecommunications readily would identify the “regular
telephone system” as the structure performing the cou-
pling function. 11 Based on our reading of the specifica-
tion, we agree.
It is well-established that the “specification must be
read as a whole to determine the structure capable of
performing the claimed function.” Budde v. Harley-
Davidson, Inc., 250 F.3d 1369, 1379 (Fed. Cir. 2001). A
structure disclosed in the specification is a “corresponding
structure” “only if the specification or prosecution history
clearly links or associates that structure to the function
recited in the claim.” Med. Instrumentation & Diagnos-
tics Corp. v. Elekta, 344 F.3d 1205, 1210 (Fed. Cir. 2003)
(quoting B. Braun Med. v. Abbott Labs., 124 F.3d 1419,
1424 (Fed. Cir. 1997)). Whether the specification “ade-
quately sets forth structure corresponding to the claimed
function necessitates consideration of that disclosure from
coupled to the special exchange, not an agreement as to
the structure performing the coupling function.
11 During oral argument, the parties indicated that,
during the proceedings before the district court, there was
no stipulation as to the relevant level of skill in the art.
That said, neither party identified a dispute as to the
level of skill, and, with respect to Claim 1, the district
court made specific findings as to the understanding of a
person skilled in the art. See Claim Construction Order,
2010 U.S. Dist. LEXIS 47266 at *32 (“A person skilled in
the art would know that a telephony system uses a num-
ber of other codes, including country codes, area codes,
billing codes and so forth.”); see also id. at *39-40 (“[T]he
Court believes that a person of skill in the art would
understand that the special exchange must be located
behind a regular telephone exchange for it to have its
intended functionality.”).
AEROTEL LTD v. TELCO GROUP 30
the viewpoint of one skilled in the art.” Budde, 250 F.3d
at 1376. If the patent fails to disclose a corresponding
structure, the claim is indefinite in scope and thus inva-
lid. Id. Accordingly, when the district court concluded
that there is no structure corresponding to the “means for
coupling,” it necessarily rendered Claim 9 invalid.
It is axiomatic that patents are presumed valid and
that “overcoming the presumption of validity requires
that any facts supporting a holding of invalidity must be
proved by clear and convincing evidence.” Id. at 1376.
Consequently, “a challenge to a claim containing a means-
plus-function limitation as lacking structural support
requires a finding, by clear and convincing evidence, that
the specification lacks disclosure of structure sufficient to
be understood by one skilled in the art as being adequate
to perform the recited function.” Id. at 1376-77.
On appeal, Aerotel argues that the district court erred
when it found that the ‘275 Patent does not disclose a
structure corresponding to the function of connecting a
telephone to the special exchange. In support of this
argument, Aerotel relies primarily on Figure 3 of the ‘275
Patent:
31 AEROTEL LTD v. TELCO GROUP
The corresponding portion of the written description
provides, in part, that:
In FIG. 3 the basic operation of the prepaid tele-
phone call system is shown in block diagram form.
The calling phone is indicated at 81. The tele-
phone 81 is connected to a regular telephone sys-
tem indicated at 82. The calling party dials the
special charge number and by a code number veri-
fier 83. The code number verifier looks into a sec-
tion of the memory as indicated by the code to
verify that the code is valid.
‘275 Patent col. 5 ll. 29-36 (emphasis added). As Aerotel
correctly points out, Figure 3 shows that the calling
telephone (81) is connected to the special exchange (83-86
and 91) through the “regular telephone system” (82).
Aerotel submits that, based on this language, a person of
ordinary skill in telecommunications would know that the
“regular telephone system” performs the coupling func-
tion.
In response, Telco argues that, because no structure is
disclosed in the specification, the district court “was not
permitted by law to consider what a person of ordinary
skill in the art would have understood the structure to
be.” Appellees’ Br. at 20. According to Telco, although the
patent makes reference to a “regular telephone system,”
there is “no disclosure linking or associating such a sys-
tem to the function of coupling a calling party station to
the specification.” Id. at 50. Looking to Figure 3, Telco
contends that the telephone (81) is separated by a dashed
line which “indicates discontinuity rather than connec-
tivity” and thus no structure for connecting is disclosed in
the specification. We do not find this argument persua-
sive, particularly in light of the specification’s explanation
AEROTEL LTD v. TELCO GROUP 32
that the “telephone 81 is connected to a regular telephone
system indicated at 82.” 12
We find that, based on Figure 3 and the corresponding
description in the specification, a person of ordinary skill
in this field would know that the “regular telephone
system” performs the coupling function. At a minimum,
Telco did not meet its burden of showing by clear and
convincing evidence that a person of ordinary skill in the
art would be unable to identify the disclosed structure,
which is, standing alone, sufficient to warrant reversal of
the district court’s construction. See Budde, 250 F.3d at
1376-77. Accordingly, we find that the district court erred
in concluding that the ‘275 Patent does not disclose a
structure corresponding to the “means for coupling.” As
such, the district court’s conclusion, which rendered
Claim 9 invalid as indefinite, is reversed.
CONCLUSION
As noted, the parties agreed that, to reverse the Con-
sent Judgment, this court would have to reject the district
court’s construction of both the “means for coupling” and
the “means for monitoring the credit.” Because we agree
with the district court’s construction of the “means for
monitoring the credit,” we affirm the portion of the Con-
sent Judgment finding that Claim 9 of the ‘275 Patent is
not infringed. For the reasons discussed above, however,
both because invalidity was asserted solely as an affirma-
12 The written description also provides that a per-
son who wants to use the telephone system “uses the
nearest available telephone, removes the handset, and
dials a special central office . . . When he is connected to
the special central office . . . a special dial tone is sent
from the special exchange to the calling station.” ‘275
Patent col. 3 ll. 20-26 (emphasis added). This language
further supports our conclusion that the regular tele-
phone is used to access the special exchange.
33 AEROTEL LTD v. TELCO GROUP
tive defense and because we find the district court’s claim
construction to be erroneous, we vacate the portion of the
Consent Judgment finding that Claim 9 is invalid as
indefinite.
AFFIRMED IN PART, VACATED IN PART
COSTS
No costs.