A little more than two years after a St. Louis jury shocked the print-on-demand industry by ordering Ingram and its Lightning Source division to pay $15 million to the On Demand Machine Corp. for infringing ODMC's patent, both sides are waiting for a decision from the Court of Appeals for the Federal Circuit on Lightning's appeal of that verdict. Oral arguments in the case were heard in November and a decision could come at any time. In addition, in February, the U.S. Patent Office rejected Harvey Ross's patent claims of having invented "a computer based book manufacturing system for the high speed reproduction of a single copy book." The rejection followed a reexamination of the patent granted to Ross, founder of ODMC, in the early 1990s that is at the heart of ODMC's lawsuit against Lightning.
Attorneys for Lightning had no comment on the decision by the Patent Office, which issued its ruling as part of what is called a nonfinal action. ODMC president Bruce Baebler said that since ODMC didn't challenge the reexamination, the company "fully expected" that the patent would be rejected. But Baebler said ODMC is preparing a response to the ruling, adding, "I still feel pretty good that we can neutralize their arguments." ODMC's response could come before the end of this week.
There is a lot at stake for both parties, as well as for the future of POD. Despite losing in the St. Louis court, Lightning has continued to operate its POD business, in part because the judge who heard the case later refused a request by ODMC to issue a permanent injunction that could have forced Lightning to close. Judge Mary Ann Medler, did, however, affirm the $15-million judgment against Lightning and, as part of the agreement allowing Lightning to continue to operate, the company agreed to put up a bond to cover possible royalties that it may owe ODMC if the jury verdict is upheld. That bond, which Lightning adds to every six months, is now reportedly up to $40 million.
While the decision by the three-panel judge hearing the appeal will go a long way toward settling the case, the dispute between ODMC and Lightning will not be over. The losing party can request a rehearing in front of the same judges or ask for a hearing before all nine judges on the Federal Circuit, a court that specializes in patent cases. An appeal to the Supreme Court is also possible. And the court is hearing not only Lightning's request that it overturn the lower court ruling but also ODMC's argument for a permanent injunction. Furthermore, the hearings over the validity of the patent by the Patent Office could also drag on for another one or two years.
The timing of the two actions is such that if the hearings over the patent extend beyond the legal proceedings, the patent could eventually be found to be invalid, but Lightning would have already paid millions of dollars to ODMC. Such a scenario has Baebler hoping that if the appeals go ODMC's way, Lightning might be inclined to reach a settlement. Baebler said he was encouraged by the recent decision by Research in Motion, manufacturer of BlackBerrys, to reach a settlement with NTP in a patent dispute.
Baebler said ODMC decided not to make any new licensing deals with other POD companies until after the Lightning case is resolved. He also said the company has a list of a few more "infringers" that ODMC will go after if it wins the Lightning suit.
The case stems from a lawsuit filed in 2001 which claimed that in establishing its POD business, Lightning infringed on patents granted to Ross in 1995. Ross died in 2002, but ODMC carried on with the litigation. People in the POD market have been monitoring the dispute, fearing that a loss by Lightning could slow the spread of POD by increasing costs. Baebler played down such concerns and said he was interested in selling ODMC to a company that "would build machines just like Harvey wanted."