The firm that provides New Jersey with an online automated negotiation process for no-fault insurance disputes violated another company's patents in creating its system, a federal judge has ruled.

U.S. District Court Judge Mary L. Cooper in Trenton, N.J. issued a summary judgment last week on behalf of the online dispute resolution firm Cybersettle, Inc., in White Plains, N.Y., which brought its patent infringement claim against National Arbitration Forum, based in Minneapolis.

Charles Brofman, Cybersettle's president and chief executive officer, commented that the ruling "made sure that infringers just can't come along and swipe years of work and put products out as if they were their own invention."

The offending elements of the system have been modified and it remains in operation, according to NAF.

NAF in 2003 was awarded a three-year Alternative Dispute Resolutions Services Contract by the New Jersey Department of Banking and Insurance to administer arbitrations for non-fault insurance injury disputes. NAF, according to the court record, said it expected to administer 20,000 cases a year.

In her ruling, Judge Cooper denied NAF's cross-motion for summary judgment, and directed Cybersettle to submit a proposed order for a permanent injunction against NAF. Earlier this year, Cybersettle agreed to forego asking damages.

NAF--in an e-mailed statement attributed to Curtis Brown, its vice president--said it was considering a possible appeal.

If Cybersettle asks the court for punitive damages and attorneys fees, Mr. Brown wrote, it will require a finding by the court that NAF actions "were an exceptional case of willfulness, which is highly unlikely."

He noted that under the judge's order, NAF can continue to employ the online mediation tool that it is currently using to process New Jersey PIP disputes.

The firm, according to Mr. Brown, did not make any revenue from earlier Automated Negotiation System versions (ANS 3 and ANS 1X) of its online negotiation tool that were judged to have infringed on the Cybersettle patents.

Judge Cooper ruled that two versions of NAF's New Jersey online dispute resolution system violated Cybersettle's U.S. Patent No. 6,330,551 that covers, among other things, an automated, online, double blind, dispute resolution system capable of multiple rounds of bidding.

Cybersettle said her decision, which re-affirms the patent and its coverage of such systems, should "serve as a powerful deterrent to other would-be online dispute resolution system infringers."

Mr. Brofman said the ruling was "an extremely important victory," explaining that his firm had spent a large amount of money and time developing processes and creating methodologies involved.

Cybersettle's case was handled by Al Jacobs and Daniel Ladow of Greenberg Taurig in New York. NAF was represented by Chris Torkelson and Karen Confoy of Sterns & Weinroth in Trenton.

Mr. Brofman said Cybersettle, in successfully bringing suit, has "basically staked out a claim that has now been supported by this Federal District Court decision, and that's pretty powerful."

Mr. Brofman said the company could seek legal costs if there is a subsequent finding by the court that NAF's actions involved willfulness, but he had not had time to discuss the issue with his attorneys and make a decision.

"Were they [NAF] to infringe again, there's potential for the issue of damages," he said.

According to Mr. Brofman the New Jersey system now in place allows only one settlement offer and one settlement demand. It is unlike the Cybersettle system, which provides for multiple offers and demands.

"Nobody settles on the first offer and demand," said Mr. Brofman. He said his company had not bid for the New Jersey contract.

Special Reports /

N.J. PIP Settlement System Violated Patents, Judge Rules

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