Archive for the ‘patent-eligible subject matter’ Category

PTAB Relies on the Federal Circuit’s Recent § 101 Decision to Deny CBM Institution

Monday, June 6th, 2016

On May 12, 2016, the Federal Circuit issued a decision on 101 patent eligibility  that overturned a summary judgment finding of § 101 invalidity for software used for databases.  Enfish, LLC v. Microsoft Corp., No. 2015-1244, 2016 WL 2756266 (Fed. Cir. May 12, 2016).  The Enfish v. Microsoft decision interpreted the “abstract idea” first prong of patent eligibility under the Mayo/Alice line of cases.  It reversed the district court’s grant of summary judgement based on § 101, finding that the data storage and retrieval system for a computer memory recited by five claims on appeal of U.S. Pat. No. 6,151,604 were patent-eligible.

Two weeks later, in a CBM review, the Patent Trial and Appeal Board (PTAB) denied institution on the reviewed claims of U.S. Pat. No. 6,006,227 on § 101, referencing Enfish v. Microsoft.  Apple v. Mirror World Technologies, CBM2016-00019, Paper 12, May 26, 2016.  Mirror World’s ‘227 patent covers a “Document Stream Operating System,” as represented by claim 13:

13. A method which organizes each data unit received by or generated by a computer system, comprising the steps of:

generating a main stream of data units and at least one substream, the main stream for receiving each data unit received by or generated by the computer system, and each substream for containing data units only from the main stream;

receiving data units from other computer systems;

generating data units in the computer system;

selecting a timestamp to identify each data unit;

associating each data unit with at least one chronological indicator having the respective timestamp;

including each data unit according to the timestamp in the respective chronological indicator in at least the main stream; and

maintaining at least the main stream and the substreams as persistent streams.

The Board determined that the ‘227 was a covered business method patent eligible for review under AIA § 18, but that the claims do not recite an abstract idea.  The Board based its decision on a number of reasons, including:

  • Patent Owner demonstrated that the claims recite a solution to a problem that is “necessarily rooted in computer technology,”
  • Patent Owner identified a number of problems solved by the claimed invention that did not exist in the pre-computer world, and
  • The Board was persuaded by Patent Owner’s assertion that the claims cannot be performed entirely by the human mind or with pen or paper, and that certain steps of the claims specifically call for operations that must be performed by a computer.

The Board then relied on this excerpt from Enfish:

We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two. Indeed, some improvements in computer-related technology when appropriately claimed are undoubtedly not abstract, such as a chip architecture, an LED display, and the like. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis. Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis.

Decision at p. 16 citing Enfish v. Microsoft at *4,  (emphasis added).

The Board concluded that the first prong of the Mayo/Alice test was not met.  The Board also went on to find that the second prong of the Mayo/Alice test was not met, noting DDR Holdings.  Consequently, the Board issued its order denying CBMR.

As noted in earlier posts, the Board has been known to rapidly adopt decisions from the courts, and this case demonstrates the velocity at which decisions are integrated into practice before the Board.

Eastern District of Texas Denies SAP’s Motion to Vacate the Judgment in the Versata Patent Infringement Case

Thursday, April 24th, 2014

SAP recently learned that the Eastern District of Texas denied its motion to set aside or stay a district court judgment in favor of Versata for infringement of its U.S. Pat. 6,553,350 (Versata Software, Inc v. SAP America, Inc., No. 2:07-cv-00153 (E.D. Tex)).  On April 20, 2014, Judge Roy S. Payne dismissed SAP’s motion despite its successful patentability challenge of Versata’s ‘350 patent last year in the PTAB.  Could SAP’s win in the first covered business method patent review be too late to rid itself of the judgment?

History of the Patent Infringement Suit and PTAB CBM Proceeding

The patent infringement suit by Versata started when it sued SAP for alleged infringement of its U.S. Patent Nos. 6,553,350 and 5,878,400 in 2007 (Versata Software, Inc v. SAP America, Inc., No. 2:07-cv-00153 (E.D. Tex)).

A first jury trial was held in 2009, and a second jury trial was held in 2011.  In the first trial, the jury found both patents directly infringed and inducement of infringement of one claim of the ’350 patent.  Shortly after the first trial, the Court granted JMOL of noninfringement of the ’400 patent.  A second trial was held on the ’350 patent and a jury found the ’350 patent infringed, resulting in a $392 million judgment and an injunction dated September 9, 2011 (stayed pending appeal).

SAP filed its petition for covered business method patent review on the first day it was available via the AIA:  September 16, 2012.  The petition included grounds for challenging the ’350 patent under 35 USC §§ 101, 112, and 102.  This was the the first covered business method patent review under the America Invents Act (CBM2012-000001).

About a month later, SAP filed a notice of appeal of the district court decision in the Federal Circuit (filed on October 11, 2011).  Briefing was completed some months later, and oral arguments were held on February 4, 2013.  About a month before the oral arguments (January 9, 2013), the PTAB instituted trial on the challenges under 35 USC §§ 101 and 102, but declined review on the challenges under 35 USC § 112.  So as of January, 2013, the dispute was being pursued both in the Federal Circuit and in the PTAB.

Based on a series of communications between the parties and the PTAB, SAP agreed to drop its challenge under 35 USC § 102 in exchange for an expedited trial on its challenges under 35 USC § 101.  The PTAB trial was held on April 17, 2013, where both parties presented their arguments concerning 35 USC § 101.

On May 1, 2013, the Federal Circuit affirmed the lower court jury decision on infringement and damages awards and vacated part of the trial court’s permanent injunction and remanded for further proceedings based on the opinion.

In June of 2013, the Patent Trial and Appeal Board (PTAB) decided that Versata’s U.S. Pat. 6,553,350 was unpatentable under 35 U.S.C. § 101.

After the Patent Office decided that the claims challenged in the related covered business method patent review were unpatentable, SAP motioned for a stay of proceedings in the Federal Circuit.  In a simple, one page document, the Federal Circuit denied that motion for stay on July 5, 2013 without providing further comment or opinion.  The Supreme Court denied certiorari of SAP’s petition on January 21, 2014.

Current Stay Motion

A “Motion of SAP America, Inc. and SAP AG For Relief From Judgment Under Fed. R. Civ. P. 59(e) or 60(b) Or For A Stay” was filed on January 21, 2014, and renewed on March 27, 2014 in the E.D. Tex. action.  Judge Payne’s denial of the stay observed:

The Court finds that all four of these [stay] factors counsel against a stay in this case. There are no remaining issues in this case to simplify. The trial has been held and the appeal is completed. A stay would clearly unduly prejudice the nonmoving party and provide a clear tactical advantage for the moving party. Moreover, a stay would not reduce the burden of litigation on the parties or the Court. Finally, the fact that the Federal Circuit has already denied Defendants’ request for a stay pending completion of the PTAB proceedings weighs heavily against Defendants’ request. Accordingly, the request for a stay is DENIED.

Judge Payne also denied the request to vacate under Rule 60(b):

Defendants have taken advantage of a full and fair opportunity to litigate the validity of the patent before this Court, before the jury, and before the Federal Circuit, even pursuing a writ to the United States Supreme Court. To hold that later proceedings before the PTAB can render nugatory that entire process, and the time and effort of all of the judges and jurors who have evaluated the evidence and arguments would do a great disservice to the Seventh Amendment and the entire procedure put in place under Article III of the Constitution. The proceedings before the PTAB are not even final at this time, but this Court does not believe that later finality will change this calculus. Indeed, it is the finality of the judgments issued by the Federal Courts that is at stake here. Unlike the situation before the Court in Fresenius USA, Inc. v. Baxter Intern., Inc., 721 F.3d 1330 (Fed. Cir. 2013), the judgment in this case is final and there are no further issues to be resolved. That fact also clearly distinguishes this case from that before the Fifth Circuit in Bros. Inc. v. W. E. Grace Mfg. Co., 320 F.2d 594 (5th Cir. 1963).

Thus, Judge Payne distinguished the present matter from the Baxter case at least in part because the Baxter judgment was not final.  Apparently, the court is of the opinion that once certiorari was denied by the Supreme Court the district court judgement became final.  It will be interesting to see SAP’s response to this decision in the upcoming months.

SAP’s Cert Petition Denied by Supreme Court in Versata Patent Infringement Suit

Thursday, January 23rd, 2014

In earlier posts, I described the $391 million patent infringement judgment awarded to Versata for SAP’s alleged infringement of US Pat. 6,553,350.  I also detailed SAP’s attempts to avoid the judgment by challenging the ‘350 patent in the first covered business method patent review conducted by the Patent Office under the America Invents Act.  (SAP v. Versata, CBM2012-00001)  SAP prevailed in the CBM proceeding in June 2013, but that was well after the district court judgment and about a month after a decision by the Federal Circuit upholding the damages portion of the judgment.  About two weeks before the CBM decision, SAP had filed a request for rehearing and a request for rehearing en banc in an effort to have the Federal Circuit reconsider its decision.

In light of the CBM decision finding the ‘350 patent claims unpatentable, SAP motioned the Federal Circuit to stay the litigation pending a final decision in the CBM proceeding.  The Federal Circuit denied SAP’s the rehearing requests.  On December 12, 2013, SAP petitioned for a writ of certiorari to the Supreme Court.  In its petition, SAP argued that the district court judgment action should have been stayed by the Federal Circuit in view of the unpatentability of  Versata’s  patent as determined by the Patent Office in the CBM review.

On Tuesday, January 21, 2014, the Supreme Court denied certiorari of SAP’s petition.  The case will return to the district court for its consideration of the vacation of the injunction by the Federal Circuit.  It remains to be seen how the district court will modify the injunction given the CBM decision and whether Versata will be able to collect its $391 million judgment against SAP in view of the Supreme Court’s refusal to take the matter.

Divided Federal Circuit Panel Finds Computer System Claims Not Patent-Eligible

Sunday, September 8th, 2013

Posted:  September 8, 2013

On September 5, 2013, the Federal Circuit affirmed a District court holding that a computer system claim was not patent-eligible under 35 U.S.C. § 101.  In Accenture Global Servs., GmbH v. Guidewire Software, Inc., a divided panel affirmed a District of Delaware decision finding system claims 1-7 of U.S. Patent 7,013,284 not patent-eligible on summary judgment.  (Accenture Global Servs., GmbH v. Guidewire Software, Inc., 800 F. Supp. 2d 613, 621-22 (D.Del. 2011).)  Judge Lourie authored the majority opinion of the panel (Judges Lourie, Reyna, and Rader), and Judge Rader filed a dissenting opinion.

District Court Action Results in Summary Judgment of Invalidity Based on 35 U.S.C. § 101

Accenture sued Guidewire for infringement of the ‘284 patent in late 2007.  In 2011, the District court found claims 1-22 of the ‘284 patent invalid under 35 U.S.C. § 101 on summary judgment.  The District court decided the summary judgment motion after the Federal Circuit and Supreme Court decisions in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)(en banc) aff’d on other grounds sub nom. Bilski v. Kappos, 560 U.S. ____, 130 S. Ct. 3218 (2010).

Federal Circuit Appeal

Accenture appealed the District court determination only as to claims 1–7, directed to a system for generating tasks to be performed in an insurance organization, but did not appeal similar method claims 8–22.  The Federal Circuit affirmed the District court in a 2:1 split panel decision by leveraging the finding of patent ineligibility of method claims 8-22 that were not appealed:

We conclude that the district court’s decision on patent-ineligibility of the system claims must also be affirmed, both because the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible and because, when considered on their own, under Mayo and our plurality opinion in CLS Bank, they fail to pass muster. Although the issue of the patent eligibility of the method claims is not before us, as it has not been appealed, it is plain to us that, as the district court held, those claims are ineligible for patent.

Because the ’284 patent’s method claims have been found to be patent ineligible, we first compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible. CLS Bank, 717 F.3d at 1291. Under this analysis, we compare the two claims to determine what limitations overlap, then identify the system claim’s additional limitations. Essentially, we must determine whether the system claim offers meaningful limitations “beyond generally linking ‘the use of the [method] to a particular technological environment.’” Id. (quoting Bilski, 130 S. Ct. at 3230).

According to the majority, one must consider if the method claims are similar enough to the apparatus claims to warrant a conclusion that the apparatus claims are equally not patent-eligible.

More about the ‘284 Patent

The ‘284 patent claims describe a computer system and method for handling insurance-related tasks.  The Federal Circuit decision summarized the claims as follows:

Claim 1 is a claim to a system for generating tasks to be performed in an insurance organization. The system stores information on insurance transactions in a database. Upon the occurrence of an event, the system determines what tasks need to be accomplished for that transaction and assigns those tasks to various authorized individuals to complete them. In order to accomplish this, the claimed system includes an insurance transaction database, a task library database, a client component for accessing the insurance transaction database, and a server component that interacts with the software components and controls an event processor, which watches for events and sends alerts to a task engine that determines the next tasks to be completed.

Claim 8 claims a method for generating tasks to be performed in an insurance organization. The method takes an insurance transaction and applies rules to that transaction to determine tasks to be completed. These tasks are made accessible to authorized individuals who then complete the task.

The text of claim 1 and claim 8 are provided for comparison:

1.  A system for generating tasks to be performed in an insurance organization, the system comprising:

an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format;

a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;

a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and

a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;

wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

Claim 8 reads as follows:

8.  An automated method for generating tasks to be performed in an insurance organization, the method comprising:

transmitting information related to an insurance transaction;

determining characteristics of the information related to the insurance transaction;

applying the characteristics of the information related to the insurance transaction to rules to determine a task to be completed, wherein an event processor interacts with an insurance transaction database containing information related to an insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format;

transmitting the determined task to a task assistant accessible by an assigned claim handler, wherein said client component displays the determined task;

allowing an authorized user to edit and perform the determined task and to update the information related to the insurance transaction in accordance with the determined task;

storing the updated information related to the insurance transaction; and

generating a historical record of the completed task.

Federal Circuit Majority Compares Apparatus Claims to Method Claims

The majority compared the method and system claims of the ‘284 patent:

It is not disputed by the parties that the ’284 patent’s system claim 1 includes virtually the same limitations and many of the same software components as the patentineligible method claims. Both claims are for “generating tasks to be performed in an insurance organization.” . . .  Both the claimed system and the claimed method contain an insurance transaction database containing information relating to an insurance transaction “decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format.” . . . Additionally, claim 1 and claim 8 both contain: a client component, . . . a task assistant, . . . and an event processor, . . . . The system claims are simply the method claims implemented on a system for performing the method.

Accenture only points to system claim 1’s inclusion of an insurance claim folder, a task library database, a server component, and a task engine in attempting to show that the system claim is meaningfully different from the ’284 patent’s method claims. However, these software components are all present in the method claims, albeit without a specific reference to those components by name. (underlining added)

The majority decision further determined that the ‘284 patent does not distinguish the system and method claims:

Indeed, even the specification of the ’284 patent makes little distinction between the system and method claims. The patent describes the invention as “[a] computer program . . . for developing component based software capable of handling insurance-related tasks.” Id. col. 3 ll. 23–25. The patent then discloses detailed software descriptions of the various software components without differentiating between the system or method claims. Further, although the patent’s Figure 1 shows a schematic diagram of the invention, one that includes computer hardware, the schematic’s hardware is merely composed of generic computer components that would be present in any general purpose computer. . . .  The patent thus discloses that the representative hardware for the ’284 patent is a generic computer. In fact, other than the preamble to claim 1 stating that it is a system claim, the limitations of system claim 1 recite no specific hardware that differentiates it from method claim 8. Indeed, in this case “[t]he system claims are [akin] to stating the abstract idea [of the method claim] . . . and adding the words: ‘apply it’ on a computer.” CLS Bank, 717 F.3d at 1291 (plurality opinion) (citing Mayo, 132 S. Ct. at 1294).

Because the system claim and method claim contain only “minor differences in terminology [but] require performance of the same basic process,” id. at 1291, they should rise or fall together. Accenture only cited four additional limitations in system claim 1, and we have already indicated why those limitations do not meaningfully distinguish the abstract idea over the patent ineligible method claim. While it is not always true that related system claims are patent-ineligible because similar method claims are, when they exist in the same patent and are shown to contain insignificant meaningful limitations, the conclusion of ineligibility is inescapable. Thus, like the unappealed method claims, the system claims of the ’284 patent are invalid under 35 U.S.C. § 101.

Federal Circuit Majority Reviews the System Claims “On Their Own”

The majority decision included a separate section to analyze the claims on their own, stating that the system claims are ineligible for patenting because they fail to include limitations that set them apart from the abstract idea of handling insurance-related information.  The majoried identified this “abstract idea” of the claim:

The abstract idea at the heart of system claim 1 of the ’284 patent is “generating tasks [based on] rules . . . to be completed upon the occurrence of an event.” ’284 patent col. 107 ll. 25, 38–39. Although not as broad as the district court’s abstract idea of organizing data, it is nonetheless an abstract concept. Having identified the abstract idea of the claim, we proceed with a preemption analysis to determine whether “additional substantive limitations . . . narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.” CLS Bank, 717 F.3d at 1282 (citing Mayo, 132 S. Ct. at 1300; Bilski, 130 S. Ct. at 3231; Diamond v. Diehr, 450 U.S. at 187); see also Ultramercial, 2013 WL 3111303, at *8 (“[T]he relevant inquiry is whether a claim, as a whole, includes meaningful limitations restricting it to an application, rather than merely an abstract idea.” (citing Prometheus, 132 S. Ct. at 1297)).

The majority decided that Accenture’s position (that the claim is limited by being applied in a computer environment and within the insurance industry) was not sufficient to adequately “narrow, confine, or otherwise tie down the claim,” citing Bilski, Diamond v. Diehr, and Parker v. Flook. The decision noted that the specification was complex, but deemed the claims to recite only “generalized software components arranged to implement an abstract concept on a computer.”

Federal Circuit Majority Compares the ‘284 Patent Claims to the Ultramercial Claims

The majority differentiated claim 1 of the ‘284 patent from the claims in the Ultramercial patent (which were found to be patent-eligible by the Federal Circuit panel only recently) by finding that claim 1 is more abstract than the claims upheld in Ultramercial.  Furthermore, the majority found that the instant case raise different procedural issues than the Ultramercial case, because in Ultramercial the claims had not been interpreted and were the subject of dismissal on a 12(b)(6) preanswer motion to dismiss.

Judge Rader Dissents

Judge Rader’s dissent made the following points:

  • Judge Rader cited his decision in Ultramercial, Inc. v. Hulu, LLC, 2010-1544, 2013 WL 3111303 at *8 (Fed. Cir. June 21, 2013) for the proposition that (1) any claim can be simplified to an abstract idea if stripped of its concrete and tangible limitations, and (2) it is not proper for a court to go hunting for abstractions by ignoring claimed concrete and tangible limitations.
  • He disagreed with the majority’s characterization and use of CLS Bank, stating: “[N]o part of CLS Bank, including the plurality opinion, carries the weight of precedent. The court’s focus should be on Supreme Court precedent and precedent from this court.”
  • He disagreed with the majority’s position that Accenture’s failure to appeal the finding of invalidity of the method claims estopped it from arguing that the elements therein are directed to patent-eligible subject matter.
  • He countered the logic set forth by the majority that the invalidity of the method claims urged similar invalidity of system claims by citing an excerpt from the CLS Bank decision.  That excerpt stated that just because one or more method claims was invalid under § 101, that does not dictate that all associated system claims must be likewise invalid.
  • Judge Rader would have held that the specific combination of computer components rendered the claim patent-eligible under § 101.

The dissent recalled an earlier quote by the Court prior to grant of en banc review of CLS Bank:  “[N]o one understands what makes an idea abstract.”  Judge Rader finished by reiterating his view that the statute should be consulted, which offers broad categories of patent-eligible subject matter.

Observations

It seems that the Federal Circuit could not be more divided on the subject of patent eligibility than it is today.  As long as the basics of patent-eligibility remain uncertain parties will have less knowledge about the strength of their patents and will expend a lot of resources posturing and briefing on these issues.  That will impact the resources of the courts.  Regardless of your position on patents and patent-eligibility, I think we all agree that what is needed is a patent system that is as uniform, fair, and predictable as possible.  It will be interesting to see if the Supreme Court is going to take this opportunity to again weigh in on patent-eligibility.

WildTangent Files its Supreme Court Certiorari Petition – Part 1

Saturday, August 31st, 2013

In September of 2009, Ultramercial, Inc. sued WildTangent, Inc., Hulu and YouTube in the Central District of California for alleged patent infringement of U.S. 7,346,545 (the ‘545 patent).  The ‘545 patent claims trading advertisement viewing for access to content over the Internet.  The Abstract of the ‘545 patent reads:

The present invention is directed to a method and system for distributing or obtaining products covered by intellectual property over a telecommunications network whereby a consumer may, rather paying for the products, choose to receive such products after viewing and/or interacting with an interposed sponsor’s or advertiser’s message, wherein the interposed sponsor or advertiser may pay the owner or assignee of the underlying intellectual property associated with the product through an intermediary such as a facilitator.

Claim 1 of the ‘545 patent is more detailed:

1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

a first step of receiving, from a content provider, media products that are covered by intellectual-property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;

a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;

a third step of providing the media product for sale at an Internet website;

a fourth step of restricting general public access to said media product;

a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;

a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;

a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;

an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;

a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;

a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and

an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

As you can see, there are 11 method steps recited in Claim 1, so it is a very detailed claim and it cannot be summarized in a sentence or two.

The history of the case is not easy to summarize either.  In short, the District Court found that the subject matter of the patent was not patent eligible and dismissed the district court action before interpreting the claims.  In 2011, the Federal Circuit reversed the District Court decision, but the Supreme Court vacated the Federal Circuit’s decision in 2012 based on its recent opinion in Mayo v. Prometheus.  And in June of 2013 the Federal Circuit again reversed the District Court decision, leading to WildTangent’s Petition for Writ of Certiorari filed last week.

WildTangent’s cert petition is attached.  I will be discussing the petition and the ongoing patent eligibility battle in more detail in future posts.

 

PTAB Authorizes SAP to file Opposition to Versata’s Rehearing Request

Tuesday, July 16th, 2013

Even though the Rehearing Request filed by Versata last week is confidential, we can glean some insight about what it contained based on the publicly available documents of record.  Today the PTAB authorized SAP to file its motion to oppose Versata’s Rehearing Request, stating:

Patent owner Versata filed a motion for rehearing [ ] of the Board’s Final Written Decision [ ]. Versata’s motion raises at least two issues that SAP has not yet had an opportunity to brief. Specifically, SAP has not yet had an opportunity to brief how the following two Federal Circuit’s decisions affect this proceeding: Ultramercial, Inc. v. Hulu, LLC, 107 USPQ2d 1193 (Fed. Cir. 2013) and Versata Software Inc. v. SAP America Inc., 106 USPQ2d 1649 (Fed. Cir. 2013).

The Board authorizes SAP to file an opposition to Versata’s motion for rehearing. The opposition is limited to addressing the impact, if any, the two recent Federal Circuit decisions have on the Board’s Final Written Decision. SAP’s opposition is due no later than July 18, 2013.

The Ultramercial case resulted in a reversal of a district court holding of invalidity under 35 U.S.C. § 101.  You may recall that Ultramercial’s U.S. 7,346,545 patent (the ‘545 patent) claims relate to a method for distributing copyrighted products over the Internet where the the consumer received a copyrighted product for free in exchange for viewing an advertisement (and the advertiser pays for the copyrighted content).  The district court granted Wildtangent’s motion to dismiss pursuant to FRCP 12(b)(6), asserting that the method claims of the ‘545 patent did not claim statutory subject matter, but the Federal Circuit reversed the district court holding the subject matter patent-eligible under 35 U.S.C. § 101.  Therefore, it is not surprising that Versata cited Ultramercial in its Rehearing Request.

Of course, it is also not surprising that Versata cited decisions from its parallel Federal Circuit appeal given the fact that the Federal Circuit upheld Versata’s district court damages decision and recently denied stay of the Federal Circuit appeal in which the Federal Circuit recently remanded the case to the district court for correction of the injunction.

SAP has until July 18, 2013 to file its opposition; however, like Versata’s Rehearing Request, SAP’s opposition brief may not be publicly accessible if it addresses protected information from Versata’s Rehearing Request.

SAP Moves for a Stay of Parallel Federal Circuit Action After PTAB Win

Saturday, June 22nd, 2013

SAP’s fight to dismiss Versata’s U.S. 6,553,350 patent assertion continues.  After SAP’s win in the PTAB on June 11, 2013, SAP filed a motion to stay the parallel Federal Circuit appeal on June 17th.  Now the Federal Circuit must decide whether to stay the ongoing appeal after upholding the district court judgment on damages and having remanding to that court on injunctive relief.  At stake is a nearly $400M judgment that SAP argues is based on invalid claims.

No one can accuse SAP of having delayed its efforts to challenge the patent under the provisions of the America Invents Act.  SAP’s counsel was the first petitioner to file a covered business method (CBM) patent review within minutes of the date it first became available on September 16, 2012.

SAP’s brief repeated the factors set forth by the AIA that are specific to CBM reviews.  SAP acknowledged that these factors were intended for use by a district court, but applied them by analogy to the Federal Circuit stay request:

Specific to CBM reviews, the AIA enumerates similar factors for determining whether to stay a case pending post-grant review. AIA § 18(b)(1), P.L. 112-29, 125 Stat. 284, 331 (2011) (factors include “(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; (B) whether discovery is complete and whether a trial date has been set; (C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and (D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.”).

SAP’s Motion to Stay at p. 5.

The motion goes on to repeat the often-quoted remarks by Senator Schumer that the AIA “places a very heavy thumb on the scale in favor of a stay being granted.”  157 Cong. Rec. S1363 (Mar. 8, 2011).

It will be interesting to see Versata’s reaction to SAP’s arguments and even more interesting to see what the Federal Circuit will decide.

PTAB CBM: Versata Patent Claims Unpatentable under 35 U.S.C. § 101

Thursday, June 13th, 2013

On June 11, 2013, the Patent Trial and Appeal Board (PTAB) issued a decision holding claims 17 and 26-29 of Versata’s 6,553,350 patent  unpatentable under 35 U.S.C. § 101.  This decision arises from a petition filed on Sep. 16, 2012, in a proceeding that was accelerated when SAP agreed to focus its challenge on its proffered 101 grounds.  As discussed in prior posts, there are parallel actions in the courts, including:  a Federal Circuit decision affirming of portions of a district court decision and remanding the injunctive portion to the district court for correction; and Versata’s challenge of the PTO’s institution of this covered business method (CBM) trial in the Eastern District of Virginia by Versata.

The PTAB explained its decision in detail, and carefully set forth its bases for applying the Broadest Reasonable Interpretation standard:

Versata states that claim construction is a question of law and that claim terms should be accorded only one definition: that which is based on a district court interpretation standard. PO Resp. 62. There are, however, two claim construction standards: the Office’s BRI construction and the district court standard set forth in Phillips v. AWH [415 F.3d 1303, 1313 (Fed. Cir. 2005) (en banc)].  The difference in standards generally arises from the ability of an applicant or patent owner in Office proceedings to amend their claims, and the fact that there is no presumption of validity before the Office.[Whereas a patent is presumed “valid” unless overcome by clear and convincing evidence before a district court, a petitioner’s burden before the Office is limited to proving “unpatentability” by a preponderance of the evidence. Compare 35 U.S.C. § 282(a) and § 326(e).] Through the use of the broadest reasonable interpretation standard, the Office is able to encourage inventors to amend their claims to remove uncertainties and over breadth of claim scope.

For at least a century, the Office has encouraged clear and unambiguous claim drafting by utilizing the broadest reasonable interpretation. For example, a 1906 Commissioner of Patent’s Decision held that there is no better method of construing claims before the Office. Specifically, this early decision explains the rationale for BRI as follows:

No better method of construing claims is perceived than to give them in each case the broadest interpretation which they will support without straining the language in which they are couched. This method would seemingly give more uniform and satisfactory results than are obtained by methods largely in vogue – such, for example, as that of importing limitations from the specification according to the exigencies of the particular situation in which the claim may stand at a given moment. The method suggested also seems to have the advantage according in its results with the probable intentions of the inventor at the time when the claim is drawn. In presenting claims to the Office the object constantly sought is breadth. Where a limited meaning is intended when a claim is drawn, what possible objection can there be to imposing that meaning unmistakably upon the claim by its express terms? That a claim which does not carry its true meaning on its face misleads those affected by the patent instead of guiding them to its true scope is alone sufficient reason why the Patent Office should refuse to recognize proposed limitations of claims which have not been clearly expressed therein.

Podlesak and Podlesak v. McInnerney, 123(2) O.G. 1989, 1990 (Dec. Com. Pat. 1906, emphasis added). This standard of claim construction and its rationale have been upheld consistently by the Federal courts, including both the Court of Customs and Patent Appeals (“CCPA”) and the Federal Circuit. . . .

The Board then continued on to discuss its constructions and how it held claims 17 and 26-29 “unpatentably abstract.”  The Board concluded:

This is a final written decision of the Board under 35 U.S.C. § 328(a). We hold Versata’s claims 17, and 26-29 to be unpatentable under 35 U.S.C. §101. Specifically, the claims recite unpatentable abstract ideas and the claims do not provide enough significant meaningful limitations to transform these abstract ideas into patent-eligible applications of these abstractions.

The Board ordered that claims 17 and 26-29 of the ’350 patent are cancelled as unpatentable.

You may recall from earlier posts, that SAP also filed an ex parte reexamination to raise the prior art challenges that it passed on in this CBM to accelerate this proceeding to trial on the 101 issues.  Versata had a motion to stay that pending reexamination which the Board declined in light of this final written decision.  The Board ordered that its claim construction in this CBM is binding on the patent owner in the reexamination and that a copy of this decision be placed in the reexamination file.

Now that this PTAB CBM decision is before us, we will monitor the parties’ next steps as this conflict progresses through the various other parallel actions.

AIA Post-Grant Practice Rapidly Integrates Federal Circuit and Board Decisions

Saturday, June 1st, 2013

AIA post-grant practice has many advantages over other proceedings, but one of the great benefits of AIA post-grant practice that we have not discussed is the speed in which AIA post-grant proceedings adopt recent patent decisions from different sources.  This is really an exciting and challenging feature of AIA post-grant practice that has become even more apparent in recent filings.  One of the reasons that AIA proceedings are so quick to adopt changes in patent law is that the PTAB offers a panel of patent judges who are already versed in patent law, so the Board does not have a large learning curve to process new decisions from the Federal Circuit and laws from Congress.  Another reason is that AIA patent trials are relatively fast-paced proceedings, which by their very nature will apply legal decisions quicker than routine district court practice.  Yet another reason is that many of the changes in practical post-grant practice are being driven by the Board itself, so the Board can quickly and consistently synthesize inputs from other sources and deploy its own procedural and legal changes.  The result is a petitions practice that can adapt quickly to a rapidly changing patent legal landscape.

One example of rapid integration of recent decisions is shown by a recent CBM petition filed on behalf of LinkedIn (CBM2013- 00025) that challenges claims 1-17 of U.S. Patent No. 7,856,430 (the ‘430 Patent) owned by AvMarkets, Inc.  This CBM petition is a convergence of findings from the recent Federal Circuit decision in CLS Bank lnt’l v. Alice Corp. Pty. Ltd., 2013 WL 1920941, at *9 (Fed. Cir. May 10, 2013) and the recent CBM petition and trial (SAP v. Versata, CBM2012-00001).  LinkedIn’s petition is notable for both what it includes and what it omits.  For example, the petition includes a single challenge of patent eligibility under 35 U.S.C. § 101 akin to the ultimate patentability challenge in SAP v. Versata and incorporating the recent CLS Bank decision.  For example, pages 4-5 of the LinkedIn petition borrows from the SAP v. Versata CBM:

The Board has concluded that the AlA’s definition of CBM patents should “be broadly interpreted and encompass patents claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” SAP America, Inc. v. Versata Development Group, Inc., No. CBM2012- 00001, at 21-22 (P.T.A.B. January 9, 2013) (Decision regarding the Institution of Covered Business Method Review), citing 77 Fed. Reg. 157 (August 14, 2012) at 48736. In particular, the Board has held that it does “not interpret the statute as requiring the literal recitation of the terms financial products or services [and that the] term financial is an adjective that simply means relating to monetary matters.” id. at 23. “At its most basic, a financial product is an agreement between two parties stipulating movements of money or other consideration now or in the future,” and encompasses “patents [that] apply to administration of business transactions.” ld., quoting 157 Cong. Rec. S5432 (daily ed. Sept. 8 2011) (statement of Sen. Schumer).

And pages 22-23 of the LinkedIn petition also incorporates findings from CLS Bank:

Moreover, the ‘430 Patent ultimately claims nothing more and nothing less than the abstract idea of generating sales leads by putting product data in a searchable index, adding only the instruction to “apply it” in the broadest field of use imaginable-the Internet. Mayo, 132 S. Ct. at 1294. That does not suffice to make these claims patentable. The idea of cataloguing customer and product data in the field of use of”the Internet” necessarily implies putting them in the formats known to be searchable on the Internet. The claims add nothing that is not already implicit in the abstract idea. Because the steps are “as a practical matter … necessary to every practical use” of the abstract idea of making commercial data searchable on the Web, they are “not truly limiting.” CLS Bank, 2013 WL 1920941 at * 11 , citing Mayo, 132 S. Ct. at 1298 (Lourie, J. concurring); see id. at *28-*29 (Rader, J., concurring) (key inquiry is “whether the claim covers every practical application of [the] abstract idea” but even if not, ” it still will not be limited meaningfully if it . .. only … identiflies] a relevant audience, a category of use, field of use, or technological environment”). The Internet is in fact so broad an area of application, it can barely be said to limit the claim even to a field of use.  CyberSource Corp. v. Retail Decisions, Inc., 620 F. Supp. 2d 1068, 1077 (N.D. Cal. 2009) (“The internet continues to exist despite the addition or subtraction of any particular piece of hardware … [T]he internet is an abstraction …. One can touch a computer or a network cable, but one cannot touch ‘the internet.”‘), aff’d, 654 F.3d 1366.

Also notable is that LinkedIn’s filing omits several things found in other CBM petitions, like a challenge based on prior art, an expert declaration offering evidence, and use of every available page (LinkedIn’s petition is only 27 pages of a possible 80 pages afforded CBM petitions).  With this approach, LinkedIn keeps the cost of challenge to a minimum and reduces estoppel to the single ground asserted should the Board issue a final decision upholding the patent.  Of course, the petition was recently filed on May 29, 2013, so it is too early to tell if it will be successful, but the concept of challenging a patent based on a petition with relatively few pages and no initial expert testimony is the latest adaptation of post-grant practice courtesy of the America Invents Act.

Patent Office Guidance for Examiners in wake of CLS Bank Decision: No Change for Now

Friday, May 17th, 2013


On May 13, 2013, the Patent Office issued a memo to USPTO examiners after the CLS Bank et al. v. Alice Corp. Federal Circuit en banc decision of last week.  The memo instructs examiners to maintain existing examination procedure for evaluating subject matter patentability.  Deputy Commissioner for Patent Examination Policy, Andrew Hirshfeld, advised examiners:  ” . . . at present, there is no change in examination procedure for evaluating subject matter eligibility. Current procedure detailed in MPEP 2106 should continue to be followed.”

The memo summarizes the initial takeaways from CLS Bank as follows:

  • There was agreement that the test for eligibility is not a rigid, bright line test and must be made by evaluating a claim as a whole, on a case-by-case basis, using a flexible approach.
  • Many of the judges explicitly noted that the test for eligibility is a separate and distinct inquiry from other patentability concerns, particularly novelty and obviousness.
  • It was generally agreed that when evaluating the claim as a whole the claim must be analyzed to determine whether the additional limitations add significantly more, or in other words add meaningful limits, to the abstract idea or law of nature.

The memo concludes that further study is needed and that this is an ongoing consideration in light of the decision:

Given the multiple divergent opinions, the USPTO is continuing to study the decision in CLS Bank and will consider whether further detailed guidance is needed on patent subject matter eligibility under 35 U.S.C. § 101.