Patents & the Financial Services Industry

 Last week XPRT Ventures filed a complaint against eBay and subsidiaries PayPal, StubHub, Bill Me Later and Shopping.com, alleging both patent infringement and trade secret theft.  XPRT (pronounced “expert”) seeks $3.8 billion in damages, and the case has already garnered substantial attention from the mainstream media, business journals, the tech world, and patent commentators.  See here, here, here, and here.

At the heart of the claim is XPRT’s assertion that eBay misappropriated various trade secrets from George Likourezos and Michael Scaturro that related to streamlining electronic payment systems when eBay acquired PayPal back in 2002 and began practicing Likourezos and Scaturro’s invention without their permission or authorization.  The complaint also alleges that eBay infringes various patents invented by Likourezos and Scaturro, which were assigned to XPRT in 2008, including U.S. Patents  7,483,856, 7,567,937, 7,627,528, 7,610,244, 7,599,881, and 7,512,563.  The patents generally relate to payment in electronic commerce transactions, particularly for electronic auctions, and it was pointed out to me that XPRT’s ‘937 patent was one out this site’s “Patent of the Week” when the patent issued last July.

According to the complaint, Likourezos contacted eBay’s in-house IP counsel in 2001 to inform him of patent applications filed by Likourezos and Scaturro and to offer eBay the chance to review the applications on a confidential basis.  The inventions disclosed in the patent applications purportedly would have improved upon eBay’s current processes for effecting payments for online auction transactions, which at that time were being performed by eBay’s Billpoint payment system, and Likourezos wanted eBay to review them to determine if the parties could enter into a business arrangement for the inventions.

Likourezos was eventually contacted by Andre Marais (then a partner at Blakely Sokoloff Taylor and Zafman LLP, now a shareholder at Schwegman Lundberg and Woessner, P.A.), who represented eBay and requested copies of the patent applications for review and analysis.  After receiving “assurances of confidentialities” from Marais, Likourezos sent him the patent applications that disclosed – according to the complaint – descriptions of additional revenue streams for eBay, particularly automatically transferring funds to an electronic auction payment account corresponding to a user of an electronic auction website and effecting payment between a user a another party, such as an electronic auction system operator.

eBay ultimately did not enter into an agreement with Likourezos, but several months later it announced its plans to acquire PayPal for “the purposes of integrating PayPal into its eBay.com platform . . . [and] such acquisition was done in order to modify PayPal and incorporate it into the eBay.com platform in the manner suggested by Mr. Likourezos.” Complaint para. 45 (emphasis added).  The complaint goes on to assert that eBay’s access to Likourezos’s “confidential information,” namely his patent applications, allowed eBay to “recognize the advantages it would realize by acquiring, modifying and integrating PayPal’s payment platform with eBay’s own e-commerce payment platform.” Complaint para. 46.

Other points of interest alleged in the complaint:

• eBay filed its own patent application (App. No. 10/427,553) to cover the eBay-PayPal payment system after Likourezos disclosed his patent applications to eBay.
• Andre Marais, who was the first outside counsel of eBay to communicate with Likourezos about the Likourezos-Scaturro invention and presumably see their patent applications, was the same practitioner who later drafted the eBay patent application and Marais continues to be the attorney or record for the eBay patent application.
• Marais and others associated with the filing and prosecution of the eBay patent application 10/427,553 knew of Likourezos’ patent applications (now “the XPRT patents”) but failed to disclose the XPRT patents to the Patent Office, thereby violating their duty of disclosure to the USPTO. [Comment: eBay did file an IDS that identified one of the XPRT CIP patent applications before any examination of its 10/427,553 application occurred and eBay has since identified all of the XPRT patents in the still-pending 10/427,553 application]
• Because the claims filed by eBay in its patent application “paralleled those of” the XPRT patents, eBay thereby “admitted the patentability of” Likourezos-Scaturro claims because eBay had a duty of candor before the USPTO to submit only patentable claims. Complaint para. 68.

This last assertion is particularly interesting.  Most patent attorneys excel at drawing distinctions between patent claims and other similar technologies.  Thus, given that the claims in the eBay application and the XPRT patents undoubtedly do not have identical language, we are likely to see eBay argue that its own claims are different enough from those in the XPRT patents to simultaneously allow eBay take the position that its own claims are patentable while XPRT’s claims are invalid and/or not infringed.

In sum, XPRT alleges infringement by eBay of six patents, misappropriation of trade secrets, and unjust enrichment by eBay for unauthorized use of XPRT’s inventions.  XPRT is seeking $3.8 billion for eBay’s alleged wrongful conduct plus treble damages.

The case poses some interesting questions, particularly because it asserts intertwined patent and trade secret misappropriation claims in a financial services-related intellectual property case.

As the case progresses, we can expect to see the outcome hinge on various fact-specific issues.  Here are a few possibilities.  On the trade secret side:

• Whether Likourezos and Scaturro were employees of XPRT at the time of the initial communications with eBay in 2001 and 2002, and if not, whether and when XPRT acquired rights to Likourezos and Scaturro’s “confidential information”?
• The precise language of the confidentiality agreement between Likourezos and eBay (according to the complaint, eBay unilaterally changed the effective date of the agreement).
  • It is not clear from the complaint whether eBay entered into a written NDA with Likourezos before Likourezos disclosed the first patent applications to eBay).
  • It is also not clear from the complaint whether eBay was bound to confidentiality if it learned of Likourezos and Scaturro’s “confidential information” independently through no improper means (according to the complaint, this “confidential information” was disclosed in patent applications that were published as early as 2002, and eBay certainly would have had legitimate access to the patent applications after they published, absent contrary language in the NDA).
• Did the PayPal technology – as it existed prior to the acquisition by eBay – misappropriate the Likourezos/Scaturro “confidential information” disclosed in the Likourezos/Scaturro patent applications?  If not, precisely how did eBay modify PayPal and incorporate it into the its platform in a manner that misappropriated the Likourezos/Scaturro “confidential information” rather than just modify the PayPal technology through normal means to join PayPal to eBay.
• According to the complaint, eBay began misappropriating the Likourezos/Scaturro “confidential information” beginning when it acquired PayPal, which occurred on July 8, 2002 and was public knowledge.  Why did Likourezos and Scaturro wait eight years to file a complaint for trade secret misappropriation? Delaware Statute of Limitations states: “An action for misappropriation must be brought within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.” 6 Del. C. § 2006.  The complaint may attempted to address this by indicating that certain aspects of eBay’s misappropriation were not implemented — and were therefore perhaps not discoverable – until 2008 (although, this may come back to the issue that the inventions were most likely publicly available as published by the PTO starting in 2002); also, “For the purposes of this section, a continuing misappropriation constitutes a single claim,” 6 Del. C. § 2006.

And on the patent side:

• After eBay acquired PayPal, was the PayPal technology applied in a specific manner that reflected eBay’s knowledge of the Likourezos/Scaturro “confidential information,” or was the mere acquisition of PayPal by eBay sufficient to infringe the XPRT patents and misappropriate the Likourezos/Scaturro “confidential information”?
• If the mere acquisition of PayPal by eBay was sufficient to misappropriate the Likourezos/Scaturro “confidential information,” whether eBay was considering acquiring PayPal before viewing Likourezos’ patent applications, which might demonstrate that eBay did not misappropriate if it can show it simply continued to proceed with an earlier business consideration – namely acquiring PayPal – notwithstanding its access to the “confidential information”?
• The impact of the prosecution history on the Likourezos/Scaturro patents on XPRT’s assertion of “provisional rights” (i.e., whether the claim amendments changed the claims beyond “substantially identical” during prosecution and, if so, what is the earliest date provisional rights will flow for royalty purposes and how does that affect the $3.8 billion damages?

More to come as this huge case develops . . .

Regent Markets Group, a Bahamas-based betting company, recently asserted U.S. Patent No. 7,206,762, against derivatives trading company IG Markets.  The patent, entitled “Betting system and method,” is directed towards an automated betting system and method for financial markets.  Specifically, the complaint alleges that Regent’s ‘762 patent is infringed by IG Markets’ PureDeal trading platform and that IG Markets contributes to and induces others to infringe the ‘762 patent.

Regent developed and operates an automated betting system that offers fixed-odds financial bets to the public over the Internet.  The patent explains the distinction between “spread bet” and a “fixed odds” bet:

Although betting in many diverse forms has been in existence for thousands of years, the concept of a bet on the future performance of one or more financial market indicators is a relatively recent one. Such a bet may take one of two forms, as will be described.

 

The first form of such a bet (the “spread bet”) is one which, if won by the making of a correct prediction, pays out a sum proportional to the market fluctuation. For instance, a speculator may bet that a given stock will fall within a set period of time, and, if this prediction is correct, may receive winnings in direct proportion to the amount by which the stock has fallen in that period of time.

 

The other form that such a bet may take is known as the “digital option”. Digital bets are of the same form as a traditional sporting bet in that the speculator predicts a certain event and receives either a fixed sum of winnings (if that event does occur) or no winnings (if the event does not occur). For instance, a speculator may bet that a certain stock index will rise to a certain level by a certain time. If the named index does reach this level, the speculator wins an agreed amount of money irrespective of any amount by which the index has exceeded the predicted level. It is this type of bet that is known as a “fixed odds” bet.

So, under a fixed-odds system, a speculator who bets that a certain stock index will rise at a certain level by a certain time wins an agreed amount of money.  To draw the analogy to sports betting, the fixed-odds betting on financial markets is akin sports betting where participants receive a point spread when betting on events such as college football, the NFL, or the NBA, and gamblers win if they accurately predict the winner of the event after the final score is adjusted by the point spread.  Similarly, fixed-odds betting also bears some resemblance to a “money line” wager when betting on sporting events such as tennis, boxing, NASCAR or other bets where winners are picked without regard for the point spread; gamblers are paid out according to the fixed money line ratios if they accurately predict the result of the event.

A couple of things caught my attention about this case.  First, speculation in the financial markets is not uncommon.  And although there is a distinction between investment and speculation, a certain degree of speculation exists in a variety of investment decisions.  Thus, even though some have tried to draw a line between speculators and investors, a more accurate description may be a continuum, with risk-bearing financial decisions that represent “investments” at one end and speculative betting, or essentially a form of gambling, at the other end.

In this context, I found it interesting that the patent was so unabashed as to frame the invention as a “betting system” without any backup position that the system was somehow something less than a method for speculators, but rather it had an investment component too.  This may not pose a problem in the U.S., where gambling patents are readily issued without concern for 35 U.S.C. §101, and the utility requirement is low and innovations are rarely found unpatentable for protecting methods that are illegal in certain jurisdictions or are considered to be immoral or offensive.  However, this is not uniformly true in other patent systems around the world.  For example, Article 5 of the Patent Law of China provides that “No patent right shall be granted for any invention that violates the laws of the State, goes against social morals or is detrimental to the public interest,” and this provision is routinely used to object to inventions directed towards gambling on the grounds that they are publicly recognized as detrimental to public interest and contrary to social morality.  Regent Market Group is organized under the laws of the Bahamas and based out of the British Isles where it is licensed and regulated by the Gambling Supervision Commission, and its founder, Jean-Yves Sireau, declares his residence and citizenship to be of Hong Kong.

Second, I think it will be interesting to see whether the defendants attack the patent’s validity, either before the District Court or through reexamination at the USPTO.  Though the patent’s claims are plainly directed to a method and system that calculates fixed odds for a bet, based on input from the user and data on the financial market, here is a sample of what a couple of the independent claims would look like if we simply changed the term “financial market” with a well-known gambling context such as, say, “sporting event”:

26.         A computer program embodied on a computer readable medium and operable on a central processing machine in communication with a data feed, for:

receiving one or more parameters from a user relating to a fixed-odds bet on an aspect of a sporting event;

obtaining data concerning the sporting event via the data feed;

calculating a fixed-odds price for the bet based on at least one of the parameters received from the user and the data obtained via the data feed; and

communicating the fixed-odds price to the user.

32.         A fixed-odds betting system comprising:

a user terminal operable to accept from a user multiple parameters relating to a fixed-odds bet on an aspect of a sporting event;

a data feed to a source of data concerning the sporting event; and

a central processing machine in communication with the data feed and the user terminal, the central processing machine operable to calculate a fixed-odds price for the fixed-odds bet based on at least one of the parameters input by the user and data obtained from the data feed.

Such sport betting systems and methods are presumably practiced at casinos, racinos, and even on the Internet, but some of the automated features may not predate the priority date of the patent (March 28, 2000).  Moreover, just because these limitations may have existed in a sports betting context does not necessarily render them obvious in a financial betting context.  For these reasons, I am eager to see how the defendant responds to what appears to be broad patent covering financial market speculation.

Ex parte Lawrence, (Appeal 2008-004133)

That Board affirmed the Examiner’s finding of obviousness in a financial services-related application.

U.S. Publication No. 20020138407 recites an invention for a method and system of facilitating the identification, investigation, assessment and management of legal, regulatory financial and reputational risks.

Claim 1 recites:

A computer-implemented method for managing risk related to a financial transaction, the method comprising:

gathering data into a computer storage, the data related to risk variables for a financial transaction;

receiving information into the computer storage relating to details of a financial transaction;

structuring the received information with a processor, according to a risk quotient criteria associated with at least one of a legal, regulatory, and reputational risk; and

generating with the processor, a risk quotient comprising at least one of a scaled numeric value and a scaled alphanumeric value based on the structured information and the gathered data.

At issue is whether one of the cited references (Basch), which is singularly concerned with financial risk, renders obvious the claim limitation of legal risk.  Appellants argued that one of ordinary skill in the art would not be lead by Basch (financial risk) to add another type of risk thereto (legal risk).  The Board disagreed, finding that “we see nothing unexpected from combining a consideration of legal risk that financial institutions are faced with to the calculation Basch conducts to manage the financial risk of a transaction. Adding legal risk to that calculation leads to a rating that accounts for a financial transaction’s financial impact as well as the legal one.”

The Board reasoned:

There appears to be no dispute that Basch discloses a system for managing financial risk of a financial transaction. See App. Br. 7 (“Basch is so specific and unambiguous regarding the direct and limited application of the methods and systems therein to financial risk [. . .] .”)

 

Also, there can be no dispute that a legal risk is a type of risk financial institutions are not only aware of but a factor in assuring their operations comply with the law. FF 3.

 

The question is whether it would have been obvious to one of ordinary skill in the art to add a legal risk as an additional factor for Basch’s system to consider in structuring information to manage the risk of a financial transaction. We find that it would have been.

 

Adding consideration of a legal risk of a financial transaction to the financial risk that Basch’s system addresses yields, as expected, a system which manages not only the financial risk of a transaction but a legal one as well.

The Board did not opine on how financial risks, which are readily and often quantified for analysis, are predictably combinable with legal risks, which are not as commonly quantified and structured for generating a risk quotient.

Blackboard Inc. v. Desire2Learn Inc., Fed. Cir., No. 2008-1368, 7/27/09).

Earlier this week the Federal Circuit invalidated all of the claims in Blackboard Inc.’s patent for conducting online courses, determining that all claims were either anticipated or inadequately disclosed.  This case is particularly relevant for computer-implemented processes as the court again revisited the requirements for reciting means-plus-function language to perform algorithm-based functions in a computer system.

Blackboard and Desire2Learn are competitors in online educational courseware.  Blackboard owns U.S. Patent No. 6,988,138, which covers systems and methods for Internet-based education, and asserted the patent against Desire2Learn in 2006.  Independent Claim 1 invoked 35 U.S.C. §112, ¶6 as follows:

1. A course-based system for providing to an educational community of users access to a plurality of online courses, comprising:

a) a plurality of user computers, with each user computer being associated with a user of the system and with each user being capable of having predefined characteristics indicative of multiple predetermined roles in the system, each role providing a level of access to a plurality of data files associated with a particular course and a level of control over the data files associated with the course with the multiple predetermined user roles comprising at least two user’s predetermined roles selected from the group consisting of a student role in one or more course associated with a student user, an instructor role in one or more courses associated with an instructor user and an administrator role associated with an administrator user, and

b) a server computer in communication with each of the user computers over a network, the server computer comprising:

means for storing a plurality of data files associated with a course,

means for assigning a level of access to and control of each data file based on a user of the system’s predetermined role in a course;

means for determining whether access to a data file associated with the course is authorized;

means for allowing access to and control of the data file associated with the course if authorization is granted based on the access level of the user of the system.

The District Court found, inter alia, that independent claim 1 and dependent claims 2-35, which depend from claim 1, were invalid for indefiniteness.  Specifically, the district court held that the specification contained insufficient structure to support one of the means-plus-function limitations found in claim 1 and, by incorporation, in dependent claims 2-35.

On appeal, the particular “means” clause at issue was the “means for assigning a level of access to and control of each data file based on a user of the system’s predetermined role in a course.”  An “access control manager” is briefly mentioned in the Specification, and according to Blackboard the “access control manager” performs the “assigning” function (“means for assigning”) and could be either software or hardware.  Blackboard argued that the “means for assigning” function is “a server computer with an access control manager and equivalents thereof.” The specification describes the “access control manager” as follows:

Access control manager 151 creates an access control list (ACL) for one or more subsystems in response to a request from a subsystem to have its resources protected through adherence to an ACL. Education support system 100 provides multiple levels of access restrictions to enable different types of users to effectively interact with the system (e.g., access web pages, upload or download files, view grade information) while preserving confidentiality of information.

The Federal Circuit determined that the access control manager “is not a description of structure; what the patent calls the ‘access control manager’ is simply an abstraction that describes the function of controlling access to course materials, which is performed by some undefined component of the system. The ACM is essentially a black box that performs a recited function. But how it does so is left undisclosed.”  The Court held that “The specification contains no description of the structure or the process that the access control manager uses to perform the ‘assigning’ function” and affirmed the lower court’s judgment on indefiniteness.

In making this finding, the relevant cases relied upon by the Federal Circuit were:

Aristocrat Technologies Australia Pty Ltd. v. International Game Technology, 521 F.3d 1328, 1331 (Fed. Cir. 2008): The Blackboard Court noted that in Aristocrat the Federal Circuit “addressed the question whether a general reference to ‘a standard microprocessor-based gaming machine with appropriate programming’ constituted a sufficient disclosure of structure to support a claimed function in a means-plus-function claim. We concluded that it did not. First, we explained that ‘[t]he point of the requirement that the patentee disclose particular structure in the specification and that the scope of the patent claims be limited to that structure and its equivalents is to avoid pure functional claiming.’ Without so limiting a claim, we noted, ‘the patentee has not paid the price but is attempting to claim in functional terms unbounded by any reference to structure in the specification.’ We then applied those teachings to the patentee’s assertion that a reference to a general purpose computer could satisfy that standard. We noted that ‘any general purpose computer must be programmed’ and pointed out that relying on such general structure is equivalent to saying ‘that the function is performed by a computer that is capable of performing the function.’ We also considered and rejected the patentee’s assertion that language describing when the computer would perform the function at issue constituted a sufficient description of the structure for performing the function. Such language, we explained, ‘describes an outcome, not a means for achieving that outcome.’ (citations omitted)

Net MoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359 (Fed. Cir. 2008): The Blackboard Court further noted that in Net MoneyIN the Federal Circuit “again addressed a patentee’s argument that reference to a computer provides sufficient structure for a claim drafted in means-plus-function form. In Net MoneyIN, the computer was not a general purpose computer; the patentee contended that the reference to a ‘bank computer’ provided sufficient structure to support the function of ‘generating an authorization indicia in response to queries containing a customer account number and amount.’  The patentee argued that ‘a person skilled in the art would know that such a computer would be programmed to compare account data and amount data to those data structures and generate an authorization indicia if credit were available.’ We rejected that argument and explained that when a computer is referenced as support for a function in a means-plus-function claim, there must be some explanation of how the computer performs the claimed function:

To avoid purely functional claiming in cases involving computer-implemented inventions, we have consistently required that the structure disclosed in the specification be more than simply a general purpose computer or microprocessor. Because general purpose computers can be programmed to perform very different tasks in very different ways, simply disclosing a computer as the structure designated to perform a particular function does not limit the scope of the claim to the corresponding structure, material, or acts that perform the function, as required by section 112 paragraph 6. Thus, in a means-plus-function claim in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm. Consequently, a means-plus-function claim element for which the only disclosed structure is a general purpose computer is invalid if the specification fails to disclose an algorithm for performing the claimed function.

Because there was no disclosed algorithm in that case, we held that the claims were invalid for lack of a sufficient recitation of structure. (citations omitted)

Drafting Tips: The key to drafting 35 U.S.C. § 112 ¶ 6 claims for computer-related inventions that disclose sufficient structure to perform the claimed functions, requires (a) sufficient detail to transform a general purpose microprocessor to a special purpose computer, while remaining cognizant that (b)  § 112 ¶ 6 means-plus-function claims are limited to the structure, material, or acts disclosed in the specification and their equivalents.  This can end up being a balancing act of including enough detail in the specification to provide sufficient structure for the “means” clause but doing so without unduly narrowing the claim scope of the “means” clause, which may be reduced with additional disclosure of the structure in the specification.

Moreover, it is critical to recognize the distinction between the level of detail that would enable ordinarily skilled artisans to make the invention (which goes to § 112 ¶ 1 enablement) and the level of detail to disclose sufficient structure (which goes to § 112 ¶ 6).  This may appear obvious, but numerous plaintiffs have muddled this distinction in recent years when arguing before the Federal Circuit.  “A patentee cannot avoid providing specificity as to structure simply because someone of ordinary skill in the art would be able to devise a means to perform the claimed function. To allow that form of claiming under section 112, paragraph 6, would allow the patentee to claim all possible means of achieving a function.” Blackboard.

The Federal Circuit has consistently held that claims invoking means-plus-function language for computer-implemented inventions require a specification that discloses a structure more than simply a general purpose computer or microprocessor.  Although not reiterated by the Blackboard Court, in Aristocrat the Federal Circuit explicitly stated that the patentee:

. . . was not required to produce a listing of source code or a highly detailed description of the algorithm to be used to achieve the claimed functions in order to satisfy 35 U.S.C. § 112 ¶ 6.  It was required, however, to at least disclose the algorithm that transforms the general purpose microprocessor to a ‘special purpose computer programmed to perform the disclosed algorithm.

This standard cited WMS Gaming, Inc. v. International Game Technology, 184 F.3d 1339 (Fed.Cir.1999), which held:

A general purpose computer, or microprocessor, programmed to carry out an algorithm creates “a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”

. . .

In a means-plus-function claim in which the disclosed structure is a computer, or microprocessor, programmed to carry out an algorithm, the disclosed structure is not the general purpose computer, but rather the special purpose computer programmed to perform the disclosed algorithm.

Merely including language in the Specification that the function may be achieved through “any standard microprocessor” machine having “appropriate programming” is insufficient. Aristocrat.

Roger Russell is a tax attorney and a legal and accounting journalist with expertise across a wide spectrum of tax, legal and accounting issues.  In his article “The fight against tax patents: Profession, institute rally behind bill to block tax strategy patents,” appearing in a recent edition of Accounting Today he provides and update on tax method patents, including a discussion of recent case law and efforts on Capital Hill to pass legislation.

Today the USPTO issued U.S. Patent No. 7,565,307 to TC License Ltd., entitled “Automatic payment method using RF ID tags.”  The invention is directed towards cashless fueling transactions by using a vehicle-based decal sticker RFID tags that are associated with a unique customer identification number.  When fuel dispenser senses a tag, the tag information is sent to a network host via the POS where it is linked to a customer’s account for transaction processing and subsequent activation of the fuel dispenser.

Claim 1 reads:

A system for conducting cashless business transactions, comprising:

a plurality of fuel dispensers, each dispenser having at least one antenna and at least one vehicle presence detector,

said at least one vehicle presence detector determining presence of a stationary vehicle by:

(i) setting a stationary vehicle timer,

(ii) detecting the vehicle while said timer is running,

(iii) determining whether the timer has exceeded a predetermined threshold while the vehicle is detected, and

(iv) if the threshold has been exceeded, determining that the vehicle is stationary;

a controller having a tag reader for reading information from a tag connected to the vehicle when the vehicle is detected by said at least one vehicle presence detector,

the controller receiving information by:

(i) attempting to read the tag of the stationary vehicle,

(ii) setting a tag read timer,

(iii) determining whether a wait time for the tag reader has been exceeded,

(iv) if the wait time for the tag reader has not been exceeded, determining the tag reader was able to read the tag,

(v) determining whether the number of readings of the tag has exceeded a predetermined threshold,

(vi) if the threshold has been exceeded, determining whether the tag is a valid tag,

(vii) extracting data from the tag; and

a point of sale computer receiving tag information from the controller and processing the tag information to conduct a cashless business transaction.

Ex Parte Dickerson, Appeal 2009-001172 (BPAI 2009)

For anyone trying to discern best practices for drafting and prosecuting computer-related claims after In re Bilski, the Board of Patent Appeals and Interferences is making it difficult to find consistent trends.  In this case, the Examiner rejected the claims under 35 U.S.C. § 101 as being directed to non-statutory subject matter.  The claims recited an invention for a method and system for increasing the business value of a company in an industry by identifying a solution based upon its impact and the company’s performance gaps.  The Board reversed all of the § 101 rejections as follows:

The Board found that claims 32 and 33 recite articles of manufacture, which fall into one of the four categories of patent-eligible subject matter.

Claim 32 recites a program product stored on a recordable medium including:

program code configured to receive operational metrics and a set of solutions for application by the industry, wherein the operational metrics include a factor used to measure health or viability of a generic company in the specific industry, wherein the set includes one of a decision, an action, a product, and a service, wherein the specific industry is a grocery store.

 

Claim 33 recites a program product stored on a recordable medium including:

program code configured to receive operational metrics, a set of solutions for application by the industry, operational performance data of the company, and average operational performance data of companies within the industry, wherein the operational metrics include a factor used to measure health or viability of a generic company in the specific industry, wherein the set includes one of a decision, anaction, a product, and a service, wherein the specific industry is a grocery store.

That Board also found that claim 31 recites an apparatus, which is likewise statutory subject matter.

Claim 31 recites a computer system including:

an information system for receiving operational metrics, a set of solutions for application by the specific industry, operational performance data of the company, and average operational performance data of companies within the specific industry, wherein the operational metrics include a factor used to measure health or viability of a generic company in the specific industry, wherein the set includes one of a decision, an auction, a product, and a service, wherein the specific industry is a grocery store industry.

Finally, the Board found that claims 23, 29, and 30 recite a computerized method which includes a step of outputting information from a computer and, therefore, are tied to a particular machine or apparatus.

23. A computerized method for identifying a solution to address exposed performance gaps of a company in a specific industry, comprising:

first identifying a plurality of operational metrics for the specific industry, wherein the operational metrics includes a factor used to measure health or viability of a generic company in the specific industry, wherein the specific industry is a grocery store industry, wherein the operational metrics include at least one of a rate of inventory turnover and a number of customers per day;

assembling a set of solutions for application by the specific industry, wherein the set includes one of a decision, an action, a product, and a service;

assessing impacts of application of the set of solutions on the operational metrics for the specific industry, wherein the assessing includes determining which of the set of solutions has a negative impact on an operational metric and determining which of the set of solutions has a positive impact on the operational metric;

after identifying, assembling, and assessing, then comparing a current operational performance of the company to an operational performance of another company within the specific industry to obtain at least one performance gap, wherein the operational performance includes a performance of a company based upon the operational metric for the specific industry;

identifying a solution based upon the impacts to address the exposed performance gaps, wherein the solution is at least one of a decision, an action, a product, and a service that impacts a problem in a positive manner; and outputting the solution from the computer system.

Judge Paul A. Magnuson of the U.S. District Court for the Middle District of Florida ruled on Summary Judgment back in May that Every Penny Counts’ patent is invalid in light of In re Bilski.  EPC’s patent 6,112,191 is directed to a system that allows consumers to save a portion of a credit or debit transaction.

Now that the Supreme Court agreed to review In re Bilski, which occurred after Judge Magnuson’s ruling, EPC filed a motion on July 7, 2009 to stay execution of costs pending the Supreme Court’s review of Bilski.  The District Court granted the defendant’s motion for Summary Judgment based solely upon the Federal Circuit’s decision in Bilski, and EPC believes the Supreme Court’s review of Bilski is likely to have a significant impact on its action.

Because we are in a period of uncertainty until the Supreme Court renders its decision on Bilski, which may not happen for a year, we are likely to see more and more plaintiffs and applicants requesting similar stays or other delays until the Supreme Court speaks.

Ex Parte Guler, Appeal 2009-000415 (BPAI 2009)

The claimed invention is directed towards providing automated decision support for designing auctions and includes a structure extractor using historical auctions for similar items, a bidding behavior predictor based on estimated unknown elements of the auction, and an optimizer.  The Examiner rejected claim 1 as obvious under 35 U.S.C. §103 based on various references.

Claim 1:

A computer-implemented automated decision support system for designing an auction for a given item, comprising:

a structure extractor that estimates unknown elements of market structure of the auction based on auction characteristics data extracted from historical auctions for similar items and a bidding model matching the extracted auction characteristics data;

a bidding behavior predictor that predicts bidding behaviors of bidders in the auction based on the estimated unknown elements of market structure and characteristics of the auction;

an optimizer that employs an evaluation criterion to generate an evaluation of the auction based on (1) the estimated unknown elements of market structure and (2) the predicted bidding behavior of bidders.

The decision turned on whether the one of the cited references disclosed “a bidding model matching the extracted auction characteristics data.”  The Appellant asserted that the reference relied upon by the Examiner for this recitation is not based on a bidding model but instead based on recent trades and/or quotations, and that the reference failed to disclose a bidding behavior predictor that predicts based on “estimated unknown elements of market structure and characteristics of the auction.”  The Examiner asserted that the reference disclosed the claimed “bidding model” and that it would be implicit in the reference because there would be no basis for making any assumptions without a model.

The Board agreed with the Appellants, based largely on a definition in the specification:

We agree with the Appellants. Here, the Specification states that the term “market structure” means substantially the same as “auction environment.” Examples of “market structure” in the auction context are recited in the Specification as “environmental factors or conditions that may affect potential bidders in the actual bidding during the auction” (Spec. 9). Claim 1 requires:

a structure extractor that estimates unknown elements of market structure of the auction based on auction characteristics data extracted from historical auctions for similar items and a bidding model matching the extracted auction characteristics data;

a bidding behavior predictor that predicts bidding behaviors of bidders in the auction based on the estimated unknown elements of market structure and characteristics of the auction; . . . .

(Emphasis added.)

Thus claim 1 requires both: 1) a structure extractor that estimates unknown elements of the market structure based in part on a bidding model, and 2) a bidding behavior predictor that predicts bidding behaviors of bidders based on the estimated unknown elements of market structure (which is based on the bidding model). Thus, the claim requires that the “bidding behavior predictor” must 1) predict bidding behaviors of bidders and 2) be based on a bidding model. The Examiner has determined that Lupien does disclose a bidding model as claimed (Ans. 28). The Examiner has also determined that a bidding model would be implicit in Lupien since there would be no basis for making any assumptions without a model (Ans. 28). However even if such a “bidding model” was implicit in Lupien, it could not also function as the separately claimed limitation of a “bidding behavior predictor.”

Ex Parte Cherian, Appeal 2009-004157 (BPAI 2009)

In an application for an invention relating to creating a computer-usable description of XML message sequencing, the Examiner rejected Claim 1 under 35 U.S.C. §101 as “software per se.”

Claim 1 reads:

A conformance testing system comprising:

a sequence verifier to receive a plurality of messages exchanged between two or more participants and to test conformance of each of the plurality of messages to a specific markup language standard without using a reference implementation of the markup language standard;

wherein the plurality of messages comprises a first message sent from a first participant of the two or more participants to a second participant of the two or more participants and a second message sent from the second participant of the two or more participants to the first participant of the two or more participants.

The Examiner asserted that claims 1 and 5-19 are directed to non-statutory subject matter because they “are nominally directed to a machine/apparatus yet they only claim software not embodied on a computer readable medium.”  The Appellants argued that “[w]hile computers such as conformance testing systems or sequence verifiers may include a compute-readable medium storing executable instructions representing a computer program, nothing in independent claim 1 states or implies that executable instructions or computer programs are being claimed.”

The Board, looking to the specification for clarification, agreed with the Examiner.  The Board found that claim 1 “expressly indicates that the conformance testing system (CTS) includes the sequence verifier,” which the specification explicitly states “is typically embodied by a programmed computer” and “[t]he programmed computer provides the herein-disclosed functionality which may be implemented in hardware and/or software and/or firmware.”  Thus, because claim 1 recites a sequence verifier that reads on software, claim 1 is directed to non-statutory subject matter, and the rejection was sustained.

As an interesting side note, the Appellant asserted, and the Board agreed, that the Examiner failed to provide any explanation for the 35 U.S.C. §101 rejection to claim 20.  Moreover, the Board declined to offer its own rationale for rejection claim 20 under §101, and the Board was persuaded that such rejection was in error.  However, given other recent BPAI decisions, it seems that this Board could have just as easily found a justification to reject claim 20 under §101.

Claim 20:

A method comprising:

receiving a plurality of messages exchanged between two or more participants, the plurality of messages comprising a first message sent from a first participant of the two or more participants to a second participant of the two or more participants and a second message sent from the second participant of the two or more participants to the first participant of the two or more participants; and

testing conformance of each of the plurality of messages to a specific markup language standard without using a reference implementation of the markup language standard.