2012-1029, -1049
`
`IN THE
`UNITED STATES COURT OF APPEALS
`FOR THE FEDERAL CIRCUIT
`
`VERSATA SOFTWARE, INC. (fonnerly known as Trilogy Software, Inc.),
`VERSATA DEVELOPMENT GROUP, INC. (fonnerly known as Trilogy
`Development Group, Inc.), and VERSATA COMPUTER INDUSTRY
`SoLUTIONS, INC. (fonnerly known as Trilogy Computer Industry Solutions, Inc.),
`
`Plaintiffs-Cross Appellants,
`
`v.
`
`SAP AMERICA, INC. and SAP AG,
`
`Defendants-Appellants.
`
`Appeals from the United States District Court for the
`Eastern District of Texas in case no. 07-CV-0153,
`Magistrate Judge Charles Everingham.
`
`BRIEF OF DEFENDANTS-APPELLANTS SAP AMERICA, INC. AND SAP AG
`
`JAMES R. BATCHELDER
`LAUREN N. ROBINSON
`ROPES & GRAY L.L.P.
`1900 University A venue
`Palo Alto, CA 94303
`(650) 617-4000
`
`DAVID J. BALL, JR.
`PAUL, WEISS, RIFKIND,
`WHARTON & GARRISONL.L.P.
`2001 K Street, NW
`Washington, DC 20006
`(202) 223-7300
`
`J. MICHAEL JAKES
`MICHAEL A. MORIN
`JOHN M. WILLIAMSON
`JENNIFER K. ROBINSON
`FINNEGAN, HENDERSON, F ARABOW,
`GARRETT & DUNNER, L.L.P.
`901 New York A venue, NW
`Washington, DC 20001
`(202) 408-4000
`
`JOHN W. THORNBURGH
`JUSTIN M. BARNES
`CRAIG E. COUNTRYMAN
`FISH & RICHARDSON, P.C.
`12390 El Camino Real
`San Diego, CA 92130
`(858) 678-5070
`
`KEVIN R. HAMEL
`SAP AMERICA, INC.
`3999 West Chester Pike
`Newtown Square, PA 19073
`(610) 610-1000
`
`February 17, 2012
`
`Attorneys for Defendants-Appellants
`SAP America and SAP A G
`VERSATA EXHIBIT 2044
`SAP v. VERSATA
`CASE CBM2012-00001
`
`

`
`CERTIFICATE OF INTEREST
`
`Counsel for SAP America, Inc. and SAP AG certifies the following
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`(use "None" if applicable; use extra sheets if necessary):
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`1 . The full name of every party or amicus represented by me is:
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`SAP America, Inc. and SAP AG
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`2. The name of the real party in interest (if the party named in the
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`caption is not the real party in interest) represented by me is:
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`SAP America, Inc. and SAP AG
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`3 . All parent corporations and any publicly held companies that own 1 0
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`percent or more of the stock of the party or amicus curiae represented by me are:
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`SAP AG owns 1 0% or more of the stock of SAP America, Inc.
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`4. The names of all law firms and the partners or associates that
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`appeared for the party or amicus now represented by me in the trial court or agency
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`or are expected to appear in this Court are:
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`Fish & Richardson,
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`P.C.: Thomas Melsheimer, John W. Thornburgh,
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`Justin M. Barnes, Craig E. Countryman, Michael A. Bittner, Benjamin
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`Charles Elacqua, *John E. Gartman, Taj Jamar Clayton, Timothy Devlin
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`James R. Batchelder, Lauren N. Robinson
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`Finnegan, Henderson,
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`Jakes, Michael Andre Morin, John M. Williamson, Jennifer Robinson
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`Ropes & Gray L.L.P.:
`Farabow, Garrett & Dunner, L.L.P.: J. Michael
`Paul, Weiss, Rifkind, Wharton & Garrison,
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`A. Gallo
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`LLP: David J. Ball, Kenneth
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`Howrey LLP: James R. Batchelder, *Lloyd R. Day, Jf., *Paul S. Grewal,
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`* Aaron R. Hand, * Anna M. Ison, *Susan M. Krumplitsch, * Alison L.
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`Maddeford, *Jonathan D. Marshall, Mario Moore, *William P. Nelson,
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`1
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`*David W. Price, Lauren N. Robinson, *Victoria Q. Smith, *Sriranga
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`Veeraraghavan
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`Christopher Bunt, Robert M. Parker
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`Parker Bunt & Ainsworth: Andrew Thompson Gorham, Robert
`Madrid & Batchelder
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`LLP: James R. Batchelder, *Lloyd
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`Day Casebeer
`R. Day, Jr., *Paul S. Grewal, *Aaron R. Hand, *Anna M. Ison, *Susan M.
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`Krumplitsch, * Alison L. Maddeford, *Christian E. Mammen, * Jonathan D.
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`Marshall, Mario Moore, *William P. Nelson, *Jackie N. Nakamura, *Lee
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`Patch, *David W. Price, Lauren N. Robinson, *Victoria Q. Smith, *Sriranga
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`Veeraraghavan, *Bradley A. Waugh, *Eva Zei
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`Truelove Law Firm: * Justin Kurt Truelove
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`Morgan Lewis
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`& Bockius, LLP: Mario Moore
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`Law Offices of Patricia L. Peden: *Patricia L. Peden
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`Patton, Tidwell
`H.Patton
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`& Schroeder:
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`*Robert William Schroeder, III, *Nicholas
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`* Terminated
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`11
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`

`
`TABLE OF CONTENTS
`TABLE OF CONTENTS ......................................................................................... iii
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`TABLE OF AUTHORITIES .......................................................................... . . ...... . vi
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`STATEMENT OF RELATED CASES ....................................... . . .......................... ix
`STATEMENT ..... ..... ...... ... ......................... ....... ... ......... 1
`I. JURISDICTIONAL
`II. STATEMENT OF THE ISSUES . ................ . .... . .............. ............... .......... ... .. 1
`III. STATEMENT OF THE CASE .... . . ...... ......... . . . .. .. .. .. . . ........ .. .... ... .. . ... .. ... . . .. . .... 2
`IV. STATEMENT OF THE FACTS .......... ....................... .. ..................... . .... ....... 6
`........... ............................ ................................. .. .... ..... 6
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`A. Versata's Patents
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`........ ....... .... ...... ....... .................. ................. . ...... 7
`1 . The ' 400 Patent
`. ..... .. ............. ...... .. ....................................... ...... 7
`2. The '350 Patent
`. .. .... .... ............... . .... .... . ...
`.......... . ........... ..... .. .......... .... . 1 0
`B. SAP's Software
`................... . .... . .. ... . 1 0 1 . SAP's ERP and CRM Business Solutions
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`........... .. ..... ... . ... ... ... 13 2. "Hierarchical Access" in SAP's Software
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`........ . ....... ..... ........ ............. 14 3 . Numbers Used by SAP's Software
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`Below .. ... ........ .. ..... . .......... . ........ .... .......... 1 4
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`C. The Infringement Findings
`....... . ........ ...... .................. ......... .. ... .. .. . ... ... .... ...... ... ..... 1 4
`1 . The Trial
`.. .... ...... ... .. . 17 2. The Verdict and JMOL Decision on Infringement
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`......3 . SAP's Redesign ............ . ........... . ........... ....... ..... ........ ..... . .... 1 9
`....... ... ...... ... 1 9
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`Software D. V ersata' s Software and the Market for Pricing
`Below ............... ........ ............ 23
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`E. The Damages and Injunction Findings
`..... ......... . .............. .......... .................. ............. ....... .. 23 1 . Lost Profits
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`......... ..... ............... ........... ........ .. .... ... ......... 29 2. Reasonable Royalty
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`111
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`....... .... ...... .. ...... .... ...... ..... .. . ..... 3l
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`3. The District Court's Injunction
`V. SUMMARY OF THE ARGUMENT .... ...................... .... ................ ... ..... ..... 35
`VI. ARGUMENT ...................... ................. ......................................................... 37
`..... ............... ........... ... .................... .. .... .. . . . ... ..... . .. 37
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`A. Standard of Review
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`B. The District Court's Holding that SAP's Software Is
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`"Capable of' Performing Certain Claimed Steps (or
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`"Causes a Computer" to Perform Those Steps) Should Be
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`Reversed Because SAP's Software Will Not Perform the
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`Claimed Operations Without Added Computer
`.. .. ... ... . . ........... . ........... ... . .... .. ... .....Instructions
`.. .... ............. ... ..... ...... ... 38
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`Uses that SAP's Software C. The District Court's Holding
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`. ...........
`..... ... . . . ......... 43 "Denormalized Numbers" Should Be Reversed
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`1. SAP's Software Does Not Satisfy the Agreed-upon
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`. ... . .............
`................ 43
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`Definition of "Denormalized Numbers"
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`2. SAP's Software Is, in All Relevant Respects,
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`Identical to Prior-Art SAP Software that Versata
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`......... . ....... ... ........... .............. 44 ..... ........ .....Expressly Disclaimed
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`Should Be Set Aside .............. ............. ..... .... 46
`D. The Lost Profits Award
`......................... 46
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`Causation in Fact. 1 . Versata Failed to Establish
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`2. Versata Failed to Apply the Panduit Factors in a
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`............ ... .......Single Consistent Market ......... ... ............... ........ 50
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`3. Versata Failed to Show Demand for Pricer During
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`............ 53 the Damages Period (Panduit Factor 1 ) ........... ............
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`4. Versata Failed to Prove Lost Profits with
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`Reasonable Probability Factor 4) .............................. 54
`(Panduit
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`a) Versata Did Not Prove It Would Have
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`Resumed Selling Pricer at All in April 2003,
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`Much Less at the Same Rate as 1 996-98 ....................... 55
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`IV
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`from the b) Versata's Calculation Extrapolated
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`Wrong 1996-98 Data, Inflating the Bottom
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`Line ...... ..... ....................... ............................... ... . . . . . ....... 57
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`a Royalty E. There Is No Substantial Evidence to Support
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`A ward over $2 Million ....................................................................... 58
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`Is Impermissibly F. The District Court's Injunction
`..... .............. ............ ......................................... ......... .......... 59 Overbroad
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`1 . Enjoining Maintenance and Additional Seats
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`.. ................. 60 Prohibits SAP from Engaging in Lawful Activity
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`2. The Injunction Against Maintenance Is Entirely
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`.................... ................ ....... .......... ... 64 ...............Disproportionate
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`... ..... ... .................. ............... 66
`VII. CONCLUSION AND RELIEF REQUESTED
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`v
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`

`
`TABLE OF AUTHORITIES
`
`Cases
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`Amstar Corp. v. Envirotech Corp.,
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`823 F.2d 1 538 (Fed. Cir. 1 987) ........................................................................... 63
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`Aro Manufacturing Co. v. Convertible Top Replacement Co. ,
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`365 U.S. 336 (1961) ............................................................................................. 63
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`Astrazeneca AB v. Mutual Pharmaceutical Co.,
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`384 F.3d 1333 (Fed. Cir. 2004) . .......................................................................... 46
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`Bellows v. Amoco Oil Co.,
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`1 18 F.3d 268 (5th Cir. 1 997) ............................................................................... 37
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`Cordis Corp. v. Boston Scientific Corp.,
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`37 ........................... ....... 658 F.3d 1347 (Fed. Cir. 2011) .........................................
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`Dun v. Lumbermen's Credit Ass 'n,
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`............................................................................................... 69
`209 U.S. 20 (1908)
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`eBay Inc. v. MercExchange, LLC,
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`547 U.S. 388 (2006) ............................................................................................. 62
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`Fantasy Sports Properties, Inc. v. SportsLine.com, Inc.,
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`287 F.3d 1 1 08 (Fed. Cir. 2002) .......................................... ........................... 40,43
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`Finjan, Inc. v. Secure Computing Corp.,
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`626 F.3d 1197 (Fed. Cir. 201 0) ............................................................... 40,41,43
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`Grain Processing Corp. v. American Maize Products Co.,
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`185 F.3d 1341 (Fed. Cir. 1999) ........................................................................... 48
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`High Tech Medical Instrumentation, Inc. v. New Image Industries, Inc. ,
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`49 F.3d 1555 (Fed. Cir. 1 995) ............... . ............................................................. 42
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`Hilgraeve Corp. v. Symantec Corp.,
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`265 F.3d 1 336 (Fed. Cir. 2001) ........................................................................... 41
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`Hockerson-Halberstadt, Inc. v. Avia Group International, Inc.,
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`222 F.3d 951 (Fed. Cir. 2000) .................................. ........................................... 47
`
`VI
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`Innogenetics, N. V. v. Abbott Laboratories,
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`512 F.3d 1363 (Fed. Cir. 2008) ......................... . . . .......................... ......... 38, 65, 66
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`Intel Corp. v. International Trade Commission,
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`946 F.2d 821 (Fed. Cir. 1991) ....................................................................... 42,43
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`Johns Hopkins University v. CellPro, Inc.,
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`152 F.3d 1342 (Fed. Cir. 1998) ........................................................................... 65
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`King Instrument Corp. v. Otari Corp.,
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`814 F.2d 1560 (Fed. Cir. 1987) ........................................................................... 64
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`Lucent Technologies, Inc. v. Gateway, Inc.,
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`580 F.3d 1301 (Fed. Cir. 2009) .................. . .. ........ .. ............................................ 61
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`Muniauction, Inc. v. Thomson Corp.,
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`532 F.3d 1318 (Fed. Cir. 2008) ....................................................... ........... ......... 37
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`Nerney v. New York, N.H. & H.R. Co.,
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`83 F.2d 409 (2d Cir. 1936) . . .. . . . . . . . . . . . . .. . .. . .........................................
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`. . . . . .
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`...........
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`" 69
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`Oiness v. Walgreen Co. ,
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`88 F.3d 1025 (Fed. Cir. 1996) ....................................................................... 58, 59
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`Poly-America L.P. v. GSE Lining Technology, Inc.,
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`383 F.3d 1303 (Fed. Cir. 2004) ................................ ............ ......................... 38, 49
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`ResQNet.com, Inc. v. Lansa, Inc.,
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`594 F.3d 860 (Fed. Cir. 2010) .............. ............................................................... 61
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`Rite Hite Corp. v. Kelley Co.,
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`56 F.3d 1538 (Fed. Cir. 1995) ............................................................................. 52
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`Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc.,
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`620 F.3d 1305 (Fed. Cir. 2010) ...... .................................... .......... ....................... 65
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`Springs Window Fashions L.P. v. Novo Industries L.P.,
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`323 F.3d 989 (Fed. Cir. 2003) . .. ............ . ............................................................. 46
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`Stickle v. Heublein, Inc.,
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`716 F.2d 1550 (Fed. Cir. 1983) .......................................... ................................. 64
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`VB
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`Telemac Cellular
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`247 F.3d 1316 (Fed. Cir. 2001) ......................................................................... . . 42
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`317 F.3d 498 (5th Cir. 2003) . ............................ . .............. .... .. . ........... .......... ....... 38
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`Water Technologies
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`850 F.2d 660 (Fed. Cir. 1 988) ...................................................... . .... ................. . 49
`
`Corp. v. Topp Telecom, Inc.,
`Vargas v. Lee,
`Corp. v. Calco, Ltd.,
`v. Macke International
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`Trade, Inc.
`Wechsler
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`486 F.3d 1286 (Fed. Cir. 2007) ............................................ . .............................. 37
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`Statutes
`28 U.S.C. § 1 1 31 .....................
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`....... ..................................
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`............ ............... .............. 1
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`. ................... . .......28 U.S.C. § 1295(a) ............. . .. . . .... .............. ...........
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`..... ..... . . ............ 1
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`28 U.S.C. § 1338(a) ............... . ..................... . .............. . . . .. .. .................. ..... .................. 1
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`28 U.S.C. § 2107(a) . ............................................. . ............... ...... . ....... ....................
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`... 1
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`Rules
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`....................... . ............. 1 Fed. R. App. P. 4(a) .......... ..................... ...............................
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`Fed. R. Civ. P. 50(a) ...................................................... . ......................................... 37
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`VI11
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`

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`STATEMENT OF RELATED CASES
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`No other appeal in or from the civil action below has been before this or any
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`other appellate court.
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`There is no other case in this or any other court known to directly affect or
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`be directly affected by this Court's decision in the instant appeal.
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`IX
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`I. JURISDICTIONAL STATEMENT
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`The U.S. District Court for the Eastern District of Texas had jurisdiction
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`over the civil action giving rise to this appeal pursuant to 28 U.S.C. §§ 1331 and
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`1338(a).
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`The U.S. Court of Appeals for the Federal Circuit has jurisdiction over this
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`appeal pursuant to 28 U.S.C. § 1295(a).
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`The Notice of Appeal from the Final Judgment entered September 9, 2011
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`(AI-3), was timely filed in accordance with 28 U.S.C. § 2107(a) and Fed. R. App.
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`P. 4(a) on October 11, 2011. AI1250-55.
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`II. STATEMENT OF THE ISSUES
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`Infringement Issue 1: Did the district court err in holding that the
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`computer instructions in SAP's software are "capable of' performing certain
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`claimed steps (or "caus[e] a computer" to perform those steps), where the software,
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`as shipped, cannot perform those steps without substantial modifications and
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`additions to SAP's computer instructions?
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`Infringement Issue 2: Did the district court err in holding that SAP's
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`software uses "denormalized numbers" where it does not satisfy the agreed-upon
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`definition of that term and is, in all relevant respects, identical to earlier SAP
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`software criticized in the specification for not using denormalized numbers?
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`1
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`Damages Issue 1: Did the district court err in refusing to overturn a $260
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`million lost profits award, where Versata was unable to identify even a single
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`customer who decided not to purchase Versata's software due to the alleged
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`infringement, Versata stopped selling its software years before the alleged
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`infringement began, and the award was based on inconsistent market definitions
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`and assumptions that improperly inflated the calculation?
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`Damages Issue 2: Did the district court err in refusing to overturn an $85
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`million reasonable royalty award that was based on the entire market value rule,
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`where Versata's own expert agreed that not a single SAP customer ever purchased
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`SAP's software because of the accused functionality?
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`Injunction Issue: Did the district court err in entering an impermissibly
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`overbroad and disproportionate injunction that not only prohibits SAP from selling
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`the accused software to new customers, but also prohibits SAP from providing
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`maintenance or additional "seats" to existing customers, notwithstanding that those
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`customers are already included in the damages award (and are therefore licensed),
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`and that SAP's software contains tens of thousands of features having nothing to
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`do with Versata's patents?
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`III. STATEMENT OF THE CASE
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`The $392 million judgment on appeal is among the largest in patent-law
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`history. Given these stakes, one might assume the patents-at-issue go to the core
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`2
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`of SAP's expansive software offerings, which are used globally by companies,
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`governments, and nonprofits to run every aspect of their businesses-from payroll
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`to planning to shipping and receiving. But that is not the case.
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`Versata's patents are directed to a very specific way to determine the price of
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`Computerized pricing, however, was ubiquitous long
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`a product using a computer.
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`Versata's
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`before Versata came along, including in SAP's prior-art software.
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`patents use both a "product hierarchy" (which was known) and a "customer
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`hierarchy" (which was known) in a very specific way to determine a price. SAP's
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`software does not work that way.
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`The district court found that the claimed pricing operations are not among
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`the tens of thousands of features in SAP's highly customizable software.
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`Nevertheless, the court found both direct and indirect infringement based solely on
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`how the computer instructions in SAP's software were added to and modified by
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`Versata's
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`expert-not on SAP's computer instructions as sold. The court reasoned
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`that, because Versata's expert never changed SAP's "source code," Versata's
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`But this focus on "source
`added instructions were irrelevant to infringement.
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`code" finds no basis in the claims, which require "computer instructions" or
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`"computer program instructions." Source code is only one type of "computer
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`instructions." And SAP's source code-without the Versata-added "computer
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`instructions" that are not found in SAP's software as shipped-does not and cannot
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`3
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`It is not an act of direct
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`practice the functionality recited in the asserted claims.
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`infringement to sell a product capable of being modified to infringe.
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`SAP's software likewise does not infringe because it does not contain
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`"denormalized numbers," which the district court correctly held to be part of the
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`"pricing information" limitation in all asserted claims.
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`The agreed-upon definition
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`requires that the meaning and units of a denormalized number be determined
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`during run-time of the software, not in advance. Versata presented no evidence
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`that the meaning and units of numbers in SAP's software are determined during
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`run-time. To the contrary, as in SAP's prior-art software (which Versata
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`disclaimed), the numbers' meaning and units are defined in advance, and SAP
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`therefore cannot infringe.
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`Nevertheless, in 2009, a jury awarded Versata a $138,641,000 royalty for
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`infringing Versata's '350 and '400 patents despite that only Versata's expert-and
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`no SAP customer-had modified SAP's software to enable it to perform the
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`claimed operations. After trial, the district court held that SAP did not infringe the
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`'400 patent as a matter of law and that Versata's damages expert's testimony
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`violated the entire market value rule, and ordered a new trial for damages on the
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`'350 patent.
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`In that new trial, the district court permitted Versata to present a speculative
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`and legally-deficient damages case, culminating in a jury verdict of $345 million.
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`4
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`Rather than setting that second verdict aside, the court added prejudgment interest
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`resulting in a total award of $391,712,036. All this for a feature! that Versata's
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`expert admitted played no role in demand for SAP's software.
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`Finally, the court entered an injunction that is legally improper because,
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`and additional SAP from providing maintenance once effective, it will preclude
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`,,2 to customers who are already part of the damages base. It is also
`"seats
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`improper because it prevents SAP from providing maintenance for not only the
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`accused pricing capability, but also any of the tens of thousands of other features.
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`The district court's injunction improperly holds SAP's software hostage based on
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`one obscure and (admittedly) unimportant "feature."
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`For the reasons below, the district court's judgment should be reversed.
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`! While SAP disputes that its software, as shipped, infringes any claim, for ease of
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`reference, it will refer to Versata's expert's additions and modifications as the
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`"accused feature" or the "accused functionality."
`2 Each SAP customer has a certain number of seats, representing the number of
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`users within the company who may use SAP's software. As explained below, the
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`damages were awarded on a per-customer basis, so each customer in the damages
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`base is licensed on a per-customer basis, without restriction on the number of seats
`for that customer.
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`5
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`

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`IV. STATEMENT OF THE FACTS
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`A. Versata's Patents
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`Versata's patents (which share a common disclosure) relate to calculating a
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`price using customer ("organizational") and product data stored in hierarchies, as
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`shown below.
`
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`
`Customer Hierarchy
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`Product Hierarchy
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`A448 (4:24-27). The pnor art-which also used customer and product
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`hierarchies-calculates a pnce by retrieving information from one node of a
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`hierarchy at a time (a technique referred to at trial as "classical access") (A4048-
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`49), whereas the patents' invention retrieves information from the entire hierarchy
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`at once (i.e., "hierarchical access") (A456 (19:7-22); A4048-49).
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`Although the phrase "hierarchical access" was used at trial as "shorthand"
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`for the inventions (A3228), the asserted claims do not cover all ways of using
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`6
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`"hierarchical access." Rather, the claims are limited to an apparatus that uses
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`hierarchical access to retrieve pricing data from both a customer hierarchy and a
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`product hierarchy to determine a single price. A456 (19:7-22); A456-57 (20:66-
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`21:29); A457 (21:61-22:35); A3277-83; A3136; A4048-49; A3526.
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`1. The '400 Patent
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`Versata asserted infringement of independent claim 31 and dependent claims
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`35 and 36. A163. Each requires "computer readable program code configured to
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`cause a computer to" perform a specific set of claimed operations, including
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`accessing both customer and product hierarchies.
`A540 (23: 10-52,23:62-67).
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`After the first trial, the district court granted JMOL of noninfringement because
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`Versata presented no evidence that SAP's program instructions, as shipped, were
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`so configured.
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`2. The '350 Patent
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`Versata asserted infringement of independent claim 29 and dependent claims
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`26 and 28. A163. Like the "configured to" limitation in the '400 patent, claims 26
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`and 28 require "computer instructions to implement" the claimed operations, which
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`the parties agreed means "computer instructions causing a computer to
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`implement." A457 (21 :61-62,22: 13-14); A10006; A155. Claim 29 requires
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`"computer program instructions capable of' performing specific claimed
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`7
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`operations, including determining a pnce usmg hierarchical access of both
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`customer and product hierarchies:
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`An apparatus for determining a price of a product offered
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`to a purchasing organization comprising:
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`a processor;
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`a memory coupled to the processor, wherein the memory
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`includes
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`computer program instructions capable of
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`retrieving from a data source
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`that is
`pricing information
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`(i) applicable to the purchasing organization and (ii) from
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`one or more identified organizational groups,
`within a
`groups, of which the
`hierarchy of organizational
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`purchasing organization is a member;
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`retrieving from the data source
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`that is
`pricing information
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`(i) applicable to the product and (ii) from one or more
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`identified product groups,
`within a hierarchy of product
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`groups, of which the product is a member; and
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`receiving the price of the product determined usmg
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`pricing information applicable to the one or more
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`identified organizational groups and the one or more
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`identified product groups
`according to the hierarchy of
`product groups and the hierarchy of organizational
`groups.
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`software must have A457 (22: 15-35)(emphases added). Thus, to infringe,
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`"computer program instructions capable of' performing hierarchical access of both
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`customer ("organizational") and product hierarchies to determine a price.
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`A second requirement of the asserted claims is using "denormalized
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`pricing limitation. To process numbers," which is part of the "pricing information"
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`8
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`information, the software must know what units and meaning to apply to retrieved
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`numbers.
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`For example, the software must know whether a number-say "10"-
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`means a price adjustment of "ten dollars" or "ten percent." In explaining what
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`"denormalized" means, the patent distinguishes prior art, including SAP's prior-art
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`numbers are "RJ3" software, in which the meaning and units of the pricing-related
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`determined by the user during data entry. Repeatedly, the patent emphasizes that
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`the "invention" leaves the meaning and units to be determined by the software's
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`"interpretation engine" "during run time":
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`of the value of Xl is determined
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`According to the present invention, the particular
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`treatment
`during run
`time. In other words, the numbers in the prior art tables
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`are "abstracted" and stored as a denormalized number . . .
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`and the interpretation of the numbers are left to the
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`interpretation engine of the present invention. This
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`dynamic interpretation of abstracted numbers during run
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`time . .. is in contrast to the static nature of the prior art
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`pricing systems.
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`A452 (11:17-28); see A450-51 (8:49-9:4); A452 (11:51-57); A454 (15:14-19);
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`A1111; A1154-57.
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`Based on the patent's emphasis on the data entry versus run-time distinction
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`as central to the "invention," and the disavowal of prior art (including RJ3) in
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`which meaning and units were defined during data entry, the district court
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`construed "pricing information" to require denormalized numbers. Consistent with
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`the patent's definition, the parties stipulated that a "denormalized number" is
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`9
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`a number, used as a price adjustment, that does not have
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`fixed units and may assume a different meaning and
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`different units depending on the pricing operation that is
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`being performed; the specific units to be associated with
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`the number, and how the number will be applied, are
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`determined during "run time" --the time that the system
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`uses the pricing adjustment data to determine the price of
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`the product offered to the purchasing organization.
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`AI0005; see A450-51 (8:49-9:4); A452 (11:17-28); A452 (11:51-57); A454
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`(15:14-19).
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`The key point for this appeal is that the number's meaning and units
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`not during data entry.
`must be determined during run-time,
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`B. SAP's Software
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`1. SAP's ERP and CRM Business Solutions
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`SAP's software (Enterprise Resource Planning ("ERP") and Customer
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`Relationship Management ("CRM"» runs most processes of large, medium, and
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`small businesses, including, for example, financials, accounting, materials
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`management, procurement, supply-chain planning, human resources, pricing, etc.
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`A5610-11; AI083; A1283; AI326-27.
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`In October 1998, SAP released a new version of its software that included,
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`among many other new features, the ability to use "hierarchical access." A1919;
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`A5612-26; A4156-57. As illustrated below, hierarchical access is a subcomponent
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`of a subcomponent, located under five tiers of functionality, and is one of tens of
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`thousands of features in SAP's software. A2043-49; A4087; A3212-13.
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`10
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`PR Special Pricing Functions
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`Special Pricing Functions
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`- Promotional pricing agreements
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`- Customer expected prioe
`- Cost
`- Gross prices
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`- Condition exclusion
`- Variant conditions
`- Mnimum order value
`- Sales order costing in pricing
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`- Duplicate conditions
`- Cumulating conditions
`- Group cond\llons
`- Pellet discounts
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`-Hierarchical AccHSes
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`for sales deals
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`- Data determination in access
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`- Data determination using a communication structure
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`- Data determination using routines
`- Data determination
`- Prioe book
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`- Condition interchange
`- Idocs and condition technology
`- Outbound prooessing
`- Inbound p rooessing
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`- Distribution scenarios
`- Customizing
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`- Customer exits
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`DDX·630
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`�I
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`Like SAP's other solutions, pricing is a flexible platform that businesses
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`customize in myriad ways to support their specific needs. To facilitate
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`"condition technique."
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`The condition technique,
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`illustrated
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`pricing-to customize
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`complex business rules.
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`11
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`customization, SAP provides a broad set of flexible tools