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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
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`OIP TECHNOLOGIES, INC.,
`Plaintiff,
`
`v.
`AMAZON.COM, INC.,
`Defendant.
`___________________________________/
`
`No. C-12-1233 EMC
`
`ORDER GRANTING DEFENDANT’S
`MOTION TO DISMISS
`(Docket No. 33)
`
`I. INTRODUCTION
`Pending before the Court is Defendant Amazon’s motion to dismiss for failure to state a
`claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Docket No. 33. Defendant
`argues that Plaintiff OIP’s patent is facially invalid under 35 U.S.C. § 101 because it covers non-
`patent-eligible subject matter. Having considered the parties’ submissions and oral argument, and
`for the reasons set forth below, the Court GRANTS Defendant’s motion to dismiss under § 101.
`II. FACTUAL & PROCEDURAL BACKGROUND
`In the Complaint, Docket No. 1, Plaintiff alleges as follows. Plaintiff OIP is the successor to
`Optivo Corporation. Compl. ¶ 19. Defendant Amazon is the world’s leading online retailer with its
`headquarters in Seattle, Washington. OIP owns the patent at issue in this case – U.S. Patent No.
`7,970,713 (“the ‘713 patent”) – entitled “Method and Apparatus for Automatic Pricing in Electronic
`Commerce.” Compl., Ex. 1. OIP’s invention was designed to facilitate e-commerce price selection
`and optimization. Id. ¶ 9. Marketed as the Optivo Pricing Solution, the invention allowed for
`“automated testing and selection of prices for goods and services sold online.” Id. ¶ 10. Optivo
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`CRS EXHIBIT 1010
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`released the product in 2001and allowed e-commerce companies to participate in trials of the
`technology. Id. ¶ 11.
`Amazon’s consumer electronics unit participated in a trial demonstration in June 2001,
`increasing its contribution margin by 7% of revenue. Id. ¶¶ 13-14. The parties exchanged
`information under a Non-Disclosure Agreement during that time. Id. ¶ 13. The parties met on
`September 18, 2001, to discuss Amazon’s potential acquisition of Optivo and its technology. Id. ¶
`16. At that meeting, Optivo presented a detailed presentation regarding the patent-pending
`technology, and projected that using the Optivo technology could increase margins by $100 million.
`Id. ¶ 17. Amazon declined to purchase Optivo, but offered employment to two Optivo engineers for
`the job title of “Price Statisticians.” Id. ¶ 18. Both engineers fielded technical questions about the
`Optivo technology during the interview. Id.
`Approximately ten years later, on June 28, 2011, the ‘713 patent issued. Id. ¶ 19. The
`abstract to the ‘713 patent states:
`An automatic pricing method and apparatus for use in electronic
`commerce environments is described. Automatic pricing uses live
`price testing to estimate and measure demand for specific
`products--taking into account where appropriate, a vendor selected
`segmentation scheme. The results of live price testing are compared
`using a vendor selected goal function, e.g. profit maximization, to
`select a new price. A goal function that balances short term gains
`versus long term gains based on customer lifetime value is described.
`The live price testing approach used is designed to minimize losses
`due to price testing through statistical methods. Additionally, methods
`for distributing price testing across time so as to avoid problems
`caused by too many ongoing tests as well as side effects from testing
`are described. The selected price is a win for both purchasers and
`vendors as the automatic price will approximate the efficiency of a
`reverse auction without the inconvenience of the auction format while
`being goal maximizing for the vendor. For example, a vendor that
`normally sets prices of items for sale to customers can use
`embodiments of the invention to great effect.
`
`Compl. Ex. 1, at 1. The ‘713 patent contains two independent claims, which the Court reproduces
`below. Claim 1, the independent method claim, states:
`A method of pricing a product for sale, the method comprising:
`[1] testing each price of a plurality of prices by sending a first set of
`electronic messages over a network to devices;
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`[a] wherein said electronic messages include offers of
`said product;
`[b] wherein said offers are to be presented to potential
`customers of said product to allow said potential
`customers to purchase said product for the prices
`included in said offers;
`[c] wherein the devices are programmed to
`communicate offer terms, including the prices
`contained in the messages received by the devices;
`[d] wherein the devices are programmed to receive
`offers for the product based on the offer terms;
`[e] wherein the devices are not configured to fulfill
`orders by providing the product;
`[f] wherein each price of said plurality of prices is used
`in the offer associated with at least one electronic
`message in said first set of electronic messages;
`[2] gathering, within a machine-readable medium, statistics generated
`during said testing about how the potential customers responded to the
`offers, wherein the statistics include number of sales of the product
`made at each of the plurality of prices;
`[3] using a computerized system to read said statistics from said
`machine-readable medium and to automatically determine, based on
`said statistics, an estimated outcome of using each of the plurality of
`prices for the product;
`[4] selecting a price at which to sell said product based on the
`estimated outcome determined by said computerized system; and
`[5] sending a second set of electronic messages over the network,
`wherein the second set of electronic messages include offers, to be
`presented to potential customers, of said product at said selected price.
`
`Compl. Ex. 1. Claim 27, the independent medium claim, describes:
`A computer-readable medium carrying instructions which, when
`executed by one or more processors, cause the one or more processors
`to price a product for sale by performing the steps of:
`[1] testing each price of a plurality of prices by sending a first set of
`electronic messages over a network to devices;
`[a] wherein said electronic messages include offers of
`said product;
`[b] wherein said offers are to be presented to potential
`customers of said product to allow said potential
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`customers to purchase said product for the prices
`included in said offers;
`[c] wherein the devices are programmed to
`communicate offer terms, including the prices
`contained in the messages received by the devices;
`[d] wherein the devices are programmed to receive
`orders for the product based on the offer terms;
`[e] wherein the devices are not configured to fulfill
`orders by providing the product;
`[f] wherein each price of said plurality of prices is used
`in the offer associated with at least one electronic
`message in said first set of electronic messages;
`[2] gathering, within a machine-readable medium, statistics generated
`during said testing about how the potential customers responded to the
`offers, wherein the statistics include number of sales of the product
`made at each of the plurality of prices;
`[3] using a computerized system to read said statistics from said
`machine-readable medium and to automatically determine, based on
`said statistics, an estimated outcome of using each of the plurality of
`prices for the product;
`[4] selecting a price at which to sell said product based on the
`estimated outcome determined by said computerized system; and
`[5] sending a second set of electronic messages over the network,
`wherein the second set of electronic messages include offers, to be
`presented to potential customers, of said product at said selected price.
`
`Id.
`
`Thus, the two independent claims are identical but that Claim 27 provides for a “computer-
`readable medium” capable of performing the method of Claim 1. The remaining claims are
`dependent claims, based off of Claims 1 or 27.
`On March 12, 2012, OIP filed this suit alleging that Amazon infringes the ‘713 patent by,
`e.g., “making and using software systems for automated testing and selection of prices for products
`and services offered for sale on www.amazon.com wherein statistics are generated during the
`testing, estimated outcomes are determined, and prices are selected for a subsequent offer for sale of
`a product or service based on the estimated outcomes.” Id. ¶ 24. OIP further alleges that Amazon’s
`infringement of the ‘713 patent “has been and continues to be willful.” Id. ¶ 26. Plaintiff alleges that
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`Amazon has had notice that the patent was pending since at least 2001, because Plaintiff directly so
`informed it. Id. ¶ 20.
`
`III. DISCUSSION
`
`A.
`
`Legal Standard
`Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the
`failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). A motion to
`dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks
`Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In considering such a motion, a court
`must take all allegations of material fact as true and construe them in the light most favorable to the
`nonmoving party, although “conclusory allegations of law and unwarranted inferences are
`insufficient to avoid a Rule 12(b)(6) dismissal.” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.
`2009). While “a complaint need not contain detailed factual allegations . . . it must plead ‘enough
`facts to state a claim to relief that is plausible on its face.’” Id. “A claim has facial plausibility when
`the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
`defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see
`also Bell Atl. Corp v. Twombly, 550 U.S. 544, 556 (2007). “The plausibility standard is not akin to a
`‘probability requirement,’ but it asks for more than sheer possibility that a defendant acted
`unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).
`B.
`Patent Eligibility Under 35 U.S.C. § 101
`Section 101 of the Patent Act provides that “[w]hoever invents or discovers any new and
`useful process, machine, manufacture, or composition of matter, or any new and useful improvement
`thereof, may obtain a patent therefore, subject to the conditions and requirements of this title.” 35
`U.S.C. § 101. “In choosing such expansive terms modified by the comprehensive ‘any,’ Congress
`plainly contemplated that the patent laws would be given wide scope.” Bilski v. Kappos, 130 S. Ct.
`3218, 3225 (2010).
`Notwithstanding the broad scope of § 101, however, there are three judicially-created
`exceptions to § 101 patent-eligibility: “laws of nature, physical phenomena, and abstract ideas.”
`Bilski, 130 S. Ct. at 3225; Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289,
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`1301 (2012). These principles are not patent-eligible because “‘they are the basic tools of scientific
`and technological work,’” which are “‘free to all men and reserved exclusively to none.’” Mayo,
`132 S. Ct. at 1293 (quoting Gottschalk v. Benson, 409 U.S. 63, 67 (1972), and Diamond v.
`Chakrabarty, 447 U.S. 303, 309 (1980)).
`In deciding whether a patent falls into one of these exceptions, courts have often used the
`“machine-or-transformation” test, under which “[a] claimed process is surely patent-eligible under §
`101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a
`different state or thing.” Bilski, 130 S. Ct. at 3224 (citations omitted). The Supreme Court has
`recently confirmed that this test is not dispositive, though it is still an “important and useful clue.”
`Id. at 3226; see also id. at 3227 (“[T]he machine-or-transformation test is a useful and important
`clue, an investigative tool, for determining whether some claimed inventions are processes under §
`101.”).
`Beyond the machine-or-transformation test, a court is obligated to hew closely to established
`precedents in this area to determine whether an invention falls within one of the exceptions to §
`101’s broad eligibility. See id. at 3231 (“Rather than adopting categorical rules that might have
`wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this
`Court’s [prior] decisions.”). Whether a claim recites patent-eligible subject matter is a question of
`law. See Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012); CyberSource Corp. v.
`Retail Decisions, Inc., 654 F.3d 1366, 1369 (Fed. Cir. 2011).
`The Federal Circuit has cautioned “that the ‘disqualifying characteristic’ of abstractness must
`exhibit itself ‘manifestly’ ‘to override the broad statutory categories of patent eligible subject
`matter.’” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 685 F.3d 1341, 1349 (Fed. Cir. 2012) (quoting
`Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010)) (“[S]ection 101 does
`not permit a court to reject subject matter categorically because it finds that a claim is not worthy of
`a patent.”)). Thus, § 101 is merely “a ‘coarse eligibility filter,’ not the final arbiter of patentability.”
` Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1066 (Fed. Cir. 2011) (quoting
`Research Corp., 627 F.3d at 869). Notwithstanding this forgiving standard, however, the Federal
`Circuit has acknowledged that “[t]he patent system represents a carefully crafted bargain that
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`encourages both the creation and the public disclosure of new and useful advances in technology, in
`return for an exclusive monopoly for a limited period of time.” Highmark, Inc. v. Allcare Health
`Mgmt. Sys., Inc., --- F.3d ----, No. 2011-1219, 2012 WL 3181659, at *17 (Fed. Cir. Aug. 7, 2012)
`(quoting Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 63 (1998)). “A patentee does not uphold his end of
`this ‘bargain’ if he seeks broad monopoly rights over a basic concept, fundamental principle, or
`natural law without a concomitant contribution to the existing body of scientific and technological
`knowledge.” Id.
`In the instant case, Defendant argues that the ‘713 patent’s claims fail to meet the coarse
`eligibility filter of § 101 because they fail the machine-or-transformation test and because they are
`directed to the abstract idea of price optimization, which is a fundamental economic principle that is
`reserved for the public.1 For the reasons set forth below, the Court agrees.
`1.
`Procedural Posture
`As a preliminary matter, Plaintiff argues that it is premature to consider Defendant’s
`eligibility challenges to the patent because the Court has yet to construe any of the claim elements,
`so the meaning of terms like “testing,” “computer system,” and “automatically” may have bearing
`on the subject matter eligibility analysis. Thus, Plaintiff argues it is too early to examine patent
`eligibility because claims construction and evidence may shed light on the distinction between an
`attempt to patent an abstract idea and an attempt to patent a practical application of that idea in a
`permissible manner under § 101. However, Plaintiff fails to explain how claims construction would
`materially impact the § 101 analysis in the instant case; instead, it merely asserts in conclusory
`
`1 The Court may examine the claims of the ‘713 patent together despite the fact that one
`independent claim is a method claim and the other describes a computer-readable medium claim.
`The Federal Circuit has confirmed that “a machine, system, medium, or the like may in some cases
`be equivalent to an abstract mental process for purposes of patent ineligibility.”Bancorp Services,
`L.L.C. v. Sun Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 2012 WL 3037176, at *9 (Fed. Cir.
`July 26, 2012) (citations omitted). This case presents such an example because the medium claim
`“recites a computer readable medi[um] for controlling a computer to perform the same . . . steps of
`method claim [1], repeated word for word.” Id. (internal quotation marks omitted). Therefore,
`“[t]here is no material difference between these two categories of claims in the asserted patents,”
`and the Court need not distinguish between the method and medium claims in its analysis because
`they are “equivalent for purposes of patent eligibility under § 101.” Id. See also Bancorp Services,
`L.L.C. v. Sun Life Assur. Co. of Canada, 771 F. Supp. 2d 1054, 1065 (E.D. Mo. 2011), aff’d, 687
`F.3d 1266 (Fed. Cir. 2012) (“[M]erely reciting data or instructions on a stored machine readable
`medium does not make a claim statutory under § 101.”).
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`fashion that construction “will undoubtedly impact the scope of the claims and could have bearing
`on the subject matter eligibility analysis.” Opp. at 22.
`In addition, Amazon points out that courts have considered § 101 eligibility at the motion to
`dismiss stage, and that therefore its motion is not per se premature. See, e.g., Glory Licensing LLC
`v. Toys “R” Us, Inc., No. 09-4252, 2011 WL 1870591, at *4 (D.N.J. May 16, 2011) (finding patent
`ineligible under § 101 on a 12(b)(6) motion); Ultramercial, LLC v. Hulu, LLC, No. 09-6918, 2010
`WL 3360098, at *7 (C.D. Cal. Aug. 13, 2010) (same). Indeed, while the Federal Circuit reversed
`Ultramercial on the merits of the § 101 analysis, it confirmed that it “has never set forth a bright line
`rule requiring district courts to construe claims before determining subject matter eligibility,” and
`that “in [that] case, the subject matter at stake and its eligibility [did] not require claim
`construction.” Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1325 (Fed. Cir. 2011) cert. granted,
`judgment vacated sub nom. WildTangent, Inc. v. Ultramercial, LLC, 132 S. Ct. 2431 (2012); see
`also Bancorp Services, L.L.C. v. Sun Life Assur. Co. of Canada (U.S.), 687 F.3d 1266, 2012 WL
`3037176, at *5 (Fed. Cir. July 26, 2012) (“Although Ultramercial has since been vacated by the
`Supreme Court, we perceive no flaw in the notion that claim construction is not an inviolable
`prerequisite to a validity determination under § 101.”).
`Accordingly, the Court concludes that the procedural posture of this case does not render
`Amazon’s motion premature.
`2.
`Summary of § 101 Jurisprudence
`The parties agree that the issue at bar is whether the ‘713 patent is patent-ineligible because
`it is an abstract idea. As the Federal Circuit has acknowledged, “When it comes to explaining what
`is to be understood by ‘abstract ideas’ in terms that are something less than abstract, courts have
`been less successful.” MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012); see
`also id. at 1260 (describing “the murky morass that is § 101 jurisprudence”). Given this uncertainty,
`a brief summary of the competing case law on this subject is instructive to set the ‘713 patent in this
`case in context.
`///
`///
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`Supreme Court
`a.
`In Bilski, the Supreme Court considered a “patent application claim[ing] a procedure for
`instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete
`section of the economy.” 130 S. Ct. at 3224.2 In other words, the patent described a method for
`hedging against risk. The Court provided a helpful summary of its most important prior
`jurisprudence regarding § 101:
`In Benson, the Court considered whether a patent application for an
`algorithm to convert binary-coded decimal numerals into pure binary
`code was a “process” under § 101.3 409 U.S. [at] 64–67. The Court
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`2 Claim 1 consisted of the following steps:
`(a) initiating a series of transactions between said commodity provider
`and consumers of said commodity wherein said consumers purchase
`said commodity at a fixed rate based upon historical averages, said
`fixed rate corresponding to a risk position of said consumers;
`(b) identifying market participants for said commodity having a
`counter-risk position to said consumers; and
`(c) initiating a series of transactions between said commodity provider
`and said market participants at a second fixed rate such that said series
`of market participant transactions balances the risk position of said
`series of consumer transactions.
`Id. at 3223-24.
`3 For example, Claim 13 read:
`A data processing method for converting binary coded decimal
`number representations into binary number representations comprising
`the steps of
`(1) testing each binary digit position ‘1,’ beginning with the
`least significant binary digit position, of the most significant decimal
`digit representation for a binary ‘0’or a binary ‘1’;
`(2) if a binary ‘0’ is detected, repeating step (1) for the next
`least significant binary digit position of said most significant decimal
`digit representation;
`(3) if a binary ‘1’ is detected, adding a binary ‘1’ at the (i 1)th
`and (i 3)th least significant binary digit positions of the next lesser
`significant decimal digit representation, and repeating step (1) for the
`next least significant binary digit position of said most significant
`decimal digit representation;
`(4) upon exhausting the binary digit positions of said most
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`first explained that “‘[a] principle, in the abstract, is a fundamental
`truth; an original cause; a motive; these cannot be patented, as no one
`can claim in either of them an exclusive right.’” Id. at 67 (quoting [Le
`Roy v. Tatham, 55 U.S. 156, 175 (1852)]). The Court then held the
`application at issue was not a “process,” but an unpatentable abstract
`idea. “It is conceded that one may not patent an idea. But in practical
`effect that would be the result if the formula for converting ...
`numerals to pure binary numerals were patented in this case.” 409 U.S.
`at 71. A contrary holding “would wholly pre-empt the mathematical
`formula and in practical effect would be a patent on the algorithm
`itself.” Id., at 72.
`In Flook, the Court considered the next logical step after Benson.
`[Parker v. Flook, 437 U.S. 584 (1978).] The applicant there attempted
`to patent a procedure for monitoring the conditions during the catalytic
`conversion process in the petrochemical and oil-refining industries.4
`The application’s only innovation was reliance on a mathematical
`algorithm. 437 U.S. at 585–586. Flook held the invention was not a
`patentable “process.” The Court conceded the invention at issue,
`unlike the algorithm in Benson, had been limited so that it could still
`be freely used outside the petrochemical and oil-refining industries.
`437 U.S. at 589–590. Nevertheless, Flook rejected “[t]he notion that
`
`significant decimal digit representation, repeating steps (1) through (3)
`for the next lesser significant decimal digit representation as modified
`by the previous execution of steps (1) through (3); and
`(5) repeating steps (1) through (4) until the second least
`significant decimal digit representation has been so processed.
`Benson, 409 U.S. at 74.
`4 Claim 1 of the patent described the method as follows:
`1. A method for updating the value of at least one alarm limit on at
`least one process variable involved in a process comprising the
`catalytic chemical conversion of hydrocarbons wherein said alarm
`limit has a current value of Bo + K; wherein Bo is the current alarm
`base and K is a predetermined alarm offset which comprises:
`(1) Determining the present value of said process variable, said
`present value being defined as PVL;
`(2) Determining a new alarm base B1, using the following
`equation: B1 = Bo(1.0–F) + PVL(F) where F is a predetermined
`number greater than zero and less than 1.0;
`(3) Determining an updated alarm limit which is defined as B1
`+ K; and thereafter
`(4) Adjusting said alarm limit to said updated alarm limit
`
`value.
`Flook, 437 U.S. at 596-97.
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`post-solution activity, no matter how conventional or obvious in itself,
`can transform an unpatentable principle into a patentable process.” Id.
`at 590. The Court concluded that the process at issue there was
`“unpatentable under § 101, not because it contain[ed] a mathematical
`algorithm as one component, but because once that algorithm [wa]s
`assumed to be within the prior art, the application, considered as a
`whole, contain[ed] no patentable invention.” Id. at 594. As the Court
`later explained, Flook stands for the proposition that the prohibition
`against patenting abstract ideas “cannot be circumvented by
`attempting to limit the use of the formula to a particular technological
`environment” or adding “insignificant postsolution activity.”
`[Diamond v. Diehr, 450 U.S. 175, 191-92 (1981)].
`Finally, in Diehr, the Court established a limitation on the principles
`articulated in Benson and Flook. The application in Diehr claimed a
`previously unknown method for “molding raw, uncured synthetic
`rubber into cured precision products,” using a mathematical formula to
`complete some of its several steps by way of a computer. 450 U.S. at
`177.5 Diehr explained that while an abstract idea, law of nature, or
`
`5 For example, Claim 11 described “[a] method of manufacturing precision molded articles
`from selected synthetic rubber compounds in an openable rubber molding press having at least one
`heated precision mold, comprising:
`(a) heating said mold to a temperature range approximating a
`pre-determined rubber curing temperature,
`(b) installing prepared unmolded synthetic rubber of a known
`compound in a molding cavity of predetermined geometry as defined
`by said mold,
`(c) closing said press to mold said rubber to occupy said cavity
`in conformance with the contour of said mold and to cure said rubber
`by transfer of heat thereto from said mold,
`(d) initiating an interval timer upon the closure of said press for
`monitoring the elapsed time of said closure,
`(e) heating said mold during said closure to maintain the
`temperature thereof within said range approximating said rubber
`curing temperature,
`(f) constantly determining the temperature of said mold at a
`location closely adjacent said cavity thereof throughout closure of said
`press,
`
`(g) repetitively calculating at frequent periodic intervals
`throughout closure of said press the Arrhenius equation for reaction
`time of said rubber to determine total required cure time v as follows:
`ln v = cz + x
`wherein c is an activation energy constant determined for said rubber
`being molded and cured in said press, z is the temperature of said mold
`at the time of each calculation of said Arrhenius equation, and x is a
`constant which is a function of said predetermined geometry of said
`
`11
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`For the Northern District of California
`
`United States District Court
`
`

`
`Case3:12-cv-01233-EMC Document50 Filed09/11/12 Page12 of 34
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`mathematical formula could not be patented, “an application of a law
`of nature or mathematical formula to a known structure or process
`may well be deserving of patent protection.” Id. at 187. Diehr
`emphasized the need to consider the invention as a whole, rather than
`“dissect[ing] the claims into old and new elements and then ...
`ignor[ing] the presence of the old elements in the analysis.” Id. at 188.
`Finally, the Court concluded that because the claim was not “an
`attempt to patent a mathematical formula, but rather [was] an
`industrial process for the molding of rubber products,” it fell within §
`101’s patentable subject matter. Id. at 192–193.
`
`Bilski, 130 S. Ct. at 3230.
`Applying this precedent to the patent for hedging against risk, the Bilski Court first found
`that the fact that the patent failed the machine-or-transformation test was not dispositive. Id. at
`3226-28. Second, the Court found that the patent could not be ineligible solely because it claimed a
`“business method.” Id. at 3228-29. The Court reasoned that “the Patent Act leaves open the
`possibility that there are at least some processes that can be fairly described as business methods that
`are within patentable subject matter under § 101,” even though in practice many business method
`patents might be invalid under other sections, such as §§ 102, 103, and 112. Id. at 3229.
`Notwithstanding these caveats, however, the Court nonetheless concluded that the patent was
`ineligible because its claims “explain the basic concept of hedging, or protecting against risk.” Id. at
`3231. The Court found that “[t]he concept of hedging, described in claim 1 and reduced to a
`mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in
`Benson and Flook. Allowing petitioners to patent risk hedging would pre-empt use of this approach
`in all fields, and would effectively grant a monopoly over an abstract idea.” Id. The Court
`
`mold,
`
`(h) for each repetition of calculation of said Arrhenius equation
`herein comparing the resultant calculated total required cure time with
`the monitored elapsed time measured by said interval timer,
`(i) opening said press when a said comparison of calculated
`total required cure time and monitored elapsed time indicates
`equivalence, and
`(j) removing from said mold the resultant precision molded and
`cured rubber article.
`Diehr, 450 U.S. at 181 n.5.
`
`12
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`1 2 3 4 5 6 7 8 9
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`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`For the Northern District of California
`
`United States District Court
`
`

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`Case3:12-cv-01233-EMC Document50 Filed09/11/12 Page13 of 34
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`additionally determined that the fact that certain claims covered only the energy and commodities
`markets did not render the invention eligible because under Flook, “limiting an abstract idea to one
`field of use or adding token postsolution components did not make the concept patentable.” Id.
`More recently, in Mayo, the Supreme Court considered a method for accurately determining
`the dosage of certain drugs for autoimmune diseases based on the way different bodies metabolized
`those drugs. 132 S. Ct. 1289. Although researchers understood the general correlation between
`certain metabolite levels in a person’s blood and the likely safety and effectiveness of a certain
`dosage, prior to the patent, “those in the field did not know the precise correlations between
`metabolite levels and likely harm or ineffectiveness. The patent claims at issue here set forth
`processes embodying researchers’ findings that identified these correlations with some precision.”
`Id. at 1295.6 The Court nonetheless concluded that the patents merely claimed a natural law
`“describing the relationships between the concentration in the blood of certain thiopurine
`metabolites and the likelihood that the drug dosage will be ineffective or induce harmful
`side-effects,” and that “the claimed processes have [not] transformed these unpatentable natural