`Filed October 21, 2014
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`
`DELL INC.
`Petitioner
`
`v.
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`DISPOSITION SERVICES LLC
`Patent Owner
`_____________
`
`Case CBM2013-00040
`Patent 5,424,944
`_____________
`
`Before SALLY C. MEDLEY, KEVIN F. TURNER, and
`MATTHEW R. CLEMENTS, Administrative Patent Judges
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`
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`PETITIONER’S REPLY BRIEF
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`
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`TABLE OF CONTENTS
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`INTRODUCTION .......................................................................................... 1
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`I.
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`II. ANALYSIS ..................................................................................................... 1
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`A.
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`Alice v. CLS Bank Confirmed the Correctness of the Board’s
`Approach to Analyzing Patent Eligibility Under § 101 ....................... 1
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`B.
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`The Claims of the ’944 Patent Are Directed to an Abstract Idea ........ 3
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`1.
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`2.
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`3.
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`Tying the claims to the physical world does not save
`them from abstractness .............................................................. 4
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`Abstract ideas are not limited to the specific examples
`recited in Alice ........................................................................... 5
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`The ’944 Patent claims are not designed to solve a
`“technological problem.” ........................................................... 7
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`C.
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`The Claims Do Not Include an Inventive Concept .............................. 8
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`1.
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`2.
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`3.
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`Patent Owner misapplies the “inventive concept” test .............. 8
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`Patent Owner ignores key evidence from the intrinsic
`record establishing that the “additional elements” of the
`claims are routine and conventional ........................................ 10
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`Considering the claim elements as an “ordered
`combination” further confirms the patent ineligibility of
`the claims ................................................................................. 12
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`III. CONCLUSION ............................................................................................. 13
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`-i-
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`TABLE OF AUTHORITIES
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` CASES
`Accenture Global Servs. GmbH v. Guidewire Software, Inc.,
`728 F.3d 1336 (Fed. Cir. 2013) ............................................................................ 1
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`Alice Corp. Pty. Ltd. v. CLS Bank Int'l,
`134 S. Ct. 2347 (2014) .................................................................................passim
`
`In re Bilski,
`545 F.3d 943 (Fed. Cir. 2008) (en banc) .......................................................... 5, 6
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`Diamond v. Diehr,
`450 U.S. 175 (1981) .............................................................................................. 7
`
`Fort Props., Inc. v. Am. Master Lease, LLC,
`671 F.3d 1317 (Fed. Cir. 2012) ............................................................................ 4
`
`Gottschalk v. Benson,
`409 U.S. 63 (1972) .............................................................................................. 11
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`Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
`132 S. Ct. 1289 (2012) .............................................................................. 1, 2, 3, 9
`
`Parker v. Flook,
`437 U.S. 584 (1978) ............................................................................................ 12
`
`SAP America, Inc. v. Versata Development Group, Inc.,
`CBM2012-00001, Paper 70 (P.T.A.B. June 11, 2013) ......................................... 9
`
` STATUTE
`35 U.S.C. § 101 .................................................................................................passim
`
` OTHER AUTHORITIES
`
`37 C.F.R. § 42.301(b) ................................................................................................ 8
`
`USPTO Preliminary Examination Instructions in view of the Supreme
`Court Decision in Alice Corporation Ply. Ltd. v. CLS Bank
`International, et al. (June 25, 2014) ..................................................................... 2
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`-ii-
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`I.
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`INTRODUCTION
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`The Board instituted this CBM Review because it found that Petitioner
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`demonstrated that claims 1-23 are “more likely than not . . . directed to non-
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`statutory subject matter and, thus, unpatentable under 35 U.S.C. § 101.” Paper 7
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`[Institution Decision] (“ID”) at 18-19, 21. Patent Owner’s Response fails to
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`establish any error or deficiency in the conclusion reached in the ID, and therefore
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`the Board should issue a Final Written Decision canceling claims 1-23 as
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`unpatentable under § 101.
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`II. ANALYSIS
`A. Alice v. CLS Bank Confirmed the Correctness of the Board’s
`Approach to Analyzing Patent Eligibility Under § 101
`
`In its Institution Decision, the Board applied a two-step approach for
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`determining whether the claims are directed to patentable subject matter under
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`§ 101. First, the Board assessed whether the claims are directed to an abstract idea,
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`and it found they are. ID at 17. Next, the Board assessed “whether ‘additional
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`substantive limitations’ work to ‘narrow, confine, or otherwise tie down the claim
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`so that, in practical terms, it does not cover the full abstract idea itself.’” Id.
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`(quoting Accenture Global Servs. GmbH v. Guidewire Software, Inc., 728 F.3d
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`1336, 1344-45 (Fed. Cir. 2013)).
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`The language the Board quoted from Accenture is based on the Supreme
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`Court’s decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc.,
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`132 S. Ct. 1289 (2012). In Mayo, the Supreme Court applied a two-step
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`framework for determining patent eligibility of claims directed to laws of nature.
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`Id. at 1296-97. In Alice Corporation Pty. Ltd. v. CLS Bank International, 134 S.
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`Ct. 2347, 2355 (2014), the Supreme Court confirmed that the Mayo framework
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`applies equally when determining patent eligibility of claims directed to an abstract
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`idea. See also U.S. Patent and Trademark Office, Preliminary Examination
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`Instructions in view of the Supreme Court Decision in Alice Corporation Ply. Ltd.
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`v. CLS Bank International, et al. at 1 (June 25, 2014), available at
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`http://www.uspto.gov/patents/announce/interim_alice_guidance.jsp (“The Supreme
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`Court made clear in Alice Corp. that it apples the [two-step] framework set forth in
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`Mayo . . . to analyze all claims directed to laws of nature, natural phenomena, and
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`abstract ideas for subject matter eligibility under 35 U.S.C. § 101.”).
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`In step one of the Alice/Mayo framework, “we determine whether the claims
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`at issue are directed to one of those patent-ineligible concepts.” Alice, 134 S. Ct. at
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`2355. In step two, “we consider the elements of each claim both individually and
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`as an ordered combination to determine whether the additional elements transform
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`the nature of the claim into a patent-eligible application.” Id. (internal quotation
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`marks omitted). Step two can be described “as a search for an inventive concept—
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`i.e., an element or combination of elements that is sufficient to ensure that the
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`patent in practice amounts to significantly more than a patent upon the [ineligible
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`concept] itself.” Id. (internal quotation marks omitted).
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`Under the Alice/Mayo framework that was effectively applied by the Board
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`in its Institution Decision, none of claims 1-23 is patent eligible under § 101. All
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`of claims 1-23 are directed to the abstract idea of handling a customer’s physical
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`item in such a way that the customer can verify that its handling instructions were
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`followed, and none of the claims contain an “inventive concept sufficient to
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`transform the claimed abstract idea into a patent-eligible application.” Alice, 134
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`S. Ct. at 2357 (internal quotations omitted) (citing Mayo, 132 S. Ct. at 1294, 1298).
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`The Claims of the ’944 Patent Are Directed to an Abstract Idea
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`B.
`As the Board correctly found in its Institution Decision, the claims of the
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`’944 Patent are directed to an abstract idea. ID at 17 (stating that “claim 1 is
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`directed to an abstract idea,” which finding was implicitly carried over to the
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`remaining claims in finding them similarly directed to non-statutory subject
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`matter). Although Patent Owner asserts that it is “fallacious and nonsensical” to
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`allege that the system claims are directed to an abstract idea—Paper 12 [Patent
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`Owner’s Response] (“POR”) at 15—Patent Owner provides no reasonable basis
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`for the Board to conclude otherwise. Each of Patent Owner’s arguments against
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`the abstractness of the claims are addressed in turn below.
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`-3-
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`1.
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`Tying the claims to the physical world does not save them from
`abstractness.
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`Patent Owner argues that the claims are not directed to an abstract idea
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`because “the contemplated disposition . . . is a necessarily physical and tangible
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`outcome achieved through the use of a system with specific recited structure.”
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`POR at 12. Patent Owner’s reliance on the “physical” and “tangible” aspects of its
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`claims has been squarely rejected by both the Supreme Court and the Federal
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`Circuit. See, e.g., Alice, 134 S. Ct. at 2358-59 (claims were directed to an abstract
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`idea despite the fact that, “[a]s stipulated, the claimed method requires the use of a
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`computer,” and stating that “[t]he fact that a computer ‘necessarily exist[s] in the
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`physical, rather than purely conceptual, realm,’ is beside the point” for purposes of
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`the § 101 inquiry) (citation omitted) (quoting patentee’s brief); Fort Props., Inc. v.
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`Am. Master Lease, LLC, 671 F.3d 1317, 1322 (Fed. Cir. 2012) (an “abstract
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`concept cannot be transformed into patentable subject matter merely because of
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`connections to the physical world”).
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`Patent Owner further argues against abstractness by contending that “all of
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`the modes of disposition recited in Claims 1-6 and 8-23 involve the physical
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`transformation of the asset . . . .” POR at 12. As noted above, such a connection to
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`the physical world does not mean the claims are not abstract. Moreover, this
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`argument fails for a second and independent reason: the “transformation” steps
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`relied upon by Patent Owner are mere “extra-solution activity,” as confirmed by
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`the patentee’s statement to the USPTO during prosecution that “the invention
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`claimed is a system and method for controlling the verifiable disposition of capital
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`assets, not the actual disposition realized.” Exhibit 1010 at 11 (emphasis added
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`and omitted). As the Federal Circuit has made clear, “the involvement of the
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`machine or transformation in the claimed process must not merely be insignificant
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`extra-solution activity.” In re Bilski, 545 F.3d 943, 962 (Fed. Cir. 2008) (en
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`banc), aff’d sub nom., Bilski v. Kappos, 561 U.S. 593 (2010) (emphasis added).
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`2. Abstract ideas are not limited to the specific examples recited in
`Alice.
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`Patent Owner argues that the claims are not directed to an abstract idea
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`because they allegedly do not meet the specific examples of abstract ideas recited
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`in Alice, namely, “a method of organizing human activity,” a “longstanding
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`commercial practice,” and a “fundamental economic practice long prevalent in our
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`system of commerce.” POR at 12-14 (internal quotation marks omitted).
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`However, nothing in Alice limits the categories of patent-ineligible abstract ideas
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`to the specific examples found in that case or any other cases. In fact, the Supreme
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`Court declined to adopt such a limiting approach in Alice, stating that “we need not
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`labor to delimit the precise contours of the ‘abstract ideas’ category in this case.”
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`Alice, 134 S. Ct. at 2357.
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`In any event, if the concept of “risk hedging” from Bilski qualifies as a
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`“method of organizing human activity” and therefore an abstract idea (see id. at
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`-5-
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`2356), the same is true of the ’944 Patent’s asset handling method. In Bilski, the
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`ineligible “risk hedging” claims aimed to “protect [buyers and sellers] against the
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`risk of price fluctuations in a discrete section of the economy.” Bilski, 561 U.S. at
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`598. Similarly, the ’944 Patent’s asset handling claims seek to protect against the
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`risk of “fraudulent warranty claims to the original asset manufacturer, poor
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`customer relations, and substantial losses in revenues to the manufacturer.”
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`Exhibit 1001 at col. 1:34-37.
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`Moreover, in the wake of the Supreme Court’s decision in Bilski, the
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`USPTO provided guidelines for evaluating “whether a method claim is directed to
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`an abstract idea.” Exhibit 1012 at 3. These guidelines identify factors weighing
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`for and against patent eligibility. One factor weighing against patent eligibility is
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`whether a claim is directed to a general concept of “how business should be
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`conducted.” Id. at 4 (internal quotation marks omitted). Another factor weighing
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`against patent eligibility, according to the USPTO guidelines, is whether a claim is
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`directed to a general concept of “[h]uman behavior” such as “following rules or
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`instructions.” Id. (emphasis added). The claims of the ’944 Patent are clearly
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`directed to the general concepts of “how business should be conducted” (see ID at
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`7-11) and “[h]uman behavior” such as “following rules or instructions”—several
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`of the claims even make explicit reference to following “predetermined customer
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`instructions.” See, e.g., Exhibit 1001 at claim 8. This further underscores that the
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`-6-
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`claims are directed to a patent-ineligible abstract idea, despite Patent Owner’s
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`conclusory arguments to the contrary.
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`3.
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`The ’944 Patent claims are not designed
`“technological problem.”
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`to solve a
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`Patent Owner next argues against the abstractness of the claims by alleging
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`that they are “‘designed to solve a technological problem in conventional industry
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`practice.’” POR at 14 (quoting Alice, 134 S. Ct. at 2358). Patent Owner does not
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`identify a particular “technological problem” allegedly solved by the claims. Nor
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`could it, because the specification of the ’944 Patent makes clear that the invention
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`is intended to solve a business problem rather than a technological one: “There is
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`thus a need for managing various types of dispositions of surplus or obsolete
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`assets.” Exhibit 1001 at col. 1:26-27. From a technological perspective,
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`“managing” the “dispositions” of “assets” can hardly be equated with the “physical
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`and chemical process for molding precision synthetic rubber” that the Supreme
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`Court found to be patent eligible in Diamond v. Diehr, 450 U.S. 175, 184 (1981).
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`See Alice, 134 S. Ct. at 2358.
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`Further underscoring the abstractness of the claims is the Board’s finding
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`that claim 1 is not directed to a “technological invention.” ID at 12-13. Patent
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`Owner attempts to brush this finding aside by arguing that “the claimed invention
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`comprises several significant structural elements that, in combination, comprise a
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`technical feature, forming a technical solution to the aforementioned technological
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`problem . . . .” POR at 14. But, as noted above, the mere presence of structural
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`elements in a claim does not preclude it from being directed to an abstract idea, or
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`else the Supreme Court could not have found the claims in Alice to be patent
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`ineligible. See Alice, 134 S. Ct. at 2353 (claims were patent ineligible despite the
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`fact that “[a]ll of the claims are implemented using a computer; the system and
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`media claims expressly recite a computer, and the parties have stipulated that
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`the method claims require a computer as well”) (emphasis added).
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`C. The Claims Do Not Include an Inventive Concept
`In arguing that its claims satisfy the “inventive concept” test from the
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`Mayo/Alice framework, Patent Owner misapplies the test and ignores key evidence
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`from the intrinsic record, as explained further below.
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`1.
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`Patent Owner misapplies the “inventive concept” test.
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`In the section of its brief entitled “The Claims of the ’944 Patent Recite an
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`Inventive Concept,” Patent Owner argues that “the correct analysis, as supported
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`by the CBM Rules, is whether the claimed subject matter as a whole recites a
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`novel and non-obvious technical feature.” POR at 16 (emphasis in original) (citing
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`37 C.F.R. § 42.301(b)). Patent Owner is incorrect. The “CBM Rules” have no
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`bearing on whether patent claims are directed to patent-ineligible subject matter
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`-8-
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`under § 101.1 The correct § 101 analysis for claims directed to an abstract idea, as
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`articulated by the Supreme Court in Alice, is to “consider the elements of each
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`claim both individually and as an ordered combination to determine whether the
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`additional elements transform the nature of the claim into a patent-eligible
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`application. We have described step two of this analysis as a search for an
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`inventive concept . . . .” 134 S. Ct. at 2355 (emphasis added) (citations and
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`quotation marks omitted); see also ID at 17 (the “relevant inquiry” focuses on the
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`“additional substantive limitations”).
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`In focusing its analysis solely upon “the claimed subject matter as a whole,”
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`Patent Owner ignores Alice’s directive to consider the claim elements “both
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`individually and as an ordered combination” and to specifically assess the
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`“additional elements” beyond the abstract idea. Moreover, Mayo rejected Patent
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`Owner’s argument that a claim is patent eligible merely because it was deemed
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`“novel and unobvious over the prior art at the time of the invention” (POR at
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`17). See Mayo, 132 S. Ct. at 1304 (“declin[ing] the Government’s invitation to
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`substitute §§ 102, 103, and 112 inquiries for the better established inquiry under
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`1 Patent Owner also incorrectly asserts that Petitioner must “prove by clear and
`convincing evidence” that the claims of the ’944 Patent are directed to patent-
`ineligible subject matter under § 101. POR at 1; see also id. at 20. There is no
`presumption of validity in proceedings before the Office, and therefore “a
`petitioner’s burden before the Office is limited to proving ‘unpatentability’ by a
`preponderance of the evidence.” SAP America, Inc. v. Versata Development
`Group, Inc., CBM2012-00001, Paper 70 at 7 n.4 (P.T.A.B. June 11, 2013).
`-9-
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`§ 101”). Rather, as the Board correctly explained, “[e]ven a novel and nonobvious
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`claim directed to a purely abstract idea is patent ineligible.” ID at 18.
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`2.
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`Patent Owner ignores key evidence from the intrinsic record
`establishing that the “additional elements” of the claims are
`routine and conventional.
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`Patent Owner contends that the claims recite “technical features . . . that
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`were not known in the prior art.” POR at 16. Patent Owner further argues that
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`“Petitioner is impermissibly applying hindsight in alleging that the components
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`recited in the claims . . . are ‘conventional.’” Id. at 17. As explained in the
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`Petition, these arguments are contradicted by the patentee’s own statements in the
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`prosecution history. In response to an enablement rejection of the original claims,
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`the patentee replaced those claims with the current claims and stated that “[t]he
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`physical system and structural basis for each step claimed is comprised of
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`conventional components well known to one skilled in the art . . . .” Paper 1
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`[Petition] (“Pet.”) at 11-12 (emphasis added) (quoting Exhibit 1010 at 13).
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`The patentee’s admission during prosecution that the components recited in
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`the claims were “conventional” and “well known to one of skill in the art” compels
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`the conclusion that the “additional elements” of the claims beyond the abstract idea
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`do not and cannot transform the nature of the claim into a patent-eligible
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`application. See Alice, 134 S. Ct. at 2358 (“T]he mere recitation of a generic
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`computer cannot transform a patent-ineligible abstract idea into a patent-eligible
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`invention.”) (emphasis added); see also id. at 2357 (computer implementation of
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`an abstract idea in Gottschalk v. Benson, 409 U.S. 63 (1972), “did not supply the
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`necessary inventive concept; the process could be ‘carried out in existing
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`computers long in use’”) (emphasis added) (quoting Benson, 409 U.S. at 67); see
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`also id. at 2359 (focusing on whether the recited computer functions were “well-
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`understood, routine, [and] conventional”) (emphasis added) (citation and internal
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`quotation marks omitted).
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`The specification of the ’944 Patent further establishes that the components
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`of the claims are generic, routine, conventional, and well-understood. See Pet. at
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`11, 20-29. For example, the “database” of claim 2 is generically described in the
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`specification as “[a]ny database software capable of storing records appropriate to
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`the specific needs of the user.” See Exhibit 1001 at col. 8:1-3. The “interactive
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`multimedia device” of claim 20 is generically described in the specification as
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`“compris[ing] a touch screen monitor and provid[ing] image, text and/or audio
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`instructions to the user and accept[ing] touch screen inputs as desired.” Id. at col.
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`5:22-25. The “image capture device” of claim 18 is generically described as being
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`a “digital camera” or “any means to capture an image” (id. at col. 4:37-40), while
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`the “data capture device” of claim 18 is described as preferably being a “keyboard”
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`(id. at col. 4:40-42). These generic and conventional elements are precisely the
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`types of “additional elements” that Alice held cannot transform an abstract idea
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`into a patent-eligible application of that idea. Alice, 134 S. Ct. at 2360 (claim
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`limitations including “a ‘data processing system’ with a ‘communications
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`controller’ and ‘data storage unit’” were “purely functional and generic” such that
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`they did not confer patent eligibility). Claims 1-23 only include elements of this
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`type, and therefore they do not provide an “inventive concept” and are not patent
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`eligible under § 101. See ID at 18 (“storing of records in a database is not a
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`meaningful limitation” and “is, at most, insignificant extra-solution activity that
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`cannot save subject matter from patent ineligibility”) (citing Parker v. Flook, 437
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`U.S. 584, 590 (1978)); id. at 20 (“the recited ‘database,’ ‘system process
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`controller,’ and ‘communications network’ are merely conventional components
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`being used for no more than their most basic functions”).
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`3. Considering the claim elements as an “ordered combination”
`further confirms the patent ineligibility of the claims.
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`Patent Owner alleges that “Petitioner’s analysis . . . does not account
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`sufficiently for any of the claims as a whole . . . .” POR at 19. This argument
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`fails, however, because when viewed as a whole, the “additional elements” of
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`claims 1-23 do not add anything patentable that is not already present when the
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`elements are considered separately. The claims do not, for example, “purport to
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`improve the functioning of [a] computer” or “effect an improvement in any other
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`technology or technical field.” Alice, 134 S. Ct. at 2359. Patent Owner alleges
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`that the claims of the ’944 Patent are designed to solve a “technological problem”
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`-12-
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`(POR at 14), but as explained above, Patent Owner does not identify the
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`“technological problem” allegedly solved by the claims. Nor could it, because the
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`specification of the ’944 Patent makes clear that the invention is intended to solve
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`a business problem rather than a technological one. See supra at 7-8.
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`III. CONCLUSION
`For the reasons set forth above and in the Petition, Petitioner respectfully
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`requests that the Board issue a Final Written Decision canceling claims 1-23 of the
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`’944 Patent as unpatentable under § 101.
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`
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`Dated: October 21, 2014
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`Respectfully submitted,
`
`/s/ Gilbert A. Greene
`Gilbert A. Greene (Reg. No. 48,366)
`Sheila Kadura (Reg. No. 70,259)
`FULBRIGHT & JAWORSKI LLP
`98 San Jacinto Boulevard, Suite 1100
`Austin, TX 78701
`Tel: 512.474.5201
`Fax: 512.536.4598
`bert.greene@nortonrosefulbright.com
`sheila.kadura@nortonrosefulbright.com
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`Attorneys for Petitioner Dell Inc.
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`CERTIFICATE OF SERVICE
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`I hereby certify that on October 21, 2014, the foregoing Petitioner’s Reply
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`Brief was served by electronic mail upon the following lead and backup counsel of
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`record for Patent Owner Disposition Services, LLC:
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`Kenneth F. Florek
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`kflorek@feiplaw.com, docket@feiplaw.com
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`Matthew J. Solow
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`msolow@feiplaw.com
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`/s/ Gilbert A. Greene
`Gilbert A. Greene
`FULBRIGHT & JAWORSKI LLP
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`-14-
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