`
`
`
`Paper No. 6
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`CALLIDUS SOFTWARE INC.
`Petitioner
`
`v.
`
`VERSATA SOFTWARE, INC. AND VERSATA DEVELOPMENT
`GROUP, INC.
`Patent Owner
`____________
`
`Case CBM2013-00052
`Patent 7,904,326
`____________
`
`Filed: September 17, 2013
`
`
`Before PATRICK E. BAKER, Trial Paralegal
`
`
`
`PETITION FOR COVERED BUSINESS METHOD PATENT
`REVIEW UNDER 35 U.S.C. § 321 AND §18 OF THE
`LEAHY-SMITH AMERICA INVENTS ACT1
`
`Pursuant to 35 U.S.C. § 321 and § 18 of the Leahy-Smith America
`
`Invents Act (“AIA”) and pursuant to 37 C.F.R. § 42.300 et seq., the undersigned
`
`hereby requests covered business method (“CBM”) patent review of claims 1-22 of
`
`1 As directed by the Board in Paper No. 4, Petitioner hereby resubmits its Petition
`to incorporate mandatory notice information.
`
`
`
`i
`
`

`

`
`
`U.S. Patent 7,904,326 (“the ‘326 patent,” attached as Petition Exhibit 1001), which
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`issued to Shari Gharavy on March 8, 2011.
`
`An electronic payment in the amount of $34,350.00 for the covered
`
`business method review fee specified by 37 C.F.R. § 42.15 (b)(1) is being paid at
`
`the time of filing this petition, charged to deposit account No. 041073.
`
`
`
`ii
`
`

`

`
`
`TABLE OF CONTENTS
`
`Page No.
`
`I.
`
`PRELIMINARY STATEMENT ..................................................................... 1
`
`II. GROUNDS FOR STANDING ........................................................................ 4
`
`A. ...... Petitioner Has Been Sued for Infringement of the ‘326 Patent and
`is Not Estopped ..................................................................................... 5
`
`B. ...... At Least One Challenged Claim is Unpatentable ................................. 6
`
`C. ...... The ‘326 Patent is a CBM Patent .......................................................... 6
`
`1. ...... Claims 1-22 are Directed to Financial Products or Services ...... 7
`
`2. ...... Claims 1-22 are Not Directed to a “Technological
`Invention” .................................................................................... 9
`
`III. STATEMENT OF PRECISE RELIEF REQUESTED FOR EACH CLAIM
`CHALLENGED ............................................................................................ 15
`
`A. ...... Claims for which Review is Requested .............................................. 15
`
`B. ...... Statutory Grounds of Challenge .......................................................... 15
`
`IV. CLAIM CONSTRUCTION .......................................................................... 15
`
`A. ...... Broadest Reasonable Interpretation .................................................... 16
`
`1. ...... “Credential Information” .......................................................... 17
`
`2. ...... “Denormalizing” ....................................................................... 21
`
`V.
`
`CLAIMS 1-22 OF THE ‘326 PATENT ARE DIRECTED TO NON-
`PATENTABLE SUBJECT MATTER .......................................................... 22
`
`A. ...... Inventions Covering Abstract Ideas are Not Eligible for Patent
`Protection, Regardless of their Form .................................................. 22
`
`B. ...... Claim 1 of the ‘326 Patent is Directed to an Abstract Idea ................. 24
`
`
`
`iii
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`1. ...... No More than General Purpose Computer Hardware and
`Programming are Used to Implement the Claimed Method ..... 29
`
`2. ...... Calculating Compensation By Validating Transactions and
`Validating Distributors Can be Accomplished by Hand .......... 32
`
`3. ...... Claim 1 Fails the Machine-or-Transformation Test ................. 36
`
`C. ...... Dependent Claims 2-22 also Define Abstract Ideas that Fail to Tie
`Down the Claimed Abstract Idea ........................................................ 42
`
`1. ...... Because Dependent Claims 2-4, 9-14, and 16-17 Add
`Nothing More than Basic Computer Functions to the
`Abstract Idea of Claim 1, They Are Not Patent-Eligible. ......... 42
`
`2. ...... Because the Rule Data Processing Limitations Reflect Only
`Rudimentary Data Manipulations, Dependent Claims 5, 9,
`15, and 20 Are Unpatentably Abstract. ..................................... 46
`
`3. ...... Dependent Claim 7 Adds Only Insignificant Post-Solution
`Activity to the Unpatentably Abstract Method of Claim 1. ..... 49
`
`4. ...... Dependent Claims 6, 8, 18, 19 and 21 Are Likewise Invalid
`Because They Fail to Add Any Meaningful Specificity to
`the Unpatentably Abstract Idea of Claim 1. ............................. 50
`
`5. ...... Because Increased Efficiency Alone Does Not Confer
`Patent-Eligibility, Dependent Claim 22 Is Invalid. .................. 54
`
`VI. CONCLUSION .............................................................................................. 55
`
`
`
`iv
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`TABLE OF AUTHORITIES
`
`
`Cases Page No.
`Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can. (U.S.),
`687 F.3d 1266 (Fed. Cir. 2012 ..................................................................... passim
`Bilski v. Kappos,
`130 S. Ct. 3218 (2010) ................................................................................. passim
`CLS Bank Int’l v. Alice Corp. Pty. Ltd.,
`717 F.3d 1269 (Fed. Cir. 2012) .................................................................... passim
`CyberSource Corp. v. Retail Decisions, Inc.,
`654 F.3d 1366 (Fed. Cir. 2011) .................................................................... passim
`Fort Props., Inc. v. Am. Master Lease, LLC,
`671 F.3d 1317 (Fed. Cir. 2012) ..................................................................... 23, 28
`Gottschalk v. Benson,
`409 U.S. 63 (1972) ....................................................................................... passim
`In re Abele,
`684 F.2d 902 (C.C.P.A. 1982) ................................................................. 39, 40, 41
`In re Am. Acad. of Sci. Tech Ctr.,
`367 F.3d 1359 (Fed. Cir. 2004) ............................................................................ 16
`In re Bilski,
`545 F.3d. 943 (Fed. Cir. 2008 .............................................................................. 40
`In re Zletz,
`893 F.2d 319 (Fed. Cir. 1989) .............................................................................. 16
`Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
`132 S. Ct. 1289 (2012) .................................................................................. 23, 31
`Parker v. Flook,
`437 U.S. 584 (1978) ................................................................................ 23, 27, 29
`Phillips v. AWH Corp.,
`415 F.3d 1303 (Fed. Cir. 2005) ............................................................................ 17
`Ultramercial, Inc. v. Hulu, LLC, No. 2010-1544,
`2013 U.S. App. LEXIS 12715 (Fed. Cir. 2013) ...................................... 23, 40, 42
`Statutes
`35 U.S.C. § 101 ................................................................................................ passim
`
`
`
`v
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`TABLE OF AUTHORITIES (con't)
`
`Page No.
`
`35 U.S.C. § 324 ................................................................................................... 6, 55
`AIA, § 18 ..................................................................................................... 6, 7, 9, 15
`Rules
`35 U.S.C. § 321 ................................................................................................... 1, 15
`37 C.F.R. § 1.114 ..................................................................................................... 12
`37 C.F.R. § 42 .................................................................................................. passim
`
`
`
`vi
`
`

`

`
`
`LIST OF EXHIBITS
`
`Petition Exhibit 1001: U.S. Patent No. 7,904,326
`
`Petition Exhibit 1002: U.S. Patent No. 7,904,326 File History
`
`Petition Exhibit 1003: Declaration of Janis McGuffey in Support of Petition for
`Covered Business Method Patent Review of U.S. Patent
`No. 7,904,326
`
`Petition Exhibit 1004: Declaration of Joseph E. DeHaven in Support of Petition
`for Covered Business Method Patent Review of U.S.
`Patent No. 7,904,326
`
`Petition Exhibit 1005: Complaint, Versata Software, Inc. v. Callidus Software
`Inc. Litigation, Case No. 1:12-cv-00931-SLR (D. Del.
`July 19, 2012), D.N. 1
`
`Petition Exhibit 1006: Decision to Institute in SAP v. Versata, CBM2012-
`00001, Paper No. 36 (PTAB Jan. 9, 2013)
`
`Petition Exhibit 1007: United States Patent and Trademark Office –
`Classification Definitions, Class 705
`
`Petition Exhibit 1008: Changes to Implement Inter Partes Review Proceedings,
`Post-Grant Review Proceedings, and Transitional
`Program for Covered Business Method Patents, 77 Fed.
`Reg. 48680 (Aug. 14, 2012)
`
`Petition Exhibit 1009:
`
`Patent Owner’s Preliminary Response in SAP v. Versata,
`CBM2012-00001, Paper No. 29 (PTAB Nov. 30, 2012)
`
`Petition Exhibit 1010: Transitional Program for Covered Business Method
`Patents—Definitions of Covered Business Method Patent
`and Technological Invention, 77 Fed. Reg. 48734 (Aug.
`14, 2012)
`
`Petition Exhibit 1011: Official Patent Trial Practice Guide, 77 Fed. Reg. 48756
`(Aug. 14, 2012)
`
`Petition Exhibit 1012:
`
`Final Written Decision in SAP v. Versata, CBM2012-
`00001, Paper No. 70 (PTAB June 11, 2013)
`
`
`
`vii
`
`

`

`
`
`I.
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`PRELIMINARY STATEMENT
`The ‘326 patent claims nothing more than the abstract idea of validating
`
`transactions and validating distributors before calculating compensation. The
`
`recited validation of transactions and distributors before generating compensation
`
`data can be performed by hand with pencil and paper and in the human mind in the
`
`absence of a “computer system.” Indeed, validating transactions and distributor
`
`credential information has been a prerequisite to receiving compensation in the
`
`insurance and financial services industries for many years. And for good reason —
`
`such validation was required by law. Exh. 1001, 1:24-33 (noting that distributors
`
`in the financial services sector require licenses and appointments in order to
`
`lawfully sell financial instruments); Id. 4:36-40 (“Transactions that do not conform
`
`to the government regulations are not typically executed and may not therefore
`
`result in any compensation to the sales representative(s) or distributor(s) associated
`
`with the transaction.”); Exh. 1003, ¶¶ 17, 21 (“the United States, state governments
`
`and/or other government organizations would require that the agent first be
`
`licensed in each state in which he or she was going to write new business”); Exh.
`
`1004, ¶ 25.
`
`Claim 1, the sole independent claim, is representative of the claimed
`
`methods:
`
`
`
`1
`
`

`

`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`
`
`
`
`1. In a computer system, a method for collectively performing
`validation of credential information of one or more product
`distributors associated with one or more product distribution
`transactions, the method comprising:
`obtaining a set of available credential information of each of the
`one or more product distributors associated with the one
`or more product distribution transactions;
`storing the set of credential information in the computer system,
`wherein the credential information is stored in a form that
`can be processed by the computer system;
`loading from at least one data source a set of credential
`validation rule data;
`obtaining the one or more product distribution transactions
`associated with the one or more product distributors; and
`processing in the computer system the one or more product
`distribution transactions and the credential validation rule
`data to validate the obtained one or more product
`distribution transactions associated with the one or more
`product distributors in accordance with predetermined
`validation criteria to determine if the one or more
`transactions can be used for compensating one or more
`product distributors, to validate the obtained credential
`information of one or more product distributors
`associated with one or more transactions to determine
`whether the one or more product distributors meet
`eligibility requirements for compensation associated with
`
`
`
`
`
`2
`
`
`
`
`
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`each of the obtained product distribution transactions for
`the one or more product distributors, and to generate
`results data representing at least any validated
`transactions and determined-eligible product distributors;
`and
`generating compensation data from the results data for each of
`the one or more product distributers to be compensated
`for the one or more product distribution transactions.
`Exh. 1001, 15:17-50.
`Here, the claimed methods do nothing more than add a general purpose
`
`
`
`computer to a decades-old method of doing business. The recited “computer
`
`system” uses conventional and routine computer processing functionality to
`
`implement an abstract idea. General purpose computers are conventional, widely-
`
`used tools to manage and process data in the information age. Neither the recited
`
`“computer system” nor the “obtaining,” “storing,” or “loading” of data puts any
`
`meaningful limit on the patent’s coverage of the abstract idea. Furthermore, the
`
`claimed methods are not tied to any particular machine nor do the methods
`
`transform or reduce any article into a different state or thing. Accordingly,
`
`independent claim 1 and all dependent claims of the ‘326 patent are patent-
`
`ineligible and invalid under 35 U.S.C. § 101 because they are directed to an
`
`abstract idea.
`
`
`
`3
`
`

`

`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`
`
`II. MANDATORY NOTICES
`A. Real Party-in-Interest
`In accordance with 37 C.F.R. § 42.8(b)(1), Petitioners identify the real party-
`
`in-interest as Callidus Software Inc.
`
`B. Related Matters
`
`In accordance with 37 C.F.R. § 42.8(b)(2), Petitioners identify the following
`
`district court and PTAB proceedings:
`
`Versata Software, Inc. v. Callidus Software, Inc., No. 1:12-cv-
`931-SLR (D. Del.)
`
`Callidus Software, Inc. v. Versata Software, Inc. and Versata
`Development Group, Inc., CBM2013-00053 (PTAB)
`
`Callidus Software, Inc. v. Versata Software, Inc. and Versata
`Development Group, Inc., CBM2013-00054 (PTAB)
`C. Lead and Back-Up Counsel
`
`In accordance with 37 C.F.R. § 42.8(b)(3) and § 42.10(a), Petitioners
`
`identify undersigned Deborah E. Fishman (Reg. No. 48,621) of Dickstein Shapiro
`
`LLP as lead counsel and Michael S. Tonkinson of Dickstein Shapiro LLP, as back-
`
`up counsel; Petitioner identifies Assad H. Rajani and Jeffrey A. Miller of Dickstein
`
`Shapiro as further back-up counsel.2
`
`
`2 Petitioner is filing concurrently herewith a motion pursuant to 37 C.F.R.
`§ 42.10(c) for both Assad H. Rajani and Michael S. Tonkinson to appear pro hac
`vice, as Mr. Rajani and Mr. Tonkinson are experienced patent litigation attorneys,
`and are counsel for Callidus Software Inc. in the above-referenced litigation in the
`
`
`
`4
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`Deborah E. Fishman (Reg. No. 48,621)
`Jeffrey A. Miller (Reg. No. 35,287)
`Assad H. Rajani (pro hac vice pending)
`Michael S. Tonkinson (pro hac vice pending)
`DICKSTEIN SHAPIRO LLP
`1841 Page Mill Road, Suite 150
`Palo Alto, CA 94304
`Phone: (650) 690-9500
`Fax: (650) 690-9501
`Email: fishmand@dicksteinshapiro.com
` millerj@dicksteinshapiro.com
` rajania@dicksteinshapiro.com
` tonkinsonm@dicksteinshapiro.com
`
`D.
`
`Service Information
`
`In accordance with 37 C.F.R. § 42.8(b)(4), Petitioners identify the following
`
`service information:
`
`Deborah E. Fishman
`DICKSTEIN SHAPIRO LLP
`1841 Page Mill Road, Suite 150
`Palo Alto, CA 94304
`Phone: (650) 690-9500
`Fax: (650) 690-9501
`Email: VERSATA-CBM@dicksteinshapiro.com
`III. GROUNDS FOR STANDING
`A.
`Petitioner Has Been Sued for Infringement of the ‘326 Patent and
`is Not Estopped
`Petitioner has standing to file this petition because Petitioner has been sued
`
`for infringement of the ‘326 patent in Versata Software, Inc. v. Callidus Software,
`
`
`District of Delaware, and as such have an established familiarity with the subject
`matter at issue in this proceeding.
`
`
`
`5
`
`

`

`
`
`Inc., No. 1:12-cv-931-SLR (D. Del.). Exh. 1005; AIA, § 18(a)(1)(B); 37 C.F.R.
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`42.302(a). Versata Software, Inc. and Versata Development Group, Inc.
`
`(collectively “Versata” or “Patent Owner”) purport to hold all right, title, and
`
`interest in the ‘326 patent. Exh. 1005, ¶ 10.
`
`Petitioner is not estopped from challenging the claims on the grounds
`
`identified in the petition. 3 37 C.F.R. § 42.302(b). Petitioner has not been party to
`
`any other post-grant review of the challenged claims.
`
`B. At Least One Challenged Claim is Unpatentable
`
`As further detailed below, claims 1-22 of the ‘326 patent are invalid under
`
`35 U.S.C. § 101 and it is “more likely than not that at least one of the claims
`
`challenged” of the ‘326 patent is unpatentable. 35 U.S.C. § 324 (a).
`
`C. The ‘326 Patent is a CBM Patent
`
`A covered business method patent (“CBM patent”) is defined as “a patent
`
`that claims a method or corresponding apparatus for performing data processing or
`
`other operation used in the practice, administration, or management of a financial
`
`product or service, except that the term does not include patents for technological
`
`inventions.” AIA, § 18 (d)(1); see also 37 C.F.R. § 42.301 (a). “The term
`
`
`3 The Board previously held that § 101 is a permissible grounds for challenging
`claims in a CBM review. Exh. 1006, at 32-36.
`
`
`
`6
`
`

`

`
`
`financial is an adjective that simply means relating to monetary matters.” Exh.
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`1006, at 23. The ‘326 patent easily meets the definition of a CBM patent.
`
`1.
`
`Claims 1-22 are Directed to Financial Products or Services
`
`The claims and specification show that the claimed methods of the ‘326
`
`patent are directed to financial product or services, i.e. monetary matters. Claim 1
`
`is directed to a method for generating compensation data whereby, in the process
`
`of calculating compensation, both the product distributors and the product
`
`distribution transactions (i.e., sales transactions) are validated. Generating
`
`compensation data clearly relates to monetary matters. Furthermore, the
`
`specification recites that the invention can be used “when selling certain products
`
`(e.g., life insurance, etc. . . .)” and “financial instruments.” Exh. 1001, Abstract.
`
`In the Background section, the ‘326 patent goes on to discuss problems related to
`
`compensating distributors “in the financial services business” and “in the financial
`
`services sector,” and related to selling “certain financial instruments.” Id., 1:24-33;
`
`see also 1:56-62; 4:7-14. Generating compensation data and validating licenses
`
`and appointments for distributors of life insurance and financial instruments in the
`
`financial services sector relates to monetary matters and is squarely within the
`
`“practice, administration, or management of a financial product or service.” AIA,
`
`§ 18 (d)(1).
`
`
`
`7
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`The ‘326 patent is classified in both 705/10 and 705/44. Exh. 1001, INID
`
`Code 52. Class 705 is titled “Data Processing: Financial, Business Practice,
`
`Management, or Cost/Price Determination.” Exh. 1007, at 1. While classification
`
`in class 705 is not determinative, it suggests that the claims of the ‘326 patent are
`
`directed to financial products and services and are subject to CBM review. Exh.
`
`1008 at 48711 (“patents subject to covered business method patent review are
`
`anticipated to be typically classifiable in Class 705”).
`
`Patent Owner Versata, in its Preliminary Response to SAP America, Inc.’s
`
`Petition For Post-Grant Review in CBM2012-00001, cited several sources that it
`
`argued provide a definition for “financial product” and “financial service,” many
`
`of which cover the claims of the ‘326 patent. For “financial product,” Versata’s
`
`various definitions included “an insurance product,” “insurance contracts,” and all
`
`manner for financial instruments, including bank deposits, credit lines, bonds,
`
`mortgages, leases, and so on. Exh. 1009, at 33, 35. Versata defined “financial
`
`services” as “a business activity whose primary purpose is the development or
`
`provision of financial products, or facilitating the use of financial products.” Id.,
`
`at 35 (emphasis added). Versata also stated that insurance is a subsector of the
`
`financial services industry, and that insurance firms are financial services firms.
`
`Id., at 36. As discussed above, the specification of the ‘326 patent states that the
`
`invention has applicability “when selling certain products (e.g., life insurance,
`
`
`
`8
`
`

`

`
`
`etc. . . .)” and “financial instruments.” Exh. 1001, Abstract. Thus, under Patent
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`Owner Versata’s own proffered definitions, the ‘326 patent claims a method used
`
`in the “practice, administration, or management of a financial product or service.”
`
`The ‘326 patent meets the USPTO’s definition of a CBM patent.
`
`2.
`Claims 1-22 are Not Directed to a Technological Invention
`A CBM patent does not cover “patents for technological inventions.” AIA,
`
`§ 18 (d)(1). A technological invention exists only where “the claimed subject
`
`matter as a whole recites a technological feature that is novel and unobvious over
`
`the prior art; and solves a technical problem using a technical solution.” 37 C.F.R.
`
`42.301(b) (emphasis added). The claims must meet both prongs of the definition
`
`for the “technological invention” exception to apply. See Exh. 1010, at 48735
`
`(quoting statement of Sen. Coburn, 157 Cong. Rec. S5428 (daily ed. Sept. 8,
`
`2011)). The determination of whether a patent is a technological invention is
`
`based on the invention as claimed. Id., at 48736. To institute CBM review, it is
`
`only necessary that one claim of the ‘326 patent is directed to a CBM that is not a
`
`technological invention. Id.
`
`Here, the ‘326 patent claims fail both prongs and, thus, it is not directed to a
`
`technological invention.
`
`
`
`9
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`i.
`
`Any Allegedly Novel and Unobvious Features of the
`‘326 Patent are Not Technological
`
`The ‘326 patent does not recite a technological feature that is novel and
`
`unobvious over the prior art. The USPTO provides guidance as to claim drafting
`
`techniques that would not typically render a patent a technological invention under
`
`37 C.F.R. 42.301(b):
`
`(a) Mere recitation of known technologies, such as computer
`hardware, communication or computer networks, software,
`memory, computer readable storage medium, scanners, display
`devices or databases, or specialized machines, such as an ATM
`or point of sale device.
`
`(b) Reciting the use of known prior art technology to
`accomplish a process or method, even if that process or method
`is novel and non-obvious.
`
`(c) Combining prior art structures to achieve the normal,
`expected, or predictable result of that combination.
`
`Exh. 1011, at 48763-64. The only vaguely technological features recited in claim
`
`1—“in a computer system,” “storing the set of credential information in the
`
`computer system,” and “processing in the computer system”—fall squarely into
`
`those inadequate claim drafting techniques. Exh. 1001, 15:17, 24-26, 31. General
`
`purpose computer systems were well known in the prior art as were storing and
`
`processing information and data in such computers.
`
`
`
`10
`
`

`

`
`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
`
`In the specification of the ‘326 patent, the applicant stated broadly that “the
`
`invention contemplates any components or set of components that implements the
`
`functionality described therein.” Exh. 1001, 9:37-41. Likewise, the specification
`
`of the ‘326 patent fails to disclose a “computer system” or even a “computer,”
`
`except to note that the “invention relates to the field of computer technology.” Id.,
`
`1:7; see also Id., 8:40-46 (“the reader should note that the invention also
`
`contemplates other software or hardware configurations that provide the
`
`functionality described herein”). Nor does the specification disclose any structure
`
`for such computer or computer system. Thus, according to the patentee, it is not
`
`any particular software or hardware configurations, i.e. the technological features,
`
`that are key to the claimed subject matter, it is merely the recited functionality for
`
`validating credentials that is allegedly novel. As the Board previously recognized
`
`in its Decision to Institute in CBM2012-00001, where a patent states that the
`
`claimed subject matter “may be implemented in any type of computer system or
`
`programming or processing environment . . . [the claim] lacks a novel and
`
`unobvious technical feature.” Exh. 1006, at 27-28.
`
`During prosecution, the applicant acknowledged that the claimed subject
`
`matter relates to a non-technological feature: calculating compensation using
`
`validated transactions and validated distributors. The applicant repeatedly
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`attempted to distinguish prior art based on the fact that the claimed subject matter
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`involves checking distributors’ (sales agents’) credentials for licensing and
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
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`appointments as a pre-requisite to receiving compensation. In total, the patentee
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`distinguished eight separate pieces of prior art on this basis. Exh. 1002, 12/8/2004
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`Response to Non-Final Office Action at 15 (arguing that two references lacked
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`teachings or suggestions “related to determining ‘whether the validated credential
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`information [of each of the distributors associated with one or more product
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`distribution transactions] meets eligibility requirements for compensation’”);
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`9/12/2005 37 C.F.R. § 1.114 RCE Submission, at 15 (“[C]ontrary to the
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`combination of Carrott and Black, to determine whether a distributor has the
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`proper credentials, in addition to merely obtaining the credentials, the system must
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`also determinate whether the credentials apply on a transaction by transaction basis
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`for commission purposes.”); 8/13/2007 Response to Non-Final Office Action, at 15
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`(“Applicants [sic] respectfully submit [sic] that these distribution related ‘rules and
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`controls’ [of Ginter] having [sic] nothing to do with the credential validation rule
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`data of claim 1.”); 6/3/2008 37 C.F.R. § 1.114 RCE Submission, at 14 (“Brewer in
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`view of Solomon fails to teach or suggest, for example ‘obtaining a set of available
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`credential information of each of the one or more product distributors’ as
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`required by claim 1.”). Thus, according to the applicant, any allegedly novel and
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`unobvious features of the subject matter claimed in the ‘326 patent pertain to the
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`validation of credentials to calculate compensation, not the use of a technological
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
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`feature such as a computer used to accomplish this task.
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`ii.
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`The ‘326 Patent Does Not Address a Technical
`Problem Nor Does It Provide a Technical Solution
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`Second, the claimed subject matter does not solve a technical problem with a
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`technical solution. The applicant noted that prior art systems “do not currently
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`have a mechanism for processing such data in a way that minimizes the time
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`required to process license and appointment data and validate a sales agent’s
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`credentials before distributing compensation to the sales agent for the transaction.”
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`Exh. 1001, 1:42-49. At its core, this is a problem of organizational management,
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`not technology. But even assuming this problem were categorized as “technical,”
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`the applicant never suggests a technological solution. Rather, the claimed methods
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`are directed to “performing collective validation of credential information.” Id.,
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`1:54-56:
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`One aspect of the invention provides a method for
`validating sales agents' credentials while processing the
`sales transaction data to determine commission amounts.
`The system is configured to perform such transaction
`processing in an efficient manner that minimizes the
`amount of computational resources required to determine
`whether a sales agent has valid credential at the time of a
`particular sale and is therefore entitled to compensation
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
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`(e.g., a commission) for the sale. The system may
`process one or more transactions at a time and may
`perform transaction processing collectively if such
`processing is desirable. Id., 2:1-11.
`The claimed subject matter does not recite any technological improvement
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`in computer systems or processing nor does it tie the claimed subject matter to any
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`particular technology. See Id., 9:39-41 (“The invention contemplates any
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`component or set of components that implements the functionality described
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`therein.”). There is no disclosure in the ‘326 patent of any particular method for
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`validating the distributors’ credentials, validating the transaction data, or
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`calculating the distributors’ compensation. Performing validation collectively for a
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`set of transactions rather than on a transaction-by-transaction basis is not a
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`technical solution, especially in light of the lack of technical features in the claims.
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`In fact, the Board has previously held that “overcom[ing] the prior art’s
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`disadvantages in storing, maintaining, and retrieving large amounts of data” does
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`not solve a technical problem using a technical solution. Id., at 28.
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`Because claim 1 of the ‘326 patent and dependent claims 2-22 neither recite
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`a technological feature that is novel and unobvious over the prior art nor solve a
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`technical problem with a technical solution, the ‘326 patent claims are not directed
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`to a “technological invention” and the ‘326 patent is eligible for CBM review.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
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`
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`IV. STATEMENT OF PRECISE RELIEF REQUESTED FOR EACH
`CLAIM CHALLENGED
`A. Claims for which Review is Requested
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`Petitioner respectfully requests review under 35 U.S.C. § 321 and AIA § 18
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`of claims 1-22 of the ‘326 patent, and the cancellation of these claims as
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`unpatentable.
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`B.
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`Statutory Grounds of Challenge
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`Petitioner requests that claims 1-22 be cancelled as unpatentable under 35
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`U.S.C. § 101. The claim construction, reasons for unpatentability, and specific
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`evidence supporting this request are detailed below.
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`V. CLAIM CONSTRUCTION
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`Petitioner identifies herein how certain terms of claims 1-22 of the ‘326
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`patent should be construed. 37 C.F.R. § 42.304 (b)(3). Though claim construction
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`is required by Rule 42.304(b)(3), here it is not necessary to determine that the ‘326
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`patent is invalid under § 101. See Bancorp Servs., L.L.C. v. Sun Life Assurance
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`Co. of Can. (U.S.), 687 F.3d 1266, 1273 (Fed. Cir. 2012) (“claim construction is
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`not an inviolable prerequisite to a validity determination under § 101”). Under any
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`construction, the ‘326 patent is invalid under 35 U.S.C. § 101 for the reasons set
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`forth below.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,904,326
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`A. Broadest Reasonable Interpretation
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`In the context of a CBM petition for an unexpired patent, the Board applies
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`the broadest reasonable interpretation (“BRI”). 37 C.F.