Paper No. 33
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`CALLIDUS SOFTWARE INC.
`Petitioner
`
`v.
`
`VERSATA DEVELOPMENT GROUP, INC.
`Patent Owner
`
`AND
`
`VERSATA SOFTWARE, INC.
`Real Party-In-Interest
`
`____________
`
`Case CBM2013-00053
`Patent 7,958,024
`____________
`
`Filed: August 22, 2014
`
`
`CORRECTED PETITIONER’S REPLY TO PATENT OWNER RESPONSE
`
`
`
`
`
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`CALLIDUS SOFTWARE INC.
`Petitioner
`
`v.
`
`VERSATA DEVELOPMENT GROUP, INC.
`Patent Owner
`
`AND
`
`VERSATA SOFTWARE, INC.
`Real Party-In-Interest
`
`____________
`
`Case CBM2013-00053
`Patent 7,958,024
`____________
`
`Filed: August 22, 2014
`
`
`CORRECTED PETITIONER’S REPLY TO PATENT OWNER RESPONSE
`
`
`
`
`
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`
`TABLE OF CONTENTS
`
`Page No.
`
`I.
`II.
`
`INTRODUCTION ........................................................................................... 1
`CLAIM CONSTRUCTION ............................................................................ 1
`A. ..... “Using a Distributor Management System” .......................................... 2
`B. ..... “Regulatory Conditions Applicable to/Associated with said Sales” .... 2
`C. ..... “Executing a Payment Process” ............................................................ 4
`D. ..... “Generating a Selling Agreement” ........................................................ 4
`E. ...... Means-Plus-Function Claim Terms ...................................................... 4
`III. CLAIMS 1, 40, 42, AND 45 ARE DIRECTED TO ABSTRACT IDEAS .... 6
`A. ..... The Remainder of Claims 1, 40, 42, and 45 Do Not Transform the
`Abstract Idea Into a Patent-Eligible Claim ........................................... 9
`B. ..... Claims 1, 40, 42, and 45 are not Tied to a Particular Machine ............. 9
`C. ..... CyberSource and Bancorp are highly relevant ................................... 11
`IV. THE DEPENDENT CLAIMS ARE ALSO UNPATENTABLE ................. 12
`V.
`PETITIONER WAS NOT BARRED FROM FILING ITS PETITION ....... 12
`VI. CONCLUSION .............................................................................................. 15
`
`
`
`
`
`i
`
`
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`CASES
`
`Alice Corp. Pty. Ltd. v. CLS Bank Int’l,
`134 S. Ct. 2347, 110 U.S.P.Q.2d 1976 (2014) ............................................passim
`
`Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Canada (U.S.),
`687 F.3d 1266 (Fed. Cir. 2012) ...................................................................... 8, 11
`
`Bilski v. Kappos,
`130 S. Ct. 3218 (2010) .......................................................................................... 8
`
`Chevron U.S.A. v. Natural Res. Def. Council,
`104 S. Ct. 2778, 467 U.S. 837 (1984) ................................................................. 13
`
`CyberSource Corp v Retail Decisions Inc.,
`654 F.3d 1366, 99 U.S.P.Q.2d 1690 (Fed. Cir. 2011) .............................. 8, 11, 12
`
`Diamond v. Diehr,
`450 U.S. 175, 101 S. Ct. 1048 (1981) ................................................................... 9
`
`Ethicon Inc. v. Quigg,
`849 F.2d 1422 (Fed. Cir. 1988) .......................................................................... 13
`
`Princess Cruises, Inc. v. United States,
`201 F.3d 1352 (Fed. Cir. 2000) .......................................................................... 14
`
`WMS Gaming Inc. v. Int’l. Game Tech.,
`184 F.3d 1339 (Fed. Cir. 1999) ........................................................................ 5, 6
`
`STATUTES
`
`35 U.S.C. § 101 .................................................................................................passim
`
`35 U.S.C. § 282 .......................................................................................................... 9
`
`35 U.S.C. § 321 .................................................................................................. 14, 17
`
`35 U.S.C. § 325 .................................................................................................. 13, 15
`
`AIA § 18(a)(1) ......................................................................................................... 13
`
`
`
`ii
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`AIA § 18(a)(1)(B) .................................................................................................... 14
`
`AIA § 18(a)(1)(C)(i) and (ii) .................................................................................... 14
`
`REGULATIONS
`
`37 C.F.R. § 42.201 ................................................................................................... 13
`
`37 C.F.R. §§ 42.300 ................................................................................................. 13
`
`37 C.F.R. § 42.300 ................................................................................................... 13
`
`
`
`
`
`iii
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`
`I.
`
`INTRODUCTION
`
`The Board instituted this CBM Review because it found that “it is more
`
`likely than not that Petitioner will prevail in establishing the unpatentability of
`
`claims 1, 2, and 35-47 of the ‘024 Patent under 35 U.S.C. § 101 as being directed
`
`to non-statutory subject matter.” Institution Decision, Paper No. 16 at 19 (PTAB
`
`Mar. 4, 2014) (“ID”). Nothing in the Patent Owner’s Response (“POR”) changes
`
`the reasoned and correct conclusions in the Institution Decision.
`
`Alice reaffirmed that claims directed to abstract ideas, without limitations
`
`sufficient to tie them down, are patent ineligible. Rather than address this
`
`standard, PO concocts its own misguided tests for patent-eligibility that have no
`
`basis in precedent and, in fact, run afoul of the holdings in Alice, Bilski, Benson,
`
`Flook, Bancorp, and CyberSource.
`
`II. CLAIM CONSTRUCTION
`PO provides an alternative claim construction for three terms (“regulatory
`
`conditions,” “executing a payment process,” and “genperating a selling
`
`agreement”) it does not contend are either necessary or even relevant for the Board
`
`to construe. As to a fourth term, “using a distributor management system,” PO
`
`seeks to inject the express use of a computer into the construction for this term. Of
`
`course, even if adopted, the use of a general purpose computer without more does
`
`not tie down the abstract idea of the challenged claims. Finally, PO attempts to
`
`
`
`1
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`“tie down” means-plus-function claims 40 and 41 by arguing that such claims
`
`require the disclosure of a specific algorithm implemented on a computer. When
`
`measured against the 304 patent’s paltry disclosure, PO has not shown the
`
`disclosure of specific programming or a resulting special purpose computer, but
`
`instead has only demonstrated that its means-plus-function claims are both abstract
`
`and indefinite.
`
`“Using a Distributor Management System”
`
`A.
`The Board has already construed “distributor management system” as
`
`“software for managing information about a sales force,” noting that “the
`
`specification of the ‘024 Patent does not provide specifics of hardware of
`
`software.” ID 10-11. PO contends that the entire term “using a distributor
`
`management system” should be construed as “using a special purpose computer
`
`executing software to perform distributor management system functions.” POR 5.
`
`PO never specifies what the “distributor management system functions” are and
`
`merely reciting the words “special purpose computer” does not make it so.
`
`Since PO does not argue that this term is means-plus-function, the recited
`
`“special purpose computer” is nothing more than any general computer. In any
`
`event, as discussed in Section E below, nothing in the patent recites a particular
`
`way or discloses a particular algorithm for implementing recited functionality.
`
`B.
`
`“Regulatory Conditions Applicable to/Associated with said Sales”
`
`
`
`2
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`PO argues that the Board’s claim construction of “regulatory conditions” is
`
`too broad and that the term should be construed as “regulatory conditions put in
`
`place by licensing and governmental organizations.” POR 7-9. PO’s argument is
`
`not supported by the intrinsic record. Moreover, PO does not and cannot argue
`
`that its construction does anything to “tie down” the abstract idea of claim 1.
`
`PO argues that “quotas” and “plan objects” fall within the scope of the
`
`Board’s construction of “regulatory conditions.” POR 8. But this argument rests
`
`on the false premise that “it is known that quotas and plans can serve as internal or
`
`external constraints,” (POR 8) yet this statement is not supported by PO’s citations.
`
`To the contrary, the cited passages (cols. 7:28-30 and 8:1-9) deal expressly with
`
`commission models and linked hierarchies; nowhere does the patent suggest that
`
`quotas or plan objects are an internal or external constraint with which a sales
`
`representative must comply in order to receive compensation.
`
`Even if adopted, PO’s proposed construction does not change the § 101
`
`analysis for the challenged claims. PO’s proposed construction simply recites a
`
`narrower genus of regulatory constraints without adding any meaningful limitation
`
`to the claims. In fact, the Board has already considered this issue in the context of
`
`the ‘024 patent’s dependent claims and concluded that the claims are still more
`
`likely than not unpatentable. For example, dependent claim 5 further defines the
`
`“regulatory conditions” to be at least one license (which would be put in place by a
`
`
`
`3
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`licensing or governmental organization), yet the Board has already concluded that
`
`claim 5 (and many other dependent claims like it) is likely unpatentably abstract.
`
`“Executing a Payment Process”
`
`C.
`PO argues that “executing a payment process” should be construed to
`
`require the use of a computer, i.e., as “executing a payment process by a computer
`
`programmed to execute a payment process.” POR 10-12. PO does not and cannot
`
`argue that its proposed construction is relevant to determining the patent eligibility
`
`of the challenged claims. Even if adopted, PO’s proposed construction would do
`
`nothing more than make the method step of claim 1 (“executing a payment
`
`process”) akin to the system limitation of claim 45 (“computer readable code
`
`executable by the processor to…execute a payment process”), which the Board has
`
`already concluded is more likely than not unpatentably abstract.
`
`“Generating a Selling Agreement”
`
`D.
`Patent Owner argues that no explicit construction of “generating a selling
`
`agreement” is necessary or probative to the issue of patent eligibility before the
`
`Board. POR 16-17. Petitioner agrees. While the Board properly construed this
`
`term in its ID, Petitioner does not believe that construction of this term can add in
`
`any meaningful way to the abstract idea of the claims in which it appears, and thus
`
`does not require construction for purposes of the Board’s decision on § 101.
`
`E. Means-Plus-Function Claim Terms
`To resuscitate unpatentably abstract claims, Patent Owner argues that the
`
`
`
`4
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`means-plus-function limitations of claims 40 and 41 involve “specific processes
`
`executed by a specially programmed computer.” POR at 17-18, 44. Nothing in the
`
`‘024 patent discloses a specific algorithm to perform the recited function and just
`
`saying that these claims require specific programming does not make it so.
`
`PO correctly argues that a means-plus-function claim requires more than just the
`
`recitation of a general purpose computer; it requires the disclosure of an algorithm
`
`that, when implemented on the computer, performs the recited functional. POR
`
`18; see also WMS Gaming Inc. v. Int’l. Game Tech., 184 F.3d 1339, 1348 (Fed.
`
`Cir. 1999). PO uses this statement of law to argue that claims 40 and 41 recite not
`
`only a general purpose computer, but also the special programming required to
`
`perform the recited function. Of course, PO’s argument ignores the fact that the
`
`‘024 patent never discloses any way of implementing the recited functionality,
`
`much less an algorithm for doing so. WMS Gaming made clear that simply reciting
`
`“an algorithm executed by a computer,” as Patent Owner seeks to do here, was
`
`insufficient to adequately disclose corresponding structure for a means-plus-
`
`function claim. Id. at 1348. Only through new and unobvious programming (i.e.
`
`with an algorithm) is the general purpose computer transformed into a programmed
`
`special purpose computer. The Federal Circuit noted:
`
`A general purpose computer, or microprocessor, programmed
`to carry out an algorithm creates “a new machine, because a
`general purpose computer in effect becomes a special purpose
`computer once it is programmed to perform particular functions
`
`
`
`5
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`pursuant to instructions from program software.” …The
`instructions of the software program that carry out the
`algorithm electrically change the general purpose computer by
`creating electrical paths within the device. These electrical
`paths create a special purpose machine for carrying out the
`particular algorithm.
`
`Id. at 1348. In contrast, one of the named inventors of the ‘024 patent admitted in
`
`deposition that the ‘304 patent does not disclose any “way” or “algorithm” to
`
`implement the recited functionality. 1
`
`PO’s claim construction argument for these means-plus-function limitations
`
`conflate into its §101 argument. Because PO never discloses any particular way or
`
`any specific programming to accomplish the recited means limitations of claims 40
`
`and 41, these claims are not tied down for purposes of §101 (and, while not
`
`relevant here, they are also indefinite under §112(2)).
`
`III. CLAIMS 1, 40, 42, AND 45 ARE DIRECTED TO ABSTRACT IDEAS
`
`
`1 8/13/14 Cheng Tr. (rough) at 161:5-16, 163:13-164:13, 164:14-165:10; 170:15-
`
`25 (“A. So, what it basically is describing is what you – what you want to have
`
`happen but not how to make that happen.”), 174:21-175:6 (“Q. Based on your
`
`review of the ‘024 patent is that algorithm set forth anywhere in the patent? A. I
`
`think the what is described but not the how.”), and 175:10-176:8 (“Q. And, again,
`
`same question, is there anything in the ’024 patent that discloses how to implement
`
`this functionality. A. I don’t see any.”).
`
`
`
`6
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`The Supreme Court in Alice was very clear about the standard that should be
`
`used to determine patent eligibility under § 101: “First, we determine whether the
`
`claims at issue are directed to one of those patent-ineligible concepts. . . . If so, we
`
`then ask, “[w]hat else is there in the claims before us?” Alice Corp. Pty. Ltd. v.
`
`CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014) (quotations omitted). The Institution
`
`Decision is consistent with Alice, which reaffirms the patent ineligibility of the
`
`present claims. Here, that abstract idea is compensating sales representatives for
`
`their sales transactions that conform to regulatory conditions. ID 15; Pet. 1.
`
`Contrary to the clear authority of Alice and its predecessors, PO argues that
`
`claims are invalid under § 101 only where the abstract idea is “a fundamental
`
`economic principle or a building block of the modern economy.” POR 27-32.
`
`Nothing in Alice, Mayo, Bilski, Benson, or Flook limits the categories of patent
`
`ineligible abstract ideas to the specific examples of abstract ideas found in those
`
`cases, nor those made up by PO by a cramped misreading of Alice and Bilski.
`
`In fact, the Supreme Court roundly rejected exactly this line of argument in
`
`Alice: “petitioner contends that the abstract-ideas category is confined to
`
`preexisting, fundamental truths that exist in principle apart from any human
`
`action. . . . Bilski belies petitioner’s assertion.” Alice at 2356 (emphasis added,
`
`quotations and modification omitted). PO does not explain how the abstract idea
`
`here is different in kind than “managing a stable value protected life insurance
`
`
`
`7
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`policy” (Bancorp at 1280-81), a “fraud detection method” (Cybersource at 1376),
`
`“risk hedging” (Bilski at 1321), or “intermediated settlement” (Alice at 2355). It is
`
`not. PO does not explain why an abstract idea regarding a mundane economic
`
`practice should be more deserving of patent protection (and thus, patent eligibility)
`
`than an abstract idea directed to a “fundamental economic practice.” The only
`
`proper inquiry is whether the claims are directed to an abstract idea;2 PO’s attempts
`
`at misdirection should be ignored.3
`
`PO argues that the prior examination of the claims is relevant here because
`
`“the PTO has already determined the claims novel and nonobvious.” POR 31.
`
`While Petitioner has not in this proceeding challenged the ‘024 patent under
`
`§§ 102 or 103, neither is the ‘024 patent presumed valid. See 35 U.S.C. § 282.
`
`“The question . . . of whether a particular invention is novel is ‘wholly apart from
`
`2 Both Alice and the Preliminary Examiner Guidelines agree that a fundamental
`
`economic practice is one of several examples of abstract ideas, but that abstract
`
`ideas are not limited to a particular category. Exh. 2015 at 2-3; Alice at 2356-57.
`
`3 Even if the “fundamental nature” of an economic practice were relevant to the
`
`§101 analysis (which it is not), PO — even while acknowledging “the expertise” of
`
`Ms. McGuffey and Mr. DeHaven — offers no evidence to rebut their declarations
`
`that provide the only evidence of record bearing on the importance of the economic
`
`practice at issue. E.g. Exh. 1012 ¶¶16-17, 21.
`
`
`
`8
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`whether the invention falls into a category of statutory subject matter.’” Diehr,
`
`450 U.S. at 190. The PTO’s § 102/§ 103 determination is simply irrelevant here.
`
`A. The Remainder of Claims 1, 40, 42, and 45 Do Not Transform the
`Abstract Idea Into a Patent-Eligible Claim
`
`PO argues that Petitioner’s characterization of the abstract idea of the ‘024
`
`patent claims omits a critical feature of the claims—namely that both the sales
`
`representatives and their sales transactions must conform to regulatory conditions
`
`to be eligible for compensation. POR 33-35. Based on this purported omission,
`
`PO argues no preemption and also that this additional feature adds materially to the
`
`abstract idea found by the Board. PO’s argument is a strawman.
`
`First, Petitioner’s characterization of the abstract idea includes both sales
`
`representatives and sales transactions. As set forth in the Petition, the abstract idea
`
`of claim 1 is “compensating sales representatives for their sales transactions that
`
`conform to regulatory conditions.” Pet. 1.
`
`Next, PO argues that because applicant argued during prosecution that the
`
`regulatory conditions for the sales representatives were “applicable to said sales,”
`
`claim 1 does not preempt the abstract idea of compensating sales representatives
`
`for their sales transactions that conform to regulatory conditions. PO 33-35. The
`
`issues of novelty/obviousness and patent eligibility are distinct issues. Moreover,
`
`PO mischaracterizes the prosecution history. As discussed in the Petition, PO
`
`argued the limitation at issue to overcome prior art related to sales of products, not
`
`
`
`9
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`distributors, so PO’s characterization of validated product transactions was actually
`
`a feature of the prior art. Finally, PO’s preemption argument is misplaced since
`
`both transactions and distributors are within the scope of the abstract idea as
`
`framed in the Petition and the ID. In any event, as Alice makes clear, pre-emption
`
`is a policy concern justifying the limits on patent eligibility, but is not a test for
`
`patentability itself. See Alice at 2354.
`
`B. Claims 1, 40, 42, and 45 are not Tied to a Particular Machine
`PO argues that claim 1 is tied to a special purpose machine because it recites
`
`“using a distributor management system.” POR at 38-39. As discussed in Section
`
`II.E. above, only through specific programming (i.e. with an algorithm) is the
`
`general purpose computer transformed into a programmed special purpose
`
`computer and no such algorithm or specific programming is recited or disclosed in
`
`the ‘024 patent. The use of a general purpose computer to implement the recited
`
`functionality, without more, cannot confer patentability. Alice at 2359 (“purely
`
`functional and generic” hardware does not provide “a meaningful limitation”).
`
`Moreover, the recited functionality of the challenged claims can be performed
`
`entirely in the human mind, as was confirmed by named inventor, Charles
`
`Erickson, in deposition.4 The Federal Circuit has never suggested that “reciting the
`
`4 The limitations of Claim 40 could be performed by “a person” using “your
`
`brain.” See Exh. 1026 at 213:20-215:24.
`
`
`
`10
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`use of a computer to execute an algorithm that can be performed entirely in the
`
`human mind falls within the Alappat rule.” Cybersource, at 1374-75.
`
`C. CyberSource and Bancorp are highly relevant
`While arguing that Petitioner “distills the claim limitations until they are no
`
`more than their first word,” PO does not deny—aside from the generically-recited
`
`computer—that the limitations of claim 1 can be performed manually. POR 40-41.
`
`PO’s statement that “Bancorp is similar [to CyberSource] – the claims, on their
`
`face, did not implicate or even recite a computer” is simply false. POR 42. The
`
`Federal Circuit invalidated method, system, and computer-readable medium claims
`
`that explicitly recited or required a computer. In Bancorp, one of the independent
`
`claims recited a “computer system for administering an existing life insurance
`
`policy.” Bancorp at 1271; Exh. 1015, 17:52-55. There, the Federal Circuit noted
`
`that “particular computing devices” “such as a ‘generator,’ a ‘calculator,’ and
`
`‘digital storage’” were required. Bancorp at 1274. Independent claims recited
`
`“computer readable media for controlling a computer,” and were also invalidated.
`
`Bancorp at 1271; Exh. 1016, (cl. 18); Exh. 1015, (cls. 18, 63). Likewise, in
`
`CyberSource, invalidated independent claim 2 that recited “a computer readable
`
`medium” that required “execution of the program instruction by one or more
`
`processors of a computer system.” CyberSource at 1373-74; Exh. 1017, (cl. 2).
`
`The Federal Circuit treated claim 2 no differently than the abstract method of claim
`
`
`
`11
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`3 that did not recite a computer: “Here, the incidental use of a computer to
`
`perform the mental process of claim 3 does not impose a sufficiently meaningful
`
`limit on the claim’s scope.” CyberSource at 1375. These holdings are consistent
`
`with Alice, where the challenged patents were directed to a “computer-
`
`implemented scheme,” and where each of the method, system, and media claims
`
`were held unpatentable as directed to abstract ideas. Alice at 2360. Here, the
`
`general-purpose computer does not save claim 1, or any other ‘024 patent claims.
`
`IV. THE DEPENDENT CLAIMS ARE ALSO UNPATENTABLE
`PO’s arguments for claims 2, 44, and 47 are premised on arguments the
`
`“generating a sales agreement” limitation is something other than merely “reducing
`
`the information to a written form,” contrary to the institution decision. ID 17-18;
`
`POR at 29-32. As discussed in Section II.4, supra, PO’s construction is incorrect
`
`and, in any event, does not tie down the abstract idea of the claim. Claim 41
`
`suffers from the same deficiencies as independent claims 2 and 40. Furthermore,
`
`PO nowhere addressed claims 35-39, 43, or 46. Compare Pet. 61-64 with POR 42-
`
`45. PO thus concedes that these claims are also unpatentable.
`
`V.
`
`PETITIONER WAS NOT BARRED FROM FILING ITS PETITION
`
`As the Board has already held, Petitioner is not estopped from challenging
`
`the claims on the grounds identified in the Petition. ID 4-6; Decision on Request
`
`for Rehearing, Paper No. 22 at 2-6 (April 9, 2014). Petitioner’s second-filed
`
`
`
`12
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`declaratory judgment (“DJ”) action did not bar Petitioner from filing its Petition.
`
`First, according to 37 C.F.R. §§ 42.300 et seq., 35 U.S.C. § 325(a)(1) does
`
`not apply to CBM Review. This is because 37 C.F.R. § 42.201—the rule
`
`promulgated by the Director of the USPTO to implement 35 U.S.C. § 325(a)(1)—
`
`is explicitly carved out of CBM Review by 37 C.F.R. § 42.300(a). 37 C.F.R.
`
`§§ 42.300; Exh. 1010 at 48691. The Director’s rulemaking that resulted in
`
`37 C.F.R. § 42.300(a) was authorized under AIA § 18(a)(1). See id. at 48680; see
`
`also Exh. 2008 at S5428 (Sen. Leahy). In that regard, the Director found that the
`
`exceptions set forth in § 42.300(a) were “consistent with section 18(a)(1) of the
`
`AIA.” Exh. 1010 at 48693. The Director’s rulemaking is consistent with the
`
`statutory mandate and entitled to deference.5 See Chevron U.S.A. v. Natural Res.
`
`Def. Council, 467 U.S. 837, 843-44 (1984); see also Ethicon Inc. v. Quigg, 849
`
`F.2d 1422, 1425 (Fed. Cir. 1988).
`
`Contrary to PO’s argument, nothing in AIA § 18 incorporates Chapter 32 in
`
`its entirety for CBM Review. In fact, such incorporation would result in statutory
`
`conflicts with other provisions of Section 18. Compare, e.g. 35 U.S.C. § 321(a)
`
`with AIA § 18(a)(1)(B); compare also 35 U.S.C. § 321 (b) with AIA §
`
`5 While the PTAB’s recent decision in SecureBuy tacitly assumed that 35 U.S.C. §
`
`325(a)(1) applies to Section 18 proceedings, the issue was not raised or argued by
`
`either party there. See SecureBuy, LLC, Paper No. 12 at 3.
`
`
`
`13
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`18(a)(1)(C)(i) and (ii). Where an “interpretation directly conflicts with the
`
`language of the statute,” it must be rejected. Princess Cruises, Inc. v. United
`
`States, 201 F.3d 1352, 1362-63 (Fed. Cir. 2000).
`
`In addition, as the Board found in its ID (at 5-7) and Decision on Request for
`
`Rehearing, Paper No. 27 (“Rehearing Denial”), Petitioner’s DJ action is properly
`
`treated as something that de jure never existed, leaving the parties as though the
`
`action had never been brought. See Rehearing Denial at 3-6, and authority cited
`
`therein. Callidus was never in a position to litigate invalidity on multiple fronts
`
`simultaneously; Petitioner’s DJ complaint was filed (but never served) and
`
`dismissed without prejudice by May 2013, more than three months before Callidus
`
`filed its petition for CBM Review. See Exhs. 2001; 2003.
`
`SecureBuy, the only precedential case addressing § 315(a) or § 325(a), is
`
`distinguishable. There, SecureBuy had filed two separate DJ actions two weeks
`
`before filing its petition for CBM Review, and those actions were still ongoing
`
`long after the petition was filed. Decision Denying Institution of Covered Business
`
`Method Patent Review, Paper No. 12 at 3, SecureBuy, LLC v. Cardinalcommerce
`
`Corp., CBM2014-00035 (P.T.A.B. Apr. 25, 2014); see Exhs. 1018 and 1019. The
`
`Board’s decision is also consistent with the legislative history that expressed
`
`concern about parallel litigation tactics or “abusive serial challenges to patents.”
`
`Exh. 2006 at S1363 (Sen. Schumer); Exh. 2009 at S952 (Sen. Grassley). None of
`
`
`
`14
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`those concerns are implicated where there has been a voluntary dismissal.
`
`Finally, even if § 325(a) applied here, Petitioner’s second-filed DJ action is
`
`properly characterized as an excepted counterclaim within the meaning of §325(a).
`
`See 35 U.S.C. § 325(a)(3). PO sued Petitioner first in the District of Delaware.
`
`Petitioner’s standing for its second-filed DJ action in California was explicitly
`
`based on PO’s first-filed action.6 Exh. 2001 ¶ 9. PO does not dispute that
`
`Petitioner’s DJ counterclaim action was a mirror image of PO’s earlier filed patent
`
`infringement claim, and both parties understood and agreed that it could not
`
`proceed in parallel. Exh. 1020 at 1; Exh. 1021; Exh. 1022. And once the motion
`
`to transfer was resolved, Petitioner voluntarily dismissed its second filed DJ claim
`
`and added precisely the same DJ claim as a counterclaim to PO’s first filed
`
`Delaware action. Exh. 1023.
`
`VI. CONCLUSION
`Petitioner has demonstrated the patent ineligibility of each claim under Alice
`
`and its predecessors, under any of the proposed constructions, and had standing to
`
`file its Petition: claims 1, 2, and 35-47 of the ‘024 patent should be cancelled.
`
`6 Petitioner’s second-filed DJ counterclaim action was filed for the express purpose
`
`of anchoring venue (in response to Patent Owner’s cross-motion for transfer) until
`
`the Delaware Court (the first-filed action) had an opportunity to rule on the then-
`
`pending motion for transfer. Exh. 1024 at 4, n.1; Exh. 1025.
`
`
`
`15
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`
`August 22, 2014
`
`Respectfully Submitted,
`
` /
`
` Deborah E. Fishman/
`Deborah E. Fishman (Reg. No. 48,621)
`Jeffrey A. Miller (Reg. No. 35,287)
`Assad H. Rajani (admitted pro hac vice)
`Michael S. Tonkinson (admitted pro hac
`vice)
`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
`
`
`Attorneys for Petitioner
`CALLIDUS SOFTWARE INC.
`
`
`
`
`16
`
`Dated:
`
`
`
`
`
`
`
`
`
`Petitioner’s Reply to Patent Owner Response
`CBM2013-00053
`The undersigned certifies that the foregoing PETITIONER’S REPLY TO
`
`PATENT OWNER RESPONSE and associated Exhibits 1015-1025 were served
`
`on Patent Owner on August 22, 2014, via electronic filing in the Patent Review
`
`Processing System.
`
`
`
`/ Deborah E. Fishman /
`Deborah E. Fishman
`Reg. No. 48,621
`
`
`
`
`
`
`
`
`
`17
`
`
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
