`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`
`IN THE UNITED STATES PATENT TRIAL AND APPEAL BOARD
`
`U.S. Patent 7,908,304
`
`
`
`U.S. Class: 707/945; 235/376; 705/7
`
`Group Art Unit: 3687
`
`Confirmation No. 6193
`
`Petition filed: August 30, 2013
`
`
`FILED ELECTRONICALLY
`PER 37 C.F.R. § 42.6(B)(1)
`
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`In re CBM Review of:
`
`
`
`Issued: March 15, 2011
`
`Inventor: David Chao et al.
`
`Application No. 09/810,514
`
`Filed: March 15, 2001
`
`For: METHOD AND SYSTEM FOR
`MANAGING DISTRIBUTOR
`INFORMATION
`
`
`Mail Stop Patent Board
`Patent Trial and Appeal Board
`U.S.P.T.O.
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`
`PETITION FOR COVERED BUSINESS METHOD PATENT
`REVIEW UNDER 35 U.S.C. § 321 AND §18 OF THE
`LEAHY-SMITH AMERICA INVENTS ACT
`
`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, 12-25, 30-
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`32, and 42-43 of U.S. Patent 7,908,304 (“the ‘304 Patent,” attached as Petition
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`Exhibit 1001), which issued to David Chao et al. on March 15, 2011.
`
`An electronic payment in the amount of $32,750.00 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.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`TABLE OF CONTENTS
`
`Page No.
`
`PRELIMINARY STATEMENT ..................................................................... 1 
`I. 
`II.  GROUNDS FOR STANDING ........................................................................ 3 
`A. ..... Petitioner has Been Sued for Infringement of the ‘304 Patent and
`is Not Estopped ..................................................................................... 3 
`B. ..... At Least One Challenged Claim is Unpatentable ................................. 4 
`C. ..... The ‘304 Patent is a CBM Patent .......................................................... 4 
`1. ...... Claims 1, 12-25, 30-32, and 42-43 are Directed to Financial
`Products or Services .................................................................... 5 
`2. ...... Claims 1, 12-25, 30-32, and 42-43 are Not Directed to a
`“Technological Invention” .......................................................... 8 
`III.  STATEMENT OF PRECISE RELIEF REQUESTED FOR EACH CLAIM
`CHALLENGED ............................................................................................ 16 
`A. ..... Claims for which Review is Requested .............................................. 16 
`B. ..... Statutory Grounds of Challenge .......................................................... 17 
`IV.  CLAIM CONSTRUCTION .......................................................................... 17 
`A. ..... Broadest Reasonable Interpretation .................................................... 17 
`B. ..... Support for Petitioner’s Broadest Reasonable Interpretation ............. 19 
`1. ...... “Module” / “Modules” .............................................................. 19 
`2. ...... “To Generate a Selling Agreement” / “To Define and
`Create A Selling Agreement” ................................................... 20 
`3. ...... “Engine” .................................................................................... 21 
`4. ...... “Backbone” ............................................................................... 22 
`
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`V. 
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`5. ...... “Interface” ................................................................................. 24 
`CLAIMS 1, 12-25, 30-32, AND 42-43 OF THE ‘304 PATENT ARE
`DIRECTED TO NON-PATENTABLE SUBJECT MATTER ..................... 25 
`A. ..... Inventions Covering Abstract Ideas are Not Eligible for Patent
`Protection, Regardless of their Form .................................................. 25 
`B. ..... Claim 12 of the ‘304 Patent is Directed to an Abstract Idea............... 27 
`1. ...... No More than General Purpose Computer Hardware and
`Programming are Used to Implement the Validating a
`Distributor to Begin Selling Products of Claim 12 ................... 31 
`2. ...... Validating a Distributor to Begin Selling Products Can be
`Accomplished by Hand ............................................................. 34 
`3. ...... Claim 12 Fails the Machine-or-Transformation Test ............... 37 
`C. ..... Claim 1 of the ‘304 Patent is Directed to an Abstract Idea ................. 41 
`1. ...... No More than General Purpose Computer Hardware and
`Programming are Used to Determine Compensation for a
`Validated Distributor of Claim 1 .............................................. 44 
`2. ...... Determining Compensation for a Validated Distributor Can
`be Accomplished by Hand ........................................................ 46 
`3. ...... Claim 1 Fails the Machine-or-Transformation Test ................. 49 
`D. ..... Claim 32 of the ‘304 Patent is Directed to an Abstract Idea............... 52 
`1. ...... No More than General Purpose Computer Hardware and
`Programming are Used to Implement the Determining
`Compensation for a Validated Distributor of Claim 32 ............ 56 
`2. ...... Determining Compensation for Validated Distributors Can
`be Accomplished by Hand ........................................................ 57 
`3. ...... Claim 32 Fails the Machine-or-Transformation Test ............... 59 
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`
`
`
`E. ...... Dependent Claims 13-25, 30-31, and 42-43 Fail to Tie Down the
`Abstract Idea of Independent Claim 12. ............................................. 59 
`1. ...... Because Dependent Claims 18, 23-25, 30, and 43 Add Only
`Rudimentary Data Manipulations to the Abstract Idea of
`Claim 12, They are Not Patent Eligible. ................................... 59 
`2. ...... Dependent Claims 13-15 and 20 Add Nothing More Than
`Basic Computer Functions to the Abstract Idea of Claim 12. .. 62 
`3. ...... Dependent Claims 16, 17, 21, and 22 Add Only
`Insignificant Post-Solution Activity to the Abstract Idea of
`Claim 12. ................................................................................... 63 
`4. ...... Dependent Claims 19, 31 and 42 Are Likewise
`Unpatentable Because They Fail to Add Any Meaningful
`Specificity to the Abstract Idea of Claim 12............................. 65 
`VI.  CONCLUSION .............................................................................................. 67 
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`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`
`LIST OF EXHIBITS
`
`Petition Exhibit 1001: U.S. Patent No. 7,908,304
`
`Petition Exhibit 1002: U.S. Patent No. 7,908,304 File History
`
`Petition Exhibit 1003: 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 1004: Decision to Institute in SAP v. Versata, CBM2012-
`00001, Paper No. 36 (PTAB Jan. 9, 2013)
`
`Petition Exhibit 1005: United States Patent and Trademark Office –
`Classification Definitions, Class 705
`
`Petition Exhibit 1006: 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 1007:
`
`Patent Owner’s Preliminary Response in SAP v. Versata,
`CBM2012-00001, Paper No. 29 (PTAB Nov. 30, 2012)
`
`Petition Exhibit 1008: Official Patent Trial Practice Guide, 77 Fed. Reg. 48756
`(Aug. 14, 2012)
`
`Petition Exhibit 1009:
`
`Final Written Decision in SAP v. Versata, CBM2012-
`00001, Paper No. 70 (PTAB June 11, 2013)
`
`Petition Exhibit 1010: 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 1011: Declaration of Joseph E. DeHaven in Support of Petition
`for Covered Business Method Patent Review of U.S.
`Patent No. 7,908,304
`
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`
`
`Petition Exhibit 1012: Declaration of Janis McGuffey in Support of Petition for
`Covered Business Method Patent Review of U.S. Patent
`No. 7,908,304
`
`
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`
`
`
`I.
`
`PRELIMINARY STATEMENT
`
`The ‘304 Patent claims are each directed to abstract ideas. While each of the
`
`three independent claims features a slightly different abstract idea, all are similarly
`
`abstract. Claim 12 is merely the abstract idea of validating a distributor to begin
`
`selling products. Similarly, claims 1 and 32 recite nothing more than the abstract
`
`idea of determining compensation for a validated distributor. Determining whether
`
`distributors are licensed and appointed has been performed for decades by hand
`
`with pencil and paper and in the human mind in the absence of a computer system.
`
`Indeed, having a valid license and appointment has been a pre-requisite to
`
`receiving compensation in the insurance and financial services industries for many
`
`years. And for good reason—it is required by law. Exh. 1001, 1:34-36 (“There
`
`are regulatory constraints on the sales force in that all distributors who sell
`
`products must be licensed and appointed, or authorized, to sell those products.”);
`
`3:24-33 (“Credential management is a critical issue for many firms . . . This need is
`
`made more acute by constantly changing government rules and regulations, as well
`
`as by different regulations imposed by the different jurisdictions in which a firm
`
`operates.”).
`
`Claim 12, one of the three independent claims of the ‘304 Patent, is
`
`representative of the abstract nature of the challenged claims:
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`12. A system for managing relationships between parties to a
`selling agreement, the system comprising:
`a database source comprising a plurality of data objects
`representative of at least one distributing party, at least
`one selling agreement, and at least one license or
`appointment associated with said at least one distributing
`party; and
`a distributor management engine configured to obtain at least
`one of said plurality of data objects from said database
`source and determine whether said at least one
`distributing party conforms with said at least one selling
`agreement and said at least one license or appointment is
`valid to allow the at least one distributing party to sell
`one or more products of the first party in accordance with
`the selling agreement.
`Id., 15:64-16:12. The recitation of a database source and a distributor management
`
`engine do not meaningfully limit the abstract idea. The “database source” is a
`
`conventional data repository, serving in the claim only to provide data related to
`
`the distributor, selling agreement, and license or appointment. Likewise, because
`
`an “engine” is software that performs the recited function, here software (for
`
`managing distributors) that obtains data from a database source to validate a
`
`distributor does not add anything to the abstract idea other than specify that the
`
`abstract idea is carried out as software.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`The other two independent claims 1 and 32 recite similar systems, adding
`
`
`
`
`
`limitations that likewise fail to tie down the abstract idea of determining
`
`compensation for a validated distributor. Furthermore, determining compensation
`
`for a validated distributor can be accomplished by hand.
`
`Here, the claimed systems require at most a general purpose computer,
`
`which is a conventional, widely-used tool to manage and process data in the
`
`information age. Neither the “processor,” “memory,” “database source,”
`
`“module,” “engine,” nor “interface” recited in the independent claims provide any
`
`meaningful limit on the ‘304 Patent’s coverage of the abstract idea. The abstract
`
`ideas of the claims are not tied to any particular machine nor do they transform or
`
`reduce any article into a different state or thing.
`
`Accordingly, each of claims 1, 12-25, 30-32, and 42-43 of the ‘304 Patent
`
`are patent-ineligible under 35 U.S.C. § 101 because they are directed to an
`
`abstract idea.
`
`II. GROUNDS FOR STANDING
`A.
`Petitioner has Been Sued for Infringement of the ‘304 Patent and
`is Not Estopped
`
`Petitioner has standing to file this petition because Petitioner has been sued
`
`for infringement of the ‘304 Patent in Versata Software, Inc. v. Callidus Software,
`
`Inc., No. 1:12-cv-931-SLR (D. Del.). Exh. 1003; AIA, § 18(a)(1)(B); 37 C.F.R.
`
`
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`§ 42.302(a). Versata Software, Inc. and Versata Development Group, Inc.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`(collectively “Versata” or “Patent Owner”) purport to hold all right, title, and
`
`interest in the ‘304 Patent. Exh. 1003, ¶ 9.
`
`Petitioner is not estopped from challenging the claims on the grounds
`
`identified in the petition. 1 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, 12-25, 30-32, and 42-43 of the ‘304
`
`Patent are unpatentable under 35 U.S.C. § 101 and it is “more likely than not that
`
`at least one of the claims challenged” of the ‘304 Patent is unpatentable. 35 U.S.C.
`
`§ 324(a).
`
`C. The ‘304 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 financial
`
`
`1 The Board previously held that § 101 is a permissible grounds for challenging
`claims in a CBM review. Exh. 1004, at 32-36.
`
`
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`is an adjective that simply means relating to monetary matters.” Exh. 1004, at 23.
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`The ‘304 Patent easily meets the definition of a CBM patent.
`
`1.
`
`Claims 1, 12-25, 30-32, and 42-43 are Directed to Financial
`Products or Services
`
`The claims and specification show that the claimed systems of the ‘304
`
`Patent are directed to financial products or services, i.e. monetary matters. Claims
`
`1, 12-25, 30-32, and 42-43 are directed to systems for companies, and in particular
`
`financial services and insurance companies, to manage relationships with and
`
`calculating compensation for the distributors or sales agents that are selling their
`
`financial products and services. Exh. 1001, 15:13-14; 15:64-65; 17:11-12. The
`
`Abstract discloses: “An embodiment of the invention provides a system that
`
`enables financial services companies to manage and track information about a sales
`
`force. . . . The system allows for configuring compensations, providing financial
`
`services companies a toolkit for creating and modeling their complex commission
`
`schedules used to compensate their sales force.” Id., Abstract. Managing
`
`compensation for the sales forces of financial services companies clearly relates to
`
`monetary matters.
`
`Furthermore, the claimed subject matter is obviously directed to the financial
`
`industry, and its products and services. The first line of the Abstract recites
`
`“financial services companies.” Id., Abstract; 3:1-4 (disclosing the “need of firms
`
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`in financial services is an ability to manages sales producer payment accounts”
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`(emphasis added)). Similarly, the Summary of the Invention states that “systems
`
`embodying the invention provide a way to manage the agreements that financial
`
`services companies have with the distributors who sell their products.” Id., 5:63-
`
`65 (emphasis added). In total, the ‘304 Patent states “financial services” or
`
`“financial products” no less than 35 times throughout the disclosure. E.g., id., 4:48
`
`(“financial services companies”); 4:22 (“a product, which may include financial
`
`services”); 5:66 (“life insurances companies”); 10:2-3 (“enable financial services
`
`institutions to manage the license and appointment credentials”). Financial
`
`services and insurance companies validating a distributor to begin selling products
`
`or determining compensation is squarely within the “practice, administration, or
`
`management of a financial product or service.” AIA, § 18(d)(1).
`
`The ‘304 Patent is classified in classes 705/7, 707/945, and 235/376. Exh.
`
`1001, INID Code 52. Class 705 is entitled “Data Processing: Financial, Business
`
`Practice, Management, or Cost/Price Determination.” Exh. 1005, at 1. While
`
`classification in class 705 is not determinative, it suggests that the claims of the
`
`‘304 Patent are directed to financial products and services. Exh. 1006, at 48739
`
`(“patents subject to covered business method patent review are anticipated to be
`
`typically classifiable in Class 705”).
`
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`
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`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 ‘304 Patent. For “financial product,” Versta’s
`
`various definitions included “an insurance product,” “insurance contracts,” and all
`
`manner of financial instruments, including bank deposits, credit lines, bonds,
`
`mortgages, leases, and so on. Exh. 1007, 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). As discussed above, the specification of the ‘304 Patent
`
`states that “the invention” relates to systems “for managing contracts between
`
`manufactures of a product and the distributors of their product,” which provides a
`
`system for financial services companies to validate and compensate their sales
`
`force. Exh. 1001, 4:43-51. The ‘304 Patent also discloses that “organizations
`
`such as life insurances companies may utilize embodiments of the invention to
`
`manage the sale and distribution of life insurance plans in a way that coincides
`
`with the regulatory constraints of government organizations.” Id., 5:66-6:2; see
`
`also id., 7:4-6 (“Each transaction represents a physical sales transaction, such as
`
`distributor selling a life insurance policy.”). Because these examples relate to the
`
`provision of financial products, under Patent Owner Versata’s own proffered
`
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`
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`definitions, the ‘304 Patent claims a method used in the “practice, administration,
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`or management of a financial product or service.”
`
`The ‘304 Patent meets the USPTO’s definition of a CBM patent.
`
`2.
`
`Claims 1, 12-25, 30-32, and 42-43 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. Exh. 1006 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. Exh. 1006 at 48736. To institute CBM review, it is only
`
`necessary that one claim of the ‘304 Patent be directed to a CBM that is not a
`
`technological invention. Id.
`
`Here, the challenged claims fail both prongs; they are not directed to
`
`technological inventions.
`
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`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`i.
`
`Any Allegedly Novel and Unobvious Features of the
`‘304 Patent are Not Technological
`
`The ‘304 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. 1008, at 48763-64. The challenged claims of the ‘304 Patent recite only
`
`known business methods used in conventional ways. Claim 12 recites a database
`
`source and an engine. Claim 1 recites a processor and a memory comprising a
`
`plurality of modules. Claim 32 recites an interface and software including a
`
`database source, an engine, and a plurality of modules. There is no indication that
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`any of the recited limitations perform anything other than conventional computing
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`tasks. Processors, memories, and database sources are well-known in the field of
`
`computer technology. The recited engines and modules, which are software
`
`components that function according to conventional programming techniques,
`
`serve only to perform the functions recited in the claims, which could and have
`
`been performed manually or mentally without reliance on a computer system. See
`
`infra Sections IV.B.1 (BRI of “module”), IV.B.3 (BRI of “engine”).
`
`The ‘304 specification discloses distributor management software, which is
`
`simply a collection of software applications for companies to manage their
`
`distributors (or sales agents). Ex. 1001, 6:8-10 (“[T]he system referred to
`
`hereinafter as Distributor Management System Suite (DMSS) comprises a suite of
`
`applications . . ..”). The ‘304 Patent does not assert that the use of software to
`
`manage distributors is anything other than prior art. See, e.g., id., 2:26-30 (“In the
`
`prior art, the creation and distribution of incentive plans is a slow process that is
`
`prone to error. It can take months to implement a new compensation plan, and
`
`dependencies on computer software can frustrate sales managers who want to
`
`make even simple changes.” (emphasis added)). Software written to run on a
`
`general purpose computer system was well-known in the prior art, as was capturing
`
`data, checking data for conformity with conditions, and determining compensation
`
`amounts from sets of data and conditions.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`According to the applicant, the claimed subject matter can be implemented
`
`without requiring any specific technology. The applicant stated broadly that
`
`“numerous specific details are set forth in order to provide a more thorough
`
`understanding of the present invention,” but “the invention may be practiced
`
`without these specific details.” Id., 5:48-53. The specification notes that the
`
`“invention relates to the field of computer technology,” id., 1:6, and discloses a
`
`general purpose computer. Id., Fig. 4; 13:46-15:3. However, aside from the
`
`exemplary general purpose computer of Figure 4, the specification does not discuss
`
`such a computer, or any other computer, in connected with the disclosed
`
`embodiments. Thus, according to the applicant, it is not any particular software or
`
`hardware configurations, i.e. the technological features, that is key to the claimed
`
`subject matter. Rather, it is merely the recited functionality for validating a
`
`distributor to begin selling products or determining compensation for a validated
`
`distributor that is allegedly novel over the prior art. As the Board previously
`
`recognized in its Decision to Institute CBM2012-00001, where a patent states that
`
`the claimed invention “may be implemented in any type of computer system or
`
`programming or processing environment . . . [the claim] lacks a novel and
`
`unobvious technical feature.” Exh. 1004, at 27-28.
`
`The prosecution history demonstrates that any allegedly novel and
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`unobvious features of the inventions claimed in the ‘304 Patent do not pertain to a
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`technical feature. During prosecution, the applicant repeatedly attempted to
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`distinguish prior art based on validating the license of a distributor. For example in
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`response to an obviousness rejection of claim 12 in view of three references,
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`Carrott, Ghosh, and Wheeler Provisional, applicant argued:
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`[T]he Carrott/Ghosh/Wheeler Provisional combination neither
`teaches nor suggest “a distributor management engine
`configured to obtain at least one of aid plurality of data objects
`from said database source and determine whether said at least
`one distributing party conforms with said at least one selling
`agreement and said at least one license or appointment is
`valid to allow the at least one distributing party to sell one or
`more products of the first party in accordance with the selling
`agreement.”
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`Exh. 1002, 2/25/2010 Response to Non-Final Office Action – Resubmission, at 13.
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`With respect to claim 1, applicant similarly argued that the combination of the
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`references failed to disclose “determining whether or not a distributor has a valid
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`license ‘to sell products associated with [a] sales transaction’.” Id., at 11
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`(alteration in original). With respect to claim 32, applicant argued that the prior art
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`cited failed to teach or suggest the recited “a licensing and appointment module
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`configured to determine if said at least one license or appointment data object
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`associated with said at least one distributor is in compliance with a set of
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`industry regulations.” Id., at 13. Applicant made very similar arguments, focused
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`U.S. Patent No. 7,908,304
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`on the function of determining a valid license or appointment for a distributor in an
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`attempt to distinguish each of the issued independent claims over other prior art as
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`well. See Exh. 1002, 6/11/2008 Response to Non-Final Office Action, at 10
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`(“Applicants have been unable to locate any recognition by Mikurak that a
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`distributor would need a valid license to receive a commission payment.”).
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`The Federal Circuit’s decision in Bancorp is illustrative of why the ‘304
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`Patent is not technological. In that case, the Federal Circuit considered claims that
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`“merely employ computers to track, reconcile, and administer a life insurance
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`policy . . ..” Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can. (U.S.), 687
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`F.3d 1266, 1279 (Fed. Cir. 2012). The Federal Circuit held that the “the computer
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`simply performs more efficiently what could otherwise be accomplished
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`manually,” and the claims were unpatentable. Id. The court distinguished the
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`claims before it with the claims it held were valid in its decision in Research
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`Corporation, which used a mask to produce higher quality halftone images using
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`less processor power and memory space, finding that “[n]o such technological
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`advance is evident in the present invention.” Id. (discussing Research Corp.
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`Techs. Inc. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010)). Here, the claims
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`are like the tracking, reconciling, and administering a life insurance policy at issue
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`in Bancorp.
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`U.S. Patent No. 7,908,304
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`Thus, any allegedly novel and unobvious features of the subject matter
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`claimed in the ‘304 Patent pertain to validating a distributor to begin selling
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`products or determining compensation for a validated distributor, not the use of a
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`technological feature such as the computer used to accomplish this task.
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`ii.
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`The ‘304 Patent Does Not Address a Technical
`Problem Nor Does It Provide a Technical Solution
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`As the Background of the ‘304 Patent discloses, the problem that the
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`applicant identifies is not a technical problem, but a management problem. Exh.
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`1001, 1:18-22 (“Managing sales and distribution channels has become a difficult
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`task . . .”); 1:7-8 (“More specifically, the invention relates to a method and system
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`for managing distributor information.”). The applicant discloses that products sold
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`across multiple distribution channels by distributors that may work for multiple
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`companies having different selling agreements. Exh. 1001, 1:29-45. In fact, the
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`Background section is replete with problems regarding managing distributors. E.g.
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`id., 1:51-52 (“effectively manage independent brokers and captive sales staff”);
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`2:22-24 (“designing and administering effective incentive programs is a difficult
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`management challenge”); 2:35-36 (“administration of quotas, territories, and
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`commissions”); 2:48 (“management of sales quotas”).
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`During prosecution, the applicant argued that those in the financial services
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`industry were required to consider problems brought about by a “distribution
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`channel model within the financial services industry [that] is very complex.” Exh.
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`U.S. Patent No. 7,908,304
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`1002, 9/4/2007 37 C.F. R. § 1.114 RCE Submission, at 10 (emphasis omitted).
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`The applicant noted that firms may have a large number of distributors to manage
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`and licensing requirements for those distributors. Id., at 10-11. Applicant referred
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`to credential (license) management as a “critical issue for many firms,” but
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`admitted that it was “well-known that sales agents are supposed to have licenses”
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`and that the “necessity of licensed individuals in certain sales transactions contexts
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`was well-known.” Id., at 10-11 (emphasis omitted). Thus, the problem presented
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`by the applicant was how to validate the licenses of a large number of distributors
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`and, with respect to claim 1, how to compensate only validated distributors. Id., at
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`10-11. Hence, applicant identifies not a technical problem, but a management
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`problem.
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`The solution identified in the claims in response to these problems is also not
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`technical. Each of independent claims 1, 12, and 32 claims subject-matter related
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`to validating a distributor. Claim 12 recites a “distributor management engine
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`configured to . . . determine whether said at least one distributing party conforms
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`with said at least one selling agreement and said at least one license or appointment
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`is valid . . ..” Exh. 1001, 16:4-9. Claim 1 recites “a licensing module configured
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`to determine if a party associated with said sales transaction has a valid license.”
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`Id., 15:25-28. See Section IV.B.1 (BRI of “module”). Claim 32 recites “a
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`licensing and appointment module configured to determine if said at least one
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`license or appointment. . . is in compliance with a set of industry regulations.” Id.,
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`17:27-32. While the re