Paper 49
`
`Trials@uspto.gov
`Tel: 571-272-7822 Entered: December 16, 2014
`
`
`
`
`RECORD OF ORAL HEARING
`
`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
`
`- - - - - - - -
`
`Cases CBM2013-00052 (Patent 7,904,326)
`CBM2013-00053 (Patent 7,958,024)
`CBM2013-00054 (Patent 7,908,304)
`
`Oral Hearing Held: Wednesday, October 29, 2014
`
`Before: SALLY C. MEDLEY, HOWARD B. BLANKENSHIP, and
`KEVIN F. TURNER (via video link), Administrative Patent Judges.
`
`
`
`The above-entitled matter came on for hearing on Wednesday,
`October 29, 2014, at 1:00 p.m., in Hearing Room A, taken at the U.S. Patent
`and Trademark Office, 600 Dulany Street, Alexandria, Virginia.
`
`
`
`Trials@uspto.gov
`Tel: 571-272-7822 Entered: December 16, 2014
`
`
`
`
`RECORD OF ORAL HEARING
`
`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
`
`- - - - - - - -
`
`Cases CBM2013-00052 (Patent 7,904,326)
`CBM2013-00053 (Patent 7,958,024)
`CBM2013-00054 (Patent 7,908,304)
`
`Oral Hearing Held: Wednesday, October 29, 2014
`
`Before: SALLY C. MEDLEY, HOWARD B. BLANKENSHIP, and
`KEVIN F. TURNER (via video link), Administrative Patent Judges.
`
`
`
`The above-entitled matter came on for hearing on Wednesday,
`October 29, 2014, at 1:00 p.m., in Hearing Room A, taken at the U.S. Patent
`and Trademark Office, 600 Dulany Street, Alexandria, Virginia.
`
`
`
`APPEARANCES:
`
`
`
`ON BEHALF OF THE PETITIONER:
`
`DEBORAH E. FISHMAN, ESQ.
`
`MICHAEL S. TONKINSON, ESQ.
`
`Dickstein Shapiro LLP
`
`1841 Page Mill Road
`
`Suite 150
`
`Palo Alto, California 94304
`
`650-690-9500
`
`
`
`
`
`
`
`
`
`ON BEHALF OF THE PATENT OWNER:
`
`
`RAGHAV BAJAJ, ESQ.
`
`
`Haynes and Boone, LLP
`
`
`600 Congress Avenue
`
`
`Suite 1300
`
`
`Austin, Texas 78701-3285
`
`
`512-867-8520
`
`
`
`
`
`
`
`
`KENT B. CHAMBERS, ESQ.
`Terrile, Cannatti, Chambers & Holland, LLP
`8911 N. Capital of Texas Highway
`Westech Center, Suite 3150
`Austin, Texas 78759
`512-338-9100
`
`2
`
`
`
`
`
`
`
`
`
`
`
`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`P R O C E E D I N G S
`
`(1:00 p.m.)
`JUDGE MEDLEY: Please be seated. Good
`afternoon. This is the hearing for CBM2013-00052, 53 and 54
`between Petitioner, Callidus Software, and Patent Owner,
`Versata Software and Versata Development Group.
`At this time we would like the parties to please
`introduce counsel beginning with Petitioner.
`MS. FISHMAN: Good afternoon, Your Honor.
`Deborah Fishman of Dickstein Shapiro on behalf of Petitioner
`Callidus Software.
`And with me today is my colleague, Michael
`Tonkinson, also from Dickstein Shapiro.
`JUDGE MEDLEY: Thank you. And for Patent
`
`Owner?
`
`MR. BAJAJ: Raghav Bajaj, Haynes and Boone, for
`Patent Owner Versata Development Group.
`MR. CHAMBERS: And Kent Chambers for Patent
`
`Owner.
`
`JUDGE MEDLEY: Thank you. Per the September
`24th order, each party will have 30 minutes of total time per case
`to present arguments for the three cases, with the exception that
`for the 52 case the parties agree on an additional 10 minutes each
`in connection with the 325(a) issues.
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`Petitioner will proceed first to present its case with
`respect to the challenged claims and grounds for which the Board
`instituted trial for CBM2013-0052.
`Petitioner, you may reserve some of your argument
`time for rebuttal. Thereafter, Patent Owner will respond. The
`same process then will be repeated for the 53 and 54 cases.
`Any questions before we get started?
`MR. BAJAJ: I do have a question, Your Honor. It
`is our understanding that Petitioner bears the burden on all
`issues. What we are not clear about is whether that includes the
`standing issue.
`And if the Patent Owner bears that burden of
`establishing a lack of standing, then we would request rebuttal
`time at least on that point at the end of the 52 CBM. I am
`looking for some guidance on that point.
`JUDGE MEDLEY: Okay. That's fine. If you want
`to have some rebuttal time, that's fine, if that's okay with
`Petitioner.
`
`MR. BAJAJ: Thank you, Your Honor.
`JUDGE MEDLEY: On that issue. Okay. You may
`
`proceed.
`
`MS. FISHMAN: Thank you, Your Honor. May it
`please the Board. With respect to CBM2013-0052 regarding
`Versata's U.S. Patent Number 7,904,326, Petitioners contend that
`Alice, the Supreme Court's decision in Alice only confirms,
`
`
`
`4
`
`
`
`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`further confirms, that the '326 patent claim 1 is unpatentably
`abstract.
`
`If we could look at slide 1.
`JUDGE MEDLEY: I'm sorry, I didn't ask you. Did
`you want to reserve rebuttal time, and how much? I can kind of
`keep an eye on the clock for you.
`MS. FISHMAN: Thank you, Your Honor. I would
`like to reserve at least 15 minutes rebuttal time on the main of
`the argument, and then I would like to reserve all of my time on
`standing.
`
`JUDGE MEDLEY: Okay. So you want to talk
`about standing in the second part of your argument?
`MS. FISHMAN: Depending on what -- right. So I
`will certainly address it in a cursory fashion, but I will reserve
`most of my time on standing for after Patent Owner has had an
`opportunity to be heard.
`JUDGE MEDLEY: Okay. That's fine.
`MS. FISHMAN: May I proceed?
`JUDGE MEDLEY: Yes. I'm sorry.
`MS. FISHMAN: So, Your Honors, it is Petitioner's
`contention that claim construction is not necessary in order to
`determine whether or not the claims of the '326 patent are
`unpatentably abstract.
`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`As was noted in our initial petition, claim
`construction is not an inviolable prerequisite to a validity
`determination under Section 101.
`And while Versata does challenge the Board's
`claim construction of the term denormalizing, this claim
`construction argument, as we will see and discuss, in the context
`of the dependent claims, it really conflates into a Section 101
`argument.
`
`So with respect to the only independent claim of
`the '326 patent, claim 1, there is no claim construction argument
`that is required necessary in order to determine whether or not
`claim 1 recites eligible subject matter.
`As I have mentioned, the legal framework has long
`been recognized that abstract ideas are exempted from the
`categories of patent-eligible subject matter. If I can have slide
`1.
`
`It is cited in Bilski v. Kappos but there is more
`than 150 years of Federal Circuit and Supreme Court precedent
`to this effect. And in July when the Supreme Court issued its
`Alice v. CLS Bank decision, it simply provided a streamlined
`framework for this analysis.
`Slide 2. In Alice, the Supreme Court says there is
`a two-part inquiry to determining whether or not claims are
`directed to patent-eligible subject matter.
`
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`
`
`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`First we look at the claim as a whole and ask, is it
`directed to patent-eligible subject matter? And if the answer is
`yes, then we look to what else in the claim adds meaningfully to
`the abstract idea. In other words, whether the balance of the
`claim adds significantly more.
`Borrowing from Mayo, the Alice court tells us that
`step 2 is whether the claim contains an inventive concept
`sufficient to transform the claimed abstract idea into
`patent-eligible application. And for claim 1 of the '326 patent,
`clearly the answer is it does not.
`As set forth in our petition, slide 9, claim 1 is
`directed to the abstract idea of generating compensation data
`using validated transactions and validated distributor credentials.
`Even Patent Owner's characterization of the '326 patent reveals a
`fundamentally abstract idea.
`Patent Owner says in their Patent Owner response
`that the '326 patent describes and claims, and it characterizes it
`as a specific method, but at the bottom it is the validation of
`distributor credentials and transactions to ensure proper
`compensation of a distributor.
`This does nothing to improve on the fundamentally
`abstract idea that claim 1 recites. Notably, the '326 patent does
`not disclose any particular way or algorithm for performing this
`validation. Patent Owner in its response points to none.
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`7
`
`
`
`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`There are no specific hardware or software
`elements recited or required by claim 1, and the '326 patent
`specification makes clear that there are no such limits on the
`application here, as taken from our petition, Petitioner's petition.
`These are various statements from the specification that disclos e
`that the invention contemplates any component or set of
`components that implements the functionality described therein,
`and makes it clear that the claims are not limited to any
`particular software or hardware configurations.
`Moreover, in our petition Petitioner set forth
`declarant testimony by Mr. Joe DeHaven and Ms. Janice
`McGuffey that demonstrated that the recited method could and
`had been performed by hand or in the human mind by insurance
`companies for many years before the filing of the '326 patent.
`And as Cybersource tells us, while there is nothing
`inherently wrong with things being performed in the human mind
`or by hand, it is highly suggestive that it touches on the
`fundamental nature of an abstract idea and threatens to foreclose
`or preempt the use of those ideas by others.
`So the testimony of Petitioner's declarants remain
`unrebutted and, as the Board recognized in its institution
`decision, the obtaining, processing and generating steps of the
`method claims are demonstrated by those declarants to have
`existed and been performed by hand.
`
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`
`
`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`So looking at claim 1, which is slide 6, the issue
`
`then is --
`
`JUDGE TURNER: Before you move on, could I
`just ask you a quick question?
`MS. FISHMAN: Yes.
`JUDGE TURNER: You were sort of finishing up
`with Alice and I just wanted to ask you a question before you
`went on to the claim.
`Patent Owner makes an argument saying that, you
`know, this notion really isn't a preexisting fundamental truth and
`that this really isn't a fundamental economic practice. I t was
`long prevalent.
`So they are saying, you know, there is really
`nothing here that even if the claim covered the whole thing there
`really wouldn't, you know, it is not like a mathematical formula
`or a target with nature or something that it would preclude others
`from doing this and this really isn't fundamental.
`And I guess, before you go on to the claim, I want
`you to respond to that, please.
`MS. FISHMAN: Absolutely. So I would
`characterize that argument, Patent Owner's argument as
`essentially saying that the claim is to the wrong kind of abstract
`idea. In other words, it is not that it doesn't recite or isn't
`directed to an abstract idea but that it is not a fundamental
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`economic practice. It is not fundamental in nature. It is not, as
`you say, a preexisting fundamental true.
`And as set forth in our reply, that doesn't salvage a
`claim from its inherent abstractness.
`And precisely this sort of argument was made in
`the Alice court, and where the Petitioner argued that the claims
`at issue in Alice should not be considered to be foreclosed
`because the methods there and the Beauregard claim there
`basically did not constitute preexisting fundamental truths.
`To quote Alice, this is the argument by Petitioner:
`Drawing on the presence of mathematical formulas in some of
`our abstract ideas precedent, Petitioner contends that the abstract
`ideas category is confined to preexisting fundamental truths that
`exist in principle apart from any human action.
`And Alice rejects that. The Supreme Court rejects
`the idea that you can have a particular kind or it has to be
`exulted and only fundamental truths are foreclosed.
`The Alice court goes on to say: If Bilski belies
`Petitioner's assertion, the concept of risk catching that was in
`Bilski that we identified as an abstract idea in that case cannot
`be described as a preexisting fundamental truth.
`In any event, the Alice court goes on to say, it is
`still an abstract idea. And just as a matter of logic, why would it
`be that a less significant abstract idea is more entitled to
`protection than a more significant one.
`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`Here the issue is that the prohibition is against the
`mental process, is against the abstract idea. And in effect Patent
`Owner's argument in this regard is a tacit concession that the
`claim of the '326 patent, claim 1, is abstract. And actually their
`principal argument is that it is the wrong kind of abstract idea.
`And while there are certainly findings in a couple
`of the cases, I believe it was Alice and Bilski regarding whether
`or not it was fundamental in nature, Cybersource and Bancorp,
`there are no such findings, at least none that we are aware of nor
`have Patent Owners pointed it out.
`It is really difficult to understand why it is that the
`claims at issue in this case, the 52 case, are fundamentally
`different in nature from the claims at issue in Bancorp and
`Cyberspace -- Cybersource, pardon me, and we submit that they
`are not.
`
`Another argument the Patent Owner makes is they
`argue that there are too many abstract ideas, that the formulation
`of the abstract ideas in Petitioner's petition has six different,
`slightly different formulation.
`Again, we contend that this really exalts form over
`substance. There may be slightly different ways of expressing
`the same abstract idea, but at bottom it is an abstract idea and
`there is nothing more in the claim to salvage it.
`Finally, Patent Owner argues that the claimed
`method is adequately limited by its application to a computer.
`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`But as we mentioned, there is no specific software or hardware
`required by the claims or provided by the specification.
`And Alice and the other precedents that we have
`cited in our papers make clear that the ancillary use of the
`computer is not enough to tie down the abstract idea.
`Finally, dependent claims 2 through 22 do not add
`meaningfully more to the abstract idea of claim 1. Versata
`concedes this fact with respect to most of the dependent claims,
`claims 3 through 8, 10, 13 through 16, and 18 to 22.
`However, with respect to dependent claims 2, 9, 11,
`12 and 17, Versata makes a claim construction argument
`regarding denormalizing in an attempt to salvage its abstract
`claims.
`
`And what it does is it tries to read into its claim
`construction of the term denormalizing the fact that
`denormalizing requires specific programming.
`Now, there are several problems with this
`argument. But most fundamentally, simply saying that a claim
`requires specific programming without the specific programming
`being recited or disclosed anywhere in the patent is not enough
`to salvage an abstract claim.
`It is much like claiming a nonabstract idea.
`Without more, there is nothing to tie it down. And we would
`propose an end run around claim amendment, but if they had
`tried to make a claim amendment there would be no support in
`
`
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`12
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`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`the specification, since there is no algorithm and there is no
`structure disclosed.
`Finally, with respect to the claim construction
`argument, Versata does concede that the term denormalizing is a
`term of art. Its position on construction has no support in the
`intrinsic record. Versata offers no expert or declarant testimony
`to support its argument. Much of what it says would be
`nonconventional. It is sheer speculation.
`And, in fact, the very extrinsic evidence that
`Versata relies on actually demonstrates that denormalizing was a
`conventional programming routine.
`So regardless of whether the Board finds it is
`necessary to construe this term or not -- we submit it is not -- the
`most fundamental point is simply calling something specific
`programming or special programming or saying that it requires
`complex programming doesn't make it so unless it is recited in
`the claims and disclosed in the specification.
`Finally, just briefly, on the issue of standing, we
`submit this issue has been fully briefed, twice considered and
`twice rejected by the Board. There were no new arguments
`presented by Patent Owners in its response.
`And so while we have detailed that we believe
`there are multiple reasons for why the standing argument fails, it
`is enough that the Board has found and the Federal Circuit has
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`consistently interpreted the effect of a voluntary dismissal as
`leaving the parties as though the action had never been brought.
`There are reams of Federal Circuit decisions that
`stand for this proposition and many of them are cited in the
`Board's prior decisions. This outcome is consistent with
`legislative history. It gives Petitioners a choice. It prevents
`re-litigation and there was no re-litigation here.
`So with that I will stop and reserve the rest of my
`time for rebuttal, unless there are questions by the Board. Okay.
`Thank you.
`
`MR. BAJAJ: Your Honor, do you need a copy of
`the slides from Patent Owner?
`JUDGE MEDLEY: Sure. You may approach the
`
`Bench.
`
`MR. BAJAJ: Thank you, Your Honors. I would
`like to reserve five minutes for rebuttal on the standing issue, if
`possible.
`
`Turning to slide 2, the statute is clear on its face.
`Section 325(a)(1) contains no exceptions, no exclusions. If a
`party files a civil action challenging validity, post-grant review,
`and the transitional program under it for Covered Business
`Method review is barred. And that's exactly the case here.
`Turning to slide 3, Petitioner clearly filed a
`complaint challenging the validity of the '326 patent. There is
`no dispute on this point. And not that it affects the
`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`determination, but the complaint challenged validity on Section
`101, the very same grounds it alleges in the petition.
`The legislative history of 325(a)(1) and similar
`draft statutes don't include any intent to allow a Petitioner to
`effectively gain the system and file a declaratory judgment
`action, dismiss it, and still be permitted to file for post-grant
`review.
`
`The legislative history -- Judge Turner, did you
`have something?
`JUDGE TURNER: No, I'm sorry.
`MR. BAJAJ: The legislative history indicates an
`intent to limit the Petitioner to one window one time. And this
`Petitioner had its one window and its one time, the declaratory
`judgment action.
`The reasoning here allows the Petitioner a second
`window, a second time. Indeed, a second bite at the Section 101
`unpatentability apple, contrary to the statute and legislative
`history.
`
`And it is not as if the Petitioner is without remedy.
`They have and continue to have a number of options to challenge
`the validity of these patents. It could have maintained the
`declaratory judgment action. It could have pursued invalidity in
`the Delaware action as a counterclaim, which it did once the
`California action terminated, or it could have filed its post-grant
`review petitions first. But for better or worse, it did none of
`
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`those things. That should have barred it from the instant
`reviews.
`
`And there is no active requirement in 325(a)(1) nor
`is there in the legislative history, nor is there any provision for
`unfiling an action. And the dismissal without prejudice in this
`case didn't just leave the parties as if it hadn't been filed.
`Indeed, Petitioner's answer in the Delaware action
`wasn't filed until the California action was dismissed. And so
`the declaratory judgment action of invalidity in the District
`Court still exists effectively in Delaware.
`Turning to slide 6, I would like to talk about the
`patent at issue in this case, the '326 patent. Claim 1 is
`reproduced here. And as noted in the patent -- Judge Turner? I
`think it is delaying. I thought I heard a question. I'm sorry then.
`The '326 patent describes and claims a specific
`method for performing transaction processing in an efficient
`manner that minimizes the use of computing resources in
`computationally expensive processes.
`And contrary to Petitioner's allegations, the claims
`of the patent are more than a mere abstraction, more than merely
`directed to an abstract idea. The abstract idea analysis is a
`narrow exception to the otherwise broad reach of Section 101.
`And at no point does the Petitioner provide any sufficient
`evidence that these claims in their fully recited language
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
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`considered as a whole are no more than mere abstractions,
`because they simply are far more than that.
`Turning to slide 7, the Alice court made clear that
`the first step in the analysis is to determine whether the claims at
`issue are directed to a patent-ineligible concept. As the court
`determined, there are certain categories of abstract ideas or
`patent-ineligible concepts.
`Fundamental economic practices, preexisting
`fundamental truths, mathematical formulas and ideas by
`themselves. But the Petitioners proposed abstract ideas fall into
`none of these categories.
`JUDGE MEDLEY: I will follow up with Judge
`Turner's question.
`MR. BAJAJ: Absolutely.
`JUDGE MEDLEY: What in Alice would lead us to
`think that this is an exhaustive list, that if you have an abstract
`idea that doesn't fall within per se one of these four categories,
`then you are good to go?
`MR. BAJAJ: I don't think that's necessarily true
`but at least under the precedence that exists, these are the
`categories that have been established over the 150 years of
`precedence that Petitioner mentioned.
`JUDGE MEDLEY: So you read Alice as saying
`this is it, this is an exhaustive list?
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
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`
`MR. BAJAJ: Certainly for now. It is a
`characterization, but the point is that the Petitioner's abstract
`ideas wouldn't be characterized by any of these four options.
`If there is a future option, I can't speak to that, but
`at least under the current precedent it is not the case.
`JUDGE MEDLEY: Thank you.
`MR. BAJAJ: Turning to slide 8 --
`JUDGE BLANKENSHIP: Before you leave that,
`the idea can be expressed a lot of different ways maybe, but
`wouldn't that be within, like, within a species of fundamental
`economic practice because you are determining how much to pay
`for a service, wouldn't that be a fundamental economic practice?
`MR. BAJAJ: There is no evidence of record on
`that point, Your Honor. And so if that is a fundamental
`economic practice that would be, you know, at issue, there would
`be evidence on that point. But there is no evidence on that point.
`JUDGE BLANKENSHIP: People have been paid
`for a lot of years, haven't they?
`MR. BAJAJ: Certainly. But do the claims recite
`only that abstract idea? I would submit that they do not. They
`recite significantly more than that very broad, abstract idea.
`JUDGE BLANKENSHIP: Proceed.
`MR. BAJAJ: Turning to slide 8, under the
`statutory threshold required by Section 326(e), the Petitioner
`must prove unpatentability by a preponderance of the evidence.
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`
`But Judge Turner started to make this point for me.
`There is no evidence to support any theory that generating
`compensation data using validated transactions and validated
`distributor’s credentials is a fundamental economic practice or in
`any of the other categories from the Alice court's reasoning.
`Calling something a fundamentally abstract idea
`does not mean it is a fundamental economic practice. And it is
`not a preexisting fundamental truth, it is not a mathematical
`relationship or formula and not an idea of itself.
`The Petitioner's proposed abstract ideas are just
`conjured from the claims in an attempt to fit their analysis. And
`just to be clear, Patent Owner doesn't contend that only
`fundamental economic practices are abstract ideas. But based on
`the Petitioner's petition it seems that's the focus of the challenge
`here.
`
`Another concern that the Petitioner has brought up
`is that preemption is not a test for patent eligibility. But the
`Alice court stated that the preemption concern undergirds or
`provides the very support for the Section 101 analysis. And
`there is no preemption analysis in the petition and certainly none
`in the reply either.
`So what is a fundamental economic practice?
`Again, Alice and Bilski cited treatises, learned books, that
`establish that the concepts in those cases were long-known
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`building blocks of this economy. And that evidence was
`unquestioned and explicitly on the record.
`That simply does not exist here. There is no
`evidence that the Petitioner's abstract ideas fall into any of the
`Alice court examples. The declaratory evidence is not sufficient
`on this point. It was not cited in the petition as establishing an
`abstract idea.
`It was cited in the petition to establish that
`allegedly these claims could have been performed by hand or
`mentally. But on the fundamental economic practice point, these
`declarations provide no evidence.
`Addressing the Cybersource and Bancorp case, both
`of those cases were before Alice and there is no indication that
`the analysis in those cases is consistent with the Alice court.
`And in Cybersource the court considered the actual
`language, the claim language of the method claims and not the
`computer-readable medium claim or any other claims in
`Cybersource. It found that the limitations in the method claim
`did not require the use of a computer.
`But here if you turn to slide 6 again and take a look
`at claim 1, finding that the claim language itself does not require
`the use of a computer would be erroneous.
`For example, if you look at the second limitation:
`Storing the set of credential information in the computer system.
`Patent Owner does not submit that the bare recitation of a
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
`
`computer system means that the claim is not an abstract idea.
`But at least the positive recitation of a computer system takes it
`out of the Cybersource analysis.
`What the Petitioner did in the petition is to reduce
`the claim functions to their functions, to obtaining, to storing, to
`loading. That's not proper. That is not considering the claim as
`a whole, as Alice and the Diehr court instruct the analysis.
`The claims can't be reduced to just their functions
`and then invalidated on the basis that those functions are
`unpatentable mental processes.
`I would submit that loading from at least one data
`source a set of credential validation data or credential
`information stored in a form that is processed by a computer
`system, is simply not a mental process.
`So what the Petitioner's argument boils down to is
`that the abstract idea can be performed mentally and, therefore,
`the claim is ineligible.
`Again, that's what the Supreme Court and Federal
`Circuit had cautioned against. It is a tempting trap, but one that
`should not be fallen into.
`And, again, the declaratory evidence was only cited
`that the stripped-down claims, according to Petitioner's analysis,
`was performed manually. But that's not supported by the
`evidence either.
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
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`On cross-examination both declarants confirmed
`that the processes of determining compensation included
`computer generation of some data.
`Because Petitioner's allegations that claim 1 recites
`an abstract idea are without any evidence, the challenge of
`unpatentability under Section 101 must fail. There is no reason
`to go to Alice, step 2, which is to find whether there is
`significantly more. The Petitioner's challenge fails on Alice,
`step 1.
`
`Turning to the dependent claims, and I would turn
`you to slide 9, please, all of the dependent claims recite statutory
`subject matter as well. And that fact is emphasized by the
`language on these slides.
`Certain dependent claims reciting the terms
`denormalizing and joining are reproduced. The construction of
`these terms is disputed and the Board construed neither claim
`term in the institution decision.
`And having attempted to construe denormalizing in
`a manner inconsistent with the understanding of a person of skill
`in the art, Petitioner now seeks to allege that claim construction
`is not necessary.
`But it is almost as if the petition is saying one
`thing, that claim construction construing denormalizing as
`creating a redundant copy is necessary on one end, but now that
`it is not.
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`CBM2013-0052; CBM2013-0053; and CBM2013-0054
`Patent Nos. 7,904,326; 7,958,024; and 7,908,304
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`And Bancorp, indeed, confirms that it will
`ordinarily be desirable and necessary to resolve claim
`construction disputes prior to a Section 101 analysis.
`Turning to the first term on slide 10, denormalizing
`is recited in dependent claims 2, 9 and 17. And with no intrinsic
`or extrinsic support, the Petitioner construed the claim term as
`creating a redundant copy of information.
`You will note there is no support for that
`construction in the specification. Nor does Petitioner provide
`any dictionaries or extrinsic evidence to support that
`construction. Petitioner didn't put forth that construction in their
`reply, nor did it provide any support for that construction today.
`By contrast, Patent Owner provided two technical
`dictionaries and ample evidence to support its construction of
`denormalizing. The term should be construed, as it says on this
`slide, as a database operation which in conjunction with specific
`programming creates a representation of data stored in two or
`more database tables joined according to specific criteria.
`And under this construction or under a proper
`construction that a person of ordinary
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