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`Paper No. 1
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
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`CALLIDUS SOFTWARE INC.
`Petitioner
`
`v.
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`VERSATA DEVELOPMENT GROUP, INC.
`Patent Owner
`
`and
`
`VERSATA SOFTWARE, INC.
`Real Party-In-Interest
`
`____________
`
`Case CBM2014-00117
`Patent 7,908,304
`____________
`
`Filed: April 17, 2014
`
`PETITION FOR COVERED BUSINESS METHOD PATENT
`REVIEW UNDER 35 U.S.C. § 321 AND §18 OF THE
`LEAHY-SMITH AMERICA INVENTS ACT
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`
`
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` 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
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`requests covered business method (“CBM”) patent review of claims 2-11, 26-29,
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`33-41, and 44-46 of U.S. Patent 7,908,304 (Exh. 1001) (“the ‘304 patent”), which
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`issued to David Chao et al. on March 15, 2011.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`TABLE OF CONTENTS
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`Page No.
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`I.
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`PRELIMINARY STATEMENT ..................................................................... 1
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`II. MANDATORY NOTICES ............................................................................. 4
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`A. Real Party-in-Interest ................................................................................. 4
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`B. Related Matters .......................................................................................... 4
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`C. Lead and Back-Up Counsel ....................................................................... 5
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`D. Service Information ................................................................................... 6
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`III. PAYMENT OF FEES ..................................................................................... 6
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`IV. GROUNDS FOR STANDING ........................................................................ 6
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`A. The Board has Previously Found that Petitioner has Been Sued for
`Infringement of the ‘304 Patent and Held that Petitioner is Not
`Estopped ..................................................................................................... 6
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`B. At Least One Challenged Claim is Unpatentable ...................................... 9
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`C. The ‘304 Patent is a CBM Patent ............................................................... 9
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`1. Claims 2-11, 26-29, 33-41, and 44-46 are Each Directed to
`Financial Products or Services ....................................................... 10
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`2. Claims 2-11, 26-29, 33-41, and 44-46 are Not Directed to a
`“Technological Invention” ............................................................. 12
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`V.
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`STATEMENT OF PRECISE RELIEF REQUESTED FOR EACH CLAIM
`CHALLENGED ............................................................................................ 19
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`A. Claims for which Review is Requested ................................................... 19
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`B. Statutory Grounds of Challenge .............................................................. 19
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`VI. CLAIM CONSTRUCTION .......................................................................... 20
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`A. Broadest Reasonable Interpretation ......................................................... 20
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`B. Support for Petitioner’s Broadest Reasonable Interpretation .................. 22
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`1. “Module” / “Modules” ................................................................... 22
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`2. “To Generate a Selling Agreement” / “To Define and Create A
`Selling Agreement” ........................................................................ 23
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`3. “Engine” ......................................................................................... 24
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`4. “Backbone” .................................................................................... 25
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`5. “Interface” ...................................................................................... 27
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`VII. CLAIMS 2-11, 26-29, 33-41, AND 44-46 OF THE ‘304 PATENT ARE
`DIRECTED TO NON-PATENTABLE SUBJECT MATTER ..................... 28
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`A. Inventions Covering Abstract Ideas are Not Eligible for Patent
`Protection, Regardless of their Form ........................................................ 28
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`B. Claim 12 of the ‘304 Patent is Directed to an Abstract Idea ................... 30
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`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 ........................ 34
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`2. Validating a Distributor to Begin Selling Products Can be
`Accomplished by Hand .................................................................. 36
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`3. Claim 12 Fails the Machine-or-Transformation Test .................... 39
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`C. Because Dependent Claims 26-29 and 41 Add Only Rudimentary
`Data Manipulations to the Abstract Idea of Claim 12, They are Not
`Patent Eligible. ......................................................................................... 43
`
`D. Claim 1 of the ‘304 Patent is Directed to an Abstract Idea ..................... 46
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`1. No More than General Purpose Computer Hardware and
`Programming are Used to Determine Compensation for a
`Validated Distributor of Claim 1 ................................................... 49
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`2. Determining Compensation for a Validated Distributor Can be
`Accomplished by Hand .................................................................. 51
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`3. Claim 1 Fails the Machine-or-Transformation Test ...................... 54
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`E. Dependent Claims 2-11 Define Abstract Ideas that Fail to Tie Down
`the Claimed Abstract Idea of Claim 1 ...................................................... 57
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`1. Dependent Claim 2 Fails to Add Any Meaningful Specificity to
`the Abstract Idea of Claim 1, and Is Itself Abstract ....................... 57
`
`2. Because Dependent Claims 3, 6, and 7 Add Only Basic
`Computer Functions and Data Manipulations to the Abstract
`Idea of Claim 1, They are Not Patent Eligible. .............................. 59
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`3. Dependent Claims 4-5 Are Unpatentable Because They Fail to
`Add Any Meaningful Specificity to the Abstract Idea of Claim
`1 ...................................................................................................... 61
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`4. Dependent Claims 8-11 Are Unpatentable Because They Are
`Merely Species of the Abstract Idea, and Thus Fail to Add
`Meaningful Specificity to the Abstract Idea of Claim 1 ................ 62
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`F. Claim 32 of the ‘304 Patent is Directed to an Abstract Idea .................... 64
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`1. No More than General Purpose Computer Hardware and
`Programming are Used to Implement the Determining
`Compensation for a Validated Distributor of Claim 32 ................. 67
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`2. Determining Compensation for Validated Distributors Can be
`Accomplished by Hand .................................................................. 69
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`3. Claim 32 Fails the Machine-or-Transformation Test .................... 70
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`G. Dependent Claims 33-40 and 44-46 Define Abstract Ideas that Fail to
`Tie Down the Claimed Abstract Idea of Claim 32 ................................... 70
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`1. Dependent Claims 33, 35, and 44 Add Nothing More Than
`Basic Computer Functions to the Abstract Ideas of Claims 1
`and 32. ............................................................................................ 71
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`2. Because Dependent Claim 34 Adds Only Basic Computer
`Functions and Data Manipulations to the Abstract Idea of
`Claim 32, It is Not Patent Eligible. ................................................ 72
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`3. Dependent Claims 36 and 37 Add Only Insignificant Post-
`Solution Activity to the Abstract Idea of Claim 32. ...................... 74
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`4. Dependent Claims 38 and 46 Are Unpatentable Because They
`Are Merely Species of an Abstract Idea, and Fail to Add
`Meaningful Specificity to the Abstract Idea of Claim 32 .............. 75
`
`5. Because Dependent Claims 39 and 40 Add Only Rudimentary
`Data Manipulations to the Abstract Idea of Claim 32, They are
`Not Patent Eligible. ........................................................................ 77
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`6. Because Dependent Claim 45 Add Only Basic Computer
`Functions and Data Manipulations to the Abstract Idea of
`Claim 32, It is Not Patent Eligible ................................................. 79
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`VIII. CONCLUSION .............................................................................................. 80
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`TABLE OF AUTHORITIES
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`Page No.
`
`Cases
`Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Can. (U.S.),
`687 F.3d 1266 (Fed. Cir. 2012) .................................................................... passim
`
`
`Bilski v. Kappos,
`130 S. Ct. 3218 (2010) ................................................................................. passim
`
`
`Chevron U.S.A. v. Natural Resources Defense Council,
`467 US 837 (1984) ................................................................................................. 8
`
`
`CLS Bank Int’l v. Alice Corp. Pty.,
`717 F.3d 1269, 1286 (Fed. Cir. 2013) .......................................................... passim
`
`
`Cyanotech Corp. v. Bd. of Trs. of the Univ. of Ill.,
`IPR 2013-00401, Paper No. 17 at 9-12 (PTAB Dec. 19, 2013) ............................. 9
`
`
`CyberSource Corp. v. Retail Decisions, Inc.,
`654 F.3d 1366 (Fed. Cir. 2011) .................................................................... passim
`
`
`Fort Props., Inc. v. Am. Master Lease, LLC,
`671 F.3d (Fed. Cir. 2012) .............................................................................. 31, 35
`
`
`Gottschalk v. Benson,
`409 U.S. 63, 67 (1972) ................................................................................. passim
`
`
`In re Am. Acad. of Sci. Tech Ctr.,
`367 F.3d 1359 (Fed. Cir. 2004) ............................................................................ 22
`
`
`In re Zletz,
`893 F.2d 319 (Fed. Cir. 1989) .............................................................................. 22
`
`
`Mayo Collaboration Servs. v. Prometheus Labs., Inc.,
`132 S. Ct. 1289, 1294 (2012) ............................................................ 30, 31, 38, 39
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`
`Parker v. Flook,
`437 U.S. 584 (1978) .......................................................................... 30, 34, 35, 36
`
`
`Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) ......................................... 23
`
`Ruckus Wireless, Inc. v. Harris Corp.,
`Case No. 11-cv-1944, 2012 WL 588792 (N.D. Cal. Feb. 22, 2012) ................... 10
`
`
`Ultramercial, Inc. v. Hulu, LLC, No. 2010-1544,
`2013 U.S. App. LEXIS 12715 (Fed. Cir. June 21, 2013) ....................... 30, 45, 59
`Statutes
`35 U.S.C. § 101 ................................................................................................ passim
`
`35 U.S.C. § 324 ........................................................................................................ 80
`
`35 U.S.C.§ 325 .......................................................................................................7, 8
`
`AIA § 18 .......................................................................................................... 7, 8, 10
`Rules
`37 C.F.R. § 42.10 ....................................................................................................... 5
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`37 C.F.R. § 42.15 ....................................................................................................... 6
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`37 C.F.R. § 42.300 .......................................................................................... 1, 7, 20
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`37 C.F.R. § 42.301 ............................................................................................ 10, 13
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`37 C.F.R. § 42.302 ..................................................................................................... 7
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`37 C.F.R. § 42.304 ................................................................................................... 20
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`37 C.F.R. § 42.8 ................................................................................................ 4, 5, 6
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`
`LIST OF EXHIBITS
`Petition Exhibit 1001: U.S. Patent No. 7,908,304
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`Petition Exhibit 1002: U.S. Patent No. 7,908,304 File History
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`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
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`Petition Exhibit 1004: Decision to Institute in SAP v. Versata, CBM2012-
`00001, Paper No. 36 (PTAB Jan. 9, 2013)
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`Petition Exhibit 1005: United States Patent and Trademark Office –
`Classification Definitions, Class 705
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`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)
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`Petition Exhibit 1007:
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`Patent Owner’s Preliminary Response in SAP v. Versata,
`CBM2012-00001, Paper No. 29 (PTAB Nov. 30, 2012)
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`Petition Exhibit 1008: Official Patent Trial Practice Guide, 77 Fed. Reg. 48756
`(Aug. 14, 2012)
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`Petition Exhibit 1009:
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`Final Written Decision in SAP v. Versata, CBM2012-
`00001, Paper No. 70 (PTAB June 11, 2013)
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`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)
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`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 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
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`Petition Exhibit 1013: Decision to Institute in Callidus v. Versata, CBM2013-
`00054, Paper No. 19 (PTAB March 4, 2014)
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`Petition Exhibit 1014:
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`Petition for Covered Business Method Patent Review in
`Callidus v. Versata, CBM2013-00054, Paper No. 6
`(PTAB Sept. 17, 2013)
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`Petition Exhibit 1015: Decision on Request for Rehearing in Callidus v.
`Versata, CBM2013-00054, Paper No. 25 (PTAB Apr. 9,
`2014)
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`Petition Exhibit 1016: Complaint, Callidus Software Inc. v. Versata Software,
`Inc. Litigation, Case No. 4:12-cv-5337 (N.D. Cal. Oct.
`16, 2012), D.N. 1
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`Petition Exhibit 1017: Notice of Voluntary Dismissal Without Prejudice,
`Callidus Software Inc. v. Versata Software, Inc.
`Litigation, Case No. 4:12-cv-5337 (N.D. Cal. May 23,
`2013), D.N. 17
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`Petition Exhibit 1018: U.S. Patent No. 7,958,024
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`Petition Exhibit 1019: U.S. Patent No. 7,904,326
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`Petition Exhibit 1020: Decision to Institute in Callidus v. Versata, CBM2013-
`00053, Paper No. 16 (PTAB March 4, 2014)
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`Petition Exhibit 1021: Decision to Institute in Callidus v. Versata, CBM2013-
`00052, Paper No. 21 (PTAB March 4, 2014)
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`I.
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`PRELIMINARY STATEMENT
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`Petitioner Callidus Software Inc. (“Callidus” or “Petitioner”) respectfully
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`requests covered business method patent (“CBM”) review of dependent claims 2-
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`11, 26-29, 33-41, and 44-46 of U.S. Patent 7,908,304 (Exh. 1001) (“the ‘304
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`patent”) pursuant to 35 U.S.C. § 321 et seq., § 18 of the Leahy-Smith America
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`Invents Act (“AIA”), and 37 C.F.R. § 42.300 et seq. Each of the independent
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`claims of the ‘304 patent and claims 1, 12-25, 30-32, and 42-43 are currently the
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`subject to an instituted CBM Review, and the PTAB has already found that these
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`claims are more likely than not unpatentable. See Decision to Institute in Callidus
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`v. Versata, CBM2013-00054, Paper No. 19 (PTAB March 4, 2014) (Exh. 1013).
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`Each of claims 2-11, 26-29, 33-41, and 44-46 depend directly or indirectly
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`from independent claims 1, 12, or 32. As a result, certain sections of the present
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`Petition related to claims 1, 12, or 32 are the same as sections found in Callidus’s
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`Petition for Covered Business Method Patent Review in Callidus v. Versata,
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`CBM2013-00054, Paper No. 6 (PTAB Sept. 17, 2013) (Exh. 1014) (hereinafter
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`“Petition in CBM2013-00054”).
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`The ‘304 patent claims are each directed to abstract ideas. While each of the
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`three independent claims 1, 12, and 32 features a slightly different abstract idea, all
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`are similarly abstract. Claim 12 is merely the abstract idea of validating a
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`distributor to begin selling products. See Exh. 1013 at 20 (“it is more likely than
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`not that claim 12 recites the abstract idea of validating a distributor to begin selling
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`products”). Similarly, claims 1 and 32 recite nothing more than the abstract idea of
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`determining compensation for a validated distributor. See also id. at 24-26.
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`Determining whether distributors are licensed and appointed has been performed
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`for decades by hand with pencil and paper and in the human mind in the absence of
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`a computer system. Indeed, having a valid license and appointment has been a
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`prerequisite to receiving compensation in the insurance and financial services
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`industries for many years. And for good reason—it is required by law. Exh. 1001,
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`1:34-36 (“There are regulatory constraints on the sales force in that all distributors
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`who sell products must be licensed and appointed, or authorized, to sell those
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`products.”); 3:24-33 (“Credential management is a critical issue for many firms . . .
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`This need is made more acute by constantly changing government rules and
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`regulations, as well as by different regulations imposed by the different
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`jurisdictions in which a firm operates.”).
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`Challenged claims 26-29 and 41 each depend on already-instituted claim 12,
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`one of the three independent claims of the ‘304 patent. Claim 12 is representative
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`of the abstract nature of the challenged claims:
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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
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`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.
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`Id., 15:64-16:12. The recitation of a database source and a distributor management
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`engine do not meaningfully limit the abstract idea. The “database source” is a
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`conventional data repository, serving in the claim only to provide data related to
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`the distributor, selling agreement, and license or appointment. Likewise, because
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`an “engine” is software that performs the recited function, here software (for
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`managing distributors) that obtains data from a database source to validate a
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`distributor does not add anything to the abstract idea other than specify that the
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`abstract idea is carried out as software.
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`Challenged claims 2-11 depend from independent claim 1, while claims 33-
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`40 and 44-46 depend from independent claim 32. Already-instituted claims 1 and
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`32 recite similar systems, adding limitations that also fail to tie down the abstract
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`idea of determining compensation for a validated distributor. Furthermore,
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`determining compensation for a validated distributor can be accomplished by hand.
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`Here, the claimed systems require at most a general purpose computer,
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`which is a conventional, widely-used tool to manage and process data in the
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`information age. Neither the “processor,” “memory,” “database source,”
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`“module,” “engine,” nor “interface” recited in the independent claims provide any
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`meaningful limit on the ‘304 patent’s coverage of the abstract idea. The abstract
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`ideas of the claims are not tied to any particular machine nor do they transform or
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`reduce any article into a different state or thing.
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`Finally, because the dependent claims do not add any meaningful limitations
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`to independent claims 1, 12, and 32, they fail to tie down the abstract idea of the
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`claimed subject matter. Accordingly, each of challenged claims 2-11, 26-29, 33-
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`41, and 44-46 of the ‘304 patent are patent-ineligible under 35 U.S.C. § 101
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`because they are directed to an abstract idea.
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`II. MANDATORY NOTICES
`A. Real Party-in-Interest
`In accordance with 37 C.F.R. § 42.8(b)(1), Petitioners identify the real party-
`
`in-interest as Callidus Software Inc.
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`B. Related Matters
`In accordance with 37 C.F.R. § 42.8(b)(2), Petitioners identify the following
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`district court and PTAB proceedings:
`
`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`Versata Software, Inc. v. Callidus Software, Inc., No. 1:12-cv-
`931-SLR (D. Del.)
`
`Callidus Software, Inc. v. Versata Software, Inc. et al.,
`CBM2013-00052 (PTAB) (U.S. Patent No. 7,904,326)
`
`Callidus Software, Inc. v. Versata Software, Inc. et al.,
`CBM2013-00053 (PTAB) (U.S. Patent No. 7,958,024)
`
`Callidus Software, Inc. v. Versata Software, Inc. et al.,
`CBM2013-00054 (PTAB) (U.S. Patent No. 7,098,304)
`
`In re Versata Development Group, Inc., Misc. No. 14-131
`(Fed. Cir.) (CBM2013-00052, -00053, and -00054)
`
`Callidus Software, Inc. v. Versata Software, Inc. et al.,
`CBM2014-00118 (PTAB) (U.S. Patent No. 7,098,024)
`C. Lead and Back-Up Counsel
`In accordance with 37 C.F.R. § 42.8(b)(3) and § 42.10(a), Petitioners
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`identify undersigned Deborah E. Fishman (Reg. No. 48,621) as lead counsel, and
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`Michael S. Tonkinson as back-up counsel, with Assad H. Rajani as further back-up
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`counsel, all of Dickstein Shapiro LLP.1
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`Deborah E. Fishman (Reg. No. 48,621)
`Michael S. Tonkinson
`Assad H. Rajani
`DICKSTEIN SHAPIRO LLP
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`1 Pursuant to 37 C.F.R. § 42.20(b), Petitioner requests authorization from the
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`Board to file a motion pursuant to 37 C.F.R. § 42.10(c), for both Assad H. Rajani
`
`and Michael S. Tonkinson to appear pro hac vice.
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`1841 Page Mill Road, Suite 150
`Palo Alto, CA 94304
`Phone: (650) 690-9500
`Fax: (650) 690-9501
`Email: fishmand@dicksteinshapiro.com
` tonkinsonm@dicksteinshapiro.com
` rajania@dicksteinshapiro.com
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`Service Information
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`D.
`In accordance with 37 C.F.R. § 42.8(b)(4), Petitioners identify the following
`
`service information:
`
`Deborah E. Fishman
`DICKSTEIN SHAPIRO LLP
`1841 Page Mill Road, Suite 150
`Palo Alto, CA 94304
`Phone: (650) 690-9500
`Fax: (650) 690-9501
`Email: VERSATA-CBM@dicksteinshapiro.com
`III. PAYMENT OF FEES
`The fee specified by 37 C.F.R. § 42.15(b)(1) is being paid by credit card at
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`the time of filing this petition. The undersigned authorizes payment for any
`
`additional fees that might be due in connection with this Petition to be charged to
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`deposit account No. 041073.
`
`IV. GROUNDS FOR STANDING
`A. The Board has Previously Found that Petitioner has Been Sued
`for Infringement of the ‘304 Patent and Held that Petitioner 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,
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`Inc., No. 1:12-cv-931-SLR (D. Del.). Exh. 1003; AIA, § 18(a)(1)(B); 37
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
`
`C.F.R.§ 42.302(a). Versata Software, Inc. and Versata Development Group, Inc.
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`(collectively “Versata” or “Patent Owner”) purport to hold all right, title, and
`
`interest in the ‘304 patent. Exh. 1003, ¶ 9.
`
`As the Board has already held, and affirmed on rehearing, Petitioner is not
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`estopped from challenging the claims on the grounds identified in the petition
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`under 37 C.F.R. § 42.302(b). Exh. 1013 at 9-12; Decision on Request for
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`Rehearing in Callidus v. Versata, CBM2013-00054, Paper No. 25 at 2-6 (PTAB
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`Apr. 9, 2014) (Exh. 1015). For the following reasons—and as the Board has
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`already held—Petitioner’s second-filed declaratory judgment (“DJ”) action (see
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`Exh. 1016) does not estop Petitioner from challenging the claims of the ‘304
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`patent.
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`First, 37 C.F.R. § 42.300(a) makes it clear that 35 U.S.C. § 325(a)(1) does
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`not apply to CBM proceedings because § 42.300(a) specifically excludes § 42.201
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`as a condition for who may file a petition for CBM review:
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`(a) A covered business method patent review is a trial subject to the
`procedures set forth in subpart A of this part and is also subject to the
`post-grant review procedures set forth in subpart C except for
`§§42.200, 42.201, 42.202, and 42.204.
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`37 C.F.R. § 42.300(a) (emphasis added). Section 42.201 is the rule promulgated
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`by the USPTO to implement § 325(a)(1). See Exh. 1010 at 48691 (stating that
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`“[t]he rule follows the statutory language of 35 U.S.C. 325(a)(1)”). The USPTO’s
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`authority (and discretion) to issue regulations to implement CBM review flows
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`directly from AIA § 18(a)(1), and its subsequent rulemaking is entitled to
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`deference under Chevron U.S.A. v. Natural Resources Defense Council, 467 US
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`837, 844 (1984), and its progeny.
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`Second, even if § 325(a)(1) applied in a CBM proceeding, Petitioner’s DJ
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`action was dismissed without prejudice before Petitioner filed any petition for
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`CBM review (see Exh. 1017 at 2), and thus does not create a bar under § 325(a)(1).
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`See Exh. 1013 at 9-12; cf. Cyanotech Corp. v. Bd. of Trs. of the Univ. of Ill., IPR
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`2013-00401, Paper No. 17 at 9-12 (PTAB Dec. 19, 2013) (DJ action dismissed
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`without prejudice does not trigger § 315(a)(1) bar), and authority cited therein.
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`Third, regardless whether § 325(a)(1) applies in a CBM proceeding in
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`general, Petitioner’s later-filed DJ action is properly characterized as a
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`counterclaim, meaning that § 325(a)(1) does not apply here:
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`“A counterclaim challenging the validity of a claim of a patent does
`not constitute a civil action challenging the validity of a claim of a
`patent for purposes of this subsection.” § 325(a)(3).
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`Patent Owner sued Petitioner first, in the District of Delaware. Standing for
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`Petitioner’s second-filed DJ action in California was explicitly based on, and likely
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`could not have been brought but for, Patent Owner’s first-filed action. See Exh.
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`1016 ¶ 9. Moreover, regardless of the district court venue selected for filing the DJ
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`action, Petitioner needed to bring the counterclaim because courts often find such
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`counterclaims to be compulsory, meaning that Petitioner would risk waiver by not
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`bringing the counterclaim. See, e.g., Ruckus Wireless, Inc. v. Harris Corp., Case
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`No. 11-cv-1944, 2012 WL 588792, at *3 (N.D. Cal. Feb. 22, 2012).
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`B. At Least One Challenged Claim is Unpatentable
`As detailed below, claims 2-11, 26-29, 33-41, and 44-46 of the ‘304 patent
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`are unpatentable under 35 U.S.C. § 1012 and it is “more likely than not that at least
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`one of the claims challenged” is unpatentable. 35 U.S.C. § 324(a).
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`C. The ‘304 Patent is a CBM Patent
`The Board has previously held that the ‘304 patent is a CBM patent under
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`AIA § 18(d)(1). Exh. 1013 at 6-9. In addition, Versata did not challenge standing
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`on these grounds in CBM2013-00053. A patent needs only one claim directed to a
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`CBM patent to be eligible for review. Id. at 6. This Section IV.C is substantially
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`the same as Section III.C of the Petition in CBM2013-00054 (Exh. 1014).
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`A “covered business method patent” (“CBM patent”) is defined as “a patent
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`that claims a method or corresponding apparatus for performing data processing or
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`other operation used in the practice, administration, or management of a financial
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`2 The Board previously held that § 101 is a permissible grounds for challenging
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`claims in a CBM review. Exh. 1004, at 32-36.
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`product or service, except that the term does not include patents for technological
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`inventions.” AIA, § 18 (d)(1); see also 37 C.F.R. § 42.301(a). “The term financial
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`is an adjective that simply means relating to monetary matters.” Exh. 1004, at 23.
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`The ‘304 patent easily meets the definition of a CBM patent.
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`1.
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`Claims 2-11, 26-29, 33-41, and 44-46 are Each Directed to
`Financial Products or Services
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`The claims and specification show that the claimed systems of the ‘304
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`patent are directed to financial products or services, i.e. monetary matters. The
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`claims are directed to systems for companies, and in particular financial services
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`and insurance companies, to manage relationships with and calculating
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`compensation for the distributors or sales agents that are selling their financial
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`products and services. Exh. 1001, 15:13-14; 15:64-65; 17:11-12. The Abstract
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`discloses: “An embodiment of the invention provides a system that enables
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`financial services companies to manage and track information about a sales
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`force. . . . The system allows for configuring compensations, providing financial
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`services companies a toolkit for creating and modeling their complex commission
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`schedules used to compensate their sales force.” Id., Abstract. Managing
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`compensation in financial services companies clearly relates to monetary matters.
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`Furthermore, the claimed subject matter is obviously directed to the financial
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`industry, and its products and services. The first line of the Abstract recites
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`“financial services companies.” Id., Abstract; see also id., 3:1-4 ( “firms in
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`financial services”). Similarly, the Summary of the Invention states that “systems
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`embodying the invention provide a way to manage the agreements that financial
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`services companies have with the distributors who sell their products.” Id., 5:63-
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`65 (emphasis added). In total, the ‘304 patent states “financial services” or
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`“financial products” no less than 35 times throughout the disclosure. E.g., id., 4:48
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`(“financial services companies”); 4:22 (“a product, which may include financial
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`services”); 5:66 (“life insurances companies”); 10:2-3 (“enable financial services
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`institutions to manage the license and appointment credentials”). Financial
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`services and insurance companies validating a distributor to begin selling products
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`or determining compensation is squarely within the “practice, administration, or
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`management of a financial product or service.” AIA, § 18(d)(1).
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`The ‘304 patent is classified in classes 705/7, 707/945, and 235/376. Exh.
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`1001, INID Code 52; Exh. 1005, at 1. While classification in class 705 is not
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`determinative, it suggests that the claims of the ‘304 patent are directed to financial
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`products and services. Exh. 1006, at 48739 (“patents subject to covered business
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`method patent review are anticipated to be typically classifiable in Class 705”).
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`Patent Owner Versata, has previously provided definitions for “financial
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`product” and “financial service,” many of which cover the claims of the ‘304
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`patent. For “financial product,” Versata’s various definitions included “an
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`insurance product,” “insurance contracts,” and all manner of financial instruments,
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`Petition for Covered Business Method Review
`U.S. Patent No. 7,908,304
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`including bank deposits, credit lines, bonds, mortgages, leases, and so on. Exh.
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`1007, at 33, 35. Versata defined “financial ser