Paper No. 1
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`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`CALLIDUS SOFTWARE INC.
`Petitioner
`
`v.
`
`VERSATA DEVELOPMENT GROUP, INC.
`Patent Owner
`
`and
`
`VERSATA SOFTWARE, INC.
`Real Party-In-Interest
`
`____________
`
`Case CBM2014-00118
`Patent 7,958,024
`____________
`
`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
`
`
`
`
`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 3-34 of U.S.
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`i
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`

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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
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`
`
`Patent 7,958,024 (Exh. 1001) (“the ‘024 patent”), which issued to David Chao et
`
`al. on June 7, 2011.
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`ii
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`

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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
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`TABLE OF CONTENTS
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`Page No.
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`
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`PRELIMINARY STATEMENT ..................................................................... 1
`I.
`II. MANDATORY NOTICES ............................................................................. 4
`A. Real Party-in-Interest ................................................................................. 4
`
`B. Related Matters .......................................................................................... 5
`
`C. Lead and Back-Up Counsel ....................................................................... 5
`
`D. Service Information ................................................................................... 6
`
`III. PAYMENT OF FEES ..................................................................................... 7
`IV. GROUNDS FOR STANDING ........................................................................ 7
`A. The Board has Previously Found that Petitioner has Been Sued for
`Infringement of the ‘024 Patent and Held that Petitioner is Not
`Estopped ..................................................................................................... 7
`
`B. At Least One Challenged Claim is Unpatentable .................................... 10
`
`C. As The Board has Previously Held, the ‘024 Patent is a CBM Patent .... 10
`
`1. The Claims of the ‘024 Patent are Directed to Financial
`Products or Services ....................................................................... 11
`
`2. The Claims of the ‘024 Patent are Not Directed to a
`“Technological Invention” ............................................................. 14
`
`V.
`
`STATEMENT OF PRECISE RELIEF REQUESTED FOR EACH CLAIM
`CHALLENGED ............................................................................................ 23
`A. Claims for which Review is Requested ................................................... 23
`
`B. Statutory Grounds of Challenge .............................................................. 23
`
`VI. CLAIM CONSTRUCTION .......................................................................... 23
`A. Broadest Reasonable Interpretation ......................................................... 24
`
`B. Support for Petitioner’s Broadest Reasonable Interpretation .................. 26
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`iii
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`1. “Distributer Management System” ................................................ 26
`
`2. “Regulatory Conditions Applicable to Said Sales” /
`“Regulatory Conditions Associated with Said Sales” ................... 28
`
`3. “Executing a Payment Process” ..................................................... 30
`
`4. “Generating a Selling Agreement” ................................................. 31
`
`
`
`VII. CLAIMS 3-34 OF THE ‘024 PATENT ARE DIRECTED TO NON-
`PATENTABLE SUBJECT MATTER .......................................................... 33
`A. Inventions Covering Abstract Ideas are Not Eligible for Patent
`Protections, Regardless of their Form ...................................................... 33
`
`B. Claim 1 of the ‘024 Patent is Directed to an Abstract Idea ..................... 35
`
`1. Any Computer System Used to Implement the Claimed
`Method is No More than a General Purpose Computer ................. 40
`
`2. Computing Compensation for Sales Representatives that
`Conforms with a Set of Regulatory Conditions Can Be
`Accomplished by Hand .................................................................. 45
`
`3. Claim 1 Fails the Machine-or-Transformation Test ...................... 48
`
`C. Dependent Claim 2 Adds Nothing More Than Insignificant Post-
`Solution Activity to the Abstract Idea of Independent Claim 1 ............... 54
`
`D. Dependent Claims 3-34 Define Abstract Ideas that Fail to Tie Down
`the Claimed Abstract Idea of Claims 1 and 2 ........................................... 56
`
`1. Claims 3|18 and 4|19 Fail to Add any Meaningful Specificity
`to the Abstract idea of Claims 1 and 2 ........................................... 57
`
`2. Claims 5|20, 6|21, 7|22, 8|23, 9|24, and 10|25 Merely Limit the
`Recited Regulatory Conditions to a Particular Species or Field
`of Use by Checking Various Aspects of a License ........................ 60
`
`3. Claims 12|27, 13|28, 14|29, 15|30, and 17|32 Merely Limit the
`Regulatory Conditions to a Particular Species or Field of Use
`by Checking Various Aspects of an Appointment ......................... 64
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`iv
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
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`4. Claims 11|26, 16|31, and 33|34 Fail to Add Any Meaningful
`Specificity to the Unpatentably Abstract Idea of Claim 1, and
`Are Themselves Abstract ............................................................... 68
`
`
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`VIII. CONCLUSION .............................................................................................. 71
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`v
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`TABLE OF AUTHORITIES
`
`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, 3230 (2010) ....................................................................... passim
`
`
`Chevron U.S.A. v. Natural Resources Defense Council,
`467 US 837 (1984) ................................................................................................. 8
`
`
`Clearstream Wastewater Sys., Inc. v. Hydro-Action, Inc.,
`206 F.3d 1440, 1446 (Fed. Cir. 2000) .................................................................. 29
`
`
`CLS Bank Int’l v. Alice Corp. Pty.,
`685 F.3d 1341 (Fed. Cir. 2012) .................................................................... 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
`
`
`Diamond v. Diehr,
`450 U.S. 175 (1981) ............................................................................................. 55
`
`
`Fort Props., Inc. v. Am. Master Lease, LLC,
`671 F.3d 1317 (Fed. Cir. 2012) ............................................................... 34, 40, 53
`
`
`Gottschalk v. Benson,
`409 U.S. 63 (1972) ....................................................................................... passim
`
`
`In re Am. Acad. of Sci. Tech Ctr.,
`367 F.3d 1359 (Fed. Cir. 2004) ............................................................................ 24
`
`
`
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`vi
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`In re Zletz,
`893 F.2d 319 (Fed. Cir. 1989) .............................................................................. 24
`
`
`Mayo Collaboration Servs. v. Prometheus Labs., Inc.,
`132 S. Ct. 1289 (2012) ................................................................................. passim
`
`
`Parker v. Flook,
`437 U.S. 584 (1978) ................................................................................ 33, 38, 40
`
`
`Phillips v. AWH Corp.,
`415 F.3d 1303 (Fed. Cir. 2005) ............................................................................ 25
`
`
`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) ......................................................................... 33, 51, 56
`Statutes
`35 U.S.C. § 101 ................................................................................................ passim
`
`35 U.S.C. § 324 ........................................................................................................ 10
`
`35 U.S.C. § 325 ......................................................................................................8, 9
`
`AIA, § 18 .......................................................................................................... passim
`
`Rules
`37 C.F.R. § 1.114 .............................................................................................. 18, 19
`
`37 C.F.R. § 42.15 ....................................................................................................... 7
`
`37 C.F.R. § 42.300 .......................................................................................... 1, 8, 24
`
`37 C.F.R. § 42.301 ................................................................................................... 11
`
`37 C.F.R. § 42.302 ..................................................................................................... 7
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`vii
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
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`
`
`37 C.F.R. § 42.304 ................................................................................................... 23
`
`37 C.F.R. § 42.8 ................................................................................................ 4, 5, 6
`Other Authorities
`
`MPEP 2106 .............................................................................................................. 41
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`viii
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`LIST OF EXHIBITS
`
`Petition Exhibit 1001: U.S. Patent No. 7,958,024
`
`Petition Exhibit 1002: U.S. Patent No. 7,958,024 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. 7,958,024
`
`
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`ix
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`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`Petition Exhibit 1012: Declaration of Janis McGuffey in Support of Petition for
`Covered Business Method Patent Review of U.S. Patent
`No. 7,958,024
`
`Petition Exhibit 1013: Decision to Institute in Callidus v. Versata, CBM2013-
`00053, Paper No. 16 (PTAB March 4, 2014)
`
`Petition Exhibit 1014:
`
`Petition for Covered Business Method Patent Review in
`Callidus v. Versata, CBM2013-00053, Paper No. 5
`(PTAB Sept. 17, 2013)
`
`Petition Exhibit 1015: Decision on Request for Rehearing in Callidus v.
`Versata, CBM2013-00053, Paper No. 22 (PTAB Apr. 9,
`2014)
`
`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
`
`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
`
`Petition Exhibit 1018: U.S. Patent No. 7,908,304
`
`Petition Exhibit 1019: U.S. Patent No. 7,904,326
`
`Petition Exhibit 1020: Decision to Institute in Callidus v. Versata, CBM2013-
`00054, Paper No. 19 (PTAB March 4, 2014)
`
`Petition Exhibit 1021: Decision to Institute in Callidus v. Versata, CBM2013-
`00052, Paper No. 21 (PTAB March 4, 2014)
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`x
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`
`
`I.
`
`PRELIMINARY STATEMENT
`
`
`
`Petitioner Callidus Software Inc. (“Callidus” or “Petitioner”) respectfully
`
`requests covered business method patent (“CBM”) review of dependent claims 3-
`
`34 of U.S. Patent 7,958,024 (Exh. 1001) (“the ‘024 patent”) pursuant to 35 U.S.C.
`
`§ 321 et seq., § 18 of the Leahy-Smith America Invents Act (“AIA”), and 37
`
`C.F.R. § 42.300 et seq. Each of the independent claims of the ‘024 patent and all
`
`remaining claims—claims 1, 2, and 35-47 of the ‘024 patent—are currently the
`
`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
`
`v. Versata, CBM2013-00053, Paper No. 16 (PTAB March 4, 2014) (Exh. 1013)
`
`(hereinafter, “Institution Decision in CBM2013-00053”).
`
`Each of claims 3-34 depend directly or indirectly from claims 1 and 2. As a
`
`result, sections of the present Petition related to claims 1 and 2 are substantially the
`
`same as sections found in Callidus’s Petition for Covered Business Method Patent
`
`Review in Callidus v. Versata, CBM2013-00053, Paper No. 5 (PTAB Sept. 17,
`
`2013) (Exh. 1014) (hereinafter, “Petition in CBM2013-00053”).
`
`The ‘024 patent claims nothing more than the abstract idea of compensating
`
`sales representatives for their sales transactions if they conform to regulatory
`
`conditions. See Institution Decision in CBM2013-00053 (Exh. 1013) at 15
`
`(agreeing with Petitioner that “it is more likely than not that claim 1 recites the
`
`
`
`1
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
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`
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`abstract idea of computing compensation for sales representatives that conform to a
`
`set of regulatory conditions”). Ensuring that sales representatives conform to
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`regulatory conditions before compensating them has been done in the absence of a
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`“computer system” for decades either in the human mind or by hand with pencil
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`and paper. Indeed, this has been a prerequisite to receiving compensation in the
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`insurance and financial services industries for many years. And for good reason —
`
`compliance with regulatory constraints was and 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.”)
`
`Each of the challenged claims 3-34 depend on already-instituted Claim 1.
`
`Claim 1 recites:
`
`1. A method for processing sales transaction data comprising:
`using a distributer management system to perform:
`capturing transaction data associated with sales
`performed by a plurality of sales
`representatives;
`
`
`
`2
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`determining if said sales representatives associated
`with said transaction data are in conformity
`with a set of regulatory conditions
`applicable to said sales;
`computing a plurality of compensation amounts
`based on said sale transactions data and said
`set of regulatory conditions; and
`executing a payment process to compensate said
`plurality of sales representatives for said
`sales in accordance with said compensation
`amounts. Id., 26:19-32.
`
`
`
`The “capturing,” “determining,” “computing,” and “executing” of data do not
`
`meaningfully limit the abstract idea. The recited “capturing” step merely collects
`
`data associated with sales transactions to be used in the determining and computing
`
`steps. The “determining” and “computing” steps are nothing more than the
`
`abstract idea of compensating sales representatives for their sales transactions if
`
`they conform to regulatory conditions. The final step, “executing a payment
`
`process,” is nothing more than distributing payment to the sales representatives.
`
`These are steps that can, and have been, historically done by hand, and any general
`
`purpose computer involvement in claim 1 is merely incidental to the abstract idea.
`
`Claim 1 is not tied to a particular machine and does not transform an article.
`
`
`
`3
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`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`Here, the claimed methods do nothing more than add a general purpose
`
`
`
`computer to a decades-old method of doing business, i.e., the recited computer
`
`media and computer systems use conventional and routine computer processing
`
`functionality to implement an abstract idea. General purpose computers are
`
`conventional, widely-used tools to manage and process data in the information age.
`
`Neither the recited “distributor management system,” “system,” “computer
`
`readable medium,” nor “system comprising: a processor; and a memory” in the
`
`independent claims provide any meaningful limit on the patent’s coverage of the
`
`abstract idea. They are not tied to any particular machine nor do they transform or
`
`reduce any article into a different state or thing. Accordingly, independent claim 1
`
`of the ‘024 patent is directed to an abstract idea and—according to the Board’s
`
`preliminary finding—claim 1 is more likely than not patent-ineligible under 35
`
`U.S.C. § 101. Because dependent claims 3-34 do not add any meaningful
`
`limitations to the abstract idea of independent claim 1, they fail to tie down the
`
`abstract idea of the claimed subject matter and are also unpatentable under 35
`
`U.S.C. § 101.
`
`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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`4
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`B. Related Matters
`
`
`
`In accordance with 37 C.F.R. § 42.8(b)(2), Petitioners identify the following
`
`district court and PTAB proceedings:
`
`Versata Software, Inc. v. Callidus Software, Inc., No. 1:12-cv-
`931-SLR (D. Del.)
`
`Callidus Software, Inc. v. Versata Software, Inc. 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.,
`CBM2014-00117 (PTAB) (U.S. Patent No. 7,098,304)
`C. Lead and Back-Up Counsel
`
`In accordance with 37 C.F.R. § 42.8(b)(3) and § 42.10(a), Petitioners
`
`identify undersigned Deborah E. Fishman (Reg. No. 48,621) of Dickstein Shapiro
`
`LLP as lead counsel and Michael S. Tonkinson of Dickstein Shapiro LLP, as back-
`
`
`
`5
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`

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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`up counsel; Petitioner identifies Assad H. Rajani of Dickstein Shapiro as further
`
`back-up counsel.1
`
`Deborah E. Fishman (Reg. No. 48,621)
`Michael S. Tonkinson
`Assad H. Rajani
`DICKSTEIN SHAPIRO LLP
`1841 Page Mill Road, Suite 150
`Palo Alto, CA 94304
`Phone: (650) 690-9500
`Fax: (650) 690-9501
`Email: fishmand@dicksteinshapiro.com
` tonkinsonm@dicksteinshapiro.com
` rajania@dicksteinshapiro.com
`
`D.
`
`Service Information
`
`In accordance with 37 C.F.R. § 42.8(b)(4), Petitioners identify the following
`
`service information:
`
`
` 1
`
` Pursuant to 37 C.F.R. § 42.20(b), Petitioner requests authorization from the
`
`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. Mr. Rajani and Mr. Tonkinson
`
`are experienced patent litigation attorneys, are counsel for Callidus Software Inc.
`
`in the above-referenced litigation in the District of Delaware, and are each
`
`admitted pro hac vice in each of the three instituted CBM Reviews listed above
`
`(CBM2013-00052, -00053, and -00054). As such, they have an established
`
`familiarity with the subject-matter at issue in this proceeding.
`
`
`
`6
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`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`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
`
`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
`
`deposit account No. 041073.
`
`IV. GROUNDS FOR STANDING
`A. The Board has Previously Found that Petitioner has Been Sued
`for Infringement of the ‘024 Patent and Held that Petitioner is
`Not Estopped
`
`Petitioner has standing to file this petition because Petitioner has been sued
`
`for infringement of the ‘024 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.
`
`42.302(a). Versata Software, Inc. and Versata Development Group, Inc.
`
`(collectively “Versata” or “Patent Owner”) purport to hold all right, title, and
`
`interest in the ‘024 patent. Id., ¶ 8.
`
`As the Board has already held, Petitioner is not estopped from challenging
`
`the claims on the grounds identified in the petition. 37 C.F.R. § 42.302(b); see
`
`
`
`7
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`

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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`also Institution Decision in CBM2013-00053 at 4-6 (Exh. 1013) (rejecting Patent
`
`Owner’s arguments that Petitioner is barred from seeking CBM Review of the ‘024
`
`patent); Decision on Request for Rehearing in Callidus v. Versata, CBM2013-
`
`00053, Paper No. 22 at 2-6 (PTAB Apr. 9, 2014) (Exh. 1015) (affirming that
`
`Petitioner has standing). For the following reasons—and as the Board has already
`
`held—Petitioner’s second-filed declaratory judgment (“DJ”) action (see Exh.
`
`1016) does not estop Petitioner from challenging the claims of the ‘024 patent.
`
`First, 37 C.F.R. § 42.300(a) makes it clear that 35 U.S.C. § 325(a)(1) does
`
`not apply to CBM proceedings because § 42.300(a) specifically excludes § 42.201:
`
`“(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.”
`§ 42.300(a) (emphasis added)
`
`Section 42.201 is the rule promulgated by the USPTO to implement § 325(a)(1).
`
`See Exh. 1010 at 48691 (stating that “[t]he rule follows the statutory language of
`
`35 U.S.C. 325(a)(1)”). The USPTO’s authority (and discretion) to issue
`
`regulations to implement CBM review flows directly from AIA § 18(a)(1), and its
`
`subsequent rulemaking is entitled to deference under Chevron U.S.A. v. Natural
`
`Resources Defense Council, 467 US 837, 844 (1984), and its progeny.
`
`
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`8
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` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`Second, even if § 325(a)(1) applies in a CBM proceeding, Petitioner’s DJ
`
`
`
`action was dismissed without prejudice prior to when Petitioner filed any petition
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`for CBM review (see Exh. 1017 at 2), and thus does not create a bar under
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`§ 325(a)(1). See Exh. 1013 at 4-6; cf. Cyanotech Corp. v. Bd. of Trs. of the Univ.
`
`of Ill., IPR 2013-00401, Paper No. 17 at 9-12 (PTAB Dec. 19, 2013) (DJ action
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`dismissed without prejudice does not trigger bar under § 315(a)(1)), and authority
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`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 was a counterclaim, meaning that
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`§ 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).
`
`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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`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
`
`
`
`9
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`
`
`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`bringing the counterclaim. See, e.g., Ruckus Wireless, Inc. v. Harris Corp., Case
`
`No. 11-cv-1944, 2012 WL 588792, at *3 (N.D. Cal. Feb. 22, 2012).
`
`B. At Least One Challenged Claim is Unpatentable
`As detailed further below, claims 3-34 of the ‘024 patent are unpatentable
`
`under 35 U.S.C. § 1012 and it is “more likely than not that at least one of the claims
`
`challenged” of the ‘024 patent is unpatentable. 35 U.S.C. § 324 (a).
`
`C. As The Board has Previously Held, the ‘024 Patent is a CBM
`Patent
`
`The Board has previously held that the ‘024 patent is a CBM Patent under
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`AIA § 18(d)(1). Institution Decision in CBM2013-00053 at 6-9 (Exh. 1013). A
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`patent needs only one claim directed to a CBM patent to be eligible for review. Id.
`
`at 6. In addition, Versata did not challenge standing on these grounds in
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`CBM2013-00053. A patent needs only one claim directed to a CBM Patent to be
`
`eligible for review. See id. at 9. The following Sections IV.C.1 and IV.C.2 are the
`
`same as Sections III.C.1 and III.C.2 of the Petition in CBM2013-00053 (Exh.
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`1014).
`
`
`
` 2
`
` The Board previously held that § 101 is a permissible grounds for challenging
`
`claims in a CBM review. Exh. 1004, at 32-36.
`
`
`
`10
`
`
`
`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`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
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`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
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`is an adjective that simply means relating to monetary matters.” Exh. 1004, at 23.
`
`The ‘024 patent easily meets the definition of a CBM patent.
`
`1.
`
`The Claims of the ‘024 Patent are Directed to Financial
`Products or Services
`
`The claims and specification show that the claimed methods of the ‘024
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`patent are directed to financial products or services, i.e. monetary matters. Claim 1
`
`is directed to computing compensation for sales representatives that conform to a
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`set of regulatory conditions. Exh. 1001, 26:19-32. The process of calculating
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`compensation amounts and paying sales representatives clearly relates to monetary
`
`matters.
`
`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 states: “A
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`system provides a way to manage agreements that institutions such as financial
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`services companies have with distributors who sell their products.” Id., Abstract
`
`(emphasis added); see also id., 3:1-4 (“Another need of firms in financial services
`
`
`
`11
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`
`
`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`
`
`is an ability to manages sales producer payment accounts”). 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., 4:47-50 (emphasis added). In total, the
`
`‘024 patent states “financial services” or “financial products” no less than 38 times
`
`throughout the disclosure. See, e.g., id., 14:27-34 (“provider of financial
`
`products”), 1:23 (“financial services providers”), 4:20 (“a product, which may
`
`include financial services”), 6:47 (“financial services institutions”). Financial
`
`services and insurance companies paying sales representatives for their sales of
`
`financial products, and checking their credentials to ensure that they are eligible for
`
`compensation is squarely within the “practice, administration, or management of a
`
`financial product or service.” AIA, § 18(d)(1). During prosecution, the applicant
`
`confirmed the connection to financial products and services. Applicant attempted
`
`to distinguish prior art references on the grounds that the prior art “is directed
`
`towards ensuring compliance with regulations of products and not with ‘sales
`
`representatives’ conformity with regulatory conditions. . . . ‘Products’ can be the
`
`subject of a sale. Clearly, ‘sales representatives,’ are not the subject of a sale.”
`
`Exh. 1002, 3/16/2009 Response to Non-Final Office Action at 14.
`
`
`
`12
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`
`
`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
`
`The ‘024 patent is classified in both 705/35 and 705/40. Exh. 1001, INID
`
`
`
`Code 52. Class 705 is entitled “Data Processing: Financial, Business Practice,
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`Management, or Cost/Price Determination.” Exh. 1005 at 1. While classification
`
`in class 705 is not determinative, it suggests that the claims of the ‘024 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”).
`
`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 apply the claims of the ‘024 patent. For “financial product” its various
`
`definitions included “an insurance product,” “insurance contracts,” and all manner
`
`of financial instruments, including bank deposits, credit lines, bonds, mortgages,
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`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 ‘024 patent states
`
`that “the invention” relates to systems to “manage the agreements that financial
`
`services companies have with the distributors who sell their products.” Exh. 1001,
`
`
`
`13
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`
`
`

`
` Petition for Covered Business Method Review
`U.S. Patent No. 7,958,024
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`
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`4:47-50. The ‘024 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
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`constraints of government organizations.” Id., 6:16-19; see also id., 7:21-23
`
`(“Each transaction represents a physical sales transaction, such as distributor
`
`selling a life insurance po