`Tel: 571-272-7822
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` Paper 11
` Entered: October 2, 2014
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`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.
`_______________
`
`CBM2014-00118
`Patent 7,958,024 B2
`_______________
`
`
`
`Before HOWARD B. BLANKENSHIP, SALLY C. MEDLEY, and
`KEVIN F. TURNER, Administrative Patent Judges.
`
`TURNER, Administrative Patent Judge.
`
`
`DECISION
`Institution of Covered Business Method Patent Review
`37 C.F.R. § 42.208
`
`
`
`
`
`CBM2014-00118
`Patent 7,958,024 B2
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`
`I.
`INTRODUCTION
`Callidus Software, Inc. (“Petitioner”) filed a Petition on April 17, 2014,
`requesting a covered business method patent review of claims 3–34 of U.S. Patent
`No. 7,958,024 (Ex. 1001, “the ’024 Patent”). Paper 1 (“Pet.”). Petitioner asserts
`that all of the challenged claims are unpatentable under 35 U.S.C. § 101. In
`response, Versata Development Group, Inc. and Versata Software, Inc. (“Patent
`Owner”) filed a Patent Owner Preliminary Response on July 24, 2014. Paper 10
`(“Prelim. Resp.”). We have jurisdiction under 35 U.S.C. § 324, which provides
`that a post-grant review may not be instituted “unless … the information presented
`in the petition … would demonstrate that it is more likely than not that at least 1 of
`the claims challenged in the petition is unpatentable.”
`Pursuant to 35 U.S.C. § 324, the Board authorizes a covered business
`method patent review to be instituted as to claims 3–34 of the ’024 Patent.
`
`
`A. The ’024 Patent
`The ’024 Patent relates to managing relationships between institutions
`associated with a product or service and the distributors thereof. Ex. 1001, 4:41-
`44. Based on governmental licensing and regulation, organizations, such as life
`insurances companies, may need to manage the sale and distribution of life
`insurance plans in a way that coincides with the regulatory constraints put in place
`on such sales by government organizations. Id. at 4:50-54. Embodiments
`disclosed in the ‘024 Patent allow for license data to be validated prior to
`distribution of compensation to sales agents for the transactions. Id. at 5:9-19. A
`suite of applications, namely a Distributor Management System Suite (“DMSS”),
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`Patent 7,958,024 B2
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`provide tracking information, such as contact points, payment methods, and
`organizational hierarchies on all parties in the system, managing regulatory
`information and ensuring that distributors are licensed and appointed to sell the
`products manufactured by the provider. Id. at 6:26-32.
`
`
`B. Illustrative Claims
`The challenged claims ultimately depend from independent claim 1, which is
`illustrative of the subject matter of the claims at issue and is reproduced below:
`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;
`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.
`
`
`C. Asserted Ground of Unpatentability
`Petitioner challenges the patentability of claims 3–34 as failing to recite
`patentable subject matter under 35 U.S.C. § 101. The Petition does not assert any
`other challenges to the patentability of the claims of the ’024 Patent.
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`D. Related Proceedings
`In compliance with 37 C.F.R. § 42.302(a), Petitioner certifies that it has
`been sued for infringement of the ’024 Patent. Pet. 7. The identified related case
`is Versata Software, Inc. v. Callidus Software, Inc., No. 1:12-cv-931-SLR (D.
`Del.). A covered business method patent review was instituted on March 4, 2014
`(“Decision on Institution”) involving the same parties, the same patent, but
`different claims. Callidus Software, Inc. v. Versata Software, Inc. and Versata
`Development Group, Inc., Case CBM2013-00053, Paper 16 (PTAB March 4,
`2014) (“’53 DI”).
`
`
`E. Covered Business Method Patent
`A covered business method patent is “a patent that claims a method or
`
`corresponding apparatus for performing data processing or other operations
`used in the practice, administration, or management of a financial product or
`service, except that the term does not include patents for technological
`inventions.” § 18(d)(1) of the Leahy-Smith America Invents Act, Pub. L.
`No. 112-29, 125 Stat. 284, 329 (2011) (“AIA”). To determine whether a
`patent is for a technological invention, we consider “[w]hether the claimed
`subject matter as a whole recites a technological feature that is novel and
`unobvious over the prior art; and solves a technical problem using a
`technical solution.” 37 C.F.R. § 42.301(b).
`Petitioner submits arguments and evidence substantially identical to those
`submitted in the Petition for CBM2013-00053 as to whether the ’024 Patent is a
`
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`covered business method patent. Pet. 10 (“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. 1014).”). As it did in its Preliminary Response in case CBM2013-
`00053, Patent Owner does not dispute that its patent claims a method for
`performing data processing or other operations used in the practice, administration,
`or management of a financial product or service, and does not include a
`technological invention. Prelim. Resp.
`In the ’53 DI, we determined that the ’024 Patent is a covered business
`method patent under AIA § 18(d)(1). ’53 DI, slip op. at 4–9. We incorporate our
`previous analysis from the ’53 DI, and for the reasons provided there, we
`determine that the ’024 Patent is a covered business method patent under AIA
`§ 18(d)(1).
`
`
`F. 35 U.S.C. § 325(a)(1)
`Patent Owner urges that the Board decline to institute review of the ’024
`Patent because Petitioner is statutorily barred from seeking such review. Prelim.
`Resp. 7–26. Patent Owner argues that 35 U.S.C. § 325(a)(1) bars Petitioner
`because Petitioner filed a civil action challenging validity of the ’024 Patent before
`the filing of the Petition. Id. Patent Owner’s arguments are substantially identical
`to those made in connection with the Patent Owner’s Preliminary Response and
`Rehearing Request in CBM2013-00053, Papers 15 and 19. We previously
`considered Patent Owner’s arguments. In the’53 DI, and the Decision on
`Rehearing, we determined that Petitioner is not statutorily barred from seeking a
`
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`covered business method patent review of the ’024 Patent. See ’53 DI, slip op. at
`4–6, and Callidus Software, Inc. v. Versata Software, Inc. and Versata
`Development Group, Inc., Case CBM2013-00053, (PTAB Apr. 9, 2014) (Paper
`22). While we recognize that 35 U.S.C. § 325(a)(1) applies to covered business
`method patent reviews,1 the Patent Owner has not persuaded us that dismissal
`without prejudice of a prior civil action challenging validity prevents institution of
`a covered business method patent review under 35 U.S.C. § 325(a)(1).
`Accordingly, for purposes of this decision, we incorporate our analysis
`regarding whether Petitioner is barred from seeking a covered business method
`patent review, under 35 U.S.C. § 325(a)(1), from the ’53 DI, slip op. at 4–6, and
`the Decision on Rehearing (Paper 22), and determine that Petitioner is not barred.
`
`
`G. Claim Construction
`In a covered business method patent review, claim terms in an unexpired
`patent are given their broadest reasonable construction in light of the specification
`of the patent in which they appear. 37 C.F.R. § 42.300(b). Under the broadest
`reasonable construction standard, claim terms are given their ordinary and
`customary meaning, as would be understood by one of ordinary skill in the art in
`the context of the entire disclosure. In re Translogic Tech., Inc., 504 F.3d 1249,
`1257 (Fed. Cir. 2007). Any special definition for a claim term must be set forth
`with reasonable clarity, deliberateness, and precision. In re Paulsen, 30 F.3d 1475,
`
`
`1 See SecureBuy, LLC v. CardinalCommerce Corp., Case CBM2014-00035,
`(PTAB Apr. 25, 2014) (Paper 12).
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`1480 (Fed. Cir. 1994).
`In the ’53 DI, we construed certain claim terms with respect to the grounds
`against claims 1 and 2—claims that are not challenged here. The claims
`challenged in this proceeding, however, depend either directly or indirectly from
`independent claim 1 or dependent claim 2, and, therefore, the construction of terms
`in independent claim 1 and dependent claim 2 is relevant to challenged claims 3–
`34. Petitioner does not dispute our constructions made in the ’53 DI. Pet. 25–26.
`Patent Owner generally disagrees with those constructions. Prelim. Resp. 27–39.
`Neither party identifies additional claim limitations beyond those construed in the
`’53 DI.
`Trial briefing is coming to an end in CBM2013-00053 and the parties have
`advanced their positions with respect to claim construction; however, we have not
`made a final determination as to claim construction. In order to maintain
`consistency between CBM2013-00053 and this proceeding, we construe certain
`claim terms for claims 1 and 2 the same as we did in the ’53 DI, despite Patent
`Owner urging a different construction for the terms. Prelim. Resp. 27–39.
`Accordingly, for purposes of this decision, we incorporate our analysis
`regarding the terms construed in ’53 DI, slip op. at 10–13.
`Those terms and their meanings are summarized here:
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`Claim Term
`distributer management
`system
`
`regulatory conditions
`applicable to/ associated with
`said sales
`
`executing a payment process
`generating a selling
`agreement
`
`Construction
`software for managing information
`about a sales force
`any internal or external constraint,
`regulation, requirement, policy or
`objective with which a sales
`representative must comply to receive
`compensation[s] for said sales
`distributing payment
`to create a selling agreement contract
`comprising templates or reusable
`components
`
`With respect to the first claim term, Patent Owner argues that the
`programming creates a specific purpose computer such that “using a distributer
`management system” should be interpreted as using a special purpose computer to
`execute specific software. Prelim. Resp. 29–30. We do not agree and conclude
`that Patent Owner’s construction would presuppose arguments discussed below
`that are not determined to be persuasive, i.e., that the system should be identified
`as a special purpose computer. With respect to the “regulatory conditions”
`limitation, Patent Owner argues that Petitioner’s construction, which we adopted,
`is overly broad, but we disagree for the reasons provided in the prior decision. ’53
`DI, slip op. at 11.
`With respect to “executing a payment process,” Patent Owner argues that the
`term should be construed as “executing a payment process by a computer
`programmed to execute the payment process.” Prelim. Resp. 34. Patent Owner
`alleges that the adopted construction “ignores both the context and the claim
`
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`language itself” (Id. at 33), but we are persuaded that although the specification of
`the ’024 Patent discloses execution by a computer, the broadest reasonable
`interpretation of the claim term does not require the execution through a
`specifically programmed computer. With respect to “generating a selling
`agreement,” Patent Owner argues that the adopted construction reads limitations
`from the specification into the claim to adopt a narrower construction, and that the
`claim term does not require a specialized construction. Id. at 35, 38. However, as
`we have discussed in our prior Decision, we conclude that either construction
`would result in the same analysis for purposes of the § 101 analysis, and thus, we
`maintain the previously adopted construction. ’53 DI, slip op. at 13.
`
`
`II. ANALYSIS
`
`A. Claims With Identical Scopes
`Petitioner points out that claims 3 and 18 are identical and both depend from
`claim 2. Pet. 57. It is axiomatic that claims 3 and 18 must have the same scope.
`Similarly, claims 33 and 34 are identical and each depends from claim 32. Id.
`Additionally, Petitioner also points out that claims 4–17 are identical to claims 19-
`32, except that each set of claims has a different chain of dependency, with claims
`4–17 depending from claim 3, and claims 19–32 depending from claim 18. Thus,
`Petitioner argues that the sets of claims, 3–17 and 18–32, as well as claims 33 and
`34, are directed to the “same invention,” in that each is drawn to identical subject
`matter. Id.; see In re Vogel, 422 F.2d 438 (CCPA 1970). Such a situation can be
`overcome by canceling or amending the claims that are directed to the same
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`invention so they are no longer coextensive in scope. In the instant proceeding,
`Petitioner indicates that identical claims would be subject to statutory double
`patenting under 35 U.S.C. § 101, but does not raise this specifically as a ground of
`unpatentability because Petitioner does not know which of the sets of identical
`claims will be cancelled. Pet. 57.
`We agree with Petitioner that claims 3–17 and 18–32 are identical in scope,
`and that claims 33 and 34 are also identical in scope. We apply our analysis to
`claims 18–33, and provide no analysis with respect to claims 3–17 and 34, because
`that analysis would be identical. It is incumbent on Patent Owner, prior to or
`coincident with the filing of Patent Owner’s Response, to either elect a set of
`claims for consideration, whereby the non-elected set would eventually be
`cancelled, or amend the claims so that they no longer have coextensive scopes.
`The sets for election will be (I) claims 3–17, (II) claims 18–33, or (III) claims 18–
`32 and 34.
`
`
`B. 35 U.S.C. § 101 Ground of Unpatentability
`Petitioner contends that claims 3–34 of the ’024 Patent are directed to non-
`statutory subject matter under 35 U.S.C. § 101. Pet. 33–71. Patent Owner presents
`no arguments with respect to the § 101 ground of unpatentability. Prelim. Resp.
`Upon reviewing Petitioner’s analysis and supporting evidence, we determine that
`Petitioner has established that claims 3–34 more likely than not are directed to non-
`statutory subject matter under § 101.
`Section 101 of Title 35, United States Code, provides that: “Whoever
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`invents or discovers any new and useful process, machine, manufacture, or
`composition of matter, or any new and useful improvement thereof, may obtain a
`patent therefor, subject to the conditions and requirements of this title.”
`The Supreme Court recognizes three exceptions to these statutory classes:
`laws of nature, natural phenomena, and abstract ideas. Alice Corp. Pty. Ltd. v. CLS
`Bank Int’l, 134 S. Ct. 2347, 2354 (2014); Mayo Collaborative Servs. v.
`Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012). Although an abstract idea
`by itself is not patentable, a practical application of an abstract idea may be
`deserving of patent protection. Alice, 134 S. Ct. at 2355. We must consider “the
`elements of each claim both individually and ‘as an ordered combination’ to
`determine whether the additional elements ‘transform the nature of the claim’ into
`a patent-eligible application.” Id. (citing Mayo, 132 S. Ct. at 1298). The claim
`must contain elements or a combination of elements that are “sufficient to ensure
`that the patent in practice amounts to significantly more than a patent upon the
`[abstract idea] itself.” Id. (citing Mayo, 132 S. Ct. at 1294).
`Petitioner submits arguments and evidence substantially identical to those
`submitted in the Petition for CBM2013-00053 regarding whether independent
`claim 1 and dependent claim 2 are directed to non-statutory subject matter under
`35 U.S.C. § 101. Pet. 35–56. The claims challenged in this proceeding depend
`either directly or indirectly from claims 1 and 2. Whether claims 1 and 2 are
`directed to non-statutory subject matter under 35 U.S.C. § 101 is relevant to
`determining if challenged claims 3–34 also are directed to non-statutory subject
`matter under 35 U.S.C. § 101.
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`In the ’53 DI, we determined that Petitioner had demonstrated that it was
`more likely than not that claims 1 and 2 are directed to non-statutory subject matter
`under 35 U.S.C. § 101. ’53 DI, slip op. at 14–16, 17–18. We recognize that since
`the time we instituted trial in CBM2013-00053, and after the Petitioner filed the
`Petition in this case, the Supreme Court issued its decision in Alice, 134 S. Ct. at
`2354. Under the framework articulated in Alice, 134 S. Ct. at 2355-2359, we still
`conclude that Petitioner has met the threshold of § 324 and demonstrated that
`claims 1 and 2 are more likely than not directed to non-patent eligible subject
`matter. Accordingly, we incorporate our previous analysis from the ’53 DI, and
`for the reasons provided there, on this record, we are persuaded that claims 1 and
`2, from which all of the challenged claims depend, are directed to non-statutory
`subject matter under 35 U.S.C. § 101. In the ’53 DI, we were persuaded that
`Petitioner has shown that it is more likely than not that claim 1 recites the abstract
`idea of computing compensation for sales representatives that conform to a set of
`regulatory conditions, and that claim 2 amounted to insignificant post-solution
`activity that does not make that claim patent eligible. We also were persuaded that
`Petitioner has shown that it is more likely than not that no additional limitations in
`any of those two claims tie down the claims so that they do not cover the full
`abstract idea itself in each of the claims. See ’53 DI, slip op. at 14–16, 17–18.
`
`Claims 18 and 19
`Claims 18 and 19 either depend directly or indirectly from independent
`claim 1 and dependent claim 2. We are persuaded that claims 18 and 19 are more
`
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`likely than not directed to non-statutory subject matter. Claim 18 recites “wherein
`said selling agreement comprises compensation components defining commission
`amounts,” and claim 19, which depends from claim 18, further recites that the
`“computing utilizes said compensation components to determine said plurality of
`compensation amounts.”
`Petitioner argues that it is expected that one would use the selling agreement
`to specify a commission schedule, that people have manually computed
`compensation from agent commissions for decades, and that limitations in claims
`18 and 19 are similar to those recited in claim 1 that we have found more likely
`than not unpatentable. Pet. 58–59. Calculating or determining payment to
`distributors fails to impose meaningful limitations on the claims directed to
`abstract ideas. Petitioner has shown that it is more likely than not that claims 18
`and 19 recite no additional substantive limitations so that the claims do not cover
`the full abstract idea of claims 1 and 2.
`
`Claims 20–25
`Claims 20–25 either depend directly or indirectly from one of independent
`claim 1, claim 2 and claim 18. We are persuaded that claims 20–25 are more
`likely than not directed to non-statutory subject matter. Claim 20 recites that the
`“set of regulatory conditions defines at least one license associated with
`performing said sales,” and claim 21, which depends from claim 20, recites that “at
`least one license equates to physical licenses issued by jurisdictions controlling
`said sales.” Claims 22–25 specify that various license requirements are checked,
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`specifically continuing education credits, renewal, expiration, and, again, renewal
`requirements, respectively.
`Petitioner argues that the recitation of a “physical license[]” or the checking
`of various requirements does nothing to cause claims 20–25 to be directed to
`something other than the abstract idea of claim 18. Pet. 60–61. However, merely
`limiting the claims to a particular species or specific field of use does not make the
`claims patentable. Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010) (holding that
`dependent claims “limiting an abstract idea to one field of use or adding token
`postsolution components did not make the concept patentable”). We are persuaded
`that the addition of a physical license or the checking of requirements does not
`render the abstract idea of claims 1, 2, and 18 to be patentable subject matter.
`
`
`Claims 26, 31, and 33
`Claim 26 depends directly or indirectly from claim 1, 2, or 18, and recites,
`that the “set of regulatory conditions defines at least one appointment associated
`with performing said sales.” Claims 31 and 33, dependent on claim 26, recite that
`the “regulatory conditions relates to said sales of a particular product type,” and “at
`least one appointment is associated with said distributor,” respectively. Petitioner
`argues that an appointment is a necessary requirement of the sales representative
`relationship and adds nothing more to the claimed abstract idea. Pet. 68–69.
`Petitioner also argues that limiting claims to a specific field of use, i.e., “particular
`product type,” does not make a claim patentable. Id. at 69. We are persuaded that
`claims 26, 31, and 33 do not add significantly to the abstract ideas recited in claims
`
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`1, 2, and 18.
`
`Claims 27–30 and 32
`Claims 27–30 and 32 either depend directly or indirectly from independent
`claim 1 or dependent claim 2, 18, or 26. Claims 27–30 and 32 relate to the
`checking of appointment requirements. We are persuaded that claims 27–30 and
`32 are more likely than not directed to non-statutory subject matter. Petitioner
`argues that claims 27–30 and 32 merely specify in greater detail the set of
`regulatory conditions relating to an appointment, and recite conventional species
`for the abstract idea recited in claims 1 and 2. Id. 64–68. We are persuaded that
`checking particular aspects of an appointment when calculating compensation,
`whether with specific or broader criteria, does nothing more than recite narrower
`forms of the abstract idea recited in claims 1, 2, and 18.
`
`
`III. CONCLUSION
`For the foregoing reasons, we determine that the information presented in
`the petition establishes that it is more likely than not that Petitioner would prevail
`in establishing unpatentability of claims 3–34 of the ’024 Patent.
`The Board has not made a final determination on the patentability of any
`challenged claims.
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`IV. ORDER
`
`It is:
`ORDERED that pursuant to 35 U.S.C. § 324(a) and § 18(a) of the AIA, a
`covered business method patent review is hereby instituted as to claims 3–34 of the
`’024 Patent;
`FURTHER ORDERED that the trial is limited to § 101 and no other
`grounds are authorized; and
`FURTHER ORDERED that Patent Owner, prior to or coincident with the
`filing of Patent Owner’s Response, must elect a set of claims, from (I) claims 3–17,
`(II) claims 18–33, or (III) claims 18–32 and 34, for consideration, or amend the
`claims so that they no longer have coextensive scopes.
`FURTHER ORDERED that pursuant to 35 U.S.C. § 324(d) and 37 C.F.R.
`§ 42.4, the trial commences on the entry date of this decision, and notice is hereby
`given of the institution of a trial.
`
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`PETITIONER:
`
`Deborah E. Fishman
`Michael S. Tonkinson
`Assad H. Rajani
`DICKSTEIN SHAPIRO LLP
`fishmand@dicksteinshapiro.com
`tonkinsonm@dicksteinshapiro.com
`rajania@dicksteinshapiro.com
`
`
`
`PATENT OWNER:
`
`Kent B. Chambers
`TERRILE, CANNATTI, CHAMBERS & HOLLAND LLP
`kchambers@tcchlaw.com
`
`David W. O’Brien
`John Russell Emerson
`HAYNES AND BOONE, LLP
`david.obrien.ipr@haynesboone.com
`russell.emerson.ipr@haynesboone.com
`
`
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