Kroy IP Holdings, LLC v. Safeway, Inc., --- F.Supp.3d ---- (2015)
`2015 WL 3452469
`
`2015 WL 3452469
`Only the Westlaw citation is currently available.
`United States District Court,
`E.D. Texas, Marshall Division.
`
`Kroy IP Holdings, LLC, Plaintiff,
`v.
`Safeway, Inc., Defendant.
`
`CASE NO. 2:12–cv–800–
`WCB | Signed May 29, 2015
`
`Synopsis
`Background: Patentee brought action against alleged
`infringer, alleging infringement of patent relating to method
`and system for providing incentive award programs over
`computer network. Alleged infringer moved for summary
`judgment of invalidity on ground that asserted claims of
`patent were directed to ineligible subject matter.
`
`[Holding:] The District Court, William C. Bryson, Circuit
`Judge, held that claims in patent did not contain inventive
`concept sufficient to transform the claimed abstract idea into
`a patent-eligible application.
`
`Motion granted.
`
`West Headnotes (3)
`
`[1]
`
`Patents
`Data processing
`
`Claims in patent relating to method and system
`for providing incentive award programs over
`computer network did not contain inventive
`concept sufficient to transform the claimed
`abstract idea, i.e., an incentive award program,
`into a patent-eligible application; although patent
`contained detailed software
`implementation
`guidelines, claimed system involved generic
`use of computer and conventional computer
`functions rather than improvement in computer
`technology or manipulation of website, and
`additional features listed in patent beyond an
`abstract incentive award program, including
`
`program providing for communication between
`provider's awards and
`its
`inventory, were
`conventional features that would be expected to
`be associated with a computer-based incentive
`award program. 35 U.S.C.A. § 101.
`
`1 Cases that cite this headnote
`
`[2]
`
`Patents
`In general; utility
`
`US Patent 7,054,830. Invalid in Part.
`
`Cases that cite this headnote
`
`[3]
`
`Patents
`In general; utility
`
`US Patent 5,822,735, US Patent 5,970,469.
`Cited.
`
`Cases that cite this headnote
`
`Attorneys and Law Firms
`
`Steven C. Schroer, Fitch Even Tabin & Flannery, Boulder,
`CO, Timothy Paul Maloney, Alison Aubry Richards, David
`Allen Gosse, Joseph Frank Marinelli, Nicole Lyn Little, Fitch
`Even Tabin & Flannery, Chicago, IL, Austin Hansley, Austin
`Hansley PLLC, Dallas, TX, Melissa Richards Smith, Gillam
`& Smith, LLP, Marshall, TX, for Plaintiff.
`
`Kirsten R. Rydstrom, Justin J. Kontul, Reed Smith,
`Pittsburgh, PA, Christine M. Morgan, William R. Overend,
`Reed Smith LLP, San Francisco, CA, Dallas William Tharpe,
`Herbert A. Yarbrough, III, Yarbrough Wilcox, PLLC, Debra
`Elaine Gunter, Findlay Craft PC, Tyler, TX, Gerard Michael
`Donovan, Reed Smith LLP, Washington, DC, Stuart A.
`Shanus, Reed Smith LLP, Los Angeles, CA, for Defendant.
`
`MEMORANDUM OPINION AND ORDER
`
`WILLIAM C. BRYSON, UNITED STATES CIRCUIT
`JUDGE
`
`*1 In this patent infringement action, defendant Safeway,
`Inc., has moved for summary judgment of invalidity on the
`ground that the asserted claims of Kroy's patent are directed to
`
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`ineligible subject matter. Dkt. No. 140. The Court GRANTS
`the motion.
`
`I. BACKGROUND
`
`Plaintiff Kroy IP Holdings, LLC, is the record owner of U.S.
`Patent No. 7,054,830 (“the '830 patent”), which relates to a
`method and system for providing incentive award programs
`over a computer network. The concept underlying the '830
`patent is that it creates a computerized means for companies
`to design or select incentive programs and to provide prizes
`to consumers who participate in the programs.
`
`Kroy asserts that defendant Safeway, Inc., infringes claims
`1, 19, 20, 21, 23, and 24 of the '830 patent. 1 The two
`independent claims of the '830 patent are claims 1 and 19.
`Those claims recite the following:
`
`1. A system for incentive program participation and
`automated award fulfillment, comprising:
`
`a host computer coupled to a network;
`
`a first database accessible from said host computer; and
`
`an automated award fulfillment application program
`executed on said host computer for participation in
`incentive programs of a plurality of providers in
`communication with an inventory management system
`associated with each of said plurality of providers
`wherein said automated award fulfillment application
`program provides sponsor-selected fulfillment, said
`automated award fulfillment application program
`comprising:
`
`code adapted to provide a sponsor-selected specific
`award unit
`item, said sponsor-selected specific
`award unit
`item being
`tailored
`to demographic
`and psychographic preferences of a sponsor-selected
`consumer user; and
`
`code adapted to provide a sponsor-selected geographic
`location for fulfillment.
`
`19. A method for providing an incentive programs [sic] and
`automating [sic] award fulfillment, comprising:
`
`providing a host computer;
`
`providing an incentive program on the host computer,
`wherein a participant may participate in said incentive
`program;
`
`providing a database of awards on the host computer
`associated with the incentive program; and
`
`providing automated award fulfillment of said awards to
`participants, including
`
`inventory
`an
`communication with
`providing
`management system associated with each of a
`plurality of providers wherein said automated award
`fulfillment comprises
`
`providing a sponsor-selected specific award unit item,
`
`providing said sponsor-selected specific award
`unit item tailored according to demographic and
`psychographic preferences of a sponsor-selected
`consumer user, and
`
`providing a sponsor-selected geographic location for
`fulfillment.
`
`*2 In plain English, claim 1 recites a program-based
`system for providing incentive awards to consumers. 2
`The program, which is run on a “host computer,” has
`several required features: it contains a database of awards
`in communication with an inventory management system
`of the company offering the incentive awards (referred to
`as a “provider”); it provides for a company that wishes
`to offer an incentive program or promotion (referred to
`as a “sponsor”) to select customer awards tailored to the
`demographic and psychographic preferences of customers
`selected by the sponsor; and it provides for the sponsor
`to select the geographic location where the awards can be
`redeemed. According to Kroy, a sponsor and a provider can
`be the same entity, in which case all of the functions set forth
`in the claim are performed by the company that offers the
`incentive award program. Claim 19 is directed to a method
`instead of a system, but the limitations of claim 19 otherwise
`parallel those of claim 1.
`
`The asserted claims that depend from claim 19 add that
`the database of awards includes awards from a plurality
`of sponsors (claim 20), that the method comprises the
`additional steps of “associating an award with the incentive
`program” and “associating a fulfillment method with the
`award” (claim 21), and that the method comprises the
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`additional step of “providing a card comprising memory
`for storing data associated with a user” (claim 23). The
`asserted claims that depend from claim 23 add that the data
`is “a personal identification number” (claim 24), and that
`the data is “information relating to a user's participation in
`said incentive program” (claim 25). The asserted claim that
`depends from claim 21 adds that “associating a fulfillment
`method” comprises providing a program that “identifies an
`award based on the geographic proximity of an award winner
`to a redemption location of an award in the database of
`awards” (claim 22).
`
`The '830 specification acknowledges that “[i]ncentive award
`programs, in which companies contract with sponsoring
`companies for programs to promote sales of the sponsoring
`companies' products or services, are well-known.”'830 patent,
`col. 1, ll. 30–33; col. 7, ll. 51–53. Such programs “offer
`awards and incentives to modify behavior of individual
`customers and to direct the consumers to some pre-
`determined action, such as purchase of products or services
`upon visiting a retail site, viewing advertising, testing a
`product, or the like.” Id., col. 1, ll. 3942.
`
`The specification states that traditional, non-computerized
`incentive programs have various drawbacks for sponsors,
`including the costs of generating and administering the
`programs, tracking the participation of consumers in the
`programs, and fulfilling the awards or prizes won in the
`programs. '830 patent, col. 1, line 65, through col. 2, line
`10. Traditional incentive programs also have drawbacks for
`consumers, such as the difficulty of tracking participation in
`multiple programs. Id., col. 1, ll. 49–64. The specification
`further points out that non-automated incentive programs,
`such as promotional mailings and coupon distribution and
`redemption systems, can be expensive and cumbersome to
`operate, and can result in low consumer participation because
`of distribution and redemption problems. Id., col. 2, ll. 24–56.
`
`introduction of
`the
`the specification,
`to
`According
`digital computers and computer networks has eliminated
`“some of the inconveniences of conventional incentive
`programs, particularly those that relate to data tracking
`and manipulation.”'830 patent, col. 2, ll. 57–60. Although
`acknowledging that computers have been used in connection
`with incentive programs in the past, the specification asserts
`that known computer incentive programs “address some, but
`not all of the drawbacks of traditional promotions.” Id., col.
`2, line 64, to col. 3, line 1. In particular, the specification
`states, computer-based systems have been used to merge
`
`information for various promotions and to track consumer
`participation in incentive programs. Id., col. 3, line 3, through
`col. 4, line 9. However, according to the specification, “none
`of the existing systems address all of the problems inherent
`in known incentive programs, particularly the problem of
`the need for an incentive program system that conveniently
`tracks participation while offering automated generation of
`incentive programs and automated fulfillment of awards won
`in incentive programs.” Id., col. 4, ll. 11–16.
`
`*3 The specification also acknowledges that computerized
`incentive programs are offered on the Internet, but it asserts
`that such systems “are generally offered by a single sponsor
`and are generally limited to offering consumers the ability
`to participate in incentive programs,” while not offering
`sponsors “the ability to conveniently generate incentive
`programs, to track participation of consumers in multiple
`incentive programs, or to provide for automated fulfillment
`of awards.” Id., col. 4, ll. 17–24. Such systems, according
`to the specification, also lack efficient means for fulfilling
`awards promised in promotional campaigns. Id., col. 4, ll.
`2532. In summary, the specification states that the prior art
`did not satisfy the need for an incentive program and award
`fulfillment system “that provides easy access to consumers
`who have standard computer hardware and software, that
`permits sponsors to build or purchase incentive programs
`easily and efficiently, and that provides for convenient
`tracking of participation and convenient, automated award
`fulfillment.” Id., col. 5, ll. 37–43.
`
`The advantages of the patented invention, according to
`the specification, are that it provides “consumer access
`to expanded incentive programs, using a conventional
`computer”; it permits “sponsors to build, buy, store, modify,
`offer, track and administer incentive programs”; and it
`permits sponsors and retailers “to offer improved award
`fulfillment for participants in incentive programs.”'830
`patent, col. 5, ll. 47–54. The specification touts the Internet's
`“increased processing power and ability to access remote
`users” who have “standard equipment such as a personal
`computer, without requiring specific hardware or software”
`and its “dynamic opportunities to transmit, store and retrieve
`data, so that new or different incentive programs may be
`conducted on a much more frequent basis than is the case with
`traditional paper systems.” Id., col. 5, ll. 55–65. According
`to the specification, the invention permits consumers to
`participate in incentive programs by connecting to a website
`located on a server of a host system. Id., col. 6, ll. 1–5.
`It also permits sponsors “to list incentive programs on an
`
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`Internet site, to obtain prepackaged incentive programs from
`a host, to build incentive programs using computer software
`provided by the host, to associate prizes with incentive
`programs offered through the site, and to fulfill awards won
`by consumers.” Id., col. 6, ll. 13–19. In addition, the invention
`envisions the creation of databases of items that permit
`automated fulfillment of specific items as incentive rewards.
`Id., col. 6, at 24–27, 40–45.
`
`II. DISCUSSION
`
`Safeway argues that the asserted claims of the '830 patent
`are directed to an abstract concept—the idea of conducting
`inventive programs and fulfilling the awards in those
`programs through the use of general purpose computers and
`networks such as the Internet. The claims are therefore invalid
`under 35 U.S.C. § 101, according to Safeway, because they
`fail to recite patent-eligible subject matter.
`
`Section 101 provides that “[w]hoever 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 has
`interpreted section 101 to bar the issuance of patents on
`“laws of nature, physical phenomena, and abstract ideas.”
`Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204,
`65 L.Ed.2d 144 (1980). Safeway contends that Kroy's claims
`are unpatentable because they are drawn to the abstract idea
`of using incentive award programs to promote sales. Reciting
`the use of computers to implement that abstract idea does
`not rescue Kroy's claims, Safeway argues, because “[u]sing a
`computer to apply the ancient idea of incentivizing a customer
`to buy more products through awards and prizes does not turn
`a basic business method into patentable subject matter.” Dkt.
`No. 140, at 1–2.
`
`A. Patentable Subject Matter Under 35 U.S.C. § 101
`Over the past several years, as a result of a series of decisions
`from the Supreme Court and the Federal Circuit, the law of
`unpatentable subject matter has developed to the point that
`it is possible to discern a number of governing principles
`applicable to cases such as this one. The Supreme Court's
`decisions in Bilski v. Kappos, 561 U.S. 593, 130 S.Ct. 3218,
`177 L.Ed.2d 792 (2010), Mayo Collaborative Services v.
`Prometheus Laboratories, Inc., ––– U.S. ––––, 132 S.Ct.
`1289, 182 L.Ed.2d 321 (2012), and Alice Corp. Pty. Ltd.
`
`v. CLS Bank International, ––– U.S. ––––, 134 S.Ct. 2347,
`189 L.Ed.2d 296 (2014), deserve particularly close attention
`in determining whether the patent in this case is directed to
`unpatentable subject matter under section 101.
`
`1. Recent Supreme Court Decisions
`
`a. Bilski
`*4 In Bilski, the Supreme Court addressed the patentability
`of an invention claiming a method for buyers and sellers of
`commodities to hedge against the risk of price fluctuations.
`As the Court explained, claim 1 of the application at issue
`in Bilski described a series of steps instructing how to hedge
`against risk, and claim 4 put the concept articulated in claim
`1 into a simple mathematical formula. Claim 1 in Bilski
`provided as follows:
`
`(a) initiating a series of transactions between said
`commodity provider and consumers of said commodity
`wherein said consumers purchase said commodity at a
`fixed rate based upon historical averages, said fixed rate
`corresponding to a risk position of said consumers;
`
`(b) identifying market participants for said commodity
`having a counter-risk position to said consumers; and
`
`(c) initiating a series of transactions between said
`commodity provider and said market participants at a
`second fixed rate such that said series of market participant
`transactions balances the risk position of said series of
`consumer transactions.
`
`130 S.Ct. at 3223–24.
`
`The Supreme Court characterized the claims in Bilski as
`efforts to patent “both the concept of hedging risk and the
`application of that concept to energy markets.” 130 S.Ct. at
`3229. Applying principles drawn from several of its prior
`decisions, the Court held that the inventions claimed in
`Bilski“are not patentable processes because they are attempts
`to patent abstract ideas. Id. at 3229–30. The Court pointed out
`that the basic concept of hedging, or protecting against risk, is
`a fundamental economic practice long prevalent in our system
`of commerce and taught in any introductory finance class;
`as such, the Court held, it “is an unpatentable abstract idea.”
`Id. at 3231. “[A]llowing a party to patent the principle of
`risk hedging, the court explained, would pre-empt use of this
`approach in all fields, and would effectively grant a monopoly
`over an abstract idea.” Id.
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`The Court added that the prohibition against patenting
`abstract ideas “ ‘cannot be circumvented by attempting to
`limit the use of the formula to a particular technological
`environment’ or by adding ‘insignificant postsolution
`activity.’ ” 130 S.Ct. at 3230, quoting Diamond v. Diehr,
`450 U.S. 175, 191–92, 101 S.Ct. 1048, 67 L.Ed.2d 155
`(1981). Accordingly, after holding the two principal claims
`to be unpatentable because they were drawn to the basic
`concept of hedging, the Court held that the remaining claims
`were merely examples of “how hedging can be used in
`commodities and energy markets,” and were therefore also
`unpatentable. “[L]imiting an abstract idea to one field of
`use or adding token postsolution components,” the Court
`explained, “did not make the concept patentable.” 130 S.Ct.
`at 3231.
`
`The Bilski Court addressed the “machine-or-transformation”
`test that the Federal Circuit had relied on to determine whether
`a claim was drawn to a patentable process. The Court held that
`the machine-or-transformation test, which asks whether the
`process at issue “is tied to a particular machine or apparatus
`or it transforms a particular article into a different state or
`thing,”130 S.Ct. at 3225, is a “useful and important clue” in
`determining whether some claimed inventions are patentable
`under section 101, but is “not the sole test for deciding
`whether an invention is a patent-eligible ‘process.’ ” Id. at
`3227.
`
`b. Mayo
`In Mayo, decided two years after Bilski, the Supreme
`Court revisited the issue of patentable subject matter. The
`claims in Mayo were directed to methods of optimizing
`the therapeutic efficacy of certain treatment protocols for
`an immune-mediated gastrointestinal disorder. The claims
`were embodied in certain diagnostic tests, and the patentee
`claimed that the unlicensed use of those tests infringed the
`claims. The method recited in the claims included the steps
`of administering a particular form of the drug thiopurine to a
`patient, determining the amount of the drug in the patient, and
`then, if the drug was present in the patient's red blood cells
`in less than a particular concentration, concluding that the
`amount of the drug given to the patient should be increased,
`while if the drug was present in the patient's red blood cells
`in more than a particular concentration, concluding that the
`amount of the drug given to the patient should be reduced.
`
`*5 The Supreme Court held that the claims in Mayo were
`unpatentable under 35 U.S.C. § 101. The Court began with
`the proposition that the claims were drawn to laws of nature
`
`— “namely, relationships between concentrations of certain
`metabolites in the blood and the likelihood that a dosage
`of a thiopurine drug will prove ineffective or cause harm.”
`132 S.Ct. at 1296. The question to be decided, as the Court
`described it, was “whether the claims do significantly more
`than simply describe these natural relations.” That is, “do
`the patent claims add enough to their statements of the
`correlations to allow the processes they describe to qualify
`as patent-eligible processes that apply natural laws?” Id.
`at 1297 (emphases in original). The Court held that they
`did not. Instead, the Court held, the steps in the claimed
`processes, other than the natural laws themselves, “involve
`well-understood, routine, conventional activity previously
`engaged in by researchers in the field.” Id. at 1294.
`
`Although the technology in Mayo was quite different from the
`technology at issue in this case, the Mayo case nonetheless
`bears significantly on this case in several respects. First, the
`Court restated the point made in Bilski that the fact that an
`abstract idea (like a natural law) is limited to a particular
`“field of use” or added “token postsolution components”
`does not make the concept patentable. 132 S.Ct. at 1301.
`Second, the Court stated that merely implementing an abstract
`idea, such as a mathematical principle, “on a physical
`machine, namely a computer,” is not a patentable application
`of that principle. Id. Third, the Court emphasized that the
`risk of preempting later inventive contributions—a risk that
`underlies the policy against allowing patents on abstract ideas
`or laws of nature—is not avoided simply because the abstract
`ideas or laws of nature at issue “are narrow laws that may
`have limited applicability.” Id. at 1302. Finally, discussing
`the line between natural laws and the patentable inventions
`that employ those natural laws, the Court noted that a process
`that focuses upon the use of a natural law must “contain other
`elements or a combination of elements, sometimes referred to
`as an ‘inventive concept,’ sufficient to ensure that the patent
`in practice amounts to significantly more than a patent upon
`the natural law itself.” Id. at 1294.
`
`c. Alice
`Four years after Bilski and two years after Mayo, the
`Supreme Court again returned to the issue of unpatentable
`subject matter in Alice. The Alice case was similar in many
`respects to Bilski, with the important difference that Alice
`involved claims to methods and systems of doing business
`implemented on a computer.
`
`The claims at issue in Alice were drawn to a computerized
`system for mitigating “settlement risk,” i.e., the risk that only
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`one party to an agreed-upon financial exchange will fail to
`satisfy its obligation. As the Court explained, the claims were
`“designed to facilitate the exchange of financial obligations
`between two parties by using a computer system as a third-
`party intermediary.” Alice, 134 S.Ct. at 2352. The claims
`involved “a method of exchanging financial obligations
`between two parties using a third-party intermediary to
`mitigate settlement risk. The intermediary creates and updates
`‘shadow’ records to reflect the value of each party's actual
`accounts held at ‘exchange institutions,’ thereby permitting
`only those transactions for which the parties have sufficient
`resources. At the end of each day, the intermediary issues
`irrevocable instructions to the exchange institutions to carry
`out the permitted transactions.” Id. at 2356.
`
`The Alice Court began by noting that Mayo had constructed
`a two-step framework for determining patent eligibility for
`claims challenged under section 101 as based on abstract
`ideas. First, the Court explained, “we determine whether the
`claims at issue are directed to one of those patent-ineligible
`concepts [including an abstract idea]. If so, we then ask
`‘[w]hat else is there in the claims before us?’ To answer
`that question, we 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. We have described
`step two of this analysis as a search for an inventive concept—
`i.e., an element or combination of elements that is ‘sufficient
`to ensure that the patent in practice amounts to significantly
`more than a patent upon the [ineligible concept] itself.” 134
`S.Ct. at 2355 (citations and quotation marks omitted).
`
`*6 The Supreme Court held that the claims before it in Alice
`were drawn to the abstract idea of intermediated settlement.
`Like risk hedging in Bilski, the Court held that intermediated
`settlement is a fundamental economic practice that qualifies
`as an “abstract idea” and thus is beyond the scope of 35 U.S.C.
`§ 101. 134 S.Ct. at 2356. Both concepts, the Court held, “are
`squarely within the realm of ‘abstract ideas' as we have used
`that term.” Id. at 2357. Quoting Mayo, the Court explained
`that “[s]imply appending conventional steps, specified at a
`high level of generality” is not enough to supply an inventive
`concept. Id.
`
`On one important issue, the facts of Alice required the Court
`to go beyond Bilski. The claims in Bilski did not require the
`use of computers, while the claims in Alice did. Significantly,
`the Court held that introducing the use of a computer into the
`claims did not render the claims in Alice patentable. To the
`
`contrary, “the mere recitation of a generic computer cannot
`transform a patent-ineligible abstract idea into a patent-
`eligible invention.” 134 S.Ct. at 2358. The relevant question,
`the Court explained, “is whether the claims here do more
`than simply instruct the practitioner to implement the abstract
`idea of intermediated settlement on a generic computer.” Id.
`at 2359. The Court concluded that they did not, because
`the function performed by the computer at each step of the
`claims was “purely conventional,” id., quoting Mayo, 132
`S.Ct. at 1298. As the Court explained, the claims before it
`did not “purport to improve the functioning of the computer
`itself, [nor did] they effect an improvement in any other
`technology or technical field.... Instead, the claims at issue
`amount to nothing significantly more than an instruction to
`apply the abstract idea of intermediated settlement using some
`unspecified, generic computer,” which the Court held was
`not enough to render the abstract idea patentable. Id. at 2360
`(quotation marks and citation omitted).
`
`2. Recent Federal Circuit Precedents
`
`a. Ultramercial
`The Federal Circuit has applied the guidance from Bilski,
`Mayo, and Alice in a number of cases, several of which
`have set forth principles that are pertinent to this case. The
`Federal Circuit case that is perhaps most directly applicable
`to this one is Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709
`(Fed.Cir.2014). That case involved a patent on a method of
`distributing copyrighted media products over the Internet.
`The claimed method provided that a consumer would receive
`a copyrighted media product for free, in exchange for
`viewing an advertisement, and the advertiser would pay for
`the copyrighted content. The claim addressed by the court
`divided the method into 11 steps that recited the process in
`detail, from the receipt of the copyrighted materials from the
`content provider, through the sale of the product at an Internet
`site, through the display of the advertising to the customer
`(after which the customer is offered access to the product),
`and finally to the receipt of payment from the sponsor of the
`advertising message.
`
`The Federal Circuit had previously held the claims in
`Ultramercial to be patent-eligible, seeUltramercial, Inc. v.
`Hulu, LLC, 657 F.3d 1323 (Fed.Cir.2011), vacated and
`remanded,––– U.S. ––––, 132 S.Ct. 2431, 182 L.Ed.2d 1059
`(2012); Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335
`(Fed.Cir.2013), vacated and remanded,––– U.S. ––––, 134
`S.Ct. 2870, 189 L.Ed.2d 828 (2014). However, in its most
`recent opinion in Ultramercial, issued after the Supreme
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`Ocean Tomo Ex. 1010-006
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`Kroy IP Holdings, LLC v. Safeway, Inc., --- F.Supp.3d ---- (2015)
`2015 WL 3452469
`
`Court remanded the case for reconsideration in light of Alice,
`the Federal Circuit held that the claims in Ultramercial
`were directed to unpatentable subject matter. Following the
`analytical path set out in Mayo and Alice, the Ultramercial
`court first held that the recited method was directed to an
`abstract idea. The court explained that “receiving copyrighted
`media, selecting an ad, offering the media in exchange for
`watching the selected ad, allowing the consumer access to
`the media, and receiving payment from the sponsor of the
`ad all describe an abstract idea, devoid of a concrete or
`tangible application.” 772 F.3d at 715. Focusing on the
`additional limitations in the claims, the court noted that most
`of them simply described “the abstract idea of showing an
`advertisement before delivering free content.” Id. As to other
`limitations, the court ruled that “the addition of merely novel
`or non-routine components to the claimed idea [does not]
`necessarily turn[ ] an abstraction into something concrete.”
`Rather, the court explained, “any novelty in implementation
`of the idea is a factor to be considered only in the second step
`of the Alice analysis.” Id.
`
`*7 Addressing that second step, the court considered
`whether the claims contained “ ‘an inventive concept’ to
`‘transform’ the claimed abstract idea into patent-eligible
`subject matter.” 772 F.3d at 715. The limitations of the patent
`in suit, the court found, “do not transform the abstract idea
`that they recite into patent-eligible subject matter because
`the claims simply instruct the practitioner to implement
`the abstract idea with routine, conventional activity.” Id.
`Addressing the 11 steps set forth in the claim, the court
`held that they constituted merely “routine additional steps
`such as updating an activity log, requiring a request from
`the consumer to view the ad, restrictions on public access,
`and use of the Internet,” which were not sufficient to
`“transform an otherwise abstract idea into patent-eligible
`subject matter.” Id. at 716. “That some of the eleven steps
`were not previously employed in this art is not enough—
`standing alone—to confer patent eligibility upon the claims
`at issue.” Id. (citations omitted).
`
`Finally, the court looked to the “machine or transformation”
`test that the Supreme Court in Bilski said was an “important
`clue” in determining whether some inventions are patent
`eligible under section 101, Bilski, 561 U.S. at 604, 130 S.Ct.
`3218. The claims of the patent at issue were not directed
`to a machine, within the meaning of that test, because they
`were “not tied to any particular novel machine or apparatus,
`only a general purpose computer.” 772 F.3d at 716. The
`limitations relating to the Internet and to the addition of a
`
`general purpose computer to otherwise conventional steps
`were not sufficient to make an invention patent-eligible. Id.
`Moreover, the court stated, a transaction such as the one at
`issue in that case, involving “manipulations of ‘public or
`private legal obligations or relationships, business risks, or
`other such abstractions cannot meet the [transformation] test
`because they are not physical objects or substances, and they
`are not representative of physical objects or substances.’ ...We
`therefore hold that the claims of the [patent at issue] do not
`transform any article to a different state or thing.” Id. at
`717 (citation omitted). Accordingly, the court concluded that
`the patent claims were directed to “no more than a patent-
`ineligible abstract idea.” Id.
`
`b. Content Extraction
`A month after the decision in Ultramercial, the Federal
`Circuit again addressed the application of section 101 in a
`case involving a patent to a computerized business method,
`and again it held that the claims were not patent eligible. That
`case, Content Extraction & Transmission LLC v. Wells Fargo
`Bank, 776 F.3d 1343 (Fed.Cir.2014), involved patents to a
`method of extracting data from hard copy documents using
`an automated digitizing unit such as a scanner, recognizing
`specific information from the extracted data, and storing
`that information in a memory. The method could be used,
`for example, in an automated teller machine that rec