OIP Technologies, Inc. v. Amazon.com, Inc., --- F.3d ---- (2015)
`
`2015 WL 3622181
`Only the Westlaw citation is currently available.
`United States Court of Appeals,
`Federal Circuit.
`
`OIP TECHNOLOGIES, INC., Plaintiff–Appellant
`v.
`AMAZON.COM, INC., Defendant–Appellee.
`
`No. 2012–1696.
`
` | June 11, 2015.
`
`Synopsis
`Background: Patentee brought infringement action against
`online retailer, claiming infringement of its patent for
`computer-implemented methods for pricing a product for
`sale. The United States District Court for the Northern District
`of California, Edward M. Chen, 2012 WL 3985118, granted
`judgment on the pleadings to alleged infringer, finding that
`the patent did not claim patentable subject matter. Patentee
`appealed.
`
`[Holding:] The Court of Appeals, Hughes, Circuit Judge,
`held that the patent involved no more than an abstract idea
`coupled with routine data-gathering steps and conventional
`computer activity.
`
`Affirmed.
`
`The Ninth Circuit reviews appeals of a dismissal
`for failure to state a claim de novo. Fed.Rules
`Civ.Proc.Rule 12(b)(6), 28 U.S.C.A.
`
`Cases that cite this headnote
`
`[3]
`
`Patents
`Eligible subject matter
`
`Patent eligibility is an issue of law reviewed de
`novo on appeal. 35 U.S.C.A. § 101.
`
`Cases that cite this headnote
`
`[4]
`
`Patents
`Laws of nature, natural phenomena, and
`abstract ideas; fundamental principles
`
`Under the now familiar two-part test described
`by the Supreme Court in Alice, a court, in
`assessing whether a patent claims patentable
`subject matter, must first determine whether the
`claims at issue are directed to a patent-ineligible
`concept, such as an abstract idea, and, if so,
`the court must then 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. 35 U.S.C.A. § 101.
`
`Cases that cite this headnote
`
`Mayer, Circuit Judge, filed a concurring opinion.
`
`[5]
`
`Patents
`Data processing
`
`West Headnotes (6)
`
`[1]
`
`Courts
`Particular questions or subject matter
`
`Court of Appeals for the Federal Circuit applies
`regional circuit law to the review of motions to
`dismiss in a patent infringement case. Fed.Rules
`Civ.Proc.Rule 12(b), 28 U.S.C.A.
`
`Cases that cite this headnote
`
`[2]
`
`Federal Courts
`Pleading
`
`A patent relating to computer-implemented
`methods for pricing a product for sale involved
`no more than an abstract idea coupled with
`routine data-gathering steps and conventional
`computer activity, and thus the patent did
`not claim patentable subject matter, where the
`patent involved the abstract idea of offer-based
`price optimization, and the claims' recitation
`of presenting offers to potential customers and
`gathering statistics generated during said testing
`about how the potential customers responded to
`the offers did not provide a meaningful limitation
`on the abstract idea, as the processes were well-
`understood, routine, conventional data-gathering
`activities. 35 U.S.C.A. § 101.
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`1
`
`Ocean Tomo Ex. 1023-001
`
`

`
`OIP Technologies, Inc. v. Amazon.com, Inc., --- F.3d ---- (2015)
`
`Cases that cite this headnote
`
`[6]
`
`Patents
`In general; utility
`
`US Patent 7,970,713. Invalid.
`
`Cases that cite this headnote
`
`Appeal from the United States District Court for the Northern
`District of California in No. 12–CV–1233, Judge Edward M.
`Chen.
`
`Attorneys and Law Firms
`
`Matthew D. Powers, Tensegrity Law Group, LLP, Redwood
`City, CA, argued for plaintiff-appellant. Also represented
`by Steven Cherensky, Paul Ehrlich, Stefani Smith, Aaron
`Matthew Nathan.
`
`Gregory G. Garre, Latham & Watkins LLP, Washington, DC,
`argued for defendant-appellee. Also represented by Gabriel
`Bell, Matthew J. Moore; Richard Gregory Frenkel, Menlo
`Park, CA; Jeffrey H. Dean, Amazon.com., Inc., Seattle, WA.
`
`Before TARANTO, MAYER, and HUGHES, Circuit Judges.
`
`Opinion
`
`HUGHES, Circuit Judge.
`
`*1 OIP Technologies alleges that Amazon.com infringes
`a patent that relates to a method of price optimization
`in an e-commerce environment. The district court granted
`judgment on the pleadings, concluding that the patent does
`not claim patentable subject matter under 35 U.S.C. § 101.
`Because we agree with the district court that the patent-in-
`suit claims no more than an abstract idea coupled with routine
`data-gathering steps and conventional computer activity, we
`affirm.
`
`I
`
`In March 2012, OIP Technologies filed suit against
`Amazon.com alleging infringement of U.S. Patent No.
`7,970,713, which claims computer-implemented methods for
`“pricing a product for sale.” See, e.g., ′713 patent col. 16 ll.
`2–39 (claim 1). The ′713 patent explains that traditionally
`
`merchandisers manually determine prices based on their
`qualitative knowledge of the items, pricing experience, and
`other business policies. In setting the price of a particular
`good, the merchandiser estimates the shape of a demand
`curve for a particular product based on, for example, the
`good itself, the brand strength, market conditions, seasons,
`and past sales. Id. at col. 1 ll. 62–col. 2 l. 2; col. 2 ll. 62–
`66. The ′713 patent states that a problem with this approach
`is that the merchandiser is slow to react to changing market
`conditions, resulting in an imperfect pricing model where
`the merchandiser often is not charging an optimal price that
`maximizes profit. Id. at col. 2 ll. 13–19.
`
`Accordingly, the ′713 patent teaches a price-optimization
`method
`that “help
`[s] vendors automatically
`reach
`better pricing decisions through automatic estimation and
`measurement of actual demand to select prices.” Id. at col. 8
`l. 15–17. Claim 1 recites:
`
`1. A method of pricing a product for sale, the method
`comprising:
`
`testing each price of a plurality of prices by sending
`a first set of electronic messages over a network to
`devices;
`
`wherein said electronic messages include offers of said
`product;
`
`wherein said offers are to be presented to potential
`customers of said product to allow said potential
`customers to purchase said product for the prices
`included in said offers;
`
`wherein the devices are programmed to communicate
`offer terms, including the prices contained in the
`messages received by the devices;
`
`wherein the devices are programmed to receive offers
`for the product based on the offer terms;
`
`wherein the devices are not configured to fulfill orders
`by providing the product;
`
`wherein each price of said plurality of prices is used in
`the offer associated with at least one electronic message
`in said first set of electronic messages;
`
`gathering, within a machine-readable medium, statistics
`generated during said testing about how the potential
`customers responded to the offers, wherein the statistics
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`2
`
`Ocean Tomo Ex. 1023-002
`
`

`
`OIP Technologies, Inc. v. Amazon.com, Inc., --- F.3d ---- (2015)
`
`include number of sales of the product made at each of
`the plurality of prices;
`
`using a computerized system to read said statistics from
`said machine-readable medium and to automatically
`determine, based on said statistics, an estimated outcome
`of using each of the plurality of prices for the product;
`
`*2 selecting a price at which to sell said product
`based on the estimated outcome determined by said
`computerized system; and
`
`sending a second set of electronic messages over the
`network, wherein the second set of electronic messages
`include offers, to be presented to potential customers, of
`said product at said selected price.
`
`Id. at col. 16 ll. 2–39. Thus, claim 1 has the following relevant
`limitations: (1) testing a plurality of prices; (2) gathering
`statistics generated about how customers reacted to the offers
`testing the prices; (3) using that data to estimate outcomes (i.e.
`mapping the demand curve over time for a given product);
`and (4) automatically selecting and offering a new price
`based on the estimated outcome. The dependent claims add
`various computer elements such as including webpages as
`advertisements in the second set of messages and generating
`statistics. See, e.g., id. at col. 16 ll. 56–60 (claim 5), col. 18
`ll. 1–22 (claims 17–18).
`
`Amazon filed a motion to dismiss OIP's complaint,
`arguing that the ′713 patent is drawn to patent-ineligible
`subject matter. The district court granted Amazon's motion,
`finding that the asserted claims merely use a general-
`purpose computer to implement the abstract idea of “price
`optimization” and is therefore ineligible for patent protection
`under 35 U.S.C. § 101. J.A. 22. The district court reasoned
`that without the “insignificant computer-based limitations,”
`the claims merely “describe what any business owner or
`economist does in calculating a demand curve for a given
`product.” J.A. 28.
`
`OIP appeals. We have jurisdiction under 28 U.S.C. § 1295(a)
`(1).
`
`II
`
` [3]
` [2]
`[1]
` We apply regional circuit law to the review of
`motions to dismiss. K–Tech Telecomms., Inc. v. Time Warner
`Cable, Inc., 714 F.3d 1277, 1282 (Fed.Cir.2013). The Ninth
`
`Circuit reviews appeals of a dismissal for failure to state
`a claim under Federal Rule of Civil Procedure 12(b)(6) de
`novo. Id. Our review “is generally limited to the face of
`the complaint, materials incorporated into the complaint by
`reference, and matters of judicial notice.” Id. Patent eligibility
`under 35 U.S.C. § 101 is an issue of law reviewed de novo.
`Accenture Global Servs. v. Guide-wire Software, Inc., 728
`F.3d 1336, 1340–41 (Fed.Cir.2013).
`
`[4]
` A patent may be obtained for “any new and useful
`process, machine, manufacture, or composition of matter,
`or any new and useful improvement thereof.” 35 U.S.C. §
`101. The Supreme Court has “long held that this provision
`contains an important implicit exception: Laws of nature,
`natural phenomena, and abstract ideas are not patentable.”
`Ass'n for Molecular Pathology v. Myriad Genetics, Inc., –––
`U.S. ––––, ––––, 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124
`(2013) (quoting Mayo Collaborative Servs. v. Prometheus
`Labs., Inc., ––– U.S. ––––, ––––, 132 S.Ct. 1289, 1293, 182
`L.Ed.2d 321 (2012)). Under the now familiar two-part test
`described by the Supreme Court in Alice, “[w]e must first
`determine whether the claims at issue are directed to a patent-
`ineligible concept,” such as an abstract idea. Alice Corp.
`Pty. Ltd. v. CLS Bank Int'l, ––– U.S. ––––, ––––, 134 S.Ct.
`2347, 2355, 189 L.Ed.2d 296 (2014). If so, we must then
`“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 . (quoting Mayo, 132 S.Ct. at 1298,
`1297).
`
`*3 [5]
` Here, the claims are directed to the concept of offer-
`based price optimization. Claim 1 broadly recites a “method
`of pricing a product for sale,” and the specification describes
`the invention as an “automatic pricing method and apparatus
`for use in electronic commerce.” ′713 patent col. 2 ll. 49–
`50; id. at col. 1 ll. 27–31. This concept of “offer based
`pricing” is similar to other “fundamental economic concepts”
`found to be abstract ideas by the Supreme Court and this
`court. See, e.g., Alice, 134 S.Ct. at 2357 (intermediated
`settlement); Bilski v. Kap-pos, 561 U.S. 593, 611, 130 S.Ct.
`3218, 177 L.Ed.2d 792 (2010) (risk hedging); Ultramercial,
`Inc. v. Hulu, LLC, 772 F.3d 709, 715 (Fed.Cir.2014) (using
`advertising as an exchange or currency); Content Extraction
`& Transmission LLC v. Wells Fargo Bank, Nat'l Ass'n, 776
`F.3d 1343, 1347 (Fed.Cir.2014) (data collection); Accenture
`Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d
`1336, 1346 (Fed.Cir.2013) (generating tasks in an insurance
`organization). And that the claims do not preempt all price
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`3
`
`Ocean Tomo Ex. 1023-003
`
`

`
`OIP Technologies, Inc. v. Amazon.com, Inc., --- F.3d ---- (2015)
`
`optimization or may be limited to price optimization in the
`e-commerce setting do not make them any less abstract.
`See buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1355
`(Fed.Cir.2014) (collecting cases); Accenture, 728 F.3d at
`1345.
`
`Beyond the abstract idea of offer-based price optimization,
`the claims merely
`recite “well-understood,
`routine
`conventional activit[ies],” either by requiring conventional
`computer activities or routine data-gathering steps. Alice,
`134 S.Ct. at 2359 (quoting Mayo, 132 S.Ct. at 1294)
`(alterations in original). Considered individually or taken
`together as an ordered combination, the claim elements
`fail “to ‘transform’ the claimed abstract idea into a patent-
`eligible application.” Id. at 2357 (quoting Mayo, 132 S.Ct.
`at 1294, 1298). For example, claim 1 recites “sending a
`first set of electronic messages over a network to devices,”
`the devices being “programmed to communicate,” storing
`test results in a “machine-readable medium,” and “using
`a computerized system ... to automatically determine” an
`estimated outcome and setting a price. Just as in Alice, “all
`of these computer functions are ‘well-understood, routine,
`conventional activit[ies]’ previously known to the industry.”
`Alice, 134 S.Ct. at 2359 (quoting Mayo, 132 S.Ct. at 1294)
`(alterations in original); see also buySAFE, 765 F.3d at 1355
`(“That a computer receives and sends the information over a
`network—with no further specification—is not even arguably
`inventive.”). Moreover, the claims are exceptionally broad
`and the computer implementation limitations do little to limit
`their scope. Indeed, the specification makes clear that this
`“programming” and the related computer hardware “refers
`to any sequence of instructions designed for execution on a
`computer system.” ′713 patent col. 6 ll. 31–33.
`
`the
`the automation of
`the claims describe
`At best,
`fundamental economic concept of offer-based price
`optimization through the use of generic-computer functions.
`Both the prosecution history and the specification emphasize
`that the key distinguishing feature of the claims is the ability
`to automate or otherwise make more efficient traditional
`price-optimization methods. For example, the specification
`states that a core advantage of the invention is reducing
`the “extremely high testing costs” of “[b]rute force live
`price testing.” Id. at col. 3 ll. 10–11. Likewise, the patentee
`distinguished traditional pricing research, by emphasizing
`that “the techniques described in [the prior art] generally
`cost more and take more time, and are less accurate
`than the technique recited in [the claims].” J.A. 393. And
`“automatically determining an estimated outcome using each
`
`of the plurality of prices for the product ... means that
`pricing decisions are made with more granularity.” J.A.
`525. But relying on a computer to perform routine tasks
`more quickly or more accurately is insufficient to render
`a claim patent eligible. See Alice, 134 S.Ct. at 2359 (“use
`of a computer to create electronic records, track multiple
`transactions, and issue simultaneous instructions” is not an
`inventive concept); Bancorp Servs., L.L.C. v. Sun Life Assur.
`Co. of Can. (U.S.), 687 F.3d 1266, 1278 (Fed.Cir.2012) (a
`computer “employed only for its most basic function ... does
`not impose meaningful limits on the scope of those claims”);
`cf. DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245,
`1258–59 (Fed.Cir.2014) (finding a computer-implemented
`method patent eligible where the claims recite a specific
`manipulation of a general-purpose computer such that the
`claims do not rely on a “computer network operating in its
`normal, expected manner”).
`
`*4 Nor does the claims' recitation of “present[ing] [offers]
`to potential customers” and “gathering ... statistics generated
`during said testing about how the potential customers
`responded to the offers” provide a meaningful limitation
`on the abstract idea. These processes are well-understood,
`routine, conventional data-gathering activities that do not
`make the claims patent eligible. See Alice, 134 S.Ct. at 2359;
`Mayo, 132 S.Ct. at 1298. Like the claims in Mayo, which
`added only the routine steps of administering medication and
`measuring metabolite levels for the purposes of determining
`optimal dosage, here the addition of steps to test prices
`and collect data based on customer reactions does not add
`any meaningful limitations to the abstract idea. Mayo, 132
`S.Ct. at 1297–98; see also Alice, 134 S.Ct. at 2357 (“
`‘Simply appending conventional steps, specified at a high
`level of generality,’ was not ‘enough ’ to supply an ‘inventive
`concept.’ ”) (quoting Mayo, 132 S.Ct. at 1300, 1297, 1294);
`see also Ultramercial, 772 F.3d at 716 (“[T]he steps of
`consulting and updating an activity log represent insignificant
`‘data-gathering steps,’ ... and thus add nothing of practical
`significance to the underlying abstract idea.”) (citations
`omitted).
`
`On appeal OIP focuses its arguments on comparing the
`claimed invention to the invention found patent eligible
`in Diamond v. Diehr, 450 U.S. 175, 101 S.Ct. 1048, 67
`L.Ed.2d 155 (1981). However, we must read Diehr in
`light of Alice, which emphasized that Diehr does not stand
`for the general proposition that a claim implemented on
`a computer elevates an otherwise ineligible claim into a
`patent-eligible improvement. Alice, 134 S.Ct. at 2358. Rather,
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`4
`
`Ocean Tomo Ex. 1023-004
`
`

`
`OIP Technologies, Inc. v. Amazon.com, Inc., --- F.3d ---- (2015)
`
`Diehr involved “a ‘well-known’ mathematical equation ...
`used ... in a process designed to solve a technological problem
`in ‘conventional industry practice.’ “ Id. (quoting Diehr,
`450 U.S. at 177, 178). Just as Diehr could not save the
`claims in Alice, which were directed to “implement[ing]
`the abstract idea of intermediated settlement on a generic
`computer”, Alice, 134 S.Ct. at 2358–59, it cannot save OIP's
`claims directed to implementing the abstract idea of price
`optimization on a generic computer. See id. at 2359–60 (“Nor
`do [the claims] effect an improvement in any other technology
`or technical field.”) (citing Diehr, 450 at 177–78).
`
`III
`
`We have considered all of OIP's arguments and find them
`unpersuasive. Because the ′713 patent claims the abstract
`idea of offer-based price optimization and lacks an “inventive
`concept” sufficient to “transform” the claimed subject matter
`into a patent-eligible application of that idea, we affirm.
`
`AFFIRMED
`
`I write separately to address the argument advanced by OIP
`Technologies, Inc. that the district court erred in resolving
`the patent eligibility issue on the pleadings. Failure to recite
`statutory subject matter is the sort of “basic deficiency,”
`that can, and should, “be exposed at the point of minimum
`expenditure of time and money by the parties and the
`court,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558, 127
`S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations and internal
`quotation marks omitted). Addressing 35 U.S.C. § 101 at the
`outset not only conserves scarce judicial resources and spares
`litigants the staggering costs associated with discovery and
`protracted claim construction litigation, it also works to stem
`the tide of vexatious suits brought by the owners of vague and
`overbroad business method patents. Accordingly, where, as
`here, asserted claims are plainly directed to a patent ineligible
`abstract idea, we have repeatedly sanctioned a district court's
`decision to dispose of them on the pleadings. See, e.g.,
`Content Extraction & Transmission LLC v. Wells Fargo
`Bank, 776 F.3d 1343, 1349 (Fed.Cir.2014); Ultramercial, Inc.
`v. Hulu, LLC, 772 F.3d 709, 717 (Fed.Cir.2014); buySAFE,
`Inc. v. Google, Inc., 765 F.3d 1350, 1352 (Fed.Cir.2014).
`I commend the district court's adherence to the Supreme
`Court's instruction that patent eligibility is a “threshold” issue,
`Bilski v. Kappos, 561 U.S. 593, 602, 130 S.Ct. 3218, 177
`L.Ed.2d 792 (2010), by resolving it at the first opportunity.
`
`Opinion for the court filed by Circuit Judge HUGHES.
`
`Concurring opinion filed by Circuit Judge MAYER.
`
`All Citations
`
`MAYER, Circuit Judge, concurring.
`
`--- F.3d ----, 2015 WL 3622181
`
`End of Document
`
`© 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
` © 2015 Thomson Reuters. No claim to original U.S. Government Works.
`
`5
`
`Ocean Tomo Ex. 1023-005