OIP v. Amazon (Fed. Cir. 2015)
In a short-but-important opinion, the Federal Circuit has affirmed a district court’s finding (on motion-to-dismiss) that OIP’s patent claims are invalid as lacking patent eligible subject matter.
The claims are directed to a multi-step process of using an offer-based inquiry method for setting product price. (U.S. Patent No. 7,970,713). The basic problem is that it is difficult to figure-out the profit-maximizing price for any given product. The inventor’s insight here is that, unlike a land-based grocery store where prices are publicly labeled, an internet-based store can offer a different price to each consumer. The invention spells out a method of testing various price-points by actually offering the product for sale to consumers different consumers being given different prices. The results of those offers (whether or not consumers purchased at the given price) can then be used to automatically calculate the price-point.
In reviewing the claimed invention, the Federal Circuit found it to be “no more than an abstract idea coupled with routine data-gathering steps and conventional computer activity.” As such, the claims are ineligible for patent protection.
Following the two-step approach of Alice Corp v. CLS Bank, the Federal Circuit first found that the claims did encompass an abstract idea — namely the abstract idea of “offer-based price optimization.” We know that the price optimization is an abstract idea because it is similar to the “fundamental economic practices” that the Supreme Court has previously found to be abstract ideas. (Note – here the appellate panel misquotes the Supreme Court as saying “fundamental economic concepts” rather than practices.) The court also states: the fact that “the claims do not preempt all price optimization or may be limited to price optimization in the e-commerce setting do not make them any less abstract.”
The second step of Alice Corp considers whether the claims include an additional inventive concept sufficient to transform the abstract idea into a patent eligible invention. Here, the court finds that additional limitations and concepts are all well understood, routine, and conventional activities that merely require conventional computer technology. “[R]elying on a computer to perform routine tasks more quickly or more accurately is insufficient to render a claim patent eligible.”
The opinion of the court was penned by Judge Hughes and joined by Judge Taranto. Judge Mayer published an additional concurring opinion indicating that eligibility is properly addressed at the motion-to-dismiss stage.
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,” Twombly, 550 U.S. 544 (2007). 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. . . . 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 (2010), by resolving it at the first opportunity.
Still fighting against this tide, Judge Gilstrap (E.D. Tex.) requires an accused infringer to must obtain leave of the court after showing good cause before filing a motion to dismiss on patent eligiblity. (Joe Mullin Article).
Despite the suggested cost of patent litigation, I expect that winning on motion-to-dismiss is considerably less expensive than the IPR/PGR/CBM process.
While it appears to have originated in Mayo, it’s worth noting that the “routine and conventional” test showed up in the PTO training materials in March of this year. See page 22, for example.
link to uspto.gov
Why don’t we just go to a “technical arts” test already?*
It seems pretty clear that the Alice “two step” gibberish (some ideas are more “abstract” than other ideas? all ideas are abstract because they are ideas – it’s like “step one – is the water wet?”) really ultimately boils down to: is the invention an advancement in science/technology, or business/finance? I mean, that’s really what the “something more” gibberish in step two gets at. So let’s remove the gibberish, and lay things out in a straightforward way. And, though this would be contrary to American exceptionalism, we could look to the EPO case law for some helpful guidance as to how to analyze whether features are “technical” or not.
*That’s a rhetorical question; I appreciate what’s involved in actually implementing changes in the law.
I appreciate your appreciation Tex.
I find it “curious,” just how difficult it is for certain factions to be inte11ectually honest about the fact that it is the judicial branch re-writing patent law (be it any portion of the judicial branch – district, CAFC, or the Supremes). I have to wonder if people really do have a difficult time understanding the difference between statutory law and common law. I would have thought this to be a foundational understanding, but apparently, such gets in the way of chasing windmills.
Regarding the ultimate sentence:
“Despite the suggested cost of patent litigation, I expect that winning on motion-to-dismiss is considerably less expensive than the IPR/PGR/CBM process.”
While generally true, this story relates to a point (eligibility under 101) which cannot be raised in an IPR. In this case there was no choice but to raise the challenge in a MTD and not to the PTAB.
This one would have likely fit as a CBM.
True for this case. But for most 101 cases – probably not.
This is yet another clear example that patent protection is claimed in order to limit competition which is bad in a market-based society.
Patent protection would not serve the constitutional purpose here “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”.
Patents would provide exlicivity on the market here. That reminds of the original purpose of patents centuries ago: to give a privilege to certain businesses.
As early as 1623, the British government established that there were too many of these privileges in the “Statute of Monopolies”.
But of course it is attractive for any business to fight competition by law rather than by market excellence.
Incidentally, the practice to offer different prices to different customers reminds me of cheap airline companies that allegedly play all kinds of games with you. In my view, that is quite a miserable practice. I have been told that Apple users are offered a higher price since they are expected to be susceptible to “snob appeal”. And if you just browse prices and come back later, you allegedly get a higher price as well.
You clearly have no idea how businesses operate. Businesses don’t invest in new technology or practices if they can easily be taken by the competitors. The reason is cost. The reason is that the business that take will have lower costs and win over the ones that invest.
That is reality. It is just frightening how so many ignorant people are in on reshaping our patent laws. Go and get some real world experience before you start your yapping.
(Thanks Obama for people like this. You filled the Fed. Cir. with people that have no science background and never practiced patent law.)
You clearly have no idea how businesses operate. Businesses don’t invest in new technology or practices if they can easily be taken by the competitors.
And yet Safeway and many other companies use computers to perform patent ineligible business methods that anybody can easily “take.”
Go figure.
So the relevance of that was what—to just harass and disrupt.
Nine years and running…
Are you really surprised Night?
the relevance of that was what
The relevance is to demonstrate that your statement that “businesses don’t invest in easily taken practices” is objectively false. Most second graders who have run a lemonade stand understand this.
I’m not sure how the point managed to fly over your lofty head. I’m also not surprised that your li’l buddy “anon” started yapping right along with you.
Keep up the great work, guys.
Indeed a major investment with a result that can be copied so easily that it is not worth while to develop it unless it is patent protected needs patent protection.
On the other hand, it is common practice in business that ideas of competitors are copied, else there would be no competition. That explains why “abstract ideas” are not patent-eligible.
Competition is somehow difficult to understand both for lawyers and for economists. Yes, competition may cause damage to competitors, but this damage does not represent a tort. And it is inefficient because it leads to duplication of efforts. Still the “experiment” in North Korea (and the failed experiments in many former communist states) shows that a competitive market economy in the end is preferable.
Reiner,
Be careful of embracing the “but for” fallacy.
“But for” is but only one reason – and certainly not the only reason – for having a patent system.
Reinier, in truth, there was no invention claimed. The only thing new was the discovery of paternal DNA in maternal serum. I think the patent owner admitted to this.
We have to fully understand that patents are not granted for mere discoveries.
This somewhat puts the American system in line out of whack with the words of the Constitution. But a very much aligns with the English idea of limiting patents to inventions in manufactures as described in the Statute of Monopolies, a product of Lord Coke and others who were struggling for the rule of law in England against the unilateral power of the crown, a struggle that brought to us in the United States both the Bill of Rights and an independent judiciary whereby a man has a right to a trial in a court of law and to jury before his life, liberty or property might be taken.
“Patents are not granted for mere discoveries.” Despite the Constitution, the definition in Section 100?
The truly sad point about Sequenom is this: invest a lot of money and find something natural that can be cheaply and effectively analyzed, and there is no “eligibility.” Find something that it takes a lot of time and money to analyze, and you get one. Talk about perversity.
When you turn 101 into a nose of wax, it can be mashed into any shape the current Royal Nine want it to be.
In common parlance, a “discovery” is all but synonymous to an “invention”. That is probably the reason why the European Patent Convention only excludes discoveries as such (but then the question arises what is meant by “as such”, which is not as straightforward as it may appear at first sight).
I guess it is decisive whether the invention can be carried out by any PHOSITA. Else it will be impossible to comply with § 112, which is a systematic argument not to accept such subject-matter under § 101.
Pure science usually can not be carried out by any PHOSITA. It needs the intervetion of a person called “inventor” to turn an invention into something practical ready for the PHOSITA. Thus in my view there are three tiers 1) the scientist 2) the inventor 3) the PHOSITA.
Ned, your “patriotism” falls short due to your over-adoration of the judiciary and failure to account for their breach of separation of powers.
Have you read the O’Malley piece in total yet?
You assume far too much Reiner with your global “this is bad” as you assume that non-innovative market features such as established position and size will not attempt to quash the new innovators.
Wake up man.
This is yet another clear example that patent protection is claimed in order to limit competition which is bad in a market-based society.
QFT. Too many Applicants think they need to be given a commercially valuable scope instead of a scope of what they invented.
Patents are officially worthless. As is a career in what used to be a niche profession. The rate at which patents are being killed is quite scary. It’s only a matter of time that many patent attorneys will be hunting for new careers.
They are attorneys – they are already trained in their “next” career.
You should be more worried about others.
Yeah… Thats a cute pet theory there.
The only thing that made patent prosecution such a sought after and lucrative field was the registration system and the requirement for a science or engineering degree (or similar through credits or whatnot). That kept the field, for a time, from being oversaturated with talent like every other area of law (as the law schools relentlessly pumped out graduates over the past twenty years).
If you think the bulk of prosecuting patent attorneys will just transition to another area of law painlessly, and be absorbed in a non-trivial amount, you are mistaken.
The world outside of patents has been a brutally oversaturated for a very long time.
Your assertions to the contrary are laughable.
What’s next anon, arguing that 10 year pros guys are going to just slide back to engineering? Also not going to happen.
“the sad reality” is spot on. And his/her analysis is not limited to prosecution. Attorneys that dedicated their careers to patent litigation will also soon be in the unemployment line. As 101/IPR/CBM continue to kill patents (not to mention, of course, looming legislation), litigation will likewise dry up.
Transitioning to new careers will not be easy, as “the sad reality” explains.
Sad that lobbying dollars work so well.
Thanks.
We are in a twilight where people have time to make some fallback plans before the hammer really falls.
Not a lot of time, but some.
It is hard to say what is going to happen. Anon’s point is that it will not only be the attorneys that will suffer, the far greater harm will come to our innovation engine.
I am mixed whether our economy will be greatly harmed or not. I am not sure if the international corporations can re-create innovation with low cost Chinese and Vietnamese labor or not.
But, for engineers this is going to be a very bad time. Engineers at big tech companies just don’t get that their jobs are there because of patents and that their salaries are large because of patents and that their freedom to move to other jobs is there because of patents.
I am not sure what this will look like in the end, but I don’t think it is total destruction but a patent system that is suited to a monopolistic international corporation using the system for their own benefit. Don’t forget that a big international corporation spends almost nothing on prosecution compared to the research money.
Engineers have had it bad for a long time. In the 90s, many of the major companies were laying off the older engineers, with their high salaries, and hiring younger engineers with cheaper salaries. That’s one reason I’m a patent attorney.
The thing that just blows me away about all of what is happening is the power of propaganda and Google bucks.
Consider that the Silicon Valley companies were found to have colluded to not hire the other companies’ workers.
Consider that hand in hand with weaker patents Google is pressing for trade secret law.
Consider that in the 1980’s regularly contracts for high tech employees had draconian trade secret provisions.
Google knows that it could get wiped out in a matter of a few years. They are doing everything they can to insure that they can take whatever comes up to wipe them out.
That is reality.
(I would still like Mark Lemley to write a post of how he is protecting IP for his start-up.)
My point is that as a group, lawyers are far more versed and trained to go into other areas of law (that’s part of the reason why the Bar tests in areas across the board).
Those who choose advancement within a technical discipline can only too readily find themselves the masters of buggy whips.
Is there a certain loss (or even great reduction) in the “nicheness” of having both a technical understanding AND a command of the law? Sure. But so what? That level of discipline easily supplants those with a command of law and “English,” polysci, or any of the myriad weaker roads that “the glut” take in their path to be an attorney. The “angst” is misplaced here by “sad,” who apparently is “sad” for personal reasons and has not yet learned how to deal with his sadness.
“That level of discipline easily supplants those with a command of law and “English,” polysci, or any of the myriad weaker roads that “the glut” take in their path to be an attorney.”
Wow.
And read that again and again and repeat it:
Patent prosecution costs almost nothing in comparison to research. Repeat it over and over because it is true.
And it is one of the great lies of the anti-patent movement that patent prosecution is so expensive. What is expensive is those research labs the companies have built to get patents.
Night, “What is expensive is those research labs the companies have built to get patents.”
Actually, this makes no sense at all. No one in their right mind would research technology only to get patents.
That’s not the point at all Ned.
It is not to “get” patents as much as it is that patents “seal the deal,” and make the level of effort worthwhile.
Why invent yourself when you can just rip off the next guy and crush him with superior size and market power?
anon, that is not what Night said. He said the research was done in order to get patents.
What is important though is that patents are necessary to protect new products. Congress is NOT LISTENING to the startup community. Weakening the ability to enforce patents against infringers cannot help the patent system as a whole. Deal with the abuses. Deal with bad patents by getting the PTO to stop issuing them in the first place.
Then deal with the source of the problem of bad patents, the Federal Circuit. The court is a special interest court that serves the needs of the patent bar. There is nothing that ever can be done to fix this, except to break up its monopoly on patent law. The forum shopping that existed prior to the Federal Circuit was a minor problem compared to the disaster wrong upon us by this court: State Street Bank (business methods), Donaldson (functional claiming), and Application of Bernhart.
Ned said ” No one in their right mind would research technology only to get patents.”
Explain that to Intellectual Ventures, Qualcomm, or IBM.
As for being oversaturated with engineers/technical people, if that’s true, why do companies keep asking for more H1-B work visas? The companies seem to think there’s a lack of skilled labor in the US.
There is no “pet” theory in what I posted.
I also never said that there was an absence of competition, nor even got into whether or not the law school pumping was a factor.
Try reading again what I did say and leave your venom against lawyers out of it.
Never a thought for the people not hired in industry due to abusive patent litigation…the companies destroyed or permanently damaged by claims with no merit, or claims with merit but small damages that are indefensible against virtually any demand a patentee cares to make…
When a claim worth a few thousand bucks costs a million dollars to fairly adjudicate, it means there can be no justice…..the lack of discipline top to bottom over the last 20 years is what has brought this.
You know what they call it when a formerly healthy system runs out of control and destroys with the former elements of creation and sustainable?
They call it cancer, and it needs to be cut-out and eradicated, or corrected before the start with new instructions.
In Mayo the Court said that “routine” and “conventional” were with respect to people “in the field.” However, is/should it also be with respect to the same *context* of use?
In other words, is it enough that the routine/conventional be used in the art at all – or does it need to be something a bit more application-specific?
It is a good point Ken. I think the answer is yes.
Dennis that is Judge Gilstrap in E.D.TX, not Golstrap, and some local counsel are rising to his defense re his order re 101 motions. They view this as a good procedure to help the judge get to the meritorious 101 motions since he has so many defendants filing 101 motions at the outset of their case, resulting in a logjam of 101 motions [part of the reason that consideration of venue transfer motions is being delayed]. Five page letter briefs single spaced with a 5 page response and three page reply that he can get to and allow full briefing only on the ones that don’t also present a viable claims construction issue. [Plus the AIA anti-joinder law has multiplied motions with multiple suits on the same patents. ] As understood, it is suggested that if you can’t win on a letter brief request to file the 101 motion, you have no chance of winning on the motion itself.
One has to wonder whether the volume of 101 motions is driven by the quality of the patent litigated in ED Tex rather than the filing of meritless motions….
Jane, that might well be a factor. But another factor is that some litigation firms do seem to like to file a whole lot of motions and do not seem to have cost-conscious clients with in-house attorneys questioning the desirability or odds of success of any of them. [Or even wondering if all that might be T-ing off the judge?] Especially with a newly expanded, popular, and ill-defined but potentially ab initio defense like Alice-101.
N.B. If C. Goodlatte’s new patent suit venue statute revival provision in his bill is enacted, downtown Marshal TX may suddenly see ample room for rolling tumbleweed, stray cattle, and a very much less crowded D.C. docket rendering these time delays and motion restriction issues moot.
Dontcha know, that in abstract math; 3 of 9 is a majority, and common law trumps the Constitution (bah, the legislative branch words are just too fallible to those d@mm scriviners who will write claims that actually meet the letter of the law).
The “Gist/Abstract” sword being honed to a fine razor sharp (double) edge…
Ah, what next can be “gisted” away…?
(I wonder if Paul Cole will step in with his – rather ignored – advice for careful and thoughtful application of what the Supreme Court “actually said”…
Cue the guy who always wants to blab about Hotel Security….
In all seriousness, has there been a single business method patent that has survived a 101 challenge besides DDR? You’d have to be nuts to bring that type of case today.
@ the Fed. Cir.
And, Mr. Deller, you should know that I think DDR was correctly decided because the subject matter was not a method of doing business, but a way of making two web pages look similar.
The inventor’s insight here is that, unlike a land-based grocery store where prices are publicly labeled, an internet-based store can offer a different price to each consumer.
I’ve been going to “land-based” stores without price tags on their items for many decades. The owner of the store charges whatever she feels like at that moment, based on any number of factors including (but not limited to) her knowledge of your income, your prior spending habits, how desperate she is for money, how tired she is of seeing the item in the store, her knowledge about who is stopping by later in the day etc etc etc. It was well known to everybody who went to the store that different customers at different times got different offers.
But apparently the inventor and the Examiner who granted this junk were born yesterday. Or they’ve been living under rocks. Or they just get super duper excited when they see that a computer is involved. Wowee zowee!
It’s great to see this decision and the concurrence and it’s safe to assume there will be more to come if applicants and patentees are intent on learning the hard way. Gilstrap is deeply in need of some basic education at this point. Hopefully Bryson gave him some.
I wonder if the “Found1ng F@ther White” factor was ever at play in these wondrous stores of no-price-labels and charge-what-the-proprietor-wants-on-a-whim policies that you appear to be ever so comfortable with (without your usual litany of “Grifters”)…
Maybe you don’t see your own dichotomies, but all the “folk” do.
Are we sure that Judge Gilstrap is requiring leave to file a motion only with respect to dismissal on the pleadings?
Also requires it on Summary Judgment.
Jane, why does a multi-step motion process violate due process? That is the way orders to show cause work. Ditto, IPRs.
Suppose a statute gives you a right, say to file a motion. If a judge says, via local rules, “you do not get to file that motion without my permission”, the judge is acting in a way that violates your right. A higher authority gives you the right to file, without permission.
Of course, that doesn’t mean it is wise to file a motion. And there are surely ways a court can deal with a frivolous motion. But you cannot be denied the right to do it granted by the Federal Rules. Brown v. Crawford County, 960 F. 2d 1002, 1006-10 (11th Cir. 1992):
District courts are not required to adopt local rules, but they must not circumvent the Federal Rules of Civil Procedure by implementing local rules or “procedures” which do not afford parties rights that they are accorded under the Federal Rules….The opportunity to move for summary judgment is being denied to practitioners in the Middle District of Georgia as a consequence of the local “procedure” utilized by these district judges. Because the local “procedure” for filing a summary judgment motion in the Middle District of Georgia violates litigating parties’ procedural and substantive rights under Rule 56, we find it to be invalid and direct that it cease forthwith.
Mandamus? What is the standard there? You must show an right to the file the motion that was denied. There can be no factual issues in dispute and it cannot be within the discretion of the court. Further, one must also show that denial of a remedy now cannot be remedied from an an appeal from a final decision.
So, do you have a mandamus remedy?
That’s a very good question. I wonder if someone will try.
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