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.