Stay Pending Petition Consideration.

Interesting set of motions in an E.D. Texas case that I’ve been following where one of my former students – Adam Baumli – is representing NexusCard who is asserting United States Patent No. 5,924,080 against a set of retailers.

Retailer defendants petitioned the PTO for Covered-Business-Method-Review and then immediately petitioned for a stay of the district court proceeding under AIA Section 18(b).  Although judges generally have the power to stay civil cases, Section 18(b) makes it easier to obtain a when a CBM (“transitional proceeding”) is pending.  The big problem for the defendants here is the Federal Circuit’s clear holding that the proceeding is not pending (and Section 18(b)) doesn’t apply until the PTO grants the petition.  See Intellectual Ventures v. JPMorgan (Fed. Cir. 2015).

DocsKroger’s Motion to StayNexuscard Opposition

The CBM petition challenges the patent claims under 35 U.S.C. 101 — arguing that they lack subject matter eligibility under Alice Corp and that the patent qualifies for CBM review because it claim a method for using a financial product and is not a technological invention. KrogerCBMPetition.

Claim 1 itself is a long one with parts (a) through (q) — all relating to a method of member coupon processing:

1. The method of processing and applying merchandise discounts to a consumer’s purchases by providing a computerized membership system, said membership including a plurality of consumer members, a plurality of point of purchase merchant members, a plurality of manufacturer members, and a centralized system provider, said membership system having:

a point of purchase merchant member computer terminal and computer and a centralized provider’s computer, said provider’s computer having a database for the storage and retrieval of information, said database storing information regarding point of purchase merchant members, manufacturer members, and consumer members, in predetermined files, at least some of said information being entered into the system at the time of a member establishing membership in said system and
communication means, said communications means providing real time communication between said member merchants’ computer terminal and said provider’s computer,

comprising the steps of:

a. providing consumer members with individual identification codes, said identification codes accessing said databases;
b. storing said consumer member identification codes on said provider’s computer in a consumer database;
c. providing each consumer member with a membership ID, said membership ID having memory storage means, said memory storage means containing at least said consumer identification code;
d. storing merchandise information provided by said manufacturer members in a manufacturer member database in said provider’s computer, said merchandise information including at least a merchandise identification code and the discount on predetermined merchandise,
e. displaying to consumers indicia, said indicia identifying point of purchase merchandise subject to a price discount,
f. transporting, by said consumer, consumer selected discounted and non-discounted point of purchase merchandise to a purchase location at said merchant member to form a collection of transported merchandise, each of said transported merchandise having a merchandise identification code,
g. scanning merchandise identification codes of each of said transported merchandise, at said communication means,
h. scanning said consumer ID,
i. uploading said scanned consumer identification code, from said merchant member, through said communication means to said provider’s computer,
j. comparing said consumer identification code with consumer identification codes stored in said provider’s computer and verifying said consumer’s membership,
k. uploading said merchandise identification code for each of said scanned merchandise from said merchant member’s computer, through said communication means to said provider’s computer,
l. comparing said uploaded merchandise identification codes with the identification codes of merchandise subject to a price discount,
m. computing the discounts on said merchandise subject to a price discount,
n. downloading to said merchant’s computer through said merchant communication means, the discounts on said merchandise subject to a price discount,
o. printing a sales slip for said member consumer including the discounts for said merchandise subject to a price discount,
p. sorting and storing in said provider’s databases said uploaded data on said consumer and said merchandise purchased by said consumer,
q. storing merchant member sales data on said merchant member computer,
wherein said provider maintains and processes, in real time, discounts provided by manufacturer members to member consumers without said member merchant being required to process said discounts or member consumers being required to present coupons or file rebates to obtain said discounts.

44 thoughts on “Stay Pending Petition Consideration.

  1. 7

    The defendants appear to have filed their motion to stay prematurely if the PTO has not granted their petition to institute a CBMR proceeding. Consequently, the stay motion should either be denied under Intellectual Ventures, or continued until after the PTO acts on the pending petition.

    If the district court denies the stay motion for lack of an instituted CBMR proceeding, the defendants may renew their motion if and when a proceeding is instituted.

  2. 6

    My local coffee shop used to keep a rolodex of cards for frequent visitors to the shop. If you bought a cup of coffee, they’d look you up in the rolodex by name and they’d stamp your card. Every tenth cup free. They’d print you out a receipt if you wanted one, I suppose, for your purchase of the cup of coffee (discounted) and sandwich.

    I’m having a hard time seeing how that’s much different than what’s described here?

    1. 6.1

      I’m having a hard time seeing how that’s much different than what’s described here?

      Maybe it’s not. That would explain the huge surge in patenting methods of information processing using a Rolodex in the wake of Hildaur Neilsen’s pioneering 1956 patent.

    2. 6.2

      This is why these attacks under 35 USC 101 are generally nothing more than attacks under 102/103 except with no evidence in the record. Judicial activism at its worst.

      1. 6.2.1

        KC: This is why these attacks under 35 USC 101 are generally nothing more than attacks under 102/103 except with no evidence in the record.

        LOL. There’s plenty of evidence “in the record,” KC. The problem — and I’m happy to educate you and your eternally confused cohorts on this for the hundredth time — is the miserably failure of the PTO (and, for many years, the CAFC) to understand (1) the relevance of pre-computer information processing to computer-implemented information processing and (2) the relationship between prior art and subject matter eligibility.

        A method of “giving a discount” comprising “using a rolodex and a piece of paper keeping track of who got the discount” isn’t eligible for patenting because “rolodex” after the structure and utility of the rolodex is disclosed. And it doesn’t matter for that analysis whether the “discount” is for rocks, airplane tickets or remotely accessed 3-D video games.

        Confused? Just ask your questions. I’m here to help. Just don’t pretend you were born yesterday and you don’t understand why Prometheus v. Mayo and Alice were 9-0 decisions that will never, ever be overturned. It’s way too late for that nonsense.

        1. 6.2.1.1

          You have twisted the message provided by KC.

          It is doubtless that you are aware of this, as this is yoru standard behavior – nine years and running.

          Great job with the chum, Prof. I bet your former student is thrilled.

        2. 6.2.1.2

          Question for you. Here is something I have been debating over. Do you think that patent eligibility under 101 should depend on when the application was filed? Using the courts analysis it would seem that the first person to file a patent on a car would pass 101, but then if a second person files a patent on the same car but adds software in the car for running some process, then the second application would fail 101. How can it be that the first application which is directed to car is elligible, which is broader is patent elligible, but the second which is narrower is not?

          How about a second example, you are the first person to get a patent on a novel car, the novel car further including novel software. Then a second person seeks to get a patent on the same car but without the software. The first application would be eligible under 101 but the second subsequent application would not?

          1. 6.2.1.2.1

            Mike: Do you think that patent eligibility under 101 should depend on when the application was filed?

            Yes. And the great thing about it: it’s already the law.

            How can it be that the first application which is directed to car is elligible, which is broader is patent elligible, but the second which is narrower is not?

            “How can it be that the first claim which describes drinking a cup of coffee is eligible but the narrower second claim describing drinking a cup of coffee and thinking a new thought about your mommy is not?”

            I hope this helps. If not, I can bring it down to kindergarten grade level for you. This is basic logic. If you can’t follow this, you shouldn’t be anywhere near a patent or patent application.

            1. 6.2.1.2.1.1

              The “re-emergence” of nothing more than the ‘mere aggregation’ line of thought (without even the need to involve [new thought]….)

              Yes, Macolm, it is noticed that you dodged the “gist” of his question, as his question does include the notion of new (proper) functionality. See Nazomi for an illustrative real world example.

          2. 6.2.1.2.2

            Mike: How about a second example, you are the first person to get a patent on a novel car, the novel car further including novel software. Then a second person seeks to get a patent on the same car but without the software. The first application would be eligible under 101 but the second subsequent application would not?

            The funny thing about these questions, Mike, is that they show everyone you have some understanding of logic and how logic can be applied to patent claims … and yet you can’t seem to wrap your head around some basic facts.

            First, you have to understand that the claims are key. You say “the first application would be eligible under 101.” That’s a mistake. The application isn’t eligible or not. The claims are eligible or they aren’t. Is your “first” “novel car”, where the “novel car” includes software, in fact “eligible”? That depends on how this “novel car” is claimed.

            Second, in your hypothetical the second application would almost certainly be anticipated by the first (if open language is used in the claim, or it would be obvious if the claim uses closed language) so … what’s the point? Assuming the facts in your hypothetical, where’s the harm to the patent system or the public or anybody else? There isn’t any.

            But somehow your ability to use basic logic can’t reach to the issues in Prometheus v. Mayo, which is where you are hung up. There’s a number of excellent compelling reasons — fully supported by incontroverted facts — that merely adding old but otherwise eligible subject matter (e.g., consuming a stimulant like caffeine) to a claim directed to ineligible subject matter (e.g., thinking a new thought) is not eligible. Are you unaware of these reasons? Or are you simply ignoring them because they are “inconvenient”?

            1. 6.2.1.2.2.1

              that merely adding

              And once again the distillation down to the b@nal “mere aggregation” pet theory – the one that does not need (at all) any sense of any portion of a claim sounding in any “mental steps.”

              You only have the b@nal Malcolm, and you constantly (and wrongly) try to stretch that b@nal to support your windmill chase.

              It’s plainly p@t hetic.

          3. 6.2.1.2.3

            Assume, Mike, that A is patentable subject matter and B is ineligible subject matter.

            When subject matter A is novel and nonobvious, the combination of A + B is patentable. When subject matter A is not novel and nonobvious, the combination of A + B is not.

            I hope you see the point here. Ineligible subject matter is given no weight unless it is integrated with the eligible so as to transform it into a useful application with in the useful Arts. This is the analysis actually conducted with the printed matter of doctrine.

            1. 6.2.1.2.3.1

              The “only” problem Ned is that you are expressly wrong per your very own beloved Supreme Court.

              What you attempt is nothing more than the mere clue of MoT.

              9-0 wrong per the Supremes.

      2. 6.2.2

        There is considerable truth in that complaint, but note that it was other judicial activism, and judicial in-activism, that has made it almost impossible to successfully “make an attack under 102 or 103” directly in a district court, no matter how good that prior art is, without spending one or two million dollars on a full blown patent suit jury trial and appeal. Rarely getting a sustained S.J. on those grounds early enough to save such costs.

        1. 6.2.2.1

          PM it was other judicial activism, and judicial in-activism, that has made it almost impossible to successfully “make an attack under 102 or 103” directly in a district court, no matter how good that prior art is, without spending one or two million dollars on a full blown patent suit jury trial and appeal.

          No doubt about that. But as we know, judge-made rules that make it more difficult and/or incredibly expensive to tank a junky patent are the kind of judicial activism that is rarely questioned by The People Who Truly Understand Patents and Technology (aka The Most Important People Ever).

          Consider the rule that requires, before tanking under 103, consideration of evidence that a junky patent was licensed after being improvidently granted in view of the prior art at the time of filing. Given what we know about how our legal system works, does that rule make any sense at all? Of course it doesn’t. But there it is. Does everyone remember the super-principled “judicial activism” “watchdogs” complaining endlessly about that judge-made rule?

          Me neither.

        2. 6.2.2.2

          Your “point” on costs is no justification for the judicial branch to violate the separation of powers Paul.

          The ends do not justify the means.

      3. 6.2.3

        KC, except, sir, the law of the land ’til sir Rich and company changed it was that business methods were not statutory, and invention, if any had to be in the means.

        Alice only restored the status quo ante. The radical, judicial activist was Rich and his fellow revolutionaries on Federal Circuit.

        1. 6.2.3.1

          …and once again (regardless of this particular patent, of which I do not comment upon), Ned is here to spread dissembling and outright L I E S.

          1) business method patents have been granted throughout the Office’s history (that Prof. Crouch had a guest post on this topic has been presented to Ned countless times now)

          2) it was Congressnot Judge Rich who acted in 1952 to liberalize patent law and remove the judicial branch from their common law tool of writing patent law and setting the definition of “invention.”

          3) Ned’s “Point of Novelty” – and his explicit attempt to use it in a 101 sense – is (and remains) a canard.

          4) it is NOT within the Judicial Branch power or authority to rewrite statutory law that is patent law in Alice. The “restoration” flies in Ned’s book, only because it aligns with his agenda. Look only to his active case to see him take an opposite and incongruent stand.

          5) The revolutionaries are at the “top” of the judicial food chain. Ned purposefully remains aloof to this fact.

    3. 6.3

      You may be right Jane, but then —in patent law–what you are supposed to do is put together prior art and combination arguments. In witch trial law, you merely gist away all details and make a vague reference to something and declare the claims to be witches and invalidate them.

    4. 6.4

      The difference is the rolodex and stamp are replaced with a machine (machines are patent eligible subject matter, by the way). Now, the ticket can be stamped by 10 different participating merchants, so, you can get 5 cups of coffee at one shop and 5 bagels at a second shop and get a free sandwich at a third shop.

      1. 6.4.1

        Les, assume that statues have to be constitutional. Assume that ideas are not within the useful Arts. Could Congress constitutionally pass a statute authorizing the patenting of ideas?

        Now machines are self-evidently within the useful Arts. Is the price of a machine within the useful Arts?

      2. 6.4.2

        participating merchants

        Two people signed an agreement. Now they’re “participating”! Super techno stuff. Promote the progress!

        you can get 5 cups of coffee at one shop and 5 bagels at a second shop and get a free sandwich at a third shop.

        A truly unthinkable proposition until the 21st century. By the way: does somebody actually have to shop at three “participating” stores to infringe this claim?

  3. 5

    The petition seems to understand the law and makes the correct arguments. Here is its summary of the non-abstract elements:

    As the above analysis shows, each of the claimed steps of claims 1 and 11 are directed to abstract ideas that are implemented through standard processes on generic computer equipment. None of the steps reflect an inventive concept. Moreover, the claimed steps when viewed as whole or as an ordered combination do not reflect an inventive concept or step. Indeed, the grouping and order of the steps is an entirely conventional arrangement consistent with typical computing functions and standard commercial transactions. The claim as a whole is nothing more than the sum of its parts—an abstract idea implemented using conventional hardware where the hardware is simply being used in a conventional manner to perform conventional steps. Thus, whether taken as individual limitations or as an ordered combination, Claims 1 and 11 fail the second step of the Mayo/Alice analysis.

  4. 4

    a computerized membership system

    Totally different from non-computerized membership systems!

    real time communication

    Another revolutionary harnessing of the fantastical power of electrical currents! Wowee zowee! This must be a continuation of one of those pre-GATT submarine cases filed way back in 1874. No?

    If patent tr0lls and their attorneys still believe that they can threaten companies with this kind of indefensible gxbage without subsantial risk of sanctions, then our patent system remains completely broken.

    1. 4.1

      MM, while it seems unlikely, they may have argued that the prior art method of communication of anything from a manufacturer to a Point of Sale terminal did not include anything like this.

      1. 4.1.1

        they may have argued that the prior art method of communication of anything from a manufacturer to a Point of Sale terminal did not include anything like this.

        Well that would be a fabrication on their part, right up there with “keeping track of which items in a finite list have been watched is completely different from keeping track of which items in a finite list have not been watched.”

        People go to places to buy stuff. They get discounts on certain items because of some abstract feature associated with them (e.g., “regular customer”) and/or the item being purchased (“10th item”, “sale item”) whatever. Someone keeps track.

        Welcome to the 14th century. Like I’ve said before, these patent tr0lls love to pretend that we were all born yesterday and the Internet was invented this morning. Why? Because their brains are in their wallets and they compete with shrimp for their dinner.

        1. 4.1.1.1

          ^^^ Is there ANY doubt that this “flowerly” attempt is nothing more than the SAME C R P baseless name-calling that has run from Malcolm nine years and running….?

          WAKE UP PROF.

  5. 3

    With a required step of: “f. transporting, by said consumer [not by “said provider”], consumer selected discounted and non-discounted point of purchase merchandise to a purchase location at said merchant member” who a direct infringer of this entire method claim?

    1. 3.1

      Paul, good eye there. Could’ve been put better as “receiving at a purchase location …”

      It is this kind of drafting “mistake” that may kill this patent; but should not have given the ease of rewrite to make the claim read on a “computerized membership system” running software according to the claimed method.

      Anyone have any ideas on how to save this claim under the revised Akamai test?

  6. 2

    That is a lot of steps. The majority of which should be condensed to “shopping and checkout”.

    Seems like someone was trying to snow an examiner into submission. I suppose I also could describe making a PB&J sandwich with such specificity and fill many pages, but it seems silly.

    Also, clear 101 candidate.

    1. 2.1

      Alex, why don’t you look up the file wrapper and tell us what the applicant argued was new. That to me would be interesting.

      1. 2.1.1

        Perhaps, but that means I need to comb through Pacer, as Pair doesn’t seem the have the wrapper.

      2. 2.1.2

        Assuming they made any argument, presumably the problem is this:

        wherein said provider maintains and processes, in real time, discounts provided by manufacturer members to member consumers without said member merchant being required to process said discounts or member consumers being required to present coupons or file rebates to obtain said discounts.

        and the super innovative solution: “use a computer!”

        In the past a “merchant” might have to had to wait hours or days for this super complicated discount data to be “processed” by a third party accountant type person. Or they just did it themselves “in real time” and used their brains. Of course that’s completely different from using a conventional well-known proxy for a human brain, colloquially known as “a thinking machine” or “a computer.”

        Or so the PTO seems to believe.

        1. 2.1.2.1

          conventional well-known proxy for a human brain

          Except, of course, that “proxy” being a machine, is, well, NOT a person or a person’s mind, and ANY legal argument does – and should – know the difference.

          (Hint: Anthropomorphication)

          1. 2.1.2.1.1

            “proxy” being a machine, is, well, NOT a person or a person’s mind,

            “A calculator, being a machine, is, well, NOT a person or a person’s mind.”

            Deep stuff. That explains the huge spike of “do it on a calculator” claims that derailed the patent system in the mid-70s.

    2. 2.2

      I suppose I also could describe making a PB&J sandwich with such specificity and fill many pages, but it seems silly.

      Also unethical. But, hey, ethics schmethics.

      How can we expect people to use computers to keep track of information if we don’t hand out hundreds of thousands of junk patents on every one of those methods? Without those patents, people would just use their computers as paperweights. It’d be too risky to try to program them without a patent. I mean gee whiz what if the program didn’t work or it only worked on one operating system? How could you recoup your investment?

      Seriously, if you ever have a chance to ask some of these patent attorneys about the world prior to 1990 (when a lot of them were born) much less 1980 or 1970, they’d probably be surprised to learn that all peanut butter and jelly sandwhiches aren’t made with 3-D printers. Or they’ll tell you that “before computers” (e.g., before 1992) people didn’t use their brains while making peanut butter and jelly sandwiches. Nope. They made those sandwiches using “their guts.”

  7. 1

    Dennis, I haven’t read the petition, but on its face the claimed invention seems more about communicating discounts to a point of sale from a manufacturer. It is not about calculating discounts. There is a distinction, in my view.

    Is this a method of doing business, or an improvement in the way information is communicated? The issue can be resolved, in my view, by considering whether the claim presents novel subject matter if everything related to “discounts” was simply removed from the claim. Is there novelty in the communication means claimed?

    Whether the novelty is in the means or the business method can be determined by looking at the file wrapper. If the the applicant argued patentability based on “discounts” as opposed to the communication system and method, that alone should be enough to sink the patent owner on 101.

      1. 1.1.1

        Les, assume for the sake of argument that machines, manufactures and compositions define the gamut of the useful Arts. Which processes are within the useful Arts?

        1. 1.1.1.1

          Are you saying that the method performed by the claimed system is not useful? Then why do you suppose the inventor bothered to invent it? Why do you suppose the accused infringers are performing it? If it isn’t useful, then what is the public policy interest/harm is allowing it to be patented?

        2. 1.1.1.2

          Once again, Ned-IMHO fake law is being trotted out as real law.

          Ned – the process category just is NOT a sub-category of the hard goods categories.

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