Versata Development Group, Inc. v. SAP America, Inc.

This was the first case in the Federal Circuit reviewing a final order in a Covered Business Method (CBM) invalidation proceeding under the America Invents Act (AIA).

In summary, according to the patent: In other words, the invention provides for flexibility in formulating a desired pricing system while reducing the prior art need to store, maintain, and retrieve huge amounts of data.

Claim 27 recites a "computer implemented method for determining a price of a product offered to a purchasing organization" comprising certain steps.

Claim 29 recites an "apparatus for determining a price of a product offered to a purchasing organization" comprising certain limitations.

SAP appealed to the Federal Circuit, which upheld the jury's infringement verdict and damages award, but vacated as over-broad a permanent injunction entered by the district court.

[16] While all that was going on, SAP in September 2012 petitioned the USPTO to institute a covered business method review of Versata's '350 patent.

The district court held that it lacked subject matter jurisdiction "because the AIA's express language, detailed structure and scheme for administrative and judicial review, legislative purpose, and nature of the administrative action evince Congress's clear intent to preclude subject matter jurisdiction over the PTAB's decision to institute patent reexamination [sic] proceedings.

The issue of whether the PTAB had the power to institute a CBM review was not before the court, because "the statute expressly instructs that we may not" address that.

In determining whether a patent is for a technological invention solely for purposes of the Transitional Program for Covered Business Methods (section 42.301(a)), the following will be considered on a case-by-case basis: whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.

[26]The statutory definition of a "covered business method patent" found in § 18(d)(1) is based on whether the claimed invention is directed to "financial products or services."

Such a narrow construction of the term would limit the scope of the definition of covered business method patents beyond the intent of section 18(d)(1) of the AIA.

Versata argued that Congress used the phrase "financial product or service" for a reason and that the plain meaning of the text of the statute limits the PTAB's jurisdiction to products or services from the financial sector—i.e., banks, brokerages, holding companies, insurance, and similar institutions with a finance focus.

The USPTO argued that the PTAB's interpretation of "financial" as "relating to monetary matters" comports with the dictionary definition in The Random House Dictionary of the English Language—"pertaining or relating to money matters", and it "readily embraces the '350 patent which expressly claims a 'method for determining a price of a product' in claim 17."

"[28] This understanding of the term, the Federal Circuit said— is reinforced by the scope of the entire § 18 program, and the general concern, including within the halls of Congress, regarding litigation abuse over business method patents.

Accordingly, the court said, "neither the statute's punt to the USPTO nor the agency's lateral of the ball offer anything very useful in understanding the meaning of the term 'technological invention.

The court agreed with the USPTO: "It would require a hyper-technical adherence to form rather than an understanding of substance to arrive at a conclusion that § 101 is not a ground available to test patents.

According to the PTAB, Versata's concept of organizational hierarchies for products and customers it abstract because it is little more than determining a price, essentially a method of calculating.

"[36] The Federal Circuit reviewed the Supreme Court's two-step analysis of Alice v. CLS Bank and its own software patent eligibility decisions, which it summed up in these terms: In Content Extraction &Transmission LLC v. Wells Fargo Bank, National Ass'n,[37] we found that claims directed to the abstract idea of collecting data from hardcopy documents, recognizing certain information within the collected data, and storing that information in memory were ineligible.

In buySAFE, Inc. v. Google, Inc.,[39] we found that claims directed to the abstract idea of creating a contractual relationship—a transaction performance guaranty—were ineligible despite the recitation of a computer that received and sent information over a network.

Using organizational and product group hierarchies to determine a price is an abstract idea that has no particular concrete or tangible form or application.

Turning to prior Federal Circuit decisions, the court said they "found similar claims to be ineligible despite the recitation of a general purpose computer or the Internet," and that was true as well for similar claims that the Supreme Court found "to be ineligible despite recitation of a general purpose computer in Alice, Flook, and Benson.

"[44] Versata argued that its invention enables desirable benefits: "fewer software tables and searches, leading to improvements in computer performance and ease of maintenance."

The steps in Versata's claims (e.g., arranging, storing, retrieving, sorting, eliminating, determining) are conventional, routine, and well-known.

In order for the addition of a machine to impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations.

Versata's claims do not meet this test, and instead function solely as a mechanism for permitting the price determination to be performed more quickly.

This "will create the kind of 'unnecessary and counterproductive litigation costs' that Congress intended these [CBM] proceedings to avoid," and it thus defeats congressional intent.

[53] Versata filed a certiorari petition that raises four questions stemming from the USPTO's covered business method (CBM) review of its "hierarchical pricing engine" patents: One commentator took issue with the definitions of "financial product" and "technological" that the PTAB used and the court sustained.

He concludes: "Moreover, once it's determined that these are financial products eligible for CBM review, it takes only a few steps to find such inventions patent ineligible.

This commentator also objected to the Federal Circuit's "brusque treatment of Versata's argument that its invention improved the performance of the computer system" by saying "these supposed benefits are not recited in the claims."

[56] A law firm blog commented on Versata that its result was consistent with congressional intent: Since its introduction, CBM filings have been devastating to business method patents; this is exactly what Congress intended.