[00:00:16] Speaker 02:
We will hear argument next in number 121696, OIT Technologies against Amazon.com.

[00:00:30] Speaker 02:
As soon as they get settled, Mr. Powers, why don't you come on up.

[00:00:44] Speaker 05:
Please.

[00:00:45] Speaker 05:
Thank you, Robert.

[00:00:47] Speaker 05:
The analytic framework for deciding the issues presented by this appeal, I think can be framed by the two Supreme Court decisions in Mayo and Deer.

[00:01:00] Speaker 05:
In Mayo, the discovery, the invention, was of a natural phenomenon.

[00:01:06] Speaker 05:
In that case, it was the relationship between certain metabolites in the human body and the toxicity or efficacy of a particular drug treatment.

[00:01:14] Speaker 05:
That was the invention in Mayo.

[00:01:16] Speaker 05:
The means of testing for those metabolites was conventional.

[00:01:21] Speaker 05:
And the holding in Mayo was, because what you're trying to claim really is the natural law, the natural phenomenon of the relationship between those metabolites and the drug efficacy, and nothing else was new, you may not have a claim that is not patentable subject matter.

[00:01:37] Speaker 05:
Deere, on the other end of the spectrum, is very different.

[00:01:41] Speaker 05:
In Deere, the Arrhenius equation was in the claims.

[00:01:46] Speaker 05:
What was new was the means of testing to provide information to input into that Arrhenius equation.

[00:01:53] Speaker 05:
And in dear, the claim was held patentable, bless you, because... That's a constant temperature measurement.

[00:02:00] Speaker 05:
The better means of providing a temperature input into the Arrhenius equation, exactly.

[00:02:04] Speaker 05:
And that was patentable, despite the fact that the technology

[00:02:10] Speaker 05:
was all conventional.

[00:02:11] Speaker 05:
The thermocouples were conventional.

[00:02:13] Speaker 05:
The computers were conventional.

[00:02:14] Speaker 05:
There was nothing new, conceivably new, about any of the technology by which you did the measurements.

[00:02:22] Speaker 05:
What was new was the testing regime, which produced better information to plug into the Arrhenius equation.

[00:02:29] Speaker 05:
In this case, the asserted natural law or phenomenon has been variously described, but is essentially asserted to be the law of demand.

[00:02:40] Speaker 05:
Now there's two problems with that in our view.

[00:02:45] Speaker 05:
The first is the law of demand is quite different from the Arrhenius equation.

[00:02:51] Speaker 05:
It's not actually knowable at any given time, and it changes constantly.

[00:02:56] Speaker 05:
The law of demand merely says that all of the things being equal, generally as prices go up, demand will go down.

[00:03:04] Speaker 05:
What we're talking about here is the particular demand curve for a particular product at a particular time.

[00:03:11] Speaker 05:
And that changes hourly maybe, in an e-commerce environment, daily, certainly weekly.

[00:03:18] Speaker 05:
No one knows at any given time.

[00:03:20] Speaker 05:
What this invention is, is a better way to test for information to plug into that analysis.

[00:03:27] Speaker 05:
It does not even claim in the claims as Deere did the Arrhenius equation.

[00:03:32] Speaker 05:
But it is like Deere, a means of testing that is new, that provides better information into an old problem.

[00:03:40] Speaker 05:
The old problem, we're not, no one's saying the problem isn't.

[00:03:43] Speaker 04:
The problem I see is that in deer, what they were improving was an actual manufacturing thing that wasn't abstract.

[00:03:54] Speaker 04:
And so they used some new equation and stuff and putting it together, they come up with a patentable claim.

[00:04:02] Speaker 04:
Here, what you're trying to improve is an abstract idea.

[00:04:07] Speaker 04:
So how do you get, I mean, I know you want to talk about deer

[00:04:10] Speaker 04:
and Mayo, but isn't this really about Bilski and Alice?

[00:04:15] Speaker 05:
There's two parts to that question, and I'm happy to answer both.

[00:04:18] Speaker 05:
The first question is whether deer is limited to the physical transformation of rubber, a physical thing.

[00:04:23] Speaker 05:
That's an argument that Amazon makes.

[00:04:26] Speaker 04:
Well, I agree with you.

[00:04:27] Speaker 04:
I mean, it doesn't have to be limited to, but what it has to be improving is something that itself is not an abstract idea, doesn't it?

[00:04:37] Speaker 05:
In my mind, first, that begs the question of the abstract idea.

[00:04:39] Speaker 04:
So I will get... Well, you're not going to dispute that the whole notion of price optimization isn't an abstract idea, are you?

[00:04:46] Speaker 05:
I will dispute that this claim covers an abstract idea.

[00:04:49] Speaker 05:
I do not dispute that the concept of trying to optimize price is an abstract idea.

[00:04:56] Speaker 05:
Not at all.

[00:04:58] Speaker 05:
Let me first answer the dear point and then get to the Mayo step one point, if I may, because they are very distinct issues and I really want to address them.

[00:05:06] Speaker 05:
On the dear point,

[00:05:07] Speaker 05:
I believe Bilsky eliminates the argument that deer and others should be construed to be limited to the physical transformation of a thing.

[00:05:15] Speaker 05:
Bilsky was presented squarely with the question of whether there's a categorical exclusion for even business method patents, which you could argue this is not.

[00:05:23] Speaker 05:
But even if it is, Bilsky eliminates the argument that that's out of bounds, if you will.

[00:05:29] Speaker 05:
And claim one of deer doesn't even claim the physical transformation of anything.

[00:05:33] Speaker 05:
It's a method of operating the press.

[00:05:36] Speaker 05:
Plane 13 talks about making rubber.

[00:05:39] Speaker 05:
So the idea, which Amazon argues, that deer is limited to the fact that it's rubber, something physical that you can touch, I think is both eliminated by Dilski and by Plane 1 of deer.

[00:05:53] Speaker 05:
Now to the second point, the Mayo step one point.

[00:05:57] Speaker 05:
Everyone agrees, I think there's no dispute, that the law of demand is an abstract concept.

[00:06:02] Speaker 05:
Trying to optimize that law of demand is an abstract concept.

[00:06:06] Speaker 05:
What Alice teaches us is that the test of abstractus, step one, is preemption.

[00:06:14] Speaker 05:
Do you preempt that abstract idea?

[00:06:19] Speaker 05:
The answer here is clearly no.

[00:06:20] Speaker 05:
There are dozens of ways, several of which were presented to the district court.

[00:06:25] Speaker 02:
Suppose I did not think that Alice said that the test is preemption.

[00:06:30] Speaker 02:
but rather explained that a concern about preemption is what underlies a series of approaches, that the approach first stated in Mayo and then reaffirmed in Alice was to demand an inventive concept on something other than the abstract idea itself.

[00:06:51] Speaker 02:
What is that here?

[00:06:52] Speaker 05:
I would agree with half of that, if I may.

[00:06:54] Speaker 05:
I think it's fair to say

[00:06:56] Speaker 05:
that Alice didn't set up for you as the definitive test for step one of May.

[00:07:01] Speaker 02:
I suppose I thought it didn't actually say it was a test at all.

[00:07:06] Speaker 02:
It was an explanation for the test of the inventive concept.

[00:07:14] Speaker 02:
And there can be 15 different ways of implementing an abstract idea.

[00:07:24] Speaker 02:
You can't have 15 separate patents on them if each one is not invented, just because each one doesn't preempt.

[00:07:32] Speaker 05:
I understand your point, but I think Alice explained, at least in part, the reason for the concern of step one as being holding up the building blocks of invention, if you will.

[00:07:45] Speaker 05:
That's in Mayo and other cases as well.

[00:07:49] Speaker 05:
I don't believe there's any argument.

[00:07:51] Speaker 05:
with the concept as amorphous as the law of demand.

[00:07:54] Speaker 05:
And amorphous doesn't mean it's an abstract concept in this sense.

[00:07:58] Speaker 05:
Amorphous means you can't own it.

[00:08:00] Speaker 05:
The concern with Alice and Bilsky and the others is you don't want to give one party ownership of something that's important that others need to use to be invented.

[00:08:11] Speaker 05:
This claim doesn't give us the power to own the law of demand.

[00:08:15] Speaker 05:
It gives us the power to own one way of getting better information to try to figure out how to press.

[00:08:21] Speaker 05:
That's all.

[00:08:22] Speaker 05:
There are dozens of ways, probably hundreds of ways, that people have tried to figure out to guess what that demand curve is for their product at that point in time.

[00:08:32] Speaker 05:
And it's individuals.

[00:08:33] Speaker 05:
Individual products are individual points in time.

[00:08:35] Speaker 05:
It'll change.

[00:08:36] Speaker 05:
Umbrellas change in the winter.

[00:08:38] Speaker 05:
Snow shoes sell as high in the summer.

[00:08:41] Speaker 05:
Thousands of ways that demand curves for individual products vary over time and vary by product.

[00:08:49] Speaker 05:
The idea that that concept is one that we could own by this patent I think is belied by the patent itself.

[00:08:55] Speaker 02:
Besides the use of the online communications, that is the use of computers and networks to engage in the communications between seller and possible buyers to gather information about what at that moment some class of buyers would be willing to pay, what is

[00:09:19] Speaker 02:
knew about this.

[00:09:22] Speaker 02:
That is, why is it not the case that before there were networks and there were bazaars, sellers didn't test out prices by saying today I'm going to charge this and I see how many turns out that's too high and I'm not selling anything so tomorrow I charged something lower.

[00:09:44] Speaker 02:
Isn't this all about the

[00:09:47] Speaker 02:
gathering by communication of information to enter into the abstract thing called a contract.

[00:09:57] Speaker 05:
I think the answer to that is no with an explanation from me.

[00:10:00] Speaker 05:
There's two pieces to that.

[00:10:02] Speaker 05:
The first piece is that of course over time people have in some form aggregated information about how much they sold and how much pricing there was.

[00:10:13] Speaker 05:
The specification talks about that in column one.

[00:10:18] Speaker 05:
The specification also says in column two that if you try to automate that, and there's a figure two in the patent that shows how badly that works in the priority.

[00:10:27] Speaker 05:
Yeah, they're big lags.

[00:10:29] Speaker 05:
Big lags.

[00:10:30] Speaker 05:
And the patent says in column two about line 25 that even if you automate that, so it's not about the computers or any of that, even if you automate that, it still looks like figure two.

[00:10:42] Speaker 05:
What's different here is two respects.

[00:10:45] Speaker 05:
One is that you're testing multiple prices of the same good at the same time.

[00:10:50] Speaker 02:
Why is it not pretty familiar that a store or a company with two stores or 15 stores tests out different prices at different stores at the same time?

[00:11:00] Speaker 05:
There is no evidence in the record that anybody has done that.

[00:11:04] Speaker 02:
That's not something about which we could take judicial notice that that's a familiar practice.

[00:11:09] Speaker 05:
No, it's not.

[00:11:11] Speaker 05:
And that's a 102 or a 103 issue, in my view.

[00:11:14] Speaker 05:
There are some things like hedging or risk management or intermediate settlements.

[00:11:20] Speaker 05:
Everyone knows that's something I think you could take traditional notice of.

[00:11:23] Speaker 05:
And they did and found that that was familiar traditional and you can't merely get a patent on automating a practice that's been historical.

[00:11:30] Speaker 05:
This is something that would involve clear conflation of 102 and 103 with 101.

[00:11:37] Speaker 05:
And there's a line and the line matters.

[00:11:42] Speaker 05:
And there is no evidence in this record that suggests that the practices that are covered by these claims are historical.

[00:11:52] Speaker 05:
And the only evidence that is in the record is squarely inconsistent with that.

[00:11:56] Speaker 05:
The most sophisticated e-commerce merchant on the planet is Amazon.

[00:12:02] Speaker 05:
It has an entire department of people whose job it is to try to figure out the best price.

[00:12:07] Speaker 05:
They try to hire our people into that department.

[00:12:10] Speaker 05:
The most sophisticated merchant on the planet found that our techniques increased their profitability by 7%, equating to over hundreds of millions of dollars.

[00:12:20] Speaker 05:
That is very good evidence in this record on the 12-by-6 motion that must be accepted that says, no, this isn't traditional practice, it's being automated.

[00:12:29] Speaker 05:
And so if the argument is this is just a traditional practice being automated, there's nothing on this 12-by-6 record that would support that.

[00:12:38] Speaker 05:
And that's a 102, 103 issue, not a 101 issue.

[00:12:42] Speaker 05:
Second response to that, if I may, is there's a big piece of this that is squarely within the holding of DDR.

[00:12:51] Speaker 05:
DDR is a separate rationale that is independent of what we've been talking about, which is Mayo step one, Mayo step two.

[00:12:58] Speaker 05:
In Mayo step two, our view is this is controlled by dear.

[00:13:02] Speaker 05:
But independently under DDR, in DDR this court is held

[00:13:07] Speaker 05:
that where the problem is different, more acute, particularly sensitive in an online environment.

[00:13:15] Speaker 05:
An online solution to that, which is different because of the differences in the online environment, is itself not now in that category of an ancient old line practice that is merely being automated.

[00:13:27] Speaker 05:
It is a new type of practice addressing a newer type of problem.

[00:13:34] Speaker 02:
So just thinking about claim one, since you don't make any arguments in your brief to distinguish one claim from another.

[00:13:42] Speaker 02:
And maybe I'm wrong here, but.

[00:13:44] Speaker 05:
We do, in fairness, Your Honor.

[00:13:46] Speaker 05:
I talk about how claim, for example, three, which is directed to the web, is different in the sense that a person's interaction by clicking on a website is a greater affirmative expression of interest.

[00:14:03] Speaker 05:
And part of the point of this patent, and claim 17 is also independently relevant for different reasons, but part of the point of this patent is that what you get from the testing, the live testing that this provides is not just how many people bought at a particular price.

[00:14:21] Speaker 05:
You know the number of the universe of people who actually were interested in that product and didn't buy.

[00:14:27] Speaker 05:
And that negative information is as important or more when you're trying to set the demand curve.

[00:14:33] Speaker 05:
because all you know if 10 people bought it is that 10 people would pay at least that price.

[00:14:39] Speaker 05:
If you then increase the price or decrease the price and the number of people who bought and didn't bought changes, that gives you materially more information than the historical practices that have been discussed.

[00:14:50] Speaker 05:
And that negative information, because you actually know the universe, because you sent them the emails or monitors clicking on the website, that's something they couldn't do in the ancient bazaar.

[00:15:00] Speaker 02:
That's something- Well, I'm not saying you had somebody

[00:15:02] Speaker 02:
you know, at the gate to the bazaar of counting people, which doesn't seem that, wouldn't seem that surprising.

[00:15:12] Speaker 05:
Any bazaar that I went through is counting people.

[00:15:14] Speaker 02:
We keep talking about bazaars just because it was mentioned in the below, but one can imagine that at any number of stores with single entrances.

[00:15:25] Speaker 05:
One can imagine someone counting the number of people entering a Walmart, but now you're talking about counting the people who actually went to look at a particular product

[00:15:32] Speaker 05:
looked at the price, were looking for that product, bought and didn't buy, there's certainly no evidence in this record that anybody has ever done that, anything approaching that level of specificity.

[00:15:44] Speaker 05:
And there's evidence to conclude that hasn't been done because the most sophisticated e-commerce merchant on the planet wasn't doing it.

[00:15:52] Speaker 04:
So let's put aside the whole e-commerce stuff.

[00:15:54] Speaker 04:
Do you think that this whole notion of kind of live testing different prices to come up with the more accurate demand curve is patentable?

[00:16:05] Speaker 05:
Patentable under 101 or 102, 103?

[00:16:07] Speaker 04:
Under 101.

[00:16:08] Speaker 05:
Yes.

[00:16:10] Speaker 05:
Absolutely.

[00:16:11] Speaker 05:
Because it is improving, as Alice said about deer, it is improving a problem in a technological process.

[00:16:19] Speaker 05:
The technological process doesn't have to be rubber, something tangible or physical.

[00:16:23] Speaker 05:
This very real technological process.

[00:16:25] Speaker 04:
So the demand, I know I'm keeping you over your time, sorry, but.

[00:16:30] Speaker 04:
It's your time, not mine.

[00:16:32] Speaker 04:
Right.

[00:16:33] Speaker 04:
The demand curve is a basic kind of economic concept.

[00:16:37] Speaker 05:
As a concept.

[00:16:38] Speaker 05:
The actual curve, people get that.

[00:16:42] Speaker 04:
Right.

[00:16:42] Speaker 04:
So if you improve upon that economic concept by saying, here's better ways to make it more accurate, you think that's a patentable idea.

[00:16:49] Speaker 05:
All we're doing, we're not improving on the concept.

[00:16:52] Speaker 05:
we're improving the data that goes into the concept.

[00:16:54] Speaker 05:
Just like deer improved the data that went into the Arrhenius equation.

[00:16:59] Speaker 05:
You had better temperature information going into the Arrhenius equation.

[00:17:03] Speaker 05:
Here you have better information about consumer demand going into a guess about the demand curve.

[00:17:09] Speaker 04:
In that sense, they're the same.

[00:17:10] Speaker 04:
And that for you goes to whether this is computer implemented or not, even though it may be impossible to do in the real world without a computer.

[00:17:17] Speaker 05:
In that sense, putting aside the DDR issues that I raised, it is irrelevant whether it's done on a computer.

[00:17:23] Speaker 05:
because the concept of it is just like deer.

[00:17:27] Speaker 05:
You couldn't certainly do it without a computer, but the inventiveness of it, the patentability of it, doesn't depend on the computer at all, just as it didn't in deer.

[00:17:40] Speaker 02:
Okay.

[00:17:42] Speaker 02:
Why don't you give Mr. Gahr a chance and we'll restore your rebuttal.

[00:17:49] Speaker 05:
Thank you.

[00:17:56] Speaker 00:
Thank you, Judge Toronto, and may it please the court.

[00:17:59] Speaker 00:
The 713 patent at issue in this case is ineligible for protection under the patent law because the price optimization concept that it claims is just as abstract as the price protection concept held ineligible in Bilsky and the price fulfillment concept held ineligible in Alice.

[00:18:16] Speaker 00:
And just like the patents invalidated in those cases, the patent in this case fails to provide the something more, the something

[00:18:24] Speaker 00:
new and significantly inventive that transforms an abstract idea that is unpatentable into a patent-eligible concept under step two of the Mayo-Alice framework.

[00:18:35] Speaker 00:
Alice makes clear beyond doubt that simply taking the abstract concept of offer-based pricing or price optimization and automating it through the use of generic computer function is not sufficient to pass Alice and Mayo's step two framework.

[00:18:52] Speaker 00:
I'd like to go back, if I could, and focus the court on the claims actually before this court.

[00:18:57] Speaker 00:
And I think Judge Toronto is quite right that they haven't meaningfully differentiated between the claims and so that the representative claim for resolution before this court is claim one.

[00:19:07] Speaker 00:
And that's set out, reprinted at page 220 of the appendix to the blue brief.

[00:19:12] Speaker 00:
And it has five basic steps.

[00:19:14] Speaker 00:
And this is it.

[00:19:15] Speaker 00:
First, testing prices by making receiving offers via electronic message or web page.

[00:19:22] Speaker 00:
gathering data about buying decisions at different prices.

[00:19:25] Speaker 00:
Third, using a computerized system to take the data and automatically determine estimated outcome of selling goods at each various price point.

[00:19:35] Speaker 00:
Fourth, selecting an optimal price from that list.

[00:19:37] Speaker 00:
And fifth, offering the product for sale via electronic message at that price.

[00:19:42] Speaker 00:
That's it.

[00:19:43] Speaker 00:
That's the concept that they claim is eligible for protection and exclusivity under the patent laws.

[00:19:48] Speaker 02:
I don't know if this question will be precise enough, but since we're in 101 land, that may not matter.

[00:19:57] Speaker 02:
You do or do not contest the proposition that a inventive way of gathering information for the process of price setting would be

[00:20:11] Speaker 00:
eligible under 101?

[00:20:13] Speaker 00:
I think, Your Honor, if it's just improving the economic pricing, the concept of pricing, our view is that it's not eligible.

[00:20:22] Speaker 00:
What Alice looks to, and this is getting back to Deere, is whether there is a technological improvement to a technological process.

[00:20:30] Speaker 00:
That's what Alice said, and it's perfectly consistent with what Deere said, which is Deere found patentable a process

[00:20:40] Speaker 00:
for curing synthetic rubber, one element of which was the mathematical formula, the theory.

[00:20:48] Speaker 00:
And what Dear repeatedly made clear throughout its decision was that the use of that formula to automatically determine the values was part of an entire process that included the use of a thermocouple, the use of a molding process, the use of the process used to actually get to synthetically cured rubber.

[00:21:05] Speaker 00:
And that was significant, because as Justice Rehnquist said in his opinion,

[00:21:09] Speaker 00:
Industrial practices such as this are the type which historically have been eligible for patent protection.

[00:21:15] Speaker 00:
Now flash forward to Alice.

[00:21:17] Speaker 00:
What the court said in Alice about the patent in DEER was that it solved, and this is on page 2358 of its decision, it solved a technical problem in conventional industry practice and it involved an improvement in technology or technological field.

[00:21:33] Speaker 00:
The patent in this case does not involve a technological process and it certainly doesn't involve a technological improvement.

[00:21:39] Speaker 00:
At best, it claims an improvement in pricing, which is a quintessential abstract economic concept, which is not patent-eligible under Section 1 or any of this court's cases.

[00:21:51] Speaker 00:
It's not patent-eligible under Alice.

[00:21:53] Speaker 00:
It's not patent-eligible under Bilsky.

[00:21:55] Speaker 00:
It's not patent-eligible under Ultramartial or Bysate.

[00:21:58] Speaker 02:
So even if they had figured out a never-before-thought-of way of determining

[00:22:08] Speaker 02:
how many people might be willing to buy how much of something at a particular time and then claimed the setting of prices using that way that would not be within 101.

[00:22:23] Speaker 00:
Let me try to answer that this way.

[00:22:25] Speaker 00:
There's a lot of talk in OIP brief about the software that OIP purportedly brought into Amazon to show them.

[00:22:32] Speaker 00:
They call it the Optimo pricing solution, I think.

[00:22:37] Speaker 00:
You know, the court takes the facts as true at this stage.

[00:22:41] Speaker 00:
But that's the story that they present.

[00:22:44] Speaker 00:
But I think what's important about that is they didn't try to come in and actually patent the specific optimal pricing solution and explain in the patent the specific thing that they purportedly showed.

[00:22:57] Speaker 00:
Right.

[00:22:57] Speaker 02:
But this is, I guess, what I'm trying to separate.

[00:23:01] Speaker 02:
I think you have an argument that this is your

[00:23:06] Speaker 02:
argument based on your recitation of the five things going on in claim one, that there's just nothing inventive here.

[00:23:12] Speaker 02:
That's one argument.

[00:23:14] Speaker 02:
Another argument is, even if that was an inventive way of coming up with information that would lead to a pricing decision, it still wouldn't qualify under 101.

[00:23:27] Speaker 00:
Your Honor, I think that is consistent with the Supreme Court's presence.

[00:23:34] Speaker 00:
That question leads you is a place closer to fluke, in which all you had was the mathematical formula that was purportedly the newest and best way of arriving at that formula.

[00:23:44] Speaker 00:
And you didn't have the technological process, the industrial process.

[00:23:48] Speaker 00:
But that said, I think that the example that you're hypothesizing is much different than the case before you.

[00:23:55] Speaker 00:
I don't think the court has to hold that it would be impossible to find patent protection under 101

[00:24:03] Speaker 00:
the type of hypothetical, your honor, positive.

[00:24:06] Speaker 00:
This case doesn't involve that situation, because the claims, as you mentioned, don't remotely go beyond breaking down the basic concept of authoritative steps.

[00:24:19] Speaker 02:
You understand then that by focusing for the moment on the narrower position, that what's at issue here is not inventive

[00:24:32] Speaker 02:
you naturally lead to the other piece of Mr. Power's argument, which is, how are we supposed to know?

[00:24:39] Speaker 02:
On this record, really?

[00:24:42] Speaker 00:
Oh, in that respect, this is no different than Alice, which was at the summary judgment stage, Bisafe, which was at the pleading stage, Ultramurcial, which was at the 12b6 stage.

[00:24:53] Speaker 02:
Well, the summary judgment stage might be

[00:24:56] Speaker 02:
somewhat different, because you actually do get to have discovery and put on evidence.

[00:25:01] Speaker 00:
There wasn't evidence in ALICE about whether or not the concept of price fulfillment was an abstract concept or a longstanding commercial practice.

[00:25:13] Speaker 00:
And I don't think there would be any basis for taking evidence on whether or not the concept of offer-based pricing is a longstanding commercial practice or economic concept.

[00:25:23] Speaker 00:
we can go back and talk about how it worked in the bazaar, you can go forward in time and think about something like the pit at the New York Stock Exchange.

[00:25:29] Speaker 02:
Well, unless there's a film for a minute, I don't know the first thing about bazaars.

[00:25:33] Speaker 02:
How am I supposed to know the answer to this question?

[00:25:35] Speaker 00:
Well, we've cited economic theory going back to centuries in our brief about the concept of pricing.

[00:25:42] Speaker 00:
And again, I don't think this is any different than the issue that was confronted in Bilsky, or in Alice, or in these other cases like Ultramershal.

[00:25:49] Speaker 00:
And I think it's irrefutable that

[00:25:52] Speaker 00:
offer-based pricing is a long-standing economic commercial practice that is a quintessential abstract idea.

[00:26:00] Speaker 00:
There's no need to take any evidence on that.

[00:26:03] Speaker 00:
I think where my friend is trying to take the court with references to the evidence and the factual story here is back to their allegations about the specific software that OIP brought in to show to Amazon.

[00:26:19] Speaker 00:
And again, if you look at the claims,

[00:26:21] Speaker 00:
It's the claims that matter.

[00:26:22] Speaker 00:
This court made that clear in the Accenture case.

[00:26:26] Speaker 00:
It's the claims, not allegations or things in the specifications.

[00:26:29] Speaker 00:
It's the claims that matter.

[00:26:30] Speaker 00:
So all those factual allegations about that are not relevant to the court's interpretations of whether these claims are sufficiently concrete and inventive.

[00:26:39] Speaker 01:
How do you respond to this argument about DDR and how it deviates from Alice?

[00:26:47] Speaker 00:
Well, Your Honor, there was a good dissent in that case.

[00:26:49] Speaker 00:
But I think DDR is

[00:26:51] Speaker 00:
distinguishable in two fundamental respects.

[00:26:54] Speaker 00:
First, as the majority in that opinion said, the patent in that case didn't simply try to claim an economic concept.

[00:27:03] Speaker 00:
And second and relatedly, the patent in that case was directed to an internet-centric problem, a problem that arose with the internet and that the patent tried to solve with respect to transactions over the internet.

[00:27:17] Speaker 00:
making a clip from one website to a next website, feel as though you're not moving from one website to another.

[00:27:26] Speaker 00:
The look and the feel of the websites would be the same.

[00:27:29] Speaker 00:
So in that case, the majority emphasized that the patent was solving internet-centric problems and wasn't simply using the internet or computers to purportedly solve a long-standing economic problem.

[00:27:41] Speaker 00:
And this case is exactly the opposite.

[00:27:44] Speaker 00:
They're not trying to solve an internet

[00:27:46] Speaker 00:
internet-centric problem.

[00:27:49] Speaker 00:
What the claim is in the patent, and the specification makes this clear about the problem that they're purportedly trying to solve, is they're trying to take the long-standing concept of price optimization and use a computerized system to improve that by optimizing the price.

[00:28:06] Speaker 00:
And that's clear from the claim.

[00:28:08] Speaker 04:
Is the problem with this that it's a long-standing economic practice that they're trying to do on a computer, or that

[00:28:15] Speaker 04:
It's an abstract idea that could never have been done.

[00:28:18] Speaker 04:
If we went back thousands of years to the first person that came up with the notion of price optimization, could they have patented that?

[00:28:26] Speaker 00:
I think it's both, Your Honor.

[00:28:27] Speaker 00:
No, I don't think they could have patented it.

[00:28:29] Speaker 00:
In the same sense that they couldn't have patented it, they couldn't have patented the law of gravity when it was discovered.

[00:28:35] Speaker 00:
I don't think it was patentable, but I think the court's cases

[00:28:39] Speaker 00:
and confirming that an abstract, instinct that an abstract idea is present, talk about long-standing economic and commercial practices.

[00:28:46] Speaker 00:
And here you certainly have that.

[00:28:48] Speaker 04:
Doesn't that get us pretty close to essentially declaring that any kind of business method that improves, that uses these kind of economic ideas, even if it's improving them, is unfathomable?

[00:29:00] Speaker 00:
I don't think so, Your Honor.

[00:29:03] Speaker 00:
For one thing, these arguments about

[00:29:06] Speaker 00:
You can't accept this position because it would mean the businessmen that patents are not patentable.

[00:29:12] Speaker 00:
These arguments were made in Alice, they were made in Bilsky, they were made in Ultramershaw, and the courts have rejected them.

[00:29:17] Speaker 00:
Secondly, we do have cases like DDR that recognize that there are concepts involving the internet, involving the e-commerce environment, that the court held are patentable.

[00:29:28] Speaker 00:
The fundamental problem with this case is it doesn't remotely approach

[00:29:32] Speaker 00:
DDR area.

[00:29:33] Speaker 00:
Instead it lies classically within the Al Spilsky Ultramershal BuySafe area where you're simply taking a long-standing economic concept and the supposed improvement is the use of generic computer functions to automate the ability to calculate an optimal price.

[00:29:54] Speaker 00:
And under the Supreme Court precedence, under this court's precedence, it's clear that that's not path-manageable.

[00:30:00] Speaker 00:
And I think going back

[00:30:02] Speaker 00:
In the history of this case, it's noteworthy that when the district court reached its decision, what it had before it was the initial panel decision in the Alice case with the CLS Bank cases.

[00:30:13] Speaker 00:
It was known at that time.

[00:30:14] Speaker 00:
And the initial panel, of course, had held that the patent in that case was eligible for protection under 101.

[00:30:21] Speaker 00:
And my friends argued that the patent in this case was indistinguishable from the patent in Alice.

[00:30:26] Speaker 00:
And we explained to the district court and the district court agreed that no, in fact, the patent in this case

[00:30:31] Speaker 00:
is even more abstract than the patent in the Alice case, because the patent in this case doesn't even have anything approaching something like the shadow records that they had relied upon in the initial panel decision to find that that price fulfillment concept was patent eligible under section 101.

[00:30:51] Speaker 00:
And so I think as the district court recognized, this case is more extreme than Alice.

[00:30:58] Speaker 00:
And the patent in this case has nothing approaching

[00:31:01] Speaker 00:
the shadow records, and Alice.

[00:31:03] Speaker 00:
The district court was right to recognize that this case was further afield from Alice.

[00:31:08] Speaker 00:
What we asked this court to do is to apply the Supreme Court precedent.

[00:31:12] Speaker 00:
And Alice and Bilsky looked to the court's own precedent in cases like BuySafe and Ultramershal and hold that the basic economic concept underlying the 713 patent offer-based pricing is not eligible for protection under the patent laws, that the patent before you in this case claimed one

[00:31:31] Speaker 00:
terms of Claim 1 provides nothing close to the significantly more required by Alice and Mayo to transform a basic economic concept available to all into a patent-eligible concept under our patent laws.

[00:31:45] Speaker 03:
There are no further questions.

[00:32:01] Speaker 05:
I think there are three categories of cases that we're talking about.

[00:32:05] Speaker 05:
One is where someone is trying to patent something that is indisputably old.

[00:32:10] Speaker 05:
That's Bilsky, that's Alice, that's BuySafe, that's content extraction.

[00:32:15] Speaker 05:
That's a set of cases where there wasn't a dispute that what was being called the abstract idea was old.

[00:32:22] Speaker 05:
And the attempt was to patent that in an online environment where the only thing that had changed was the fact that it was being done by computers or online.

[00:32:31] Speaker 05:
That's not patentable.

[00:32:32] Speaker 05:
That's not this case.

[00:32:34] Speaker 05:
There's a second category of cases where what you're trying... Can I just ask a point of clarification?

[00:32:38] Speaker 02:
Yes.

[00:32:40] Speaker 02:
Were shadow accounts old in Alice or merely the process of some higher level of generality that was talked about?

[00:32:50] Speaker 05:
It was treated in Alice as a surrogate for what was old.

[00:32:55] Speaker 05:
I don't know that there was any evidence in the record and can't represent that there was or not.

[00:32:59] Speaker 05:
about whether they were old or new.

[00:33:02] Speaker 05:
I think it was treated as a conceptual embodiment of the basic concept.

[00:33:06] Speaker 05:
That was how I read the opinion.

[00:33:08] Speaker 05:
There's a second category, which is like Mayo, where what you're trying to patent is the law of nature.

[00:33:15] Speaker 05:
You figured out the relationship between this gene or this set of metabolites or something else, and nothing else is inventive.

[00:33:23] Speaker 05:
Those are not patent.

[00:33:25] Speaker 05:
The third category is defined by deer.

[00:33:27] Speaker 05:
undeniably had the Arrhenius equation, which is undeniably old.

[00:33:31] Speaker 05:
They even had the Arrhenius equation in the claims, which we don't.

[00:33:35] Speaker 05:
And the Arrhenius equation is an equation which the law of demand, which I put in quotes, isn't and couldn't be.

[00:33:43] Speaker 05:
It's not something you could own the way you could own the Arrhenius equation if it were in a patent.

[00:33:48] Speaker 05:
But there, what was patentable was getting new sources of information, a better way to get information to use that Arrhenius equation.

[00:33:56] Speaker 05:
Same equation,

[00:33:57] Speaker 05:
Same process, everything else is the same, nothing unconventional about the computers.

[00:34:03] Speaker 05:
All that was new is they figured out a better way to get information relevant to using that equation.

[00:34:08] Speaker 05:
That is this case.

[00:34:11] Speaker 05:
We are claiming that we have found a better way to get information to estimate the demand curve.

[00:34:17] Speaker 05:
That's patentable in exactly the same way it was in Deere.

[00:34:20] Speaker 05:
It is not in the category of Bilsky or Alice or BuySafe or Contact Extraction

[00:34:26] Speaker 05:
where there there was no dispute that what was being claimed as being inventive was old, here there is a dispute.

[00:34:33] Speaker 05:
And on a 12b6 motion, you can't take judicial notice here that somebody in an ancient bazaar did this, or somebody at Walmart did this.

[00:34:42] Speaker 05:
There's no evidence of that.

[00:34:44] Speaker 05:
And the evidence which must be taken as true here is squarely, irreconcilably inconsistent with that.

[00:34:51] Speaker 05:
On this record, on these issues, I would assert

[00:34:54] Speaker 05:
that you cannot find this patent to be ineligible under 101.

[00:35:00] Speaker 05:
The second point I wanted to make is about the distinction being made about deer.

[00:35:06] Speaker 05:
That it has to be a technological process and that means something tangible like rubber.

[00:35:10] Speaker 05:
That is the argument that's being made.

[00:35:12] Speaker 05:
That argument, taken to its extreme and it's already at the extreme, would essentially read out business method paths.

[00:35:21] Speaker 05:
I can't think of one that would be valid

[00:35:24] Speaker 05:
under Amazon's theory of this case.

[00:35:27] Speaker 05:
That argument was squarely precluded by Bilsky.

[00:35:30] Speaker 05:
It was presented to Bilsky and rejected by Bilsky.

[00:35:33] Speaker 05:
So there is squarely room to say that when Alice says that Deere solved a technological problem in a conventional industry practice, which is the term, there's no dispute that when Amazon and other merchants price, that's a conventional industry practice.

[00:35:50] Speaker 05:
And there's no dispute it's a technological problem.

[00:35:52] Speaker 05:
How do you get that information?

[00:35:54] Speaker 05:
We solve that technological problem, or at least have a better solution to it.

[00:35:58] Speaker 05:
That's exactly what Alice says Deere's does.

[00:36:02] Speaker 05:
It's exactly what other cases say Deere's about.

[00:36:06] Speaker 05:
Now, Amazon's brief tries to make Deere something like an 80s fad that should be ignored the way Millie Vanille and Cagney and Lacey should be ignored.

[00:36:16] Speaker 05:
It's not.

[00:36:17] Speaker 05:
It's been given clear modern relevance by Alice.

[00:36:21] Speaker 05:
Alice has categorized it as a very specific

[00:36:24] Speaker 05:
exception to all of the other cases.

[00:36:27] Speaker 05:
Are we solving a technological problem in a conventional industry practice?

[00:36:32] Speaker 05:
Absolutely.

[00:36:33] Speaker 05:
We prove that by increasing Amazon's net by 7%.

[00:36:37] Speaker 05:
Council says, well, that's technology, not the claims.

[00:36:41] Speaker 05:
In this case, one must take as true what was pled.

[00:36:45] Speaker 05:
And what was pled is the technology that was tried at Amazon

[00:36:48] Speaker 05:
practices these claims.

[00:36:49] Speaker 02:
That's not at all the same thing, is it?

[00:36:51] Speaker 02:
It's not, but it's relevant.

[00:36:54] Speaker 02:
It is relevant, but the claims could be sufficiently broad that they encompassed some very, very, very special individual applications that were very, very, very valuable.

[00:37:06] Speaker 05:
One could hypothesize a set of circumstances where the Venn diagrams intersected at such a meaningless point.

[00:37:14] Speaker 02:
That doesn't have to be meaningless.

[00:37:15] Speaker 02:
It's just that broad claims encompass embodiments, and some of the embodiments may have details that Amazon was willing to pay a lot of money for or found very valuable anyway, but not the broader set, which is what your claims come from.

[00:37:34] Speaker 05:
True.

[00:37:34] Speaker 05:
There is no evidence on that issue either way.

[00:37:36] Speaker 05:
The only evidence we have is that the technology that was shown to Amazon increased their net in a very meaningful way, and that that practices these claims.

[00:37:44] Speaker 05:
Now, if one wants to argue that that shouldn't be given effect, one would want to have facts that would go down the lines that your honor was just describing, which don't exist on this record.

[00:37:53] Speaker 02:
But Mr. Garm makes the point, which seems to me to have some weight, that essentially the same thing could have been said in at least Alice, maybe in Bilsky, that who knows how these kinds of

[00:38:10] Speaker 02:
what the past world is with respect to these economic practices without an evidentiary record.

[00:38:15] Speaker 05:
Well, and that I think my response to Your Honor's question about judicial notice is the answer.

[00:38:19] Speaker 05:
I think hedging, we all know has been done.

[00:38:24] Speaker 05:
Shadow accounts?

[00:38:25] Speaker 05:
Shadow records wasn't viewed, by the court at least, as anything that is independent of that historical practice.

[00:38:33] Speaker 05:
It was representative of general historical practice.

[00:38:36] Speaker 05:
So I don't think,

[00:38:39] Speaker 05:
I realize my time is up.

[00:38:40] Speaker 05:
The only three points I want to leave you with are, I think, to hold it for Amazon would violate Bilsky's admonition that you're essentially reading business method patents out.

[00:38:50] Speaker 05:
Second, the DDR exception clearly applies.

[00:38:53] Speaker 05:
This is a very different problem.

[00:38:54] Speaker 03:
You're wrapping it up.

[00:38:56] Speaker 05:
Column 4 tells you that.

[00:38:58] Speaker 05:
And finally, the deer controls.

[00:39:00] Speaker 05:
And deer has to be given the effect that Alice says.

[00:39:03] Speaker 05:
And deer controls.

[00:39:04] Speaker 02:
Thank you, Mr. Powers.