[00:00:00] Speaker 00: We have three cases scheduled for oral argument this morning. [00:00:04] Speaker 00: The first one is Kickstarter, Inc. [00:00:05] Speaker 00: versus Fanfield, LLC. [00:00:09] Speaker 00: Mr. Smith? [00:00:14] Speaker 00: Mr. Smith, I understand you have reserved two minutes for rebuttal time. [00:00:17] Speaker 00: Is that correct? [00:00:18] Speaker 00: That's correct, Your Honor. [00:00:19] Speaker 00: Okay, you may proceed. [00:00:21] Speaker 01: Thank you, Your Honor. [00:00:22] Speaker 01: Good morning. [00:00:24] Speaker 01: May it please the Court. [00:00:25] Speaker 01: My name is Craig Smith. [00:00:26] Speaker 01: I represent Fan Funded and Ardashare in this appeal. [00:00:30] Speaker 01: I'm going to focus on the 101 issues today. [00:00:33] Speaker 01: And in particular, I'm going to focus on two particular issues that we think justify reversal of the district court's judgment. [00:00:41] Speaker 01: The first issue is the burden that the district court did not apply in this particular case. [00:00:47] Speaker 01: And the second is we believe that the district court did not properly apply the two-step analysis that's required under ALIS. [00:00:56] Speaker 01: Starting with the burden question, in this particular case, [00:01:00] Speaker 01: As in any case, every patent is entitled to the presumption of validity. [00:01:05] Speaker 01: Section 282 is clear on that point. [00:01:07] Speaker 01: And that puts the burden on the person challenging that patent in order to be able to set forth. [00:01:14] Speaker 00: Is that question fully settled, whether validity, the presumption of validity applies in a Section 101 inquiry? [00:01:25] Speaker 01: We think it is, Your Honor, for several reasons. [00:01:28] Speaker 01: The two reasons why I would say I think it's a settled law is the Supreme Court's decision in Microsoft v. IPI made it very clear the presumption of validity applies. [00:01:38] Speaker 01: The burden is always there on the challenger. [00:01:41] Speaker 01: It never changes. [00:01:42] Speaker 01: It's a constant burden and that it requires clear evidence in order to be able to surmount that burden. [00:01:49] Speaker 02: Does that apply to both the factual issues and the legal issues? [00:01:53] Speaker 02: I mean, if you look at Justice Breyer's concurrence in Eye for Eye, he says it just applies to factual issues. [00:02:00] Speaker 01: We would disagree that you would separate them out, that you would take a burden and then say, well, it only applies to the factual issues in play, not to the legal issues in play. [00:02:08] Speaker 03: How can you have a clear and convincing standard for a legal question? [00:02:12] Speaker 01: But I think many legal questions, as we know this court deals with, have underlying factual issues. [00:02:18] Speaker 03: Well, right. [00:02:18] Speaker 03: That's what Judge Stoll just asked you. [00:02:20] Speaker 03: Does it apply to only the factual questions, or does it apply to the ultimate legal question as well? [00:02:26] Speaker 01: That's correct, Your Honor. [00:02:27] Speaker 01: I would say it applies to both because of the fact that the legal issue that is being decided by the court has underlying factual issues. [00:02:34] Speaker 01: So you can't separate the two from them. [00:02:37] Speaker 03: But if there are no factual issues, then how do you come up with what's clear and convincing [00:02:43] Speaker 03: I mean, you're using the word evidence. [00:02:45] Speaker 03: Evidence is not something you use to arrive at a legal conclusion. [00:02:50] Speaker 01: I think with regard to the word evidence, I think the better word is standard, clear and convincing standard. [00:02:57] Speaker 03: But let me ask you this hypothetical. [00:02:58] Speaker 03: Let's assume we know exactly what the reach and bounds of a patent is, what it's directed to, what it's claiming, everything. [00:03:06] Speaker 03: There's no dispute about the facts. [00:03:09] Speaker 03: Where then [00:03:11] Speaker 03: does a clear and convincing evidence. [00:03:13] Speaker 03: So they've met on all those factual determinations. [00:03:16] Speaker 03: They've proven every single one of those items by clear and convincing evidence. [00:03:20] Speaker 03: Then isn't it just a pure question of law as to whether it fits within the eligible categories under 101 or not? [00:03:29] Speaker 01: Make sure I understand the hypothetical. [00:03:32] Speaker 01: If all of the underlying factual determinations have been made, you're asking whether or not the legal conclusion made by the court [00:03:40] Speaker 01: has to be made to satisfy the clear and convincing standard. [00:03:45] Speaker 01: Is that right, Your Honor? [00:03:46] Speaker 01: So I think in that scenario, yes, it still has to meet the clear and convincing standard. [00:03:50] Speaker 03: What's a clear and convincing legal conclusion as opposed to a regular legal conclusion? [00:03:55] Speaker 01: I think the court looking at what it has to decide, meaning for a 101 challenge. [00:04:00] Speaker 03: Do you have any support whatsoever where we've ever set a legal conclusion? [00:04:04] Speaker 03: Not the underlying facts, but the legal conclusion has to be supported by [00:04:09] Speaker 03: a clear and convincing evidence standard. [00:04:12] Speaker 01: I would provide to you this court's unbanked decision when dealing with CLS Fank and Alice. [00:04:19] Speaker 01: A five-member portion of the court had an opinion that said, presumption of validity applies to the 101 issue, which is a legal issue. [00:04:27] Speaker 02: Does something have underlying factual issues? [00:04:30] Speaker 01: I'm sorry. [00:04:30] Speaker 02: 101. [00:04:32] Speaker 02: You think it has underlying factual issues, right? [00:04:34] Speaker 01: That's correct. [00:04:34] Speaker 02: So why isn't that what the court was referring to? [00:04:39] Speaker 02: and CLS Bank. [00:04:41] Speaker 01: I mean, I can't say what the court was specifically referring to. [00:04:44] Speaker 01: It's our interpretation that based on the majority opinion stating that clear and convincing standard applies to the 101 decision. [00:04:53] Speaker 01: And then another four member group in a concurring opinion saying it's the clear and convincing evidence standard that applies. [00:04:59] Speaker 01: Our interpretation is that has to mean that the decision under 101 still has to meet the threshold burden of clear and convincing. [00:05:08] Speaker 01: that you don't diminish the burden simply because 101 is ultimately a legal issue. [00:05:18] Speaker 01: So our view is that the court dispensed with this burden. [00:05:23] Speaker 01: And it dispensed with this burden so that the appellee in this case didn't have to present clear evidence of its position. [00:05:31] Speaker 01: And that infected the entire opinion that the court rendered. [00:05:36] Speaker 02: What are the factual issues underlying the one-on-one analysis here that you see? [00:05:41] Speaker 02: What are the factual issues that come to you? [00:05:43] Speaker 01: So I think there are several factual issues that come up. [00:05:45] Speaker 01: In this case, I think in particular, two that are important is the court looked at what it considered to be known and routine components of the claims. [00:05:55] Speaker 01: It did this without really focusing on the actual, what would be the facts that would consider known routine, but stated that these are known and routine elements. [00:06:03] Speaker 01: That to us is a factual determination to say that looking at the elements of a claim, we are going to determine that those are known and routine elements suggest that it's a reference to something that is in fact known and routine. [00:06:17] Speaker 03: Well, what do you think that the court looked at that they said was it said was known and routine that's not known and routine? [00:06:24] Speaker 01: For example, the court actually laid out a number of elements for the claim. [00:06:28] Speaker 01: The thing that the court, in our view, specifically didn't mention was the fact that [00:06:33] Speaker 01: all these claims require software tools and these software tools are provided by a server from and allowing remotely accessible tools like web-based tools. [00:06:45] Speaker 03: Where in any of those words you just said is anything that's not known in routine? [00:06:51] Speaker 01: There are no examples that we can find and it certainly wasn't pointed out in the record where there is someone who's provided a platform for artists where [00:07:01] Speaker 01: They now have access to tools that allow them to manage it. [00:07:06] Speaker 03: You're getting too specific though. [00:07:07] Speaker 03: I mean, that's not what the district court referred to as known in routine. [00:07:11] Speaker 03: What the district court referred to as known in routine is a server. [00:07:14] Speaker 03: You would agree that a server is known in routine, right? [00:07:17] Speaker 01: Yes, your honor. [00:07:18] Speaker 03: Software is known in routine. [00:07:21] Speaker 01: Correct, your honor. [00:07:22] Speaker 03: A web presence, online access, all of that is known in routine, right? [00:07:26] Speaker 01: Correct. [00:07:27] Speaker 03: Taking each individual word or component and saying, [00:07:31] Speaker 03: But that's what we do. [00:07:33] Speaker 03: I mean, we have dozens of cases where we look at these 101 cases and we say all these conventional elements of computers and the internet and the like are known in routine. [00:07:44] Speaker 03: And so then we look at what your patent is directed to. [00:07:48] Speaker 01: And I would respond, Your Honor, that in looking at what the claims are directed to, [00:07:52] Speaker 01: There are novel software tools. [00:07:55] Speaker 03: Yes, but just a minute ago, you were complaining that the district court relied on factual conclusions about known and routine items that you thought weren't known and routine. [00:08:06] Speaker 03: And everything you recited, you just conceded was known and routine. [00:08:09] Speaker 03: So what factual conclusion did the district court draw that wasn't known and routine? [00:08:16] Speaker 01: I wouldn't concede that I acknowledge that all of the elements are known in routine. [00:08:21] Speaker 03: I would say- Would you want to go through them again? [00:08:22] Speaker 03: I mean, server, computer software, the internet, anything else? [00:08:27] Speaker 01: The claims have much more specific than just those elements, Your Honor. [00:08:31] Speaker 03: But to your- Did the district court call those much more specific elements known in routine? [00:08:36] Speaker 01: Yes. [00:08:36] Speaker 03: Which ones? [00:08:37] Speaker 01: The court went through almost every element of the claim with the exception of a few and said, [00:08:43] Speaker 01: These are known and routine elements. [00:08:45] Speaker 01: And so walk through claims. [00:08:46] Speaker 03: Which one specifically did the district court say that's known and routine that you think is not known and routine? [00:08:54] Speaker 01: For example, the provision of software tools to manage a project. [00:08:59] Speaker 02: Can you tell me where that is? [00:09:00] Speaker 01: Oh, sure. [00:09:01] Speaker 01: I'm sorry. [00:09:01] Speaker 01: Your Honor, it would be on A146 on the record. [00:09:04] Speaker 01: This is claim one of the patent and suit. [00:09:09] Speaker 03: So you think a website that provides software tools is not known and routine? [00:09:14] Speaker 01: In this context, no, it is not known in routine, Your Honor. [00:09:19] Speaker 00: OK. [00:09:19] Speaker 00: It seems to me that the claims don't even raise the question whether it's known in routine. [00:09:24] Speaker 00: I mean, software tools, server, these have no amount of specificity to them. [00:09:33] Speaker 00: It's just a very general description. [00:09:36] Speaker 00: I mean, how do we know what software tools are being utilized? [00:09:40] Speaker 00: It says software tools. [00:09:42] Speaker 01: Well, Your Honor, I think what's novel about this is that there wasn't in the prior art, and we're not aware of any real world. [00:09:50] Speaker 00: When I'm looking at prior art, this is 101. [00:09:54] Speaker 00: We're looking at what the claims are directed to. [00:09:58] Speaker 00: And if the claims are directed to a server or software tools, it just seems to me that that's almost at the very height of a generalization. [00:10:09] Speaker 01: I would disagree, Your Honor, because I think if you look at the claim as a whole, we're not just talking about... Well, I have. [00:10:15] Speaker 00: I mean, when you go through the claim as a whole, claim one, which is representative, I don't see any type of limitation on these very broad and general statements that almost anybody knows or understands that can expect a computer, a server, software tools. [00:10:35] Speaker 00: Those are extremely generalized statements. [00:10:39] Speaker 01: And there's... In response, Your Honor, I would say that there are many patents that have sort of known routines or known pieces to them, but the combination of them makes them unique and makes them patentable. [00:10:55] Speaker 00: And the fact of that in this situation, there are elements of this claim... Okay, so the combination of them makes them unique and patentable. [00:11:02] Speaker 00: That's a legal question, isn't it, in this situation and 101? [00:11:06] Speaker 00: Correct, Your Honor. [00:11:08] Speaker 00: And so we would submit that... We were asking you what are the factual issues and it seems to me you haven't cited any as of now. [00:11:15] Speaker 01: I think the whole question of known and routine is a factual issue because in order to be able to determine whether something is known and routine, there would, in our view, need to be some evidence to support where does the court or where does the... Well, perhaps if you're talking about a specific type of function of a database and have different structures, [00:11:38] Speaker 00: or you explode out the software tool, and now you have an architecture of structure, and then the argument becomes whether those are known and routine. [00:11:49] Speaker 00: But that doesn't exist here. [00:11:51] Speaker 00: All you have is a term, software tool. [00:11:54] Speaker 00: I mean, to me, I'm not even sure that raises a question whether it's known or routine. [00:12:00] Speaker 00: I mean, conventional and well-known it is, but I'm not sure it raises the question. [00:12:07] Speaker 00: a software tool, a server? [00:12:10] Speaker 01: We think it does, Your Honor, because it provides a complete invention, meaning looking at all the claims as a whole. [00:12:17] Speaker 01: I think one of the concerns we've seen with this court and other is that if you take apart just the individual elements and you just identify one piece of it and say, well, this, having a computer or having the internet is known and routine, that is one way to look at it. [00:12:32] Speaker 01: But I don't think it's the proper way to analyze the claim as a whole because the [00:12:37] Speaker 01: Sorry. [00:12:38] Speaker 02: No, I just wanted to point out just to make sure that we don't get off track. [00:12:41] Speaker 02: The idea is whether it's a technological improvement. [00:12:45] Speaker 01: Correct. [00:12:45] Speaker 02: Or whether it is a abstract idea that you're just putting on a computer and saying apply it. [00:12:52] Speaker 01: Correct. [00:12:52] Speaker 02: And so that's where the focus should be. [00:12:54] Speaker 01: Correct. [00:12:55] Speaker 02: It's not whether each individual element is not, whether it's novel or conventional. [00:13:01] Speaker 02: So, but what do you have in your claim that shows that what you have here [00:13:05] Speaker 02: It's a technological improvement on a computer or on something else, as opposed to just an abstract idea of having patrons fund an artist and saying, I'm going to put it on a computer. [00:13:19] Speaker 01: Sure. [00:13:19] Speaker 01: Your honor. [00:13:20] Speaker 01: So the claims as written talk about first the server. [00:13:23] Speaker 01: So what the invention in more general terms is talking about, it's created a platform, a, well, sometimes referred to as a fan funding platform, which didn't exist before, meaning it was not something [00:13:36] Speaker 01: that was in real world technology. [00:13:38] Speaker 01: It only existed once the internet became available and people could use it. [00:13:43] Speaker 01: And this platform now allows people for the first time and artists now have a centralized place where they can manage their own projects. [00:13:52] Speaker 01: So there's software tools to manage the product and a centralized database that is able to take what the artist is providing [00:14:01] Speaker 01: and then help manage all of the facets that usually artists had to do on their own, meaning trying to figure out who would be interested in their projects, trying to find fans for their project. [00:14:12] Speaker 02: But this is something people did outside of the computer realm for years and years, right? [00:14:17] Speaker 01: Individual artists would certainly be looking for fans and people who would be willing to do it. [00:14:23] Speaker 01: There's never been a centralized platform where artists could come together and say, [00:14:29] Speaker 01: I am now going to present my ideas and my new album, my new artistic work to the world. [00:14:36] Speaker 02: What in the claim is the technological improvement? [00:14:40] Speaker 01: I think it's the combination of the fact that you have now a centralized way of being able to provide this platform. [00:14:47] Speaker 01: So you've got a server that provides these remotely accessible tools. [00:14:52] Speaker 01: And as a result of this, you are able to provide software tools [00:14:57] Speaker 01: that allow artists for the first time to be able to manage their project. [00:15:01] Speaker 01: Ms. [00:15:01] Speaker 01: Smith, you're well into your rebuttal time. [00:15:03] Speaker 01: I just noticed. [00:15:04] Speaker 01: OK. [00:15:04] Speaker 01: Thank you, Your Honor. [00:15:07] Speaker 00: Sure. [00:15:07] Speaker 00: Ms. [00:15:08] Speaker 00: Counselor Brand. [00:15:15] Speaker 04: May it please the Court, Peter Brand for Kickstarter. [00:15:18] Speaker 04: The district court properly concluded that this patent, which claims only the abstract and time-honored concept of patronage, was unpatentable under section 101. [00:15:28] Speaker 04: We all know that abstract ideas are not patentable. [00:15:31] Speaker 04: In step one, under Alice, we look to whether or not the claims are directed to a patent-ineligible concept. [00:15:38] Speaker 00: As this court recently... Could you first address your opponent's argument concerning a burden-shifting requirement that arises if there's a factual issue in a 101 [00:15:48] Speaker 04: I think that the oral argument today underscored what we took from the brief, which was that there was no underlying factual dispute at all where you would apply the heightened standard. [00:16:00] Speaker 04: You certainly could have a heightened standard if you were looking at the underlying facts, but there are no such facts in this case. [00:16:08] Speaker 04: We draw our point from Justice Breyer's concurrence that [00:16:15] Speaker 04: A legal issue isn't clear and convincing. [00:16:17] Speaker 04: You're either right or you're wrong, and it's simply a question of law. [00:16:20] Speaker 04: So there has not been any improper shifting of the burden. [00:16:25] Speaker 04: The district court acknowledged the standard below in reaching the ruling, but noted that there were no disputed facts. [00:16:31] Speaker 04: So I think that disposes of that issue in its entirety. [00:16:36] Speaker 04: With regard to the substance of this, this [00:16:40] Speaker 04: These claims are directed towards an abstract concept of patronage, which was basically the concept of raising funds for an artistic project from patrons in exchange for incentives. [00:16:54] Speaker 04: There's no dispute that's been around for a really long time, whether it's PBS, which I can remember from my childhood, or you go back to the days of the Medici's, or barn raisings, or whatever. [00:17:04] Speaker 04: The concept of getting together, raising money, and you get something for it has been around for a very long time. [00:17:10] Speaker 04: And as the court this morning and a number of the questions have alluded to, you can't just say, well, do it on the internet or do it on a computer or do it on it. [00:17:18] Speaker 04: And that will give you something that is, in fact, patentable. [00:17:24] Speaker 04: And there's no dispute that the underlying concept is of ancient religiosity. [00:17:29] Speaker 04: The problems that were identified in the patent to be solved are all business problems. [00:17:33] Speaker 04: The problems that were identified by the inventor [00:17:36] Speaker 04: We're producing works without losing your rights, copyright infringement, and getting a wider audience. [00:17:44] Speaker 04: And indeed, the patent in column two, line 34 says, and we address this, quote, with the current business model of different artists, industrials. [00:17:54] Speaker 04: In other words, we have a business problem of longstanding nature, and we address it using conventional and well-known manners in the business. [00:18:07] Speaker 04: So you can call it what you will. [00:18:09] Speaker 04: That doesn't change that that's an abstract concept. [00:18:12] Speaker 04: We don't think that the claims add any inventive concept. [00:18:16] Speaker 04: As a number of the questions this morning alluded to, the directions are all really functional. [00:18:23] Speaker 04: You do it on a computer, use a server, and so forth. [00:18:28] Speaker 04: And it's not only that, but it is language that is using very generic terms. [00:18:35] Speaker 04: I mean, as the colloquy this morning underscored, software tools, server, internet, et cetera. [00:18:43] Speaker 04: And these are not like, you know, this is not the invention of a new server. [00:18:47] Speaker 04: Or this is not something that is, this is how we're going to improve the computer functionality on a computer. [00:18:54] Speaker 04: Or, you know, which the court did recently in that Enfish case. [00:18:59] Speaker 04: Or we're going to solve a particular problem that coming out of [00:19:04] Speaker 04: of an issue that arises on the internet, the DDR case, for example, in which you are looking at, well, how do we solve a problem that arises simply because you're on the internet? [00:19:17] Speaker 04: We don't have any of that here. [00:19:19] Speaker 04: What we have is we're going to raise money for an artistic project, and we're going to do it on the internet. [00:19:26] Speaker 04: And that's really all the claims really talk about. [00:19:28] Speaker 04: And without any further substance to those claims, [00:19:32] Speaker 04: That simply is just not patentable under a lot of cases. [00:19:38] Speaker 04: Certainly, as I look at the cases that this court has decided recently, and you know far better than I how that applies. [00:19:49] Speaker 02: Did the summary judgment here apply to all of the claims in the patent or just some of them? [00:19:56] Speaker 04: The Section 101 arguments applied to all of the claims for the entire patent. [00:20:03] Speaker 04: That is correct. [00:20:04] Speaker 04: And so some of the other arguments that the court never reached on obviousness, et cetera, only applied to a subset of the claims. [00:20:13] Speaker 04: But this one, it went to claim one as a representative claim and concluded there's no there there and concluded that the entire patent was not patentable under section 101. [00:20:28] Speaker 04: I'm happy to address further questions if the court has them. [00:20:33] Speaker 04: I don't think you want to hear my take on TLI and FISH. [00:20:37] Speaker 04: We thank you, sir. [00:20:39] Speaker 01: Thank you. [00:20:46] Speaker 01: Thank you, Your Honor. [00:20:46] Speaker 01: We'll restore you back to two minutes of your time. [00:20:48] Speaker 01: That's very nice of you. [00:20:49] Speaker 01: Thank you, Your Honor. [00:20:50] Speaker 01: I appreciate it. [00:20:50] Speaker 01: I just wanted to make a couple of points. [00:20:53] Speaker 01: Listening to Appellee's argument, the suggestion seems to be that [00:20:57] Speaker 01: Kickstarter didn't have any burden in order to surmount the challenge of a one-on-one case in order to invalidate the patent. [00:21:05] Speaker 01: And we think that couldn't be the proper analysis here. [00:21:08] Speaker 01: The examples also provided by Peli here, none of those examples are examples that would in any way involve the inventions that are in this case. [00:21:20] Speaker 01: And none of those examples were examples they even used to try to say that our patent would be invalid below. [00:21:25] Speaker 01: So the PBS analogy, all of those [00:21:28] Speaker 01: Those are not the real-world corollaries. [00:21:30] Speaker 01: There are no real-world corollaries to a fan-funding platform on the intranet. [00:21:34] Speaker 01: And the idea of patronage being an option. [00:21:36] Speaker 03: There are no real-world corollaries to an artist seeking contributions to fund a painting? [00:21:43] Speaker 01: There's no real-world corollary of a fan-funding platform, meaning... But that's not the right question. [00:21:49] Speaker 03: I mean, of course there's no real-world corollary to the internet before the internet, but we've held in dozens of cases that taking something [00:21:56] Speaker 03: that was previously done in the real world, either on pen and paper or through other things, and just putting it on the internet is not patent eligible. [00:22:04] Speaker 03: So what besides crowdfunding, which could, I mean, you're not disputing that there wasn't patronage before the internet. [00:22:13] Speaker 03: So what besides putting patronage on the internet do you claim? [00:22:17] Speaker 01: We claim a fanfunding platform, which is very different from the examples that are talked about as being real world examples, meaning [00:22:25] Speaker 01: Having someone be able to go out and say, I want to raise money for a project, is very different from a platform that allows artists to come together, be able to present their information to a group of fans. [00:22:37] Speaker 01: Fans can come to one location central. [00:22:39] Speaker 03: Have you been to an art show? [00:22:41] Speaker 03: I mean, that's exactly what happens at art shows. [00:22:43] Speaker 03: A group of artists gets together, shows a bunch of their artwork, and people give them money for it. [00:22:48] Speaker 03: And sometimes they take orders for new works. [00:22:50] Speaker 03: I mean, this is all very, very ordinary. [00:22:55] Speaker 01: We would respectfully disagree, but I understand your position. [00:22:58] Speaker 01: I would also point out that even the concept of patronage, which has been used here, doesn't even apply to one of the claims in the case. [00:23:05] Speaker 01: Claim 17 of the case, which was never analyzed by Kickstarter, the court has nothing to do with patronage. [00:23:11] Speaker 01: And yet that was not actually addressed by the court or by Kickstarter anytime during its briefing. [00:23:18] Speaker 01: Finally, [00:23:19] Speaker 01: The appellee ended its argument indicating that the 101 issue applied to all of the claims. [00:23:24] Speaker 01: We'd submit that as actually incorrect, that the summary judgment briefing was dealing with the asserted claims in the case. [00:23:30] Speaker 01: And there are certainly claims that were not asserted in this case. [00:23:34] Speaker 01: Thank you for your attention. [00:23:35] Speaker 01: Thank you very much. [00:23:37] Speaker 00: Our next case is a state of David Rubenstein.