[00:00:00] Speaker 00:
Okay.

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Bye.

[00:01:16] Speaker ?:
Okay.

[00:01:37] Speaker ?:
Okay.

[00:02:23] Speaker 00:
The United States Court of Appeals for the Federal Circuit is now open and in session.

[00:02:29] Speaker 00:
So I stage the United States and its Honorable Court.

[00:02:32] Speaker 03:
Thank you.

[00:02:33] Speaker 03:
Be seated.

[00:02:33] Speaker 03:
Okay.

[00:02:40] Speaker 03:
Our first argued case this morning, December 15, 1782, Croy I.P.

[00:02:46] Speaker 03:
Holdings against Safeway, Incorporated.

[00:02:49] Speaker 03:
Mr. Mulaney.

[00:02:53] Speaker 01:
May it please the court.

[00:02:56] Speaker 01:
Inventions that provide specific technical solutions to problems associated with prior conventional industry practice are patent eligible.

[00:03:06] Speaker 01:
The 830 patent claims here are directed to systems and methods that were unconventional in the 1997 timeframe in which the invention was made.

[00:03:17] Speaker 01:
The invention solved technical problems associated with computerized incentive program systems.

[00:03:24] Speaker 01:
The claims are patent eligible, subject matter that is also novel and non-obvious.

[00:03:30] Speaker 01:
The district court erred in holding otherwise on summary judgment.

[00:03:33] Speaker 01:
In 1997, there were numerous computerized incentive program systems in existence or being proposed.

[00:03:43] Speaker 01:
These systems offered opportunities, no doubt, but they also presented real challenges in the real world.

[00:03:50] Speaker 01:
Computer networks allowed access to

[00:03:53] Speaker 01:
a very diverse customer base spread across a very wide geographical reach.

[00:04:00] Speaker 05:
Is it right to say that the, pardon the interruption, but is it right to say that the abstract idea here is providing an incentive award program on a computer network?

[00:04:13] Speaker 01:
Well, that's what the district court found, and we disagree with that.

[00:04:18] Speaker 01:
In fact, we believe that was sort of the first

[00:04:22] Speaker 01:
place where the court aired in its analysis.

[00:04:24] Speaker 05:
And what's wrong with that understanding, identification of the abstract idea involved in this claim?

[00:04:31] Speaker 01:
It's far too broad in general relative to the actual claim limitations, Your Honor.

[00:04:36] Speaker 01:
The actual claim limitations clearly show that the claim as a whole is not simply a computerized version of the broad concept of an incentive program.

[00:04:46] Speaker 01:
There are many, many types of incentive programs.

[00:04:49] Speaker 05:
Well, maybe that would be the

[00:04:52] Speaker 05:
a proper argument for step two of the ALIS inquiry on whether or not you have an inventive concept.

[00:04:58] Speaker 05:
But as for step one, I mean we have to go through this step two step framework I think, and step one is trying to figure out what is the abstract idea.

[00:05:10] Speaker 05:
So what would you say in response to step one?

[00:05:14] Speaker 01:
Well I still believe that even in step one, ALIS and the other cases

[00:05:18] Speaker 01:
instruct that we are looking at what is the abstract idea embodied in the claims.

[00:05:23] Speaker 01:
And so the claims are still relevant in step one.

[00:05:27] Speaker 01:
These claims have numerous specific limitations that show that they clearly are not simply directed to an abstract idea of all computerized incentive programs.

[00:05:37] Speaker 01:
Now, and we've dealt with this in detail in our brief, the limitations include specific details of the system architecture of claim one,

[00:05:48] Speaker 01:
the relationship between the award fulfillment application.

[00:05:51] Speaker 04:
Doesn't that, I hear what you're saying, but doesn't that really get to what Judge Chen was talking about in this colloquy with you, the inventive concept part of it.

[00:06:02] Speaker 04:
It's difficult for me to see how at the step one phase we don't have anything more here than just a coupon incentive program.

[00:06:12] Speaker 04:
I'm not saying it's a bad program or anything, but this is what you're saying now, really directed to

[00:06:18] Speaker 04:
Part two test, as Judge Chen was saying.

[00:06:21] Speaker 01:
If I could answer your question in two parts, Your Honor, and I will get to the step two.

[00:06:25] Speaker 01:
But before I do that, I do want to sort of hold my ground on my argument that in step one, it is improper to define the abstract ideas broadly as a district court did.

[00:06:35] Speaker 01:
And the importance of that, in my view, under the case law, is that what Alice is ultimately instructing is that conventional abstract ideas to conventional practices

[00:06:47] Speaker 01:
do not become patent eligible by adding routine components and functions in order to practice the conventional idea on a computer.

[00:06:56] Speaker 03:
Well, but that case didn't go that far, did it?

[00:07:00] Speaker 03:
I mean, we don't really know where the boundary is.

[00:07:03] Speaker 03:
My concern with your argument is, before us, or at least on this appeal, to focus on the appeal, is that even if some of the claims, and let's assume some of the claims are sufficiently

[00:07:17] Speaker 03:
detailed to overcome abstraction.

[00:07:20] Speaker 03:
You still have the problems of the trial judge summary judgment under Section 103, for example.

[00:07:31] Speaker 03:
It might be helpful to hear your comments on Section 103.

[00:07:36] Speaker 01:
Okay.

[00:07:36] Speaker 01:
May I finish answering Judge Schultz's question and then turn to the 103 issue, Your Honor?

[00:07:43] Speaker 01:
Pardon?

[00:07:45] Speaker 01:
complete my answer to the question about step two.

[00:07:48] Speaker 01:
So in the alternative, even if you believe it's proper to define the abstract ideas broadly as the district court did, then the question becomes when we look at the claims as a whole and as the individual claimant limitations, do the claims preempt the entire abstract idea or even a majority of it?

[00:08:09] Speaker 01:
And clearly here they do not.

[00:08:10] Speaker 01:
If the abstract idea

[00:08:12] Speaker 01:
is the broad idea of a computerized incentive program.

[00:08:15] Speaker 01:
There are many, many, many computerized incentive programs that are not preempted when we consider the specific claim limitations.

[00:08:23] Speaker 01:
The claims themselves establish that, the fact that there were dozens of prior patents cited against the patent to other types of computerized incentive programs.

[00:08:32] Speaker 05:
I know you need to still answer Judge Newman's Section 103 question, but the preemption angle that you're presenting

[00:08:40] Speaker 05:
only takes you so far.

[00:08:41] Speaker 05:
That's not really a complete answer, because I can think of the Ultramershal case, for example, that was an 11-step method for streaming video content on the Internet.

[00:08:54] Speaker 05:
There were 11 steps going on there, and I think it's fair to say that that claim did not preempt all ways of streaming video content in exchange for watching a commercial.

[00:09:06] Speaker 05:
Nevertheless, even though

[00:09:08] Speaker 05:
it didn't preempt the abstract idea per se, it was still nevertheless found invalid under section 101.

[00:09:16] Speaker 01:
The difference, I believe, Your Honor, between the facts of that case and the facts here is that ultimately the steps in Ultramershal were simply sort of the computer required components to computerize the conventional practice, fundamental long-standing practice of using advertising as a currency medium.

[00:09:36] Speaker 01:
And here,

[00:09:37] Speaker 01:
We don't have that situation.

[00:09:38] Speaker 01:
Here, the steps of this claim define an entirely new method and system to operate an incentive program.

[00:09:45] Speaker 01:
So even if you remove all the computer components and look at the actual methodology involved, there was no evidence in the record that that type of an incentive program where the sponsor controls the selection of individual awards for individual consumers and dictates the fulfillment details

[00:10:04] Speaker 01:
in the manner that the claim requires, and communication with inventory data to be able to integrate the business data with the incentive program strategy.

[00:10:14] Speaker 01:
There was no evidence in the record that that method was conventional, whether practiced manually or through any prior computer system.

[00:10:22] Speaker 01:
And that takes us out of these other cases where conventional activity was simply computerized, even with numerous steps.

[00:10:30] Speaker 01:
Now, to your question, Your Honor, about 103,

[00:10:33] Speaker 01:
The district court overstepped its bounds and became a fact finder in the face of a record full of genuinely disputed material facts regarding the proper interpretation of the two primary pieces of prior art, Dalapa and Scraggy, the evidence of commercial success and other secondary considerations of non-obviousness, the evidence of whether there would have been a motivation to modify the teachings of Dalapa in view of Scraggy,

[00:11:03] Speaker 01:
And this not only made his summary judgment under 103 improper, but it also infected the analysis under 101 because the district court relied on some of that same evidence as justification for finding that these claims really did do relate to conventionally practiced activity.

[00:11:29] Speaker 01:
What the court should have done is recognize that on this record,

[00:11:33] Speaker 01:
This issue was none of these issues were appropriate to be resolved on summary judgment.

[00:11:37] Speaker 01:
We submitted a declaration of a qualified technical expert, Mr. Sherwood.

[00:11:44] Speaker 01:
He analyzed the prior in detail.

[00:11:47] Speaker 01:
It was Safeway's burden of proof on all these issues.

[00:11:51] Speaker 01:
They submitted no expert testimony whatsoever.

[00:11:54] Speaker 01:
They simply made lawyer argument about how they interpreted the Dilapa reference

[00:12:00] Speaker 01:
and the Scraggy reference and why it supposedly would have been obvious to combine the two.

[00:12:05] Speaker 01:
The district court largely ignored Mr. Sherwood's proffered expert opinion.

[00:12:12] Speaker 01:
That was improper.

[00:12:13] Speaker 01:
His reasonings for doing so are really unsound.

[00:12:17] Speaker 01:
He then didn't even accept all of Safeway's interpretations of the prior art.

[00:12:22] Speaker 01:
The court came up with entirely new interpretations of the DeLappe reference, for example,

[00:12:28] Speaker 01:
this issue of the award fulfillment application on the host having to be in communication with an inventory management system.

[00:12:36] Speaker 01:
That is a very important requirement of the technical architecture of these claims.

[00:12:41] Speaker 01:
The district court identified three computers of the Dilawper reference as being the host system.

[00:12:49] Speaker 01:
But when it came to this issue of the host system and this fulfillment program having to communicate with an inventory management system, the district court

[00:12:58] Speaker 01:
in a very inconsistent manner, relied instead on a computer that's located at a retail store, which the Courson analysis did not identify as being part of the host system.

[00:13:12] Speaker 01:
He then noted that in Dilapa, this computer at the retail store communicates with an inventory management system.

[00:13:19] Speaker 01:
But that doesn't match the architecture of the claims.

[00:13:23] Speaker 01:
The claims require a host system

[00:13:26] Speaker 01:
with an automated award fulfillment application that has the recited functions of the claim and which also is in communication with an inventory management system.

[00:13:35] Speaker 01:
Mr. Sherwood was a qualified technical expert who analyzed the art from the perspective of a person skilled in the art.

[00:13:43] Speaker 01:
This court has made clear that in other than simple cases, that type of evidence is very important.

[00:13:49] Speaker 01:
This is not a simple case.

[00:13:51] Speaker 01:
These are complicated computer systems

[00:13:53] Speaker 01:
involving many different components.

[00:13:55] Speaker 01:
And frankly, the district court just misread and misapplied what the LAAPA's complex architecture really was showing relative to the claims.

[00:14:07] Speaker 01:
He made similar errors in analyzing whether what is an award database could be considered this inventory management system.

[00:14:17] Speaker 01:
The claims require both an award database and separately recite

[00:14:22] Speaker 01:
that this fulfillment application communicates with an inventory system.

[00:14:27] Speaker 01:
And that architecture is important because a core concept of this invention is the ability of the sponsor to set up these programs with access to real-time inventory data about business conditions that exist so that the sponsor can very readily determine which awards to offer to which consumers at which locations.

[00:14:50] Speaker 01:
That was a technical advance over the art.

[00:14:54] Speaker 01:
It was evidence in the record that that was a very important advance.

[00:14:56] Speaker 05:
Are the claims really written that way, I guess?

[00:14:59] Speaker 05:
I'm sorry?

[00:14:59] Speaker 05:
Are the claims really written that way as describing some detailed technical advance?

[00:15:05] Speaker 05:
I mean, I know the lower court judge looked at the claim as essentially saying, well, of course you need to check the inventory before you direct a customer to a location to pick up their award.

[00:15:20] Speaker 05:
the fact that a system has automated pooling of knowledge of what's available, what kinds of awards are available to give, and where are they located to be given to a customer.

[00:15:38] Speaker 05:
What's so unique and special about that?

[00:15:41] Speaker 01:
Well, your question really, the point you made about the district court's ruling, really highlights the problem here.

[00:15:50] Speaker 01:
The district court, as you just mentioned, said, well, of course, a retailer would check inventory before giving an award.

[00:15:59] Speaker 01:
Well, the record shows that that was not the conventional practice.

[00:16:03] Speaker 01:
In the real world, these retailers are running multi-store operations serving thousands and thousands of customers and distributing... The claims don't call for thousands and thousands of customers and thousands and thousands of different companies.

[00:16:17] Speaker 01:
That's correct.

[00:16:18] Speaker 05:
I agree with you, Your Honor.

[00:16:20] Speaker 05:
I think the point made below was that this claim, as written broadly, it covers fairly simple embodiments practicing these claims.

[00:16:34] Speaker 01:
Well, I don't really agree that the claim is directed to simple embodiments because what the record shows is that there was a complete separation in function and structure between the systems retailers used

[00:16:49] Speaker 01:
to run incentive programs, and the systems they used to run the rest of their operations, their inventory systems, their point of sale systems.

[00:16:56] Speaker 01:
And what the inventors did was essentially bring those two systems together in a way that allowed retailers of all sizes to much better coordinate the logistics and the use of business intelligence in running these programs in a much more effective way.

[00:17:12] Speaker 01:
There was overwhelming evidence in the record.

[00:17:16] Speaker 05:
So the inventive concept boils down to

[00:17:19] Speaker 05:
before assigning out awards, checking the inventory to make sure the awards are there?

[00:17:24] Speaker 01:
No, the inventive concepts, we look at the claim as a whole.

[00:17:28] Speaker 01:
It's a combination of a system in which the sponsor of the program controls the selection of individual awards for individual consumers that are personalized to the consumer's demographic and psychographic preferences and also does so using a system that can communicate with the inventory data

[00:17:48] Speaker 01:
in order to allow the sponsor to make good decisions in that targeting.

[00:17:54] Speaker 01:
And the system requires that the sponsor can then dictate exactly where that consumer can pick up that particular award.

[00:18:01] Speaker 01:
And the evidence in the record is that there were no prior systems that did that.

[00:18:06] Speaker 01:
And in the real world, because they didn't do that, there were real challenges associated with operating these large incentive program systems.

[00:18:15] Speaker 01:
I agree with you.

[00:18:16] Speaker 01:
The claim is not limited to any particular size.

[00:18:20] Speaker 01:
But I submit that it is still relevant to look at real-world evidence of the commercial impact of this invention, the commercial success that allowed companies like Safeway to achieve, the lack of any such system in the 1997 time frame when the invention was applied for, and the fact that even the closest two prior references

[00:18:45] Speaker 01:
when properly read as a person of skill and the art would read them, do not disclose or suggest this type of a system.

[00:18:52] Speaker 03:
Let's hear from the other side.

[00:18:54] Speaker 03:
We'll save you some rebuttal time.

[00:18:56] Speaker 03:
Thank you, Your Honor.

[00:18:59] Speaker 03:
Mr. Martin.

[00:19:01] Speaker 02:
Thank you and good morning, Your Honors.

[00:19:02] Speaker 02:
May it please the Court, James Merton for Safeway.

[00:19:06] Speaker 02:
Judge Bryson entered two dispositive orders here that thoroughly analyzed the record and properly applied the controlling law.

[00:19:13] Speaker 02:
And we urge the court to look to those two orders and the analysis in it in order to affirm.

[00:19:18] Speaker 02:
Picking up on a couple of the 101 points that were raised, this court's case law, the Alice case, the Bilsky case, the Mayo case, all take prong one of the Alice test and boil down the claims to their essence or the heart of the claims in exactly the way that Judge Bryson did.

[00:19:41] Speaker 02:
And so I don't think that we can find any error at all in the way he treated the inventive concept here, particularly when we compare it to the run of cases that this court has decided.

[00:19:53] Speaker 05:
What do you think the Supreme Court meant with respect to prong one when it said that the question to be asked is to decide whether the claim is directed to an abstract idea.

[00:20:05] Speaker 05:
And so therefore, it's not just about the bare attempt

[00:20:11] Speaker 05:
in isolation to figure out what must be the underlying abstract idea in a claim, but instead to try to determine above and beyond that whether the claim itself is directed to that abstract idea.

[00:20:24] Speaker 05:
What do you think the Supreme Court was getting at?

[00:20:27] Speaker 02:
Well, I can only say in terms of the Alice opinion, the court seemed to be looking at, conceptually,

[00:20:37] Speaker 02:
What did the claim relate to when you looked at all the specific elements of it?

[00:20:42] Speaker 02:
And there, of course, they reduced it to intermediated settlement risk as the proper description of the claim under prong one.

[00:20:51] Speaker 05:
I guess my question is, can you imagine a situation where a claimed invention would ultimately survive under 101 because prong one of that two-step framework had not been met?

[00:21:05] Speaker 05:
Because you don't

[00:21:06] Speaker 05:
always try to just merely find whether there's an abstract idea.

[00:21:10] Speaker 05:
I think the question is, is the claim directed to an abstract idea?

[00:21:14] Speaker 05:
It doesn't say locate the underlying abstract idea.

[00:21:19] Speaker 05:
So the way the prong one is framed, it suggests, does it not, that there's a possibility that there are claims out there that are not directed to an abstract idea.

[00:21:34] Speaker 02:
I think it suggests that, but it still comes down to a matter of construction of the claims themselves on whether you end up there.

[00:21:42] Speaker 02:
I mean, that seems to be the lesson from the cases, not only Alice, but from this court as well.

[00:21:47] Speaker 02:
So it's theoretically possible, I suppose, to draft away from the abstract concept.

[00:21:57] Speaker 02:
But we certainly don't have that when you take a look at the claims here.

[00:22:00] Speaker 02:
I think even if you moved beyond that to the second step of Alice

[00:22:05] Speaker 02:
There is no detail in the claims here.

[00:22:08] Speaker 02:
There is no specificity that sets forth an inventive concept and certainly the claims as drafted here are directed to an abstract concept.

[00:22:18] Speaker 02:
In fact, the patent admits that.

[00:22:20] Speaker 02:
It says it's a commonplace ordinary practice and to me that fits well within the concepts that this court has articulated as common ordinary business practices

[00:22:32] Speaker 02:
in Bancorp, in Intellectual Ventures, in Versada, and a whole host of cases.

[00:22:39] Speaker 04:
On PROMPT II, it's... Let me ask you, you're turning to PROMPT II and something that's puzzled me a little bit in looking at both this case and the various cases that have been decided in this course in the wake of Alice and so forth.

[00:22:56] Speaker 04:
When we're looking at PROMPT II, the Supreme Court says we look for an inventive concept, correct?

[00:23:02] Speaker 04:
Does that mean we're looking for something that is clearly an invention as opposed to an abstract idea?

[00:23:09] Speaker 04:
Or are we looking at something that's an invention that is novel, non-obvious, not anticipated?

[00:23:19] Speaker 04:
In other words, where do we draw the line in the inventive concept inquiry between what's an inventive concept and whether

[00:23:29] Speaker 04:
we're in a 102 or 103 situation.

[00:23:31] Speaker 04:
I've just been puzzling on that.

[00:23:34] Speaker 04:
Maybe I shouldn't be.

[00:23:35] Speaker 02:
Well, no, I think that there isn't a case that ties this all up in a neat bow.

[00:23:41] Speaker 02:
So in reading through the cases, I think the analysis goes something like this.

[00:23:48] Speaker 02:
Ultramershal would tell us that novelty alone is not going to provide us with the inventive concept.

[00:23:56] Speaker 02:
We knew there that there were

[00:23:58] Speaker 02:
some very specific limitations, limitations far more detailed here, and the patent specifically provided in the argument was made that it was novel.

[00:24:09] Speaker 02:
And there, the court said, that's not enough.

[00:24:14] Speaker 02:
Second, in ALICE, what we had was a set of limitations that called for a specialized computer to perform

[00:24:24] Speaker 02:
ordinary business functions or carry them out more efficiently and there the Supreme Court told us that's not enough.

[00:24:32] Speaker 02:
So I don't think that the inventive concept can be satisfied simply because we have novelty on the one hand or a specialized computer that makes it more efficient on the other.

[00:24:45] Speaker 02:
That much we know.

[00:24:47] Speaker 02:
At the other end of the spectrum we know from DDR, we know from research corporation,

[00:24:53] Speaker 02:
And we know from the Deere case that if you have disclosures or limitations in the claims that alter the way the computer performs a DDR, that provide a technical advancement in the way the computer functions, and that's research corporation, or that you have a revolutionary development.

[00:25:21] Speaker 04:
Do you think you could have, in your opinion,

[00:25:23] Speaker 04:
theorizing that you could have a technical advance in the way the computer operates, but perhaps that advance would not be non-obvious.

[00:25:36] Speaker 04:
You could satisfy the inventive concept prong of the Alice regime, but you might not have a non-obvious invention.

[00:25:48] Speaker 02:
I think that's possible.

[00:25:51] Speaker 02:
I don't think you can get it out of the claims in this case by any stretch of the imagination.

[00:25:57] Speaker 03:
Do focus on the claims here.

[00:25:59] Speaker 03:
I mean, there is a very interesting evolution of how Section 101 is being treated in every different case on different facts and on different details which have led to generalized statements which we then try to apply.

[00:26:17] Speaker 03:
It seems to me that to help focus on the correctness of the summary judgments here because they were on the three grounds to respond to Section 103.

[00:26:31] Speaker 03:
And because if indeed this ruling is supportable for summary judgment on the ground of obviousness, then at least that will resolve this case.

[00:26:42] Speaker 03:
And if it's not, then we must consider the other elements.

[00:26:48] Speaker 02:
OK, so to finish off with 101 and to pivot immediately to 103, this case is the functional equivalent of ALICE when you look at the claims.

[00:27:00] Speaker 02:
Each of the steps here relates to well-understood conventional activity.

[00:27:05] Speaker 02:
Computers are hosting, using computers and networks to communicate, using databases to manage data.

[00:27:12] Speaker 02:
There is nothing in the claims about improving computers themselves

[00:27:17] Speaker 02:
or improving the operation of computers because of a problem that arises from computers?

[00:27:24] Speaker 05:
Well, the other side says, I know you're going to get to 103, but the other side says the interesting twist here, the reported inventive concept, is the integration of two information systems.

[00:27:39] Speaker 05:
One is the inventory management system, and the other one is the incentive awards program.

[00:27:45] Speaker 05:
And those two

[00:27:48] Speaker 05:
information systems hadn't really been adjoined before and they are integrating them together and by doing so you get a much more robust system overall.

[00:28:01] Speaker 02:
You may get that as a matter of lawyer argument but you're not going to get it out of the specific language in the claims themselves.

[00:28:08] Speaker 05:
Well it talks about the two

[00:28:09] Speaker 05:
those two systems I just talked about as being in communication with each other, right?

[00:28:14] Speaker 02:
It does, but there is nothing in the claims themselves that explains what that communication is, how it's accomplished, or that is accomplished, as a matter of fact, Your Honor, by anything more than automation using computers.

[00:28:30] Speaker 02:
The claims don't say anything about how the databases operate.

[00:28:34] Speaker 02:
They don't say anything.

[00:28:36] Speaker 03:
But the claims don't put any details.

[00:28:39] Speaker 03:
Those belong in the specification, unless you're telling us that the claims must include details that distinguish from the references, which is a supportable theory.

[00:28:53] Speaker 02:
Under Section 101, the claims, as Accenture makes clear, are the key to this.

[00:28:59] Speaker 02:
And there isn't anything in these claims that even explains the inventory management system.

[00:29:06] Speaker 03:
That's 101.

[00:29:06] Speaker 03:
That's the abstraction aspect.

[00:29:08] Speaker 03:
But now let's talk about obviousness.

[00:29:11] Speaker 02:
OK.

[00:29:11] Speaker 02:
Well, under obviousness, it seems to me, the basic proposition that's offered by the other side is that expert testimony was provided here and required here in order to determine both issues of whether the patent was obvious in light of the prior art and second, whether the motivation to combine the de Lapa and Scrogi references was

[00:29:37] Speaker 02:
apparent from the prior art.

[00:29:41] Speaker 02:
Judge Bryson goes through those issues very carefully.

[00:29:45] Speaker 02:
And as we know from KSR and the following cases, expert testimony is not required on either one of these issues when the motivation to combine is apparent from the prior art, which it is here, or alternatively, where the problem to be solved is one that doesn't involve technological analysis

[00:30:07] Speaker 02:
where an expert needs to explain some functioning, which is also true here.

[00:30:13] Speaker 02:
There is nothing like that in this patent or in these claims.

[00:30:17] Speaker 02:
And in fact, the detail in Judge Bryson's analysis demonstrates his understanding of the art and his comprehension of it, which led him to the conclusions on obviousness.

[00:30:31] Speaker 02:
Turning to Mr. Sherwood's declaration, we find three things there that are relevant to 103.

[00:30:38] Speaker 02:
The first is he doesn't analyze the prior art references in any great detail in a lengthy declaration.

[00:30:46] Speaker 02:
He talks a lot about the claims, and he makes a number of legal arguments, but he doesn't make a real nitty-gritty comparison with the prior art in the fashion that Judge Bryson did.

[00:31:00] Speaker 02:
Second, it's not a technological explanation in that declaration.

[00:31:05] Speaker 02:
It is more

[00:31:06] Speaker 02:
aligned with an argument about what the claims mean, and so that to me is not a function for an expert either.

[00:31:15] Speaker 02:
And finally, the motivation to combine is apparent from the factual record here.

[00:31:22] Speaker 02:
Dilapa was a very comprehensive coupon system, merchandise inventory system that existed in 1992 before the advent of computer applications

[00:31:35] Speaker 02:
Scroge followed that by taking the same sort of coupon system, adding the computer to it, a logical step, and as Judge Bryson said, it was at least apparent to an ordinary person in the art that the combination of DeLappe and Scroge would have led you to say there is nothing non-obvious, if you will, about using a computer to speed up

[00:32:04] Speaker 02:
the delivery of these coupons.

[00:32:08] Speaker 02:
That analysis fits very consistently into this court's obviousness jurisprudence and when you have a case where the prior art leads you to this conclusion, it is not immune from summary judgment and it certainly isn't immune from summary judgment just because an expert declaration arrives or because

[00:32:34] Speaker 02:
as has been argued here, the moving party didn't have an expert declaration of its own.

[00:32:40] Speaker 02:
So 103, Your Honor, is fully dispositive, as is, I might add, the anticipation analysis that Judge Bryson made for precisely the same reasons.

[00:32:51] Speaker 02:
He followed the claim disclosure specifically in Dilapa.

[00:32:55] Speaker 02:
He aligned them very specifically with the limitations and disclosures in the patent here.

[00:33:00] Speaker 02:
And it is clear that

[00:33:04] Speaker 02:
The Dilapa patent does indeed anticipate the elements of, excuse me, the 830 patent and this diversion that we see there that Sherwood's declaration can change that.

[00:33:20] Speaker 02:
It can't.

[00:33:20] Speaker 02:
It can't change what the Dilapa claims, number one.

[00:33:24] Speaker 02:
And number two, the differences that are offered up as to the sponsor and administrator and inventory management system.

[00:33:33] Speaker 02:
simply don't exist.

[00:33:35] Speaker 02:
Dilapa discloses fully an inventory management system, and it is clear under the Dilapa patent, as Mr. Sherwood the expert conceded, that a sponsor and an administrator perform functionally the same task.

[00:33:52] Speaker 02:
So anticipation is likewise present, and 102 is a fully dispositive ground.

[00:34:00] Speaker 02:
But the 101 analysis in this case that Judge Bryson undertook fits very comfortably within this court's run of cases in its analysis of abstractness and the inventive concept.

[00:34:12] Speaker 02:
And I call the court's attention, finally, to the claims here.

[00:34:16] Speaker 02:
You will not see the kind of content that is necessary.

[00:34:20] Speaker 02:
And the claims are the beginning and the end of the analysis.

[00:34:24] Speaker 02:
to create an invented concept consistent with Alice Ultramershal and the remaining cases.

[00:34:32] Speaker 03:
Any questions for Mr. Martin?

[00:34:35] Speaker 03:
Thank you, Mr. Martin.

[00:34:37] Speaker 03:
Mr. Maloney, you have a couple of minutes.

[00:34:41] Speaker 01:
Thank you, Your Honor.

[00:34:44] Speaker 01:
On this issue of step one and step two, what the district court should have done

[00:34:53] Speaker 01:
we are defining the abstract idea as broadly as the court did.

[00:34:58] Speaker 01:
The court should have then recognized that under step two, these claims do not simply claim the abstract idea itself.

[00:35:07] Speaker 01:
And that is the purpose of step two under ALICE, to determine if there's an inventive concept that gives us comfort that the claim is not simply claiming a computerized version of the abstract idea itself, using routine functions and routine components.

[00:35:21] Speaker 01:
That is the preemption issue

[00:35:23] Speaker 01:
that Alice is concerned with, because we don't want to take conventional ideas out of the public realm simply by saying, well, I'm the first one to do it on a computer.

[00:35:32] Speaker 01:
And that's not what this claim does at all.

[00:35:34] Speaker 01:
These claims are much more specific than the abstract idea.

[00:35:37] Speaker 01:
They do not simply computerize all versions of incentive program systems.

[00:35:44] Speaker 01:
And then what the court should have recognized is that this claim is eligible under 101.

[00:35:51] Speaker 01:
And as other cases have noted, we still have 102 and 103 to test the validity of a claim.

[00:35:57] Speaker 01:
And under 102 and 103, the court should have recognized this is not a record upon which the grant of summary judgment is proper.

[00:36:05] Speaker 01:
They have a clear and convincing evidence burden of proof.

[00:36:09] Speaker 01:
They tried to prove it with nothing more than lawyer argument, and we just heard more of that.

[00:36:13] Speaker 01:
They discount Sherwood's declaration as supposedly not detailed enough.

[00:36:17] Speaker 01:
It's an extraordinary detailed analysis of the prior art

[00:36:21] Speaker 01:
from the perspective of a person of skill in the art.

[00:36:23] Speaker 01:
And the agreed qualifications of that person are not possessed by Safeway's lawyers.

[00:36:29] Speaker 01:
And with all due respect, the district court doesn't possess those qualifications either.

[00:36:34] Speaker 01:
And it showed because he misread some of the fundamental aspects of what the two pieces of prior art were disclosing.

[00:36:42] Speaker 01:
And he got the anticipation wrong because of that.

[00:36:45] Speaker 01:
His obviousness analysis was the same kind of conclusory

[00:36:49] Speaker 01:
hindsight analysis that this court has repeatedly cautioned is improper.

[00:36:53] Speaker 01:
In one sentence, what is the inventive concept?

[00:36:56] Speaker 01:
The inventive concept is providing a system where the sponsor controls the selection of the award, consumer, and the fulfillment parameters in conjunction with the use of real-time inventory data from an inventory management system.

[00:37:15] Speaker 01:
That was inventive.

[00:37:16] Speaker 01:
It solved very real problems in the industry.

[00:37:19] Speaker 01:
and it's not disclosed in either of these references.

[00:37:22] Speaker 03:
Thank you very much.