[00:00:06] Speaker 02: Council Pernick, you've reserved three minutes of your time. [00:00:11] Speaker 02: Is that correct? [00:00:12] Speaker 02: That's correct, your honor. [00:00:13] Speaker 02: Did I pronounce your name correctly? [00:00:15] Speaker 01: Yes, you did. [00:00:16] Speaker 01: Thank you. [00:00:18] Speaker 01: Thank you. [00:00:19] Speaker 01: Okay, may it please the court. [00:00:21] Speaker 01: Last weekend, thousands of Cubs fans used their bank cards in mass transit to go watch the first World Series games in Wrigley Field since the 1940s. [00:00:31] Speaker 01: These commuters [00:00:34] Speaker 01: took the bank cards out of their pockets. [00:00:39] Speaker 01: They took the cards out of their pockets and tapped it against the card reader at the turnstile. [00:00:48] Speaker 01: The card reader analyzed embedded circuitry inside the card and almost instantly assessed whether to keep the turnstile locked or to open it up and let these commuters go watch their cubs in action. [00:01:03] Speaker 01: This technology was not available just three years ago. [00:01:07] Speaker 01: Now, we're here today because the district court thought that this type of gating system was too abstract to be patented. [00:01:15] Speaker 01: We think that was in error. [00:01:17] Speaker 01: And I'd like to consider the claims of the 617 patent to illustrate this. [00:01:23] Speaker 02: Now, it's undisputed that for decades... In your briefing, you go a great length to illustrate [00:01:33] Speaker 02: the problem that needed to be solved or the problem that you feel the patent solved. [00:01:39] Speaker 02: That's timing at the gate to keep people from waiting at the gate. [00:01:45] Speaker 02: How does the use of the credit card under the claims of the patent, the credit card itself, how does that speed up that process? [00:01:54] Speaker 01: Well, there was also another problem, connectivity. [00:01:58] Speaker 01: Sometimes there's a lack of connectivity. [00:02:00] Speaker 01: But this speeds it up because it happens right at the entry gate. [00:02:04] Speaker 01: at the turnstile. [00:02:05] Speaker 01: So it's one thing to say, I mean, for decades, people could use their bank cards at a ticket machine or at a ticket booth. [00:02:15] Speaker 01: They would have to wait in line to pay and they could do it that way. [00:02:19] Speaker 01: And the conventional way, as the patent explains and as the Saunders prior art explains, the conventional way for the transaction to be evaluated was to hop through [00:02:31] Speaker 01: several networks, the acquiring bank, the issuing bank, things like that. [00:02:35] Speaker 01: What these claims have is evaluation locally. [00:02:41] Speaker 01: The norm was to do it remotely through several networks, but here in the claims, an unconventional approach is to evaluate the transaction locally. [00:02:53] Speaker 01: The inventors bucked the conventional wisdom on this. [00:02:58] Speaker 01: The prior art taught away from local processing. [00:03:02] Speaker 01: If you look at the Saunders patent application at paragraphs three. [00:03:08] Speaker 02: Under the patent, the bank card is used only for identification. [00:03:14] Speaker 02: Is that right? [00:03:16] Speaker 02: That's right. [00:03:17] Speaker 02: So it's not used for the financial transaction itself. [00:03:21] Speaker 02: I mean, money is not deducted from the card. [00:03:25] Speaker 01: That's right. [00:03:26] Speaker 01: That's one of the errors the district court made when finding that these claims were directed to paying for your ride with a credit card. [00:03:37] Speaker 02: So the use of the card is mostly for identifying the person. [00:03:41] Speaker 01: Yes. [00:03:42] Speaker 01: And the claims require evaluating the card. [00:03:45] Speaker 01: They check it against what's called a whitelist, which was also unconventional. [00:03:51] Speaker 01: So the inventors bucked the conventional wisdom [00:03:54] Speaker 01: in where the evaluation occurred. [00:03:58] Speaker 01: Saunders, at paragraphs 3, 8, 13, and 21, says do not check, do not evaluate the transaction locally. [00:04:09] Speaker 01: He said if you do, if you store information there, it will be insecure and susceptible of being hacked. [00:04:16] Speaker 01: Saunders says you better do that evaluation through, store the information far away [00:04:22] Speaker 01: at the distant remote networks belonging to the banks. [00:04:25] Speaker 01: But the inventors wanted to speed up the process, so they checked it at the whitelist locally. [00:04:33] Speaker 01: The district court acknowledged that this sped up the process. [00:04:37] Speaker 01: The district court. [00:04:39] Speaker 02: So suppose that everybody with a blue shirt gets into the stadium, and everybody with a different colored shirt does not. [00:04:47] Speaker 02: Can't you have somebody standing at the turnstile and just [00:04:50] Speaker 02: looking at the blue shirts and saying, go in, go in, go in, and you, red shirt, no. [00:04:58] Speaker 02: And isn't that what the bank card does? [00:05:00] Speaker 02: It's just simply identifying the person that's standing there at the turnstile. [00:05:06] Speaker 01: Well, there were several problems to be solved. [00:05:09] Speaker 01: Yes, it's being used as a means of identification. [00:05:12] Speaker 02: It seems to me that the novel thing that your patent claims is the use of a credit card for a number of other reasons. [00:05:20] Speaker 02: Everybody's got one. [00:05:23] Speaker 02: You don't have to carry multiple cards. [00:05:26] Speaker 02: You just use one card. [00:05:29] Speaker 01: Well, there are three ways in which... I mean, this was a problem that the transit sector struggled with for years. [00:05:35] Speaker 01: That's undisputed. [00:05:37] Speaker 01: How to allow people to use their cards at the entry gate. [00:05:42] Speaker 01: That's undisputed. [00:05:44] Speaker 01: And the inventions here [00:05:48] Speaker 01: had three benefits. [00:05:51] Speaker 01: There were problems that were recognized, how to do it quickly enough, how to secure the data. [00:05:56] Speaker 01: And the inventions here took unconventional approaches to doing all that. [00:06:02] Speaker 02: Let's look at the last assertion you just made, unconventional approaches. [00:06:07] Speaker 02: When I look at the claims and what claims are directed at, you're looking at a bank, and I'm looking at claim one of the [00:06:16] Speaker 02: a 003 patent. [00:06:20] Speaker 02: You're looking at a bank card terminal. [00:06:26] Speaker 02: I'm assuming when I go to the grocery store and I slide a card through that little machine, that's a bank card terminal? [00:06:35] Speaker 01: It's not being used to regulate access to a transit system, but it's a type of terminal. [00:06:39] Speaker 01: OK. [00:06:40] Speaker 02: All right. [00:06:41] Speaker 02: And then you go on, you have a processing system. [00:06:49] Speaker 02: a bank card reader, a processor, a memory, access controller. [00:07:02] Speaker 02: Aren't these all conventional? [00:07:06] Speaker 01: Standing alone in isolation, these components were not novel. [00:07:14] Speaker 01: But Diamond v. Deere and DPR. [00:07:16] Speaker 02: So you're saying the ordered combination of the use of this is the novelty? [00:07:20] Speaker 01: Yes. [00:07:20] Speaker 01: The combination of these elements in an unconventional way provides an inventive concept and also, under prong one, improved on existing technological processes. [00:07:32] Speaker 01: Could I respond to a couple of things your honor noted? [00:07:35] Speaker 01: Sure. [00:07:36] Speaker 01: I mean, first of all, the setting matters here. [00:07:38] Speaker 01: When people are at the grocery store or when you're waiting to pay your bill at the restaurant, you can wait the seconds that it takes. [00:07:47] Speaker 01: But there's a unique need for speed when you're rushing to catch your train. [00:07:52] Speaker 01: So at the entry gate, at the turnstile, you can't wait all that time. [00:07:59] Speaker 01: So the setting matters here. [00:08:01] Speaker 01: There was a unique need for speed here. [00:08:04] Speaker 01: And so the components. [00:08:07] Speaker 01: What is it that provides the speed? [00:08:09] Speaker 01: OK, the speed is provided as in Amdocs, the decision from two days ago. [00:08:15] Speaker 01: The choice of architecture to do this locally instead of the conventional way of doing it remotely through all the distance. [00:08:22] Speaker 03: Where is that in the claims? [00:08:25] Speaker 03: Well, the claims cover this assembly. [00:08:27] Speaker 03: It seems to me that doing it locally, certainly I understand that. [00:08:32] Speaker 03: And it seemed to me that doing it locally, the absence of having to go through a network [00:08:36] Speaker 03: or having to wait for the Internet and all of the things that you have to go through if you charge something at a grocery store or at a restaurant. [00:08:46] Speaker 03: The question is where is that in the claims? [00:08:48] Speaker 03: We don't claim the effect. [00:08:50] Speaker 03: We don't think we have to claim... You don't claim the absence of a network or a processor or a comparator at a local place or something of that sort. [00:09:06] Speaker 01: Well, the evaluation takes place. [00:09:09] Speaker 01: We claim, in the system claims, the architecture necessary to do the local evaluation. [00:09:16] Speaker 01: In the method claims, the actions take place. [00:09:20] Speaker 01: We don't claim the results or the effect. [00:09:23] Speaker 02: The novelty of what you're claiming is the use of the bank card. [00:09:26] Speaker 02: I mean, it seems to me that's the focus of the... When I asked the question, what are the claims directed to, [00:09:34] Speaker 02: The first thing it takes me to, and it seems that the focus of the claims is the use of the bank card for the identification. [00:09:41] Speaker 01: The use of a bank card to control access to a transit system. [00:09:46] Speaker 02: To control access, for example, when I'm at the airport and I go up to the kiosk and I'm flying American Airlines and I put my credit card in there, my credit card, it gives me access to the American Airlines system. [00:10:03] Speaker 02: I've paid for anything or I've done anything, but it's already given me the access to the system. [00:10:09] Speaker 02: That's really the novelty of your pen, isn't it? [00:10:13] Speaker 01: Well, I think there are three improvements that the combinations provide here. [00:10:18] Speaker 01: One of them that we've been focused on is speed. [00:10:21] Speaker 01: But that's a function of where the evaluation takes place. [00:10:25] Speaker 01: That was important in Bascom. [00:10:27] Speaker 01: That was important in Amdocs. [00:10:30] Speaker 01: But also, the inventors here improved on the conventional process in other ways, too. [00:10:36] Speaker 01: Another question is, what will the process be? [00:10:40] Speaker 01: What will we compare the card against? [00:10:44] Speaker 01: In prior art, that defendant's site, the systems checked credit cards against blacklists. [00:10:50] Speaker 01: These are lists of bad, invalid cards. [00:10:54] Speaker 01: That's what the defendant's prior art does. [00:10:57] Speaker 01: The inventors here [00:10:58] Speaker 01: recognized that black lists are of limited value. [00:11:02] Speaker 01: They only check historically bad cards. [00:11:06] Speaker 01: Modern fraudsters, and the specification discusses this, modern fraudsters have cards at their disposal that can generate a new number each time. [00:11:15] Speaker 02: Let me ask you something. [00:11:18] Speaker 02: You said something that's of big interest to me. [00:11:22] Speaker 02: You said that the claims don't identify a result. [00:11:28] Speaker 02: Not the system claims. [00:11:30] Speaker 02: Not the system claims. [00:11:31] Speaker 02: So all you've done is the claims identify the functions? [00:11:37] Speaker 01: No, no, not the functions. [00:11:38] Speaker 01: I mean, I think this case is very different from many of the cases this court has addressed recently where the problem was claims in issue only claimed the function or the result and not the how-to. [00:11:52] Speaker 01: Here, we don't claim the result or the effect. [00:11:57] Speaker 01: DDR holdings didn't claim the effect of keeping the user's attention. [00:12:04] Speaker 01: Amdocs, two days ago, didn't claim the effect of avoiding bottlenecks. [00:12:09] Speaker 01: These claims claimed systems. [00:12:12] Speaker 01: They told you how to do it, and that had a benefit and a result. [00:12:16] Speaker 01: Here, we claim the architecture, the components, the hardware components, [00:12:21] Speaker 01: that achieve these results. [00:12:23] Speaker 01: They make the conventional process faster. [00:12:26] Speaker 03: But those components are claimed as being sort of coupled to each other to perform that result. [00:12:32] Speaker 03: But it doesn't necessarily say directly coupled or locally coupled or coupled without a network or coupled without delay. [00:12:42] Speaker 03: Correct? [00:12:43] Speaker 03: Well, the claims we've been talking about. [00:12:47] Speaker 03: They could be coupled. [00:12:48] Speaker 03: They could be cross-town. [00:12:49] Speaker 03: They could have to go. [00:12:50] Speaker 03: could have to go through a network. [00:12:52] Speaker 03: There could be all kinds of delay associated with that. [00:12:55] Speaker 03: I'm trying to focus on the claim language and whether the claim language gives you a hook to hang on to make the argument you're making. [00:13:04] Speaker 01: Well, the claims are to a bank card terminal, and I think any fair reading of that. [00:13:10] Speaker 01: I mean, no one identified as a claim construction issue whether a bank card terminal could be distributed all over the world. [00:13:19] Speaker 03: But isn't that [00:13:21] Speaker 03: essential if you're going to avoid the latency problem that you're trying to overcome? [00:13:27] Speaker 01: I think Bank Card Terminal has a known and standard meaning that no one has disputed, and the patents illustrate what it's talking about. [00:13:39] Speaker 03: I realize you're into your rebuttal. [00:13:43] Speaker 01: Can I get to a third benefit? [00:13:45] Speaker 02: Answer the question. [00:13:49] Speaker 03: Well, go ahead briefly, because I want to get into a little bit of a discussion about step one of Alice that may take some time. [00:13:56] Speaker 03: So go ahead and ask your question. [00:13:58] Speaker 01: OK. [00:13:58] Speaker 01: Well, the other thing that the other way that the claims improved on the conventional existing processes was data security. [00:14:06] Speaker 01: The other thing that the defendant's prior art has is they store blacklists, and they don't talk about data security at all. [00:14:15] Speaker 01: These are only [00:14:16] Speaker 01: bad cards, so they didn't need to protect them, and they don't mention that challenge at all. [00:14:22] Speaker 01: The one reference that talks about the security of the data that will be stored locally is Saunders. [00:14:29] Speaker 01: And Saunders couldn't figure out how to secure historical card information. [00:14:34] Speaker 01: That's why he said, you can't do this locally. [00:14:37] Speaker 01: You have to do it through remote, distant networks. [00:14:40] Speaker 01: But many of the claims here require hashing, a security mechanism that will protect [00:14:46] Speaker 01: the information stored at the bank card terminal. [00:14:49] Speaker 01: So we made it more secure, faster, and more robust with the whitelist. [00:14:53] Speaker 03: All right. [00:14:55] Speaker 03: Let me direct your focus to Alice step one. [00:14:57] Speaker 03: Step one, determine whether the claims are directed to an abstract idea. [00:15:04] Speaker 03: The courts are having a terrible time trying to figure out how to do that. [00:15:10] Speaker 03: And the risk in all of this is that [00:15:13] Speaker 03: determining whether the claims are directed to an abstract idea in many ways seems to be a totally abstract arbitrary process. [00:15:23] Speaker 03: And so what do you think the test should be in determining whether a claim is directed to an abstract idea? [00:15:32] Speaker 03: And let me try to break it down into two parts to that. [00:15:35] Speaker 03: First, what's the proper way to characterize a claim? [00:15:42] Speaker 03: Here, the district court characterized it as using a bank card to access mass transit. [00:15:52] Speaker 03: Is that the right characterization? [00:15:56] Speaker 03: How many things in the claim do you overlook or ignore? [00:16:01] Speaker 03: You see where I'm going? [00:16:04] Speaker 03: You have an idea? [00:16:07] Speaker 03: Maybe you could say, well, this claim is directed to [00:16:12] Speaker 03: gaining access to a transit system. [00:16:17] Speaker 03: That's ultimately what it's all about. [00:16:20] Speaker 03: What level do we go in step one in identifying what the claim is directed to? [00:16:27] Speaker 01: Yeah, I agree. [00:16:28] Speaker 01: Obviously, it's a vexing problem and litigants and the court, I think, is struggling with that. [00:16:34] Speaker 01: It was mentioned in the AmDOT's opinion [00:16:36] Speaker 01: two days ago. [00:16:37] Speaker 01: How do we do this? [00:16:38] Speaker 03: But almost every one of our opinions wrestles with this issue. [00:16:42] Speaker 03: And I don't think we have yet to articulate something that has meaningful guidance. [00:16:50] Speaker 01: So in this case, and the district court characterized it a few ways. [00:16:54] Speaker 01: Your honor mentioned one. [00:16:56] Speaker 01: It also said paying with a bank card or paying for a transit ride with a credit card. [00:17:02] Speaker 01: We think under... [00:17:04] Speaker 01: evidence is the problem that i'm having yes how do we just so this out one of the ways i think the uh... internet patents case talks about trying to figure out what the basic character of the patent is and it says you look at the patent as a whole you look at the prior art and you look at the attempts to uh... improve on the prior art uh... in this case we think the district court however it was characterized [00:17:34] Speaker 01: really reduce the claims to overgeneralized gists. [00:17:39] Speaker 01: And that's what I'm trying to get at. [00:17:43] Speaker 03: What's the test we use to determine, well, have you overgeneralized or have you not overgeneralized? [00:17:51] Speaker 01: Well, I think the thing to recognize here is that commuters were paying with [00:17:58] Speaker 01: credit cards or debit cards with bank cards for rides for decades. [00:18:01] Speaker 03: I'm not talking specifically about this case. [00:18:04] Speaker 03: I'm trying to formulate a test. [00:18:06] Speaker 03: You're writing the test and you're going to write the opinion that says to determine what the claims are directed to for purposes of ALIS step one, you do the following. [00:18:21] Speaker 01: I think it's a little bit holistic and you need to look at the specification [00:18:26] Speaker 01: what it says about the problems it was trying to solve, the prior art that it was trying to improve on, and you have to look at the claim language. [00:18:34] Speaker 01: And I think it's necessarily a little bit of a holistic approach to try and find the basic character. [00:18:42] Speaker 02: And in this case... Doesn't McCrow set out a way to look at step one of Alice, the McCrow decision? [00:18:51] Speaker 01: To talk about the, find the improvements and how the [00:18:56] Speaker 02: Well, that's part of it. [00:18:58] Speaker 02: And also defining whether the claims are directed to how you get to your desired result, which in your case is eliminating the latency problem at the turnstiles, and whether those limitations themselves remove the claims from embracing an abstract idea. [00:19:24] Speaker 01: Yes, the claim elements here [00:19:26] Speaker 02: Akir, you yourself define your patent as a method to enter into a transit system. [00:19:35] Speaker 02: Or maybe to do it quickly. [00:19:40] Speaker 02: You haven't expressed an abstract idea when you say that. [00:19:44] Speaker 02: When you say it's a way of paying to enter the theater. [00:19:47] Speaker 02: It's a way to pay to get into the train or on the bus. [00:19:52] Speaker 02: That's paying for entry is an abstract idea. [00:19:56] Speaker 02: What is it in your claims? [00:19:59] Speaker 02: How are your claims directed to elements that begin to remove the pan from embracing that abstract idea? [00:20:11] Speaker 01: Well, all of the claim elements working together, these hardware elements enable the transit system to make it happen. [00:20:19] Speaker 01: We have the interface that at some point has downloaded the historical data [00:20:25] Speaker 01: the whitelist in this case of known good cards, different than what's in the defendant's prior art. [00:20:32] Speaker 01: Then the processor sends those to the memory. [00:20:36] Speaker 01: The memory stores this historical whitelist of good known cards. [00:20:44] Speaker 01: Then the bank card reader will evaluate the currently presented card. [00:20:49] Speaker 01: And this is all at the terminal gate. [00:20:51] Speaker 01: The bank card reader does that. [00:20:54] Speaker 01: is connected to the processor. [00:20:57] Speaker 01: The processor is able to take that information and evaluate it with the memory. [00:21:03] Speaker 01: These are all coupled together. [00:21:06] Speaker 01: And the memory is also coupled to the processor, which is coupled to the second interface, which controls access. [00:21:15] Speaker 03: Do you disagree with the district court's characterization of the claims? [00:21:20] Speaker 03: as either using a bank card to access mass transit or paying for a subway or bus ride with a credit card? [00:21:29] Speaker 01: Yes, because those all encompass even just paying at a ticket machine and waiting online to do that. [00:21:34] Speaker 01: That's not what these are about. [00:21:37] Speaker 03: What more would you add in terms of what the district court should have characterized these claims? [00:21:43] Speaker 01: I think the first step characterization is controlling access to the transit system. [00:21:48] Speaker 01: by enabling the use of the bank card directly at the terminal gate, not with a vendor, not at a ticket machine. [00:21:56] Speaker 01: You can see this in the abstract. [00:21:58] Speaker 01: You can see this in the field of the invention. [00:22:00] Speaker 01: Do the claims say that? [00:22:03] Speaker 01: Directly at the terminal? [00:22:05] Speaker 01: The claims are for the bank card terminal for regulating access. [00:22:10] Speaker 03: Where does it say directly? [00:22:14] Speaker 03: It says at the terminal, but [00:22:16] Speaker 03: That could be through some connection or through some network. [00:22:21] Speaker 01: Well, the bank card terminal is complete. [00:22:23] Speaker 01: You can do extra steps. [00:22:24] Speaker 01: I don't think DDR holdings, for instance, prevented the user from also going to the third party website. [00:22:32] Speaker 01: But the claims contained the steps at initiation of the hyperlink, the composite website. [00:22:41] Speaker 01: You could have added on steps and kept going. [00:22:44] Speaker 01: In Amdocs, yesterday you could have, that's the wrong case, but you can always add extra steps. [00:22:58] Speaker 01: They don't preclude you from taking those steps. [00:23:03] Speaker 01: That was true in DDR holdings. [00:23:05] Speaker 02: I mentioned earlier, and let me just to clarify, it seems to me that the focus of the claims are on the use of the bank card. [00:23:16] Speaker 01: The use of a bank card directly at the terminal gate to control access to the system, the transit system. [00:23:22] Speaker 02: What the bank card does is just say, this is Jim Reyna standing there. [00:23:27] Speaker 02: That's all the bank card does. [00:23:30] Speaker 02: And everything else happens there locally. [00:23:33] Speaker 02: I get that. [00:23:34] Speaker 02: Right. [00:23:34] Speaker 02: It's being used. [00:23:35] Speaker 02: This pen is focused on the use of the bank card. [00:23:38] Speaker 02: It's the use of the bank card that really clears up the latency issue. [00:23:45] Speaker 01: The evaluation of the bank card locally... All it's doing is evaluating for identification. [00:23:51] Speaker 01: Yes, it's not about payment. [00:23:53] Speaker 02: Right, it's not about payment. [00:23:55] Speaker 01: Right. [00:23:56] Speaker 01: But the use of the bank card locally speeds up the process. [00:24:01] Speaker 01: The use of the white list is an advantage over the prior art because it's more potent than the black list that was in the conventional prior art and the hashing in the 617 patent and many of the dependent claims [00:24:14] Speaker 01: in the 003 patent makes it more secure than was in the prior arc. [00:24:18] Speaker 01: Faster, more robust, and more secure. [00:24:22] Speaker 02: Okay. [00:24:23] Speaker 02: Okay. [00:24:24] Speaker 02: We got it. [00:24:25] Speaker 02: We'll give you some time for rebuttal. [00:24:27] Speaker 02: Thank you very much, Your Honor. [00:24:29] Speaker 02: Mr. Reed. [00:24:52] Speaker 00: Good morning, your honor. [00:24:53] Speaker 00: May I please the court? [00:24:55] Speaker 00: The fundamental difference between this case and the cases that were discussed by appellate here is that there is no improvement to the functioning of any technology. [00:25:06] Speaker 00: There's no improvement to the functioning of the generic computer and processor side, and there's no improvement to the functioning of the credit card or the credit card equipment. [00:25:14] Speaker 00: There's no improvement to the functioning of any mass transit equipment or devices. [00:25:19] Speaker 00: As District Court accurately held, [00:25:22] Speaker 00: These claims simply add conventional components to an abstract idea with some additional language thrown in, applying it to a particular field of use, the field of mass transit. [00:25:35] Speaker 03: Mr. Reed, what do you say to my question about how we decide how to characterize claims in assessing ALICE Step 1? [00:25:47] Speaker 03: What's your test? [00:25:49] Speaker 00: That's also a difficult question. [00:25:52] Speaker 03: I know it's been raised before and... It seems to me the entire process of assessing whether a claim is directed to an abstract idea itself is abstract. [00:26:04] Speaker 00: I would agree with that, Your Honor. [00:26:05] Speaker 03: And wholly arbitrary. [00:26:07] Speaker 03: That's what I'm having trouble with. [00:26:10] Speaker 03: In these cases, you know, everybody involved, the advocates, the judge, the court of appeals, we're all trying to make [00:26:21] Speaker 03: a judgment as to whether a claim is directed to something that is abstract or not. [00:26:29] Speaker 03: And we're using all sorts of rationalization. [00:26:35] Speaker 03: And maybe that's what it ultimately comes down to, but it just strikes me as being so terribly arbitrary that it's almost not useful. [00:26:46] Speaker 03: Maybe we should just bypass step one and say, well, it's directed to so-and-so. [00:26:51] Speaker 03: And let's just look to see whether there's any structure that adds something that's not common. [00:26:58] Speaker 00: Well, some of the more recent cases certainly have lent themselves to such an interpretation. [00:27:03] Speaker 00: They do seem to be conflating the two steps in the ALICE framework in terms of whether the improvement to functionality is a step one consideration or whether it's a step two consideration, contrasting end fish with the Bascom decision. [00:27:18] Speaker 03: Do you have any insights as to [00:27:21] Speaker 03: a better articulation of how we evaluate step one? [00:27:26] Speaker 00: Frankly, Your Honor, I do not. [00:27:28] Speaker 00: I think that the patent provides clues. [00:27:30] Speaker 00: I think that Mr. Purnip was correct, and that the specification may provide some clues as to the direction of the claims. [00:27:37] Speaker 00: And the claim language itself has to be evaluated. [00:27:39] Speaker 00: But in terms of articulating a broad test, I don't have the answer for you, Judge Lynn. [00:27:45] Speaker 00: I'm sorry. [00:27:45] Speaker 00: I wish I did. [00:27:46] Speaker 03: All right. [00:27:47] Speaker 03: Well, in this case, Mr. [00:27:50] Speaker 03: Mr. Pernick says that the district court's characterization of these claims is not right. [00:27:57] Speaker 03: It was characterized as using a bank card to access mass transit or paying for a subway or bus ride with a credit card. [00:28:06] Speaker 03: And he says, no, it should include something like using a bank card directly to access mass transit or locally to access mass transit. [00:28:18] Speaker 03: What's your response to that? [00:28:20] Speaker 00: Our response is the district court got it right. [00:28:22] Speaker 00: As you're on or intubated in your questions, the language of the claims doesn't add that particular directly or local requirement to this abstract idea. [00:28:33] Speaker 00: In fact, in their brief themselves, Pellant characterizes it as these patents enable an open transit system that allows commuters to use a bank card at a physical gate or terminal to enter a mass transit system. [00:28:47] Speaker 00: I'm not seeing an operative distinction in terms of [00:28:49] Speaker 00: an abstract idea between how they articulated it there and how the district court articulated it as using a bank card to access mass transit. [00:28:57] Speaker 00: And in particular, the later two patents, not the 03 and 617, but the 390 and 816 patents, they made no claim that there's any local requirement in those particular patents. [00:29:10] Speaker 03: Let me ask you another question relating to step one. [00:29:12] Speaker 03: The second phase or aspect of [00:29:18] Speaker 03: Alice step one. [00:29:20] Speaker 03: And my understanding is that, you know, after you characterize the claim, in this case, using a bank card to access mass transit, then you decide, well, is that directed to an abstract idea? [00:29:35] Speaker 03: And I can see if the claim is characterized as a method of hedging or method of providing escrow accounts, [00:29:48] Speaker 03: or multiplication, division, processing, storing, scanning. [00:29:57] Speaker 03: These are all abstract ideas. [00:30:03] Speaker 03: Here it's using a bank card to access mass transit. [00:30:07] Speaker 03: What's abstract about that? [00:30:10] Speaker 00: What's abstract, Ron, and this goes to the NFIS decision, is that that idea, the idea standing alone, [00:30:16] Speaker 00: using a bank card to access mass transit is not improving any technological function. [00:30:22] Speaker 00: There's no improvement. [00:30:22] Speaker 03: I'm not talking about improvements. [00:30:25] Speaker 03: I'm not getting into step two as to whether there's something in the claim that adds. [00:30:30] Speaker 03: Trying to focus on step one. [00:30:33] Speaker 03: What's abstract about in the sense of setting up a hedge fund or [00:30:41] Speaker 03: providing escrow accounts or multiplying or storing or processing. [00:30:47] Speaker 03: Those are all abstract concepts. [00:30:49] Speaker 03: I'm having trouble with just saying that using a bank card to access mass transit is abstract. [00:30:56] Speaker 03: And to help your thinking on this, what if the conclusion was, well, using a token to access mass transit? [00:31:07] Speaker 03: And certainly that would not be abstract, would it? [00:31:10] Speaker 00: Well, Your Honor, I think you're still talking about a concept, an abstract concept. [00:31:17] Speaker 03: And what takes it from abstract... You think if a claim were characterized as being directed to using a token to access a mass transit, you think that would be an abstract idea? [00:31:29] Speaker 00: Yes, Your Honor, because you're talking about a concept. [00:31:33] Speaker 00: You're not talking about a particular functionality. [00:31:37] Speaker 03: If it's using a particular type of token. [00:31:39] Speaker 03: That means no matter what the claim is, if you characterize it in terms of its functionality, bingo, you've passed Alice step one, because it's just the functionality and nothing more. [00:31:59] Speaker 00: I'm not sure that's correct, Your Honor, in the sense that it depends on what you characterize and what that is. [00:32:03] Speaker 00: If what you're characterizing and what the concept is [00:32:06] Speaker 00: is a well-known business practice. [00:32:09] Speaker 00: And the case law has said that that then falls on the abstract side of the line. [00:32:14] Speaker 00: If what you're characterizing is the idea that you determine in the claim actually represents an improvement to technology akin to Enfish, the self-referential table in Enfish, but the court found, well, the self-referential table, that's what it's directed to, but the self-referential table improved a technological process, improved computer technology. [00:32:34] Speaker 02: In this case, it seems to me that there's nothing that's happened to the bank card to improve it. [00:32:40] Speaker 00: That's absolutely correct. [00:32:42] Speaker 02: It's just a bank card. [00:32:43] Speaker 00: It's just a bank card. [00:32:45] Speaker 00: And there's nothing that improves the computer components. [00:32:48] Speaker 00: There's nothing that improves the terminal. [00:32:49] Speaker 02: The trains are directed to the use of a bank card to enter into... To access mass transit. [00:32:54] Speaker 00: That is the idea. [00:32:54] Speaker 02: And yet, there's nothing in the claims that says, what is it that it's doing to the bank card? [00:32:59] Speaker 02: How are any type of limitations being placed [00:33:03] Speaker 02: I'm narrowing down the bank card itself. [00:33:06] Speaker 02: It's just the use of a bank card. [00:33:08] Speaker 00: The use of a bank card as an identifying token. [00:33:10] Speaker 00: That's correct, Ron. [00:33:15] Speaker 00: So with that abstract idea, then moving on to this step two, since I'm running low on time, there is no improvement to technology. [00:33:23] Speaker 00: There is nothing inventive beyond that abstract idea in these particular claims. [00:33:27] Speaker 00: Now, they pointed to a couple of improvements, supposed improvements, namely speed, [00:33:33] Speaker 00: And in their briefing speed and this idea of not writing data to the credit card, I'd like to address each of those. [00:33:41] Speaker 00: With respect to speed, and he spent most of his time talking about this speed improvement, this idea of a local list. [00:33:47] Speaker 00: And he says it's an improvement over remote authorization. [00:33:51] Speaker 00: Well, that analysis does not go back far enough. [00:33:55] Speaker 00: When you're talking about credit cards and the concept of a credit card, credit cards predate remote authorization. [00:34:01] Speaker 00: Remote authorization was something that actually was implemented [00:34:03] Speaker 00: in the 70s and 80s and much later in the credit card development. [00:34:06] Speaker 00: When credit cards were first introduced back in the 1950s and 60s, local verification was how credit cards worked. [00:34:14] Speaker 00: The clerk received a credit card. [00:34:16] Speaker 00: It was subscribed to lists from the bank issuers of card numbers. [00:34:21] Speaker 00: And every time you received that credit card, the clerk was presented with that credit card. [00:34:26] Speaker 00: They would take that credit card. [00:34:26] Speaker 00: They'd compare it to this book they received, this list they received. [00:34:30] Speaker 00: And based on that comparison, they would approve or disprove the transaction. [00:34:34] Speaker 00: So what this patent reports to do is take what that clerk was doing back in the 50s and 60s and put them on a mass transit term. [00:34:43] Speaker 00: Put them in a field of use of mass transit. [00:34:46] Speaker 00: And the only speed improvement that's being realized is being realized by taking that concept, by taking that action that was done by a clerk in the 50s and putting it on a generic computer. [00:34:56] Speaker 00: That's where the speed improvement comes. [00:35:00] Speaker 00: And Alice has said, and Bilsky has said, a number of cases have said, just putting it on a general computer [00:35:05] Speaker 00: does not make it non-abstract. [00:35:10] Speaker 00: Now with respect, and again, that only applies to the first two patents, the 003 and 617 patents. [00:35:15] Speaker 00: We didn't hear it today, but they've also raised the issue of the benefit of the 816 and 390 patents, which they don't even claim have any local components, nor can they, given the claim language. [00:35:26] Speaker 00: The 816 and 390 patents, the supposed benefit is this inability to write data to the card. [00:35:33] Speaker 00: Well, as your honors know, [00:35:34] Speaker 00: The inability to write data to a credit card is an inherent characteristic of a credit card. [00:35:40] Speaker 00: So they're saying nothing more about the credit card and saying that's a benefit than it uses a credit card to access mass transit. [00:35:46] Speaker 00: And if you can just say credit card or if you can just identify a characteristic of a computer that's inherent. [00:35:51] Speaker 02: Just to be sure, there's nothing being written on the credit card. [00:35:55] Speaker 02: This patent does not require writing anything on the credit card. [00:36:01] Speaker 00: That's correct, Your Honor. [00:36:03] Speaker 00: No use of a credit card requires writing on a credit card. [00:36:06] Speaker 00: It's an inherent characteristic. [00:36:08] Speaker 02: And so if identifying that characteristic... Well, a credit card merchant, like Visa or MasterCard, they can authorize somebody to actually write data on the credit cards. [00:36:23] Speaker 00: They could, in terms of authorizing a merchant, an actual sales clerk, I suppose is theoretically [00:36:30] Speaker 00: possible, but there's certainly no... But they don't do it. [00:36:33] Speaker 00: They don't do it. [00:36:34] Speaker 00: Right. [00:36:34] Speaker 00: And so I say inherent characteristic. [00:36:36] Speaker 00: I mean, inherent characteristic of credit cards as they're actually used. [00:36:39] Speaker 00: Theoretically, you could do that, I suppose, Your Honor. [00:36:42] Speaker 00: But in terms of credit cards, how they're used, it's an inherent characteristic. [00:36:45] Speaker 00: And if pointing out an inherent characteristic is sufficient to bestow patent eligibility, then we're right back with the problem we had in Alice and Mayo, where they said patent eligibility should not be a question of the draftsman's art. [00:37:00] Speaker 00: So I want to talk briefly on a couple other points you said. [00:37:06] Speaker 00: The setting matters here. [00:37:07] Speaker 00: Well, the case law actually largely disagrees with his comment about the setting matters here. [00:37:14] Speaker 00: They said that applying an abstract concept to a particular field of use is not relevant. [00:37:19] Speaker 00: This goes all the way back to Fluke. [00:37:22] Speaker 00: In Fluke, they said, they tried to say, well, we're not just taking this formula, we're applying it to alarm system monitoring. [00:37:28] Speaker 00: And Fluke made clear, no, [00:37:29] Speaker 00: Just applying the abstract idea to a field of use does not make it any less abstract. [00:37:34] Speaker 00: And that's been repeated in Bielski. [00:37:35] Speaker 00: That's been repeated in this court's decisions. [00:37:38] Speaker 00: So the fact that they're taking this abstract concept and they're applying it in the field of mass transit does not add anything to the inquiry before the court today under session 101. [00:37:52] Speaker 00: And finally, I'd like to address one issue that was raised in the briefing, especially the reply brief, this idea of preemption. [00:37:57] Speaker 00: We're criticized by our take on preemption. [00:37:59] Speaker 00: And I think the court's decisions made clear that preemption is not the test of patent eligibility. [00:38:06] Speaker 00: The decision Ariosa made that clear. [00:38:09] Speaker 00: Preemption, of course, is properly characterized as a concern. [00:38:14] Speaker 00: It's certainly the concern underlying the exemptions in the Supreme Court's 101 jurisprudence. [00:38:21] Speaker 00: An apparent appellant here alleges a handful of alleged non-preemptive uses. [00:38:24] Speaker 00: But again, that's scarcely relevant here. [00:38:28] Speaker 00: Dating back to Fluke, the Supreme Court found claims that were ineligible despite the fact that they, quote, do not, however, cover every conceivable application of the formula. [00:38:40] Speaker 00: Similarly, in the OIP Technologies case, they identified roughly a dozen different supposed non-preemptive uses of the abstract idea. [00:38:50] Speaker 00: And the courts there also said that the claims do not preempt all price optimization [00:38:56] Speaker 00: or may be limited to a particular setting, do not make them any less abstract. [00:39:01] Speaker 00: The same analysis applies here. [00:39:02] Speaker 00: Just because they've identified, in this case, three or four of what they allege are non-preemptive uses of this abstract idea that would not be covered by the claims does not make that idea any less abstract. [00:39:16] Speaker 00: So to sum up, Your Honors, the district court, and what I would characterize as a very well-reasoned and very thoughtful opinion, got this one right. [00:39:26] Speaker 00: These claims are directed to an abstract idea, and there's nothing inventive whatsoever about the routine components and processes used in each to implement the abstract idea. [00:39:36] Speaker 00: As such, we ask this Court to affirm the District Court's decision on all counts. [00:39:40] Speaker 00: Thank you. [00:39:59] Speaker 01: Two minutes. [00:40:00] Speaker 01: Okay, I'd like to respond to a couple of points. [00:40:02] Speaker 01: First, we did not take an old brick and mortar process here and just automate it. [00:40:08] Speaker 01: The process was already networked and computerized. [00:40:11] Speaker 01: There wasn't an employee behind the scenes rifling through 10 million paper records looking to see if the commuter's card was approved. [00:40:19] Speaker 01: It was already networked and computerized, and we made it better. [00:40:24] Speaker 01: I want to also point out what happened before. [00:40:27] Speaker 01: You were allowed to use a credit card or bank card at the gate. [00:40:31] Speaker 01: You had to use a traditional mechanism like a transit ticket or pass. [00:40:36] Speaker 01: But that meant you had to carry around a separate thing and find it in your pocket, in your bag. [00:40:44] Speaker 01: The benefit of using bank cards here is that everyone's got them. [00:40:47] Speaker 01: You don't need to carry around something else. [00:40:50] Speaker 01: That was something the transit sector wanted. [00:40:53] Speaker 01: But it provided its own set of problems. [00:40:56] Speaker 02: You agree you haven't done anything to the bank card? [00:40:58] Speaker 01: Not to the bank card. [00:40:59] Speaker 01: But the use of the bank card presented problems. [00:41:03] Speaker 01: One of them is speed. [00:41:05] Speaker 01: Because the way you do it is you've got to hop through the distinct networks. [00:41:08] Speaker 01: The patents talk about that. [00:41:10] Speaker 01: Saunders talks about that. [00:41:11] Speaker 01: We solved that problem. [00:41:16] Speaker 02: You solved the problem by bringing the information that gives approval to [00:41:23] Speaker 02: entry and you localize that yes and and with the bank card all it does is say this is jim reyna and there's the other process that figures out if i got enough money or not to get in yes but the location of where evaluation occurs is becoming a recurring theme here in amdocs two days ago [00:41:45] Speaker 01: The court approved of a patent because one of the unconventional things was where the processing took place near the data sources, like here. [00:41:55] Speaker 01: In BASCOM, where the evaluation occurred conferred a benefit. [00:42:00] Speaker 01: It was done remotely, the internet filtering. [00:42:05] Speaker 01: When it was local, users could get into the computer and change the settings. [00:42:11] Speaker 02: The claims themselves go to the distributed [00:42:15] Speaker 02: locations and then describe the function and the limitations with respect to distributed location. [00:42:26] Speaker 02: That's the focus of those claims. [00:42:28] Speaker 02: The focus of your claim is on the bank card. [00:42:31] Speaker 02: You're not claiming the ability or the function of payment. [00:42:41] Speaker 02: No, it's not about payment. [00:42:44] Speaker 02: Your patent is focused on use of the bank card. [00:42:47] Speaker 01: Well, it's focused on the terminal that allows one to use a bank card to access the system. [00:42:52] Speaker 01: And I would just say about Amdocs, it didn't claim avoiding bottlenecks. [00:42:56] Speaker 01: It just claimed the architecture where the benefit was avoiding bottlenecks elsewhere in the system. [00:43:02] Speaker 01: We here claim an architecture that is faster, more secure, and more robust than what defendants point to to try and show that we were conventional. [00:43:11] Speaker 01: OK. [00:43:12] Speaker 01: Thank you. [00:43:12] Speaker 02: All right. [00:43:12] Speaker 02: Thank you very much. [00:43:15] Speaker 02: Our next case is in rations.