[00:00:06] Speaker 00:
We have a busy morning today.

[00:00:09] Speaker 00:
We have four cases that are scheduled for argument.

[00:00:15] Speaker 00:
And one case that's been scheduled on the briefs, and that case we've reviewed.

[00:00:23] Speaker 00:
The first case this morning is Unwired Planet, LLC versus Google, Inc.

[00:00:29] Speaker 00:
And this is case 1812, Mr. J.

[00:00:36] Speaker 00:
I now understand you reserve four minutes for rebuttal time.

[00:00:39] Speaker 00:
Is that correct?

[00:00:40] Speaker 03:
That's correct, Your Honor.

[00:00:41] Speaker 00:
OK, you may proceed.

[00:00:42] Speaker 03:
Although perhaps I have this wrong.

[00:00:45] Speaker 03:
You called the 1812, not the two combined docket number cases.

[00:00:51] Speaker 00:
I called 1810.

[00:00:52] Speaker 00:
That's what we have up on the docket first.

[00:00:55] Speaker 03:
That's right, Your Honor.

[00:00:56] Speaker 03:
I'm sorry.

[00:00:57] Speaker 03:
I thought you had said 1812.

[00:00:58] Speaker 03:
OK.

[00:00:59] Speaker 03:
As this colloquy indicates, I'm here today in two cases between Unwired Planet and Google.

[00:01:05] Speaker 03:
And while there is one overlapping issue, the eligibility for covered business method review, I'd like to begin this argument with the issue that's unique to this case, which is the obviousness issue.

[00:01:16] Speaker 05:
And if we decide against you on the obviousness, we don't have to get to the CBM in this case.

[00:01:20] Speaker 05:
Is that right?

[00:01:21] Speaker 03:
I wouldn't agree with that, Your Honor, because of the possibility of further review in the IPR decision.

[00:01:29] Speaker 03:
We'd urge the court to decide them both.

[00:01:31] Speaker 03:
In particular, if you just decide the IPR, we think that the CBM issue, for one thing, is significant, for another, overlaps substantially with what you'll need to decide in the second case.

[00:01:44] Speaker 05:
We don't have to.

[00:01:45] Speaker 05:
I know you want us to.

[00:01:46] Speaker 05:
I mean, it resolves the case if we rule against you on obviousness.

[00:01:51] Speaker 03:
That's right, Your Honor.

[00:01:53] Speaker 03:
A final decision in the IPR would resolve the case.

[00:01:56] Speaker 00:
So since you're arguing both cases, let me ask you for this argument.

[00:02:00] Speaker 00:
Are you going to also argue the CBM issue?

[00:02:02] Speaker 00:
Absolutely.

[00:02:03] Speaker 00:
Why don't you start with that one?

[00:02:04] Speaker 00:
Because I do have a preliminary question.

[00:02:06] Speaker 00:
And what's our standard of review?

[00:02:09] Speaker 00:
What are we reviewing here?

[00:02:10] Speaker 00:
Regulation, regulation language, or statutory text?

[00:02:14] Speaker 03:
You are reviewing the interpretation of statutory text by the board.

[00:02:18] Speaker 03:
And that's important.

[00:02:21] Speaker 03:
Both halves of that are important.

[00:02:23] Speaker 03:
One, it is statutory text and not regulatory language, because the regulation just parrots the statute.

[00:02:28] Speaker 02:
And under Gonzalez v. Oregon... What's the standard for reviewing statutory text?

[00:02:33] Speaker 03:
It's de novo, Your Honor.

[00:02:34] Speaker 03:
And it's de novo here for several reasons.

[00:02:37] Speaker 03:
One is that what you're being asked to review under the APA is whether the agency has acted in excess of its jurisdiction.

[00:02:44] Speaker 03:
It's a pure matter of statutory interpretation.

[00:02:46] Speaker 05:
I'm a little confused.

[00:02:47] Speaker 05:
Are you asking us to de novo review the application of the CBM statute to the facts of this case?

[00:02:56] Speaker 03:
We're first asking you to review what is the standard for CBM review.

[00:03:01] Speaker 05:
Well, haven't we already decided that?

[00:03:02] Speaker 05:
I mean, in Versado, we made it very clear that CBM isn't confined to financial industries, per se, but goes beyond that to a broader definition, as the board has

[00:03:14] Speaker 05:
as said in its notice and comment making.

[00:03:17] Speaker 05:
I mean, that's pretty clear from Versada that we've already decided that it has an expansive scope, haven't we?

[00:03:22] Speaker 03:
Well, Your Honor decided, Your Honors decided Versada based on the plain statutory language.

[00:03:28] Speaker 03:
I mean, the court was expressive about that, that it was deciding it not based on a clause put on it by the board.

[00:03:35] Speaker 03:
It acknowledged that it does have an expansive scope, not limited to banks and brokerages.

[00:03:38] Speaker 05:
Well, I don't think that that's necessarily true.

[00:03:40] Speaker 05:
We relied very heavily in Versada.

[00:03:42] Speaker 05:
on the board's comments during the notice and comment process in the rulemaking about this.

[00:03:48] Speaker 05:
So we didn't pluck the statutory language out of context.

[00:03:53] Speaker 05:
We looked at how the board looked at it, at the legislative history, and the like.

[00:03:56] Speaker 05:
So we've already determined, as a matter of law, that it reaches beyond mere financial industry.

[00:04:02] Speaker 03:
Well, two responses to that, Judge Hughes.

[00:04:03] Speaker 03:
One, if I may, it's not the board's interpretation.

[00:04:07] Speaker 03:
It's the director's interpretation during the rulemaking.

[00:04:10] Speaker 03:
And that's significant because the board itself has no entitlement to deference.

[00:04:16] Speaker 02:
And the second point... Well, the director's interpretation is not in the form of a regulation because the regulation simply copied the exact language of the statute.

[00:04:26] Speaker 02:
The so-called director's interpretation turns out to be lawyer's argument.

[00:04:31] Speaker 02:
You don't give deference to lawyers arguing, do we?

[00:04:36] Speaker 03:
You don't, Your Honor.

[00:04:37] Speaker 03:
It is a negative decision.

[00:04:39] Speaker 03:
It was a decision not to promulgate rules, the authority given the director in the statute book.

[00:04:44] Speaker 05:
How would you have us define CBN, then?

[00:04:47] Speaker 05:
I understand this.

[00:04:49] Speaker 05:
There's no deference here on the statutory interpretation.

[00:04:52] Speaker 05:
But we've already made that call in Versada.

[00:04:55] Speaker 05:
So aren't we just applying Versada's definition of CBN

[00:04:58] Speaker 05:
to this case.

[00:05:00] Speaker 05:
Well, if I take Versada's definition... Let me take a step further.

[00:05:03] Speaker 05:
Aren't we just reviewing the board's application of Versada to this case?

[00:05:08] Speaker 03:
I don't think so, Your Honor.

[00:05:09] Speaker 03:
For one thing, the court in Versada did not bless the expansive, you know, what in that case was dicta by the board, but in this case is absolutely essential to the CBM determination.

[00:05:22] Speaker 03:
The idea that incidental... What's essential?

[00:05:24] Speaker 02:
That we bless the board's broader interpretation?

[00:05:28] Speaker 03:
I'm sorry, I'm asking the court not to bless the board's interpretation.

[00:05:33] Speaker 03:
It's very important that the court understand that Versada has not agreed that the board is interpreting the statute correctly in all respects.

[00:05:41] Speaker 03:
And in particular, the court of Versada has not upheld the application of

[00:05:46] Speaker 03:
the so-called incidental standard, incidental to a financial product or service, a definition which reads out two of the key elements of the statute.

[00:05:55] Speaker 03:
It reads out used in, and it reads out practice, administration, or management.

[00:05:59] Speaker 03:
Something that is incidental to a financial product or service, but is not used in the practice, administration, or management.

[00:06:04] Speaker 02:
Where in the statute is the word incidental?

[00:06:07] Speaker 03:
It's not in the statute at all, Your Honor.

[00:06:08] Speaker 02:
That's why we think it's completely ultraviolet.

[00:06:10] Speaker 02:
So it's not before us.

[00:06:11] Speaker 03:
Oh, no, Your Honor.

[00:06:13] Speaker 03:
My friends on the other side and the board have relied 100% on the concept of incidental for their interpretation.

[00:06:20] Speaker 02:
Where did they get that from?

[00:06:21] Speaker 02:
Is that in Versailles?

[00:06:22] Speaker 03:
No, Your Honor.

[00:06:22] Speaker 03:
It is not in statute at all.

[00:06:25] Speaker 00:
That came up during the comment period.

[00:06:27] Speaker 00:
Did it not?

[00:06:29] Speaker 03:
Yes.

[00:06:30] Speaker 03:
But I don't think that even if the director had put that in a regulation, which he did not, which he did not,

[00:06:37] Speaker 02:
There still would be a question as to whether that's a correct interpretation of the statute.

[00:06:42] Speaker 03:
That's right.

[00:06:43] Speaker 03:
We don't think that it could be square.

[00:06:44] Speaker 02:
As of now, there's nothing, there's not even a regulation to cause us to want bother to do that.

[00:06:49] Speaker 03:
That's correct, Your Honor, that there is nothing in the statute that says incidental and my friends on the other side have not offered, nor did the board offer, any interpretation under the statutory text using the words used in practice administration or management

[00:07:03] Speaker 03:
that would sustain CBM eligibility in this case.

[00:07:06] Speaker 00:
I'm sure we'll hear from them on that issue in due course.

[00:07:09] Speaker 03:
Indeed, Your Honor.

[00:07:10] Speaker 00:
So in this case, what is it about the methods that are not covered business methods?

[00:07:18] Speaker 03:
So this case that we're talking about right now involves the 205 patent.

[00:07:23] Speaker 03:
The 205 patent is a method of prioritizing results from a search.

[00:07:28] Speaker 03:
And it's not a covered business method because this is something

[00:07:31] Speaker 03:
First of all, that's not used by people who provide financial products or services at all.

[00:07:37] Speaker 03:
It's used by the network administrator.

[00:07:39] Speaker 03:
And second of all, it is not used to practice, administer, or manage any financial product or service.

[00:07:46] Speaker 03:
At most, it might be used by a wireless user.

[00:07:49] Speaker 03:
who wants to find the nearest pizza shop, the nearest tow truck, traffic information, or an ATM.

[00:07:55] Speaker 03:
The ATM is a purely exemplary embodiment.

[00:07:58] Speaker 03:
And the board itself, and this gets back to Judge Hughes's question about the standard of review, in addition to the de novo point that we've made, we've also made an arbitrary and capricious point.

[00:08:07] Speaker 03:
Now, something contrary to law is always arbitrary and capricious.

[00:08:10] Speaker 03:
But in particular here, the board, in another decision, ServiceNow, has expressly said that an ATM

[00:08:18] Speaker 03:
as an illustrative embodiment is not good enough to qualify for covered business review.

[00:08:23] Speaker 03:
And in this case, they did the exact opposite.

[00:08:25] Speaker 03:
That is the very definition of arbitrary and capricious decision making.

[00:08:30] Speaker 05:
So in that view, whatever your definition of CBM is, their actions here are arbitrary and capricious.

[00:08:36] Speaker 03:
That's correct, Your Honor.

[00:08:37] Speaker 03:
And we think that the court should clarify that the incidental

[00:08:41] Speaker 03:
the use of incidental as the standard in place of the statutory language is wrong, but even if it were right, we would still win for the reason that we just discussed.

[00:08:50] Speaker 02:
Why does it matter whether we decide this case under IPR or under CBM?

[00:08:59] Speaker 03:
Well, I have to say candidly, in order to keep the patent, my client needs to win them both.

[00:09:06] Speaker 03:
So we need to prevail in the IPR and also in the CBM.

[00:09:10] Speaker 03:
But we think in the CBM, you can decide it purely on the eligibility question, because the board had no business reaching the merits of the CBM.

[00:09:18] Speaker 03:
We don't think the court needs to reach it either.

[00:09:19] Speaker 03:
And the other side can go and litigate that.

[00:09:22] Speaker 00:
So this is your argument that the board had no jurisdiction?

[00:09:26] Speaker 03:
The board in the CBM had no jurisdiction.

[00:09:29] Speaker 00:
So that question would proceed first.

[00:09:33] Speaker 03:
The board had jurisdiction over the IPR.

[00:09:36] Speaker 03:
Yes, the board did have jurisdiction over the IPR.

[00:09:38] Speaker 05:
Again, if we just look at the IPR, we agree with them that these claims are obvious and the patent is invalid.

[00:09:45] Speaker 05:
We don't have to reach these more difficult questions about the CBM in this case.

[00:09:48] Speaker 05:
I know your next one

[00:09:49] Speaker 05:
is head on.

[00:09:51] Speaker 02:
The CBM becomes moot if we find that the patent is obvious and therefore invalid.

[00:09:58] Speaker 03:
That's correct.

[00:09:59] Speaker 03:
As Judge Hughes just said, you'll still have to decide essentially the same issue in the other case.

[00:10:03] Speaker 02:
We urge you to decide.

[00:10:04] Speaker 02:
Why don't we go to that issue if the presiding judge is agreeable?

[00:10:08] Speaker 03:
To the obviousness issue.

[00:10:09] Speaker 03:
I'd be happy to, Your Honor.

[00:10:11] Speaker 03:
The key limitation in the patent is the farther over nearer ordering limitation.

[00:10:17] Speaker 03:
That appears nowhere in the prior art.

[00:10:19] Speaker 03:
In order to get it out of the prior art, the board said, first of all, that it is disclosed in Gaylitz.

[00:10:26] Speaker 03:
That's wrong.

[00:10:27] Speaker 03:
It also said that it is disclosed by other references that disclose listing things in alphabetical order.

[00:10:37] Speaker 03:
That also isn't wrong, because that also isn't correct.

[00:10:39] Speaker 03:
because it doesn't satisfy the standard for insurance.

[00:10:42] Speaker 05:
Can you just clarify for me one thing?

[00:10:44] Speaker 05:
This patent doesn't mandate that every single item be displayed farther over near a right.

[00:10:50] Speaker 05:
It's just proximity independent.

[00:10:53] Speaker 03:
It's proximity independent, your honor.

[00:10:54] Speaker 03:
So returning a sequence of two, one, three, four, five, six, seven, I think.

[00:11:01] Speaker 05:
So this patent claims

[00:11:04] Speaker 05:
proximity independent ordering, not near or over farther ordering.

[00:11:09] Speaker 03:
It does not claim near or over farther ordering, that's right.

[00:11:11] Speaker 03:
It claims returning the pair of results.

[00:11:16] Speaker 05:
Why is an alphabetized list proximity independent ordering?

[00:11:20] Speaker 03:
The alphabetized list is proximity independent, Your Honor, but that's not all of the patent claims because the patent requires

[00:11:26] Speaker 03:
not just that the criteria be independent of proximity, but that the method only applies when it calls for returning farther over nearer.

[00:11:39] Speaker 03:
Let me illustrate that with an example.

[00:11:41] Speaker 03:
If McDonald's has paid for priority over Burger King, and McDonald's would be the closest result anyway, the method has no application.

[00:11:52] Speaker 03:
It only applies when McDonald's needs to

[00:11:55] Speaker 03:
be bumped up in the list over Burger King so that McDonald's, although farther away, is returned first.

[00:12:01] Speaker 03:
That's the farther over nearer ordering.

[00:12:03] Speaker 03:
That doesn't appear anywhere in the prior art.

[00:12:05] Speaker 03:
The board purported to get that out of the prior art by turning primarily to the Gaylitz reference.

[00:12:10] Speaker 03:
And the Gaylitz reference is a treatise on screen design.

[00:12:13] Speaker 03:
We think that that's not apposite in any event.

[00:12:16] Speaker 03:
But I would urge the court to look in particular at the passage on A1053 that the board said

[00:12:24] Speaker 03:
teaches prioritizing address information.

[00:12:28] Speaker 03:
It does no such thing.

[00:12:29] Speaker 00:
Gaylitz, though, teaches prioritizing results for display to users.

[00:12:34] Speaker 03:
It teaches a number of ways of prioritizing not search results, Your Honor, but menu items for display to users.

[00:12:42] Speaker 03:
The board said that Gaylitz is about search results, but it's not.

[00:12:45] Speaker 03:
But it does teach a number of ways, and in that... But it would teach how to prioritize search results.

[00:12:53] Speaker 03:
I think that that assumes the premise of Google's argument, Your Honor, to say that it would teach how to prioritize search results.

[00:12:59] Speaker 03:
Because after all, it's a treatise on how to design menus, menus that it says should remain static to build familiarity.

[00:13:11] Speaker 03:
And I don't think that that's what you'd look to for a treatise on how to order search results.

[00:13:15] Speaker 00:
But in getting it to order, how you want the priority or the results to be prioritized?

[00:13:20] Speaker 03:
Well, Gaylitz says that you should look first to the natural ordering.

[00:13:25] Speaker 03:
So assuming that Gaylitz is applicable art, it says you should look first to natural ordering.

[00:13:29] Speaker 03:
And it gives a number of other options.

[00:13:31] Speaker 03:
And then fifth in a string is kind of a last resort for small lists.

[00:13:37] Speaker 03:
It says, use alphabetical order if no frequency or sequence pattern is obvious.

[00:13:42] Speaker 03:
And it's our submission that, given that Brohoff, for example, teaches nearer over farther, that a skilled artisan

[00:13:50] Speaker 03:
would not look to Galitz and say, I'm instead going to use this.

[00:13:53] Speaker 00:
Why would a skilled artisan have to even look at Galitz?

[00:13:56] Speaker 00:
This is something that's created a question for me.

[00:14:01] Speaker 00:
And it seems to me that under KSAR, when you're looking at a practical result or a practical activity, prioritizing results in alphabetical order or near to further or further to near is just, that's practical.

[00:14:17] Speaker 00:
It just seems that

[00:14:18] Speaker 00:
a person skilled in the art would look at this and say, gee, maybe I should put these in alphabetical order.

[00:14:23] Speaker 00:
Maybe I should put them further to nearer.

[00:14:26] Speaker 03:
Well, first of all, Your Honor, that's not what the board said.

[00:14:29] Speaker 03:
And there's no substantial evidence in the record to say from which the board could have concluded that anyone was using farther over nearer.

[00:14:35] Speaker 03:
It's not in the art at all.

[00:14:36] Speaker 03:
After all, in an IPR, an obviousness argument has to be based on printed publications.

[00:14:41] Speaker 03:
And the only printed publications here are Brohoff, which expressly teaches

[00:14:46] Speaker 03:
for this combination, which expressly teaches prioritizing nearer over farther.

[00:14:51] Speaker 03:
And Gaylitz, which we think both is inapposite, does not teach farther over nearer under any reading.

[00:14:57] Speaker 03:
And we don't think that its alphabetizing teaching would apply either.

[00:15:00] Speaker 02:
You don't think KSR entitles us to use common sense when we read these, do you?

[00:15:07] Speaker 03:
Well, Your Honor, common sense, I think, suggests

[00:15:10] Speaker 03:
that in this case, a skilled artisan in the field of location-based services would have done exactly what Brohoff and Remy both taught, which is to return nearer results before farther away results.

[00:15:23] Speaker 03:
And the innovation here is to combine payment for placement and farther over nearer.

[00:15:30] Speaker 03:
I don't think that common sense tells you that that was already obvious in the art.

[00:15:34] Speaker 03:
And that's certainly not what the board said.

[00:15:36] Speaker 03:
The board purported to get it out of Galitz, and it simply is not there.

[00:15:41] Speaker 03:
I see done for my time.

[00:15:43] Speaker 03:
Thank you.

[00:15:43] Speaker 00:
Mr. Wright.

[00:15:58] Speaker 04:
Thank you, your honor, and may it please the court.

[00:16:02] Speaker 04:
Substantial evidence supports the board's determination that

[00:16:06] Speaker 04:
in the IPR proceeding, or its final determination in the IPR proceeding, that the challenge claims are obvious over the prior art.

[00:16:14] Speaker 04:
And that's all this court needs to determine to resolve the appeal on the 205 patent.

[00:16:21] Speaker 04:
And because it's case dispositive, I'd like to start.

[00:16:24] Speaker 02:
Our standard of review is clearly simply the standards

[00:16:33] Speaker 02:
of substantial evidence in the record to support their decision.

[00:16:37] Speaker 04:
That's correct.

[00:16:39] Speaker 04:
So the only claim feature upon which UP attempts to distinguish the prior art here is the so-called farther first ordering or farther over nearer ordering.

[00:16:51] Speaker 04:
But when Brohoff and Gaylitz are combined, that is the precise result that you get.

[00:16:58] Speaker 04:
And allow me to explain.

[00:17:00] Speaker 04:
There's no dispute that Brohoff discloses a geographical database that provides service provider information upon the request of a subscriber.

[00:17:12] Speaker 04:
And the only thing that UP argues is allegedly missing from Brohoff is this farther over near ordering.

[00:17:21] Speaker 04:
So Brohoff, however, has a gap.

[00:17:24] Speaker 04:
It uses geographic zones to

[00:17:29] Speaker 04:
to order the service provider lists.

[00:17:32] Speaker 04:
But the gap in Brilhoff is where you have multiple service providers within a single geographic zone.

[00:17:39] Speaker 04:
And if you turn to A1590, which is Brilhoff's Figure 5, you'll see that in Zone C, which is the very outside zone, you have both a BP station and a 76 station.

[00:17:57] Speaker 04:
Brohoff leaves it open to either the skilled artisan or the network administrator for how to order multiple service providers within a single geographic zone.

[00:18:07] Speaker 04:
So if you turn to Gaylitz, which is directed to, Gaylitz recognized that in the future operating systems were going to be on much smaller devices.

[00:18:18] Speaker 04:
That could be in a purse or in a wallet.

[00:18:20] Speaker 04:
And it talks about ordering menus when you have a small screen density.

[00:18:25] Speaker 04:
And it suggests that for small lists, which is what you actually have in Brohoff, that you use alphabetical ordering.

[00:18:31] Speaker 04:
It's a much faster and easier way to do it.

[00:18:33] Speaker 04:
And when you apply that ordering to the situation in Brohoff in Figure 5, you have the OK station, which is in the first zone, the Q8 station, which is in the second zone, and then in the third zone, you have to decide whether to order the 76 station first or the BP station first.

[00:18:54] Speaker 04:
And if you turn to Gaylitz, to the extent that you even need to turn to Gaylitz, you order it alphabetically, and the 76 station comes first.

[00:19:03] Speaker 04:
And in the diagram, the 76 station is further away from the BP station.

[00:19:08] Speaker 04:
So when you actually combine the references, you get the claimed result.

[00:19:13] Speaker 02:
Doesn't Eldon Zarko cast an unfair

[00:19:20] Speaker 02:
thumb on the decisional process.

[00:19:23] Speaker 02:
That is, if all the PTAB needs is substantial evidence in the record on a question of obviousness that we have to uphold if there's substantial evidence, isn't that somewhat unfair to the other side in that kind of a case?

[00:19:40] Speaker 04:
Well, setting aside the fairness, Your Honor, that is the standard.

[00:19:44] Speaker 04:
But it's not unfair in any event.

[00:19:49] Speaker 04:
especially with respect to appellate review.

[00:19:52] Speaker 04:
It's not this court's job to look at these facts to know what references teach is a question of fact, whether two references are combinable is a question of fact, whether the reference is analogous or is a question of fact.

[00:20:07] Speaker 04:
And on appeal, it would be wasteful for this court every time to look at these things anew.

[00:20:14] Speaker 04:
So it's not an unfair standard at all.

[00:20:17] Speaker 04:
It's the correct standard.

[00:20:19] Speaker 04:
So I think the confusion in the IPR here lies because what UP is saying is that the wearing clause sets up a necessary result.

[00:20:35] Speaker 04:
That's the position UP has to take to save its patent in the inter partes review.

[00:20:41] Speaker 04:
So even though the board rejected that construction, and that construction sets up an internally

[00:20:49] Speaker 04:
an internal inconsistency in the claim, and that construction finds no support in the specification, even if you accept that construction, that still does not impart this ordering of two service providers, still does not impart patentability to claim one.

[00:21:09] Speaker 04:
And in fact, when UP turns to find written description support for this element,

[00:21:17] Speaker 04:
It has to recognize that this is purely a result, as the board recognized.

[00:21:21] Speaker 04:
The Learing Clause is purely a claimed result.

[00:21:24] Speaker 04:
And when you use proximity independent-based ordering, which the claim also requires, one result is that the farther service provider can be ordered and will be ordered ahead of the nearest service provider, at least in an even number of the cases.

[00:21:45] Speaker 02:
Their case has to be that farther over nearer is absolutely required in every instance.

[00:21:52] Speaker 02:
Is that correct?

[00:21:54] Speaker 02:
To win in the IPR.

[00:21:55] Speaker 02:
To win in the IPR.

[00:21:56] Speaker 04:
It does.

[00:21:57] Speaker 04:
That's true.

[00:21:58] Speaker 04:
But again, that sets up this internal inconsistency in the claim.

[00:22:02] Speaker 04:
Why do you use proximity to the independent?

[00:22:04] Speaker 02:
I understand your point.

[00:22:06] Speaker 02:
I just wanted to be sure that I had it straight.

[00:22:09] Speaker 04:
So again, with respect to the inter partes review, substantial evidence supports the board's determination

[00:22:15] Speaker 04:
that the challenge claims are obvious.

[00:22:20] Speaker 04:
I'm happy to answer any other questions that the panel might have in that regard.

[00:22:25] Speaker 00:
You want to address the CVM issue?

[00:22:27] Speaker 04:
We can start addressing that, certainly.

[00:22:29] Speaker 04:
So if you'll allow me to shift.

[00:22:39] Speaker 02:
The advantage of the CBM issue, if it's actually a CBM, is that that opens up the 112 issue, right?

[00:22:50] Speaker 02:
It does open up the 112 issue.

[00:22:52] Speaker 02:
It's not otherwise open under the IPR.

[00:22:55] Speaker 04:
It's not open, but I think there is still an issue with respect to UP's argument in the IPR that this wearing clause is a necessary requirement.

[00:23:07] Speaker 04:
I think UP suggested it's a conditional step, that somehow the method is only performed when you have this pay for play situation.

[00:23:18] Speaker 04:
But again, that's in the art.

[00:23:19] Speaker 04:
That's in Hopkins, and that's in Rich.

[00:23:23] Speaker 04:
So to the extent that we address that construction, I still think the construction that's at play in the IPR.

[00:23:31] Speaker 04:
So the only support that UP has for

[00:23:36] Speaker 04:
The farther over nearer limitation in the specification is that one line that talks about prioritizing with the preferences of a service.

[00:23:48] Speaker 02:
It's not the 112 issue.

[00:23:50] Speaker 04:
It's not, but their argument, it's not really a claim construction argument.

[00:23:57] Speaker 04:
The construction that the board used is correct in view of the only support that's in the specification.

[00:24:05] Speaker 04:
I still think it impacts, to the extent that there is even a claim construction issue here, I think it impacts that.

[00:24:14] Speaker 04:
But you can still reach that and understand that argument without addressing the covered business method appeal for the 205 patent.

[00:24:27] Speaker 04:
So with respect to the covered business method patent and the standard of review,

[00:24:35] Speaker 04:
There are the Congress unambiguously delegated to the agency the responsibility for implementing this transitional program for covered business method patents.

[00:24:51] Speaker 00:
I think we'd have a different case with respect to this particular issue if the agency had adopted a regulation that was different from the statutory text.

[00:25:01] Speaker 00:
But in this case, it adopted almost verbatim the statutory test.

[00:25:06] Speaker 00:
So even if we refer to the regulatory language, aren't we really interpreting the statute here?

[00:25:14] Speaker 04:
Well, I think no.

[00:25:17] Speaker 04:
And here's why.

[00:25:18] Speaker 04:
UP has repeatedly characterized this as a case of the Patent Office merely parroting the statute.

[00:25:26] Speaker 04:
Although it didn't need to, because CBM eligibility is a procedural rule, the Patent Office nonetheless went through the full notice and comment

[00:25:36] Speaker 04:
rulemaking for establishing the regulations related to CBM review.

[00:25:43] Speaker 04:
And in doing so, it received numerous comments from the bar, and from law firms, and from corporations, et cetera, saying, oh, you should narrow the scope of the definition, or you should broaden the scope of the definition, or whatever it was.

[00:25:59] Speaker 02:
Well, that becomes relatively irrelevant

[00:26:03] Speaker 02:
in light of A, the statute, and B, this court's decision in Versailles.

[00:26:12] Speaker 02:
The commentary has to do with why don't you adopt a regulation.

[00:26:16] Speaker 02:
They never did.

[00:26:17] Speaker 02:
The regulation they adopted was verbatim the statute.

[00:26:22] Speaker 02:
So they have no standing to claim any benefit from their regulation.

[00:26:28] Speaker 02:
It's simply a

[00:26:30] Speaker 02:
printed version of the statute.

[00:26:31] Speaker 02:
So the regulation is irrelevant.

[00:26:35] Speaker 04:
I think arguably they get some benefit because they went through notice and comment.

[00:26:39] Speaker 05:
Are you trying to suggest that the comments in the Federal Register apart from the regulation get some kind of deference?

[00:26:46] Speaker 04:
No.

[00:26:46] Speaker 04:
No, not suggesting that.

[00:26:48] Speaker 05:
Well, then you're not going to get very far because the regulation itself doesn't do anything but repeat the statute.

[00:26:54] Speaker 04:
OK, so.

[00:26:55] Speaker 05:
But I mean, it seems to me that what you should be arguing is that we've already referred to and incorporated those comments, not just in Versata, but in Blue Calypso and also in SightSound, when we've looked at this and said financial activity is not confined to financial institutions.

[00:27:12] Speaker 05:
I mean, particularly in Blue Calypso, we specifically cite that register language you're talking about in noting our definition.

[00:27:20] Speaker 04:
Right, so implicitly, at least, in both

[00:27:23] Speaker 04:
actually in all three of the cases, Versata, Sight, Sound, and Blue Calypso, that specific language of the office was incorporated into those decisions.

[00:27:33] Speaker 05:
It doesn't have to be a matter of deference, although we did say in Versata that they should get substantial deference, but it's a matter of statutory construction, and we can look at the various ways they treated the legislative history in arriving at that statutory construction, can't we?

[00:27:51] Speaker 04:
Right, but I think what

[00:27:52] Speaker 04:
CITESDOWN and Blue Calypso established and it's consistent with the substantial deference language that the agencies accorded in Versailles is that the correct standard of review for looking at an agency decision in determining whether a patent is CBM eligible, which is really the core of the agency's authority that Congress delegated to it, is you look at those decisions under

[00:28:19] Speaker 04:
Section 706 of the APA, and you use an arbitrary... Whether they're arbitrary and capricious, yeah.

[00:28:23] Speaker 05:
An arbitrary and capricious... Whether the director is properly exercising her discretion to institute a CVM review, we've said repeatedly is subject to arbitrary and capricious review.

[00:28:33] Speaker 04:
Right.

[00:28:34] Speaker 04:
Right.

[00:28:34] Speaker 00:
And that's the standard that the court should use here in determining... If that standard is for the institution, the grounds, the basis for the institution, that's not the standard.

[00:28:44] Speaker 00:
And I don't think Versado says that

[00:28:46] Speaker 00:
the statutory, interpreting the statutory text is subject to something other than a de novo review.

[00:28:59] Speaker 02:
Let me also clarify something which constantly gets thrown back, and I think it's a misunderstanding.

[00:29:08] Speaker 02:
Versata says, furthermore, the expertise of the USPTO entitles the agency to substantial deference

[00:29:17] Speaker 02:
in how it defines its mission.

[00:29:20] Speaker 02:
Congress recognized this by its broad delegation of rulemaking authority in the establishment and implementation of the transitional post-grant review proceeding.

[00:29:32] Speaker 02:
It might have been helpful if the agency had used that authority to elaborate on its understanding of the definition provided in the statute.

[00:29:43] Speaker 02:
That's what Versada said.

[00:29:45] Speaker 02:
Versada never even implied that the statute was somehow subject to the expertise of the USPTO because that's not what statutes do, not at least since Madison versus Marbury.

[00:30:02] Speaker 02:
That quote unfortunately is lifted out of context and not only by lawyers, but occasionally by us, but it's incorrect.

[00:30:12] Speaker 02:
we have in Versada, we were very clear that it's a statute that we're interpreting.

[00:30:22] Speaker 04:
So yes, the statute is what is being interpreted.

[00:30:27] Speaker 02:
Let's look at the language of the statute, counsel.

[00:30:30] Speaker 02:
The statute says, for purposes of this section, the term covered business method patent means a patent that claims a method of corresponding apparatus

[00:30:38] Speaker 02:
for performing data processing or other operations used in the practice administration or management of a financial product or service, meaning a financial product or a financial service.

[00:30:53] Speaker 02:
You're not suggesting that what's involved in this patent is a financial product, that this is a patent for a financial product or a financial service, are you?

[00:31:07] Speaker 04:
And I assume here we're still talking about the 205 patent.

[00:31:12] Speaker 04:
We haven't turned to the patent in the next week.

[00:31:15] Speaker 02:
We're going to have the same issue when we get to that one.

[00:31:18] Speaker 02:
But since we're into this one, we can talk about it here.

[00:31:21] Speaker 04:
So this court, I think, resolved in sight sound that the exchange of a good or a service for money qualifies as a financial

[00:31:37] Speaker 04:
activity.

[00:31:38] Speaker 00:
That's if the claim method is for an exchange of financial services or exchange of money.

[00:31:44] Speaker 00:
But what is it about these claims that there's a claim for a method of performing something related to a financial service?

[00:31:54] Speaker 00:
Finding the proximity of a location of businesses or a bathroom, a roadside service area, somebody

[00:32:05] Speaker 00:
That's not, is that claiming a method for performing a financial service?

[00:32:11] Speaker 04:
Well, what the board did is the board looked at the service provider here and determined that that's, according to the specification, determined that

[00:32:26] Speaker 04:
the service providers really a proxy for a business, business entity.

[00:32:31] Speaker 00:
Well, that would make every service provider a proxy for business and everything is a CBM.

[00:32:37] Speaker 02:
Well, let me give you a hypothetical.

[00:32:40] Speaker 02:
Let's assume I invent a stent.

[00:32:43] Speaker 02:
You know what a stent is?

[00:32:44] Speaker 02:
I do.

[00:32:45] Speaker 02:
Okay.

[00:32:45] Speaker 02:
Let's assume I invent a stent that has a balloon

[00:32:49] Speaker 02:
device in it with a cage and it's a new invention and I work on that and I get a patent on it and I'm going to sell that invention and get money.

[00:33:05] Speaker 02:
Is that a financial service or a financial product?

[00:33:10] Speaker 04:
Well, I think the inquiry there begins with the claim, right?

[00:33:16] Speaker 02:
With the invention.

[00:33:18] Speaker 02:
It begins with the invention.

[00:33:19] Speaker 02:
What is the invention?

[00:33:21] Speaker 04:
Well, the invention here, I think the 205 patent and the patent that we'll be discussing next fall squarely within the type of patent that Congress was concerned about when it implemented this transitional program.

[00:33:35] Speaker 00:
They were concerned about finding the proximity of an ATM as a financial product or financial service and carved out a whole new set of methods

[00:33:48] Speaker 00:
for CBN?

[00:33:51] Speaker 04:
No, the type of patent that Congress was concerned about were patents that arose post-State Street Bank, which was in 1998, and pre-Bilski, which was in 2010, that are no longer valid, directed to patentable subject matter.

[00:34:09] Speaker 02:
They were concerned about all those business method patents that somehow suddenly appeared

[00:34:15] Speaker 02:
thousands of business method patents attempting to patent everything that everybody did.

[00:34:22] Speaker 02:
That's what they were concerned about.

[00:34:24] Speaker 02:
They weren't concerned about your patent, were they?

[00:34:28] Speaker 04:
Well, with this particular patent, let's just turn back to the example that UP used, an example that would infringe the patent.

[00:34:36] Speaker 04:
That's a pay-for-play system where Burger King wants to be prioritized ahead of

[00:34:44] Speaker 04:
McDonald's when you search for two fast food restaurants.

[00:34:49] Speaker 04:
Certainly there are business methods that are out there, and that's the nature of the underlying enforcement action.

[00:34:56] Speaker 05:
I just have one thing.

[00:34:56] Speaker 05:
I mean, I get that.

[00:34:58] Speaker 05:
If that's the way the board had characterized this, you might have a better argument.

[00:35:01] Speaker 05:
The problem is the board has this incredibly arbitrary definition that anything incidental to a bank whatsoever

[00:35:10] Speaker 05:
is financial.

[00:35:11] Speaker 05:
That could include a patent on a light bulb to put in the lobby.

[00:35:15] Speaker 05:
If this had been a patent for a business method to prioritize ordering in exchange for purchase of this business method, you might have a better CVM argument.

[00:35:28] Speaker 05:
But here you don't.

[00:35:29] Speaker 04:
Well, I think that's where the incidental to or complementary to what comes into play.

[00:35:35] Speaker 00:
But where's the term incidental in the statute?

[00:35:37] Speaker 00:
It's not in the statute.

[00:35:39] Speaker 00:
That argument's not going to go very far.

[00:35:42] Speaker 00:
Now, you're out of time, and we let you go over time.

[00:35:47] Speaker 00:
Well, we're well into the next patent.

[00:35:49] Speaker 00:
Yes, we're into the next patent, but you'll get another shot at it, and I'll give everybody enough time.

[00:35:54] Speaker 00:
So let's go back and hear from Mr. Jay, and I'll restore your full four minutes of time.

[00:36:03] Speaker 05:
Thank you very much, Your Honor.

[00:36:04] Speaker 05:
Is your argument about the definition of CBM, about this incidental language,

[00:36:08] Speaker 05:
That's part of it.

[00:36:10] Speaker 05:
Because, I mean, you can get there two ways.

[00:36:14] Speaker 05:
I mean, by incidental, the board is really saying anything at all related to a bank, including the light bulb in the lobby, that's clearly arbitrary and capricious.

[00:36:24] Speaker 05:
We don't have to delve into this line drawing of what is and or isn't a CBM patent, where we've already set out broad principles of that.

[00:36:33] Speaker 05:
But if your argument is that somehow

[00:36:37] Speaker 05:
the board has gone beyond the statutory definition because it's gone beyond financial institutions.

[00:36:42] Speaker 05:
Haven't we already rejected that?

[00:36:43] Speaker 03:
I want to make absolutely clear, Judge Hughes, we are not arguing for a banks and brokerages definition.

[00:36:48] Speaker 03:
We are not arguing for a financial institutions definition.

[00:36:51] Speaker 03:
A car dealership... So let me ask you this.

[00:36:54] Speaker 05:
I was asking your friend this and telling him what his better argument would have been is if the patent said, here's a method for

[00:37:04] Speaker 05:
optimizing search results for your company by allowing you to pay for priority.

[00:37:11] Speaker 05:
And so it's a business method.

[00:37:14] Speaker 05:
Look, you pay us $10,000, we'll put you at the top of the list.

[00:37:17] Speaker 05:
Or you pay us a lot more than that, I suspect, at Google.

[00:37:20] Speaker 05:
That seems to me to be a business method, no?

[00:37:24] Speaker 03:
A business method, but the question is, does it involve the practice, administration, or management of a financial product or service?

[00:37:32] Speaker 03:
Now, I don't think you have to agree with me for me to win this case, but I'm going to say no, it's not, because that equates a financial product or service with a product or service that someone would pay money for.

[00:37:41] Speaker 03:
That's an awful lot of things.

[00:37:43] Speaker 03:
It's not consistent with the legislative history.

[00:37:45] Speaker 05:
But it seems to me very indistinguishable from the pricing algorithms that issue in Versado.

[00:37:51] Speaker 05:
It was the same kind of thing.

[00:37:52] Speaker 05:
It wasn't involving anything financial, but it was here, we'll offer you this.

[00:37:57] Speaker 05:
This will offer you a way to optimize prices.

[00:38:00] Speaker 05:
will offer you this.

[00:38:02] Speaker 05:
It's a way to optimize revenue streams.

[00:38:04] Speaker 03:
I'm not sure that that's right, Your Honor, because I think you're right that a pricing algorithm and likewise an electronic credit card transaction algorithm like InsightSound, that has to do with the transaction itself.

[00:38:16] Speaker 03:
And the office in its guidance has actually said something along the lines of a way of doing a transaction.

[00:38:24] Speaker 03:
That might be a covered business method.

[00:38:26] Speaker 03:
But having a product that you sell is not a financial product or service.

[00:38:31] Speaker 05:
No, no, I get that.

[00:38:32] Speaker 05:
Maybe we're not on the same page about the example.

[00:38:35] Speaker 05:
I mean, it's not people just going out and selling the pricing algorithm.

[00:38:40] Speaker 05:
It's the algorithm itself.

[00:38:42] Speaker 05:
But if this is an algorithm that allows businesses to purchase higher access on a search to get more revenue, that seems to me to be a business method.

[00:38:51] Speaker 03:
I think that it might well be.

[00:38:55] Speaker 00:
Well, in that case, it would be, because what you're actually claiming is you're claiming a method.

[00:38:59] Speaker 03:
You're claiming the method of the pricing itself.

[00:39:02] Speaker 00:
Right.

[00:39:02] Speaker 00:
Or in Judge Hu's example, you're claiming a method to pay for priority.

[00:39:07] Speaker 00:
And that's in your claims.

[00:39:08] Speaker 03:
And in neither this case nor the next case, do you have anything like that?

[00:39:12] Speaker 02:
But a method for making money, as long as it doesn't involve printing, a method for making money surely cannot be a

[00:39:24] Speaker 02:
CBM by definition, can it?

[00:39:26] Speaker 03:
Absolutely not.

[00:39:27] Speaker 03:
I think that the legislative history, to the extent that it sheds any light, it says exactly that, that Senator Leahy and Senator Kyle both pointed out that this was not for the entire universe.

[00:39:39] Speaker 03:
This is a very powerful tool of covered business method review.

[00:39:42] Speaker 03:
It has fewer limitations than PGR.

[00:39:45] Speaker 05:
I don't understand your answer to that, because isn't the pricing algorithm in Versada

[00:39:50] Speaker 05:
a method to maximize revenue, which is another way of saying a method to make money.

[00:39:56] Speaker 03:
I took Judge Plager's question to be a method of making money, meaning that you have something valuable and you sell it, not a method.

[00:40:02] Speaker 05:
Sure.

[00:40:02] Speaker 05:
I mean, that's it.

[00:40:03] Speaker 03:
Obviously.

[00:40:03] Speaker 03:
Not a method of optimizing.

[00:40:04] Speaker 05:
But that's not a method.

[00:40:05] Speaker 05:
I mean, if you invent a product and you sell it, that's not a method.

[00:40:09] Speaker 03:
And all we have here is a service that the other side is hypothesizing might one day be sold.

[00:40:15] Speaker 03:
That, of course, is not even in the claims.

[00:40:17] Speaker 03:
If I could, I'd like to take 30 seconds just to go back to the obviousness issue, because it is so important.

[00:40:25] Speaker 03:
Judge Plager, I think, brought out the standard of review.

[00:40:28] Speaker 03:
And while we're not arguing with the standard of review, I think that with the standard of review comes the important point that the board can only be sustained on the reasoning that the board itself used, and it cannot be sustained based on findings that the board did not make.

[00:40:40] Speaker 03:
And in this case, my friends are asking you to do exactly that.

[00:40:44] Speaker 03:
A16, you will see not that this alphabetical order principle is key.

[00:40:49] Speaker 03:
It says that farther over nearer is in the prior art.

[00:40:53] Speaker 03:
And so my friends saying that farther over nearer was not the critical limitation

[00:40:57] Speaker 03:
That's not what the board said.

[00:40:58] Speaker 03:
They said it's in the prior art, and they cited a page of Galitz 1053 that you will see does not, in fact, teach prioritizing address information in that way.

[00:41:07] Speaker 03:
It just says put the address before the city, the city before the state, and the state before the zip code.

[00:41:13] Speaker 03:
That is not the same thing as prioritizing nearer over farther, farther over nearer, or anything like it.

[00:41:19] Speaker 00:
Do you need to sit down, or?

[00:41:21] Speaker 03:
I'm happy to stand right here if you want to call the next one.

[00:41:22] Speaker 00:
Let's go into the next case, which is 1812.

[00:41:26] Speaker 00:
And this case turns entirely on the question