[00:00:00] Speaker 02:
The second and last case argued today.

[00:00:25] Speaker 07:
is global check services versus electronic payment systems, appeal number 17-1062.

[00:00:30] Speaker 07:
Mr. Lanzer, whenever you're ready.

[00:00:47] Speaker 01:
I understand that I may refer to an iPad from time to time when I'm making arguments.

[00:00:54] Speaker 02:
I'm sorry, can you speak up a little?

[00:00:56] Speaker 01:
I understand.

[00:00:56] Speaker 01:
I can refer to my iPad from time to time when making art.

[00:00:59] Speaker 01:
I keep a lot of notes on there.

[00:01:01] Speaker 03:
I just want to make sure I'm not... That's fine.

[00:01:20] Speaker 01:
Okay.

[00:01:20] Speaker 01:
May I please the court?

[00:01:21] Speaker 01:
This is an appeal from

[00:01:23] Speaker 01:
just a court decision that global checks patent was directed towards an abstract idea and therefore ineligible for patentability under Section 101.

[00:01:33] Speaker 02:
Mr. Oz, I have only one question for you.

[00:01:35] Speaker 02:
Why did you concede that your patent was illegal under step one?

[00:01:47] Speaker 01:
Like opposing counsel, I was focused too much on the idea that post-nation checks as a form of short-term financing was a fundamental economic practice.

[00:02:00] Speaker 01:
What makes our patent different, however, is that turning those into electronic debits and leveraging the funds transaction networks

[00:02:10] Speaker 01:
is not something that was traditionally part of the short-term financing process.

[00:02:15] Speaker 07:
Could you describe what you mean by electronic debit?

[00:02:18] Speaker 07:
Because as I understand it, that means reading and extracting data out of paper checks and converting them into some kind of electronic data that can be processed by a funds transfer network.

[00:02:34] Speaker 01:
Is that right?

[00:02:35] Speaker 01:
Essentially, that is correct, John.

[00:02:37] Speaker 07:
And your client didn't invent that, right?

[00:02:41] Speaker 07:
There was already in banking laws the notion of electronic debit for transferring electronically funds from the payor to the payee through a so-called electronic funds network.

[00:02:59] Speaker 01:
That concept did exist and that technology did exist.

[00:03:02] Speaker 01:
What is different here, however, is that

[00:03:04] Speaker 01:
He leveraged that technology in an unconventional manner.

[00:03:08] Speaker 01:
No one thought about treating post-dated checks as what are called accounts receivables under the Funds Transaction Network rules.

[00:03:17] Speaker 01:
Normally, that was reserved for situations where checks are mailed in on a monthly basis.

[00:03:23] Speaker 01:
For example, if you are a utility, every month you get hundreds of checks from your customers for whatever their electronic bill was.

[00:03:30] Speaker 01:
And those were processed through the system as accounts receivables.

[00:03:34] Speaker 01:
No one thought about using that on post-dated checks in these short-term financing transactions.

[00:03:40] Speaker 01:
That's where we differ, and I think that's what elevates us.

[00:03:42] Speaker 07:
Can you pinpoint your invention?

[00:03:44] Speaker 07:
Because right now, as I understand your invention, I'm imagining a merchant receives paper form post-dated checks and files them away in some kind of file cabinet, and then has some kind of tickler to remind

[00:04:04] Speaker 07:
him or her that a certain date has come around so the check is no longer post-dated, it can now be cached.

[00:04:10] Speaker 07:
And what your invention is, is the idea of electronically extracting that data off those post-dated paper checks, storing them somewhere, and then having some kind of electronic tickler that, when the right day arrives, takes that stored electronic data

[00:04:34] Speaker 07:
and then sends it through the funds transfer network.

[00:04:37] Speaker 07:
Am I understanding the invention correctly?

[00:04:40] Speaker 01:
That is one description of the invention you are.

[00:04:42] Speaker 07:
OK.

[00:04:43] Speaker 01:
But here again.

[00:04:43] Speaker 07:
And help me understand why that's an inventive concept when we already know that the principle that automating already established human implemented analog is not good enough under our precedent post-Alice.

[00:05:02] Speaker 01:
I don't believe that it is automation of a human analog because of the way it uses the system, the funds transfer networks in an unconventional manner.

[00:05:18] Speaker 05:
How is it unconventional to use the funds transfer network that's pre-consisting?

[00:05:23] Speaker 05:
This is taking paper checks that merchants could have gotten and paper and deposited

[00:05:30] Speaker 05:
in paper at certain times and saying we're going to do it electronically through the funds transfer system.

[00:05:36] Speaker 05:
I don't understand why we're here.

[00:05:38] Speaker 05:
I mean we have had since Alice a dozen or so of these cases that are exactly like this which is taking a common financial practice

[00:05:46] Speaker 05:
from the real brick and mortar world and putting it on a computer, and we find every single one of them eligible.

[00:05:52] Speaker 05:
And this one is exactly like those cases.

[00:05:57] Speaker 05:
I don't see how you distinguish this from any of those cases.

[00:06:01] Speaker 05:
It's buy safe.

[00:06:02] Speaker 05:
It's intellectual ventures.

[00:06:03] Speaker 05:
It's all of these cases.

[00:06:06] Speaker 05:
It improves.

[00:06:08] Speaker 05:
What does it improve?

[00:06:09] Speaker 05:
It doesn't improve the financial network, does it?

[00:06:13] Speaker 05:
It doesn't improve a computer.

[00:06:16] Speaker 05:
It automates a process and makes it more efficient.

[00:06:19] Speaker 05:
What we've said over and over and over again that using computers and networks to make a pre-existing process work better or faster isn't good enough.

[00:06:32] Speaker 01:
Our position is that it improves the short-term financing process here.

[00:06:36] Speaker 05:
And that's exactly what we've said isn't good enough.

[00:06:40] Speaker 05:
It's a fundamental business practice that is improved by the use of the computer.

[00:06:45] Speaker 05:
It doesn't improve the computer.

[00:06:46] Speaker 05:
It doesn't improve the financial network.

[00:06:48] Speaker 05:
It doesn't improve anything technological.

[00:06:51] Speaker 05:
It improves the business practice.

[00:06:53] Speaker 05:
That's ineligible.

[00:06:58] Speaker 00:
And Dragon has never really grappled with the plain language of the claim.

[00:07:01] Speaker 00:
Plain language of the claim means you initiate storage, you start storage by pushing the record key.

[00:07:08] Speaker 02:
There's another way to ask that same, or make that same point, even if this was eligible under 101, isn't it obvious or obvious?

[00:07:19] Speaker 02:
Well, obviousness was... In other words, your notion of an inventive concept is obviously obvious, so it's not inventive.

[00:07:31] Speaker 01:
With all due respect, one, that issue wasn't raised at the trial level, and two, actually that issue was

[00:07:37] Speaker 01:
pushed back and forth at the time in the USPTO when they were trying to get the patent granted.

[00:07:45] Speaker 01:
And there were several times it came back.

[00:07:49] Speaker 01:
And that was concerns that the examiners had.

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And eventually, GlobalChet was able to work around that.

[00:07:57] Speaker 01:
But coming back to the problem, which obviously troubles the court as wise, it was just like all anymore.

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prior patents that have been validated post-Alice, it was extremely difficult to find a business method patent.

[00:08:15] Speaker 01:
I'm not even sure that it is one that has survived Alice.

[00:08:19] Speaker 01:
And I'm not certain that Alice hasn't wiped out business method patents, although I don't think that was the intent of the Supreme Court.

[00:08:28] Speaker 01:
By focusing so much on the abstract idea of fundamental economic practices, we lose sight of the purpose of patents.

[00:08:39] Speaker 01:
And we lose sight of the Supreme Court's warning that if we focus too much on the judicial exceptions, abstract laws of nature, natural phenomena, eventually we risk swallowing up the whole of patent law.

[00:08:55] Speaker 07:
For purposes of your appeal and your claimed invention, can you just try one more time to formulate what is the inventive concept here?

[00:09:04] Speaker 01:
The inventive concept was, as I said, leveraging the funds transfer networks in a way that allowed post data checks to be treated as accounts receivable transactions.

[00:09:19] Speaker 07:
Right.

[00:09:19] Speaker 07:
And can you break that down a little more deeply?

[00:09:22] Speaker 07:
It's the idea of converting these post-dated paper checks into electronic data, right?

[00:09:31] Speaker 07:
And then when the time is ready, sending that electronic data over the funds transfer network.

[00:09:38] Speaker 07:
Is that the invention?

[00:09:40] Speaker 01:
That is.

[00:09:40] Speaker 01:
In part, yes, Your Honor.

[00:09:43] Speaker 07:
OK, what am I missing out of that?

[00:09:45] Speaker 01:
One thing, it's, as we've said in our brief, bridging the gap between traditional presenters, which is you take the check to the bank,

[00:09:52] Speaker 01:
and using the fund to transfer networks to process it as an electronic debit.

[00:10:01] Speaker 01:
EPS and their group referred to a couple patents involving converting checks into electronic debits to suggest that the idea of processing checks as electronic debits was not an inventive concept, yet apparently it was inventive enough for those patents to be granted.

[00:10:20] Speaker 01:
And to the best of my knowledge, those patents are still valid and subsisting today.

[00:10:27] Speaker 06:
Perhaps because nobody has challenged those patents yet.

[00:10:31] Speaker 06:
I mean, if they're just business method patents, they're probably gone too, aren't they?

[00:10:38] Speaker 01:
It depends on how broadly we're going to read Alice.

[00:10:40] Speaker 01:
And that is one of the problems with Alice.

[00:10:44] Speaker 01:
As I said here, we think that we improve upon a fundamental business practice.

[00:10:49] Speaker 01:
We create opportunity for merchants to, instead of having to hold these checks in a drawer somewhere, take them down to the bank every month, keep them straight.

[00:11:00] Speaker 02:
You've come up with an electronic tickler system.

[00:11:05] Speaker 02:
Right, Your Honor.

[00:11:07] Speaker 07:
Electronic tickler for electronic data.

[00:11:11] Speaker 01:
Yes, Your Honor.

[00:11:13] Speaker 01:
OK.

[00:11:14] Speaker 01:
And if I may draw an analogy, one of the questions that one of the things this court made in BISH versus Microsoft, which was decided a little year ago, and that was drafted as a software patent.

[00:11:29] Speaker 01:
The key question is whether the focus is on the specific improvement in computer capabilities or instead on a process that quantifies as an abstract idea for which computers are invoked merely as tools.

[00:11:43] Speaker 01:
In the context of a business method patent, I think the key question is similar.

[00:11:49] Speaker 01:
Whether the focus is on a specific improvement in a business method as opposed to an abstract idea for which computers are merely used as a tool.

[00:12:00] Speaker 01:
We have improved upon a business method here.

[00:12:04] Speaker 01:
I know that EPS relies on content extraction, which was the ATM case where the patent involved

[00:12:13] Speaker 01:
scanning data from checks and recognizing it and storing it.

[00:12:17] Speaker 01:
But that patent did nothing with the data.

[00:12:21] Speaker 01:
The global check patent does something with the data.

[00:12:24] Speaker 01:
It processes it as an electronic transaction.

[00:12:28] Speaker 01:
It results in something happening, money being transferred from point A to point B. That was already being done before though, right?

[00:12:38] Speaker 07:
Transferring funds from point A to point B.

[00:12:40] Speaker 01:
That's correct, but it had not been done in this combination, Your Honor, and it had not been done in this particular manner.

[00:12:52] Speaker 01:
I would say it's the difference between taking a picture of a bridge and actually building the bridge.

[00:13:01] Speaker 01:
In this case, we built a bridge between traditional presentment and using the electronic funds transfer network to process

[00:13:10] Speaker 01:
What is, otherwise, a time-consuming onerous task.

[00:13:13] Speaker 01:
It also allows him to combine his check verification process with the processing and storing of the electronic data.

[00:13:24] Speaker 07:
You're into your rebuttal.

[00:13:27] Speaker 07:
Would you like to save it?

[00:13:28] Speaker 07:
Yes, I do.

[00:13:29] Speaker 07:
OK.

[00:13:30] Speaker 07:
Let's hear from the other side.

[00:13:32] Speaker 04:
any of its briefs, but this was clearly wrong.

[00:13:35] Speaker 04:
So this court should start from the foundation that the first of our names found right at the time of the broadcast to require the transmitter.

[00:13:45] Speaker 00:
Good morning, Your Honors.

[00:13:46] Speaker 00:
Scott Proble on behalf of Electronic Payment Systems.

[00:13:49] Speaker 00:
And frankly, you've made several of my points for me already, although I'm sure there are others that you may need me to answer.

[00:13:55] Speaker 00:
But overall, there was some criticism in the reply brief that EPS and perhaps the district court

[00:14:02] Speaker 00:
had not looked at this patent closely enough that it had too high a view of it.

[00:14:08] Speaker 00:
And frankly, if you look at this patent claim by claim and really roll up your sleeves and look at what it says, it becomes less inventive the more you look.

[00:14:19] Speaker 00:
If you look at the process that's described in the patent, there's nothing new or inventive about it.

[00:14:25] Speaker 00:
You start with a first check and you bring it in

[00:14:30] Speaker 00:
And they do exactly what they do with any other check you use to buy a product.

[00:14:35] Speaker 00:
They run it through a funds availability analysis or a database.

[00:14:40] Speaker 00:
And they run it through, essentially, a check database to see if there have been any insufficient funds.

[00:14:48] Speaker 07:
The patent owner is saying that they, for the first time, have invented this bridge between all of that with post-dated checks

[00:14:59] Speaker 07:
building this bridge to the electronic funds network to send off the data and those post-data checks at the right time in an automatic fashion.

[00:15:10] Speaker 07:
That seems to be their proposed invention.

[00:15:14] Speaker 07:
What do you have to say about that?

[00:15:16] Speaker 00:
Well, there are two parts of it.

[00:15:17] Speaker 00:
One is as far as the conversion, and then the other is as far as presenting them at the wrong time.

[00:15:23] Speaker 00:
As far as the conversion is pointed out by the court,

[00:15:27] Speaker 00:
That conversion has existed for a long time and is recognized in the patent.

[00:15:31] Speaker 00:
So again, we should look to the patent because it specifically recognizes in column four, I think it's lines 26, the existence of this process to transfer funds electronically using an electronic funds network.

[00:15:45] Speaker 00:
So there's nothing inventive about that.

[00:15:47] Speaker 00:
Now, as to whether it solves an existing problem or they might take it out of the drawer at the wrong time, it doesn't really even solve that problem because the patent specifically contemplates

[00:15:58] Speaker 00:
that instead of the human factor being, am I going to take the check out of the drawer on the right day, the human factor is, I have to put the right date into the computer.

[00:16:07] Speaker 00:
That is entered by keypad according to the words of the patent.

[00:16:11] Speaker 00:
So again, if you look at the patent, it shows that it's just simply not invented.

[00:16:16] Speaker 00:
So if you go step by step, each step is a well-known process.

[00:16:24] Speaker 00:
The check guaranteed

[00:16:27] Speaker 00:
check that's done, or the check ratification check that's done when the first check comes in.

[00:16:32] Speaker 00:
Don't process.

[00:16:34] Speaker 00:
And it really doesn't even deal with post-dated checks.

[00:16:38] Speaker 00:
All it really does is, as you said, a ticker system.

[00:16:42] Speaker 00:
It puts the checks in an electronic drawer instead of the cash register drawer.

[00:16:47] Speaker 00:
And when the computer says that date comes up, it pulls it out, and it's no longer a post-dated check.

[00:16:53] Speaker 00:
And it processes it electronically

[00:16:55] Speaker 00:
using the known machines and the known systems.

[00:17:00] Speaker 00:
So if you go through each step of the process, even when you get to the second and subsequent checks, the wording of the patent doesn't even use the verification process of the patent.

[00:17:14] Speaker 00:
They verify the first check, and based on that verification, they then change the format of all the checks to electronic debits.

[00:17:25] Speaker 00:
When the time comes up for that second check, this patent doesn't even go back through the verification process.

[00:17:32] Speaker 00:
So as far as it being some kind of a bridge between the two processes in the check verification process and the actual processing of the checks through the electronic funds network, there is no bridge.

[00:17:45] Speaker 00:
First check's checked.

[00:17:47] Speaker 00:
They get to the rest of them.

[00:17:48] Speaker 00:
They process them.

[00:17:49] Speaker 00:
And they process them using a typical scanner

[00:17:54] Speaker 00:
a generic scanner that does what generic scanners do.

[00:17:57] Speaker 00:
They store it in a generic computer that does what computers do.

[00:18:02] Speaker 00:
And they send it across a funds transfer network that's intended just to transfer funds.

[00:18:08] Speaker 00:
So there's really nothing, anything that is inventive about it.

[00:18:13] Speaker 00:
And the patent actually acknowledges each of those steps as already existing.

[00:18:23] Speaker 00:
There really just isn't this inventiveness anywhere in the patent.

[00:18:29] Speaker 00:
The gap that they say was bridged, if they're saying it's a gap between the electronic funds transfer and the check process, as the court's already identified, that gap was bridged long ago.

[00:18:45] Speaker 00:
And it has been bridged for a substantial period of time.

[00:18:49] Speaker 00:
All that they're actually doing, there's no real transformation of information here.

[00:18:53] Speaker 00:
What you have is you have a check that has certain data on it.

[00:18:58] Speaker 00:
And now it's being put into an electronic form that has the exact same data.

[00:19:03] Speaker 00:
An electronic form tells you the person's name, the amount of the check, the account it's drawn on, just like the check.

[00:19:08] Speaker 00:
So there's really no inventive transformation.

[00:19:12] Speaker 00:
The idea that it's solving the problem, I think I've addressed.

[00:19:18] Speaker 00:
The problems that are addressed

[00:19:19] Speaker 00:
And identified in the patent differ a little bit from those that are identified by global check in the briefing.

[00:19:25] Speaker 00:
The problem that you mentioned about does the check get pulled out on the wrong date is identified in the patent.

[00:19:32] Speaker 00:
But the only other problem that's identified in the patent is a problem that occurs if all the checks are written on the same date.

[00:19:38] Speaker 00:
And that's really not addressed or solved by the patent.

[00:19:42] Speaker 00:
So it doesn't solve a problem.

[00:19:45] Speaker 00:
There's nothing new.

[00:19:46] Speaker 00:
There's nothing inventive.

[00:19:49] Speaker 00:
It's just simply a typical business method patent that this court and the Supreme Court has made clear is not eligible.

[00:19:57] Speaker 00:
So I have some time left, and I'll be glad to answer questions.

[00:20:01] Speaker 00:
But that's really the message that I wanted to convey today.

[00:20:04] Speaker 07:
I think we have your argument, and we've had your briefing.

[00:20:06] Speaker 07:
Thank you very much.

[00:20:07] Speaker 07:
Thank you.

[00:20:08] Speaker 07:
We'll hear Mr. Lanz's rebuttal now.

[00:20:12] Speaker 01:
Actually, I'd like to ask the court to have a few simple questions.

[00:20:15] Speaker 01:
But man, we don't have any data here else.

[00:20:18] Speaker 07:
Okay, thanks very much.

[00:20:19] Speaker 07:
The case is submitted.

[00:20:21] Speaker 03:
That concludes today's argument.