[00:00:00] Speaker 04:
We have decided to change the order of argument slightly, and if counsel for liquid, the fourth case, are here, we'd like to hear that case second after the Correca case.

[00:00:19] Speaker 04:
Are liquid counsel here?

[00:00:22] Speaker 04:
Yes, sir.

[00:00:22] Speaker 04:
Okay, thank you.

[00:00:23] Speaker 04:
All right, so first we'll hear number 171672.

[00:00:28] Speaker 02:
brekia versus mcdonald's corporation mr war was written was in your honor wars thank you good morning your honors map wars and on behalf of william grisha we're asking in this appeal for the court to reverse the district courts dismissal of mister free she's complaint the principal reason

[00:00:58] Speaker 02:
in the basis for our request is that the district court erred in relying on physical possession of components of the claim system in order to plead liability for use under Section 271.

[00:01:21] Speaker 02:
That holding by the district court that is relying

[00:01:27] Speaker 03:
So do you dispute that McDonald's does not practice any of the claim limitations itself?

[00:01:35] Speaker 02:
We do dispute that, Your Honor.

[00:01:38] Speaker 02:
The main components of the system are the modules that reside in the back end of the accused tokenization system.

[00:01:50] Speaker 02:
So those modules are in the physical possession of the credit card companies.

[00:01:55] Speaker 02:
So let's take, for example, MasterCard.

[00:01:58] Speaker 02:
MasterCard physically possesses those components.

[00:02:04] Speaker 02:
But if your honors will look at the preamble language to these system claims, it includes, for example, worldwide cloud infrastructure, including a plurality of devices.

[00:02:24] Speaker 02:
Part of that plurality of devices here would be the point of sale device at the McDonald's store that is used to transmit the personal account number of the McDonald's customer to the back end, to the six modules that are in physical position.

[00:02:45] Speaker 00:
What language?

[00:02:46] Speaker 00:
Can you point me to language in a claim that you're talking about?

[00:02:53] Speaker 02:
Why don't we go to the 860 patent?

[00:03:04] Speaker 02:
Claim 9, page 21 of the appendix.

[00:03:15] Speaker 02:
And if your honors are all there,

[00:03:18] Speaker 02:
A system for authorizing access to digital content using a worldwide cloud system infrastructure, the infrastructure comprising connected modules in operation as computing and storage.

[00:03:35] Speaker 02:
Now just to focus on that language, those are the six modules that I referenced before that do reside at the back end of the system.

[00:03:45] Speaker 02:
But reading on...

[00:03:47] Speaker 04:
within the control of McDonald's?

[00:03:50] Speaker 02:
Not in physical control.

[00:03:53] Speaker 02:
What we argue, however, Your Honor... Or functionally.

[00:03:57] Speaker 02:
Well, they're in control under this court's centillion holding, because McDonald's is controlling the system as a whole.

[00:04:08] Speaker 04:
Well, you're basically saying that use is sufficient, use and benefit is sufficient to bring us under centillion.

[00:04:15] Speaker 04:
And you don't have to actually control or contribute any of the modules.

[00:04:20] Speaker 04:
That's correct.

[00:04:21] Speaker 02:
That is our position, your honor.

[00:04:24] Speaker 00:
I'm not sure if it makes a difference.

[00:04:27] Speaker 00:
I thought one way you could make your point is to say McDonald's is indirectly controlling everything by sending everything that is listed in these modules by indirectly the signal that then automatically makes all of it

[00:04:44] Speaker 00:
go into service.

[00:04:47] Speaker 02:
Yes.

[00:04:48] Speaker 00:
And we're relying on this until... You were, I think, about to say there's something in here that's actually in McDonald's possession.

[00:04:56] Speaker 00:
Put aside the word control.

[00:04:57] Speaker 00:
Right.

[00:04:58] Speaker 00:
What is that?

[00:05:01] Speaker 02:
The computing and storage comprising a server, a database, devices and users.

[00:05:11] Speaker 02:
wherein the digital content is at least one of encrypted, not encrypted, the system facilitating access rights between a plurality of data processing devices.

[00:05:24] Speaker 02:
And so that's where McDonald's comes into the scope of this claim.

[00:05:30] Speaker 02:
And if you look at the Centillion case, for example, which holds that use under Section 271 of a system claim

[00:05:40] Speaker 02:
requires the right to put the system into service.

[00:05:46] Speaker 02:
That's point number one.

[00:05:47] Speaker 02:
Where does McDonald's get the right to put the system into service?

[00:05:51] Speaker 02:
It pays MasterCard a fee.

[00:05:54] Speaker 04:
Just to try to understand what you just said about the science, are you saying the plurality of data processing devices that one or more of those devices is provided by McDonald's itself?

[00:06:08] Speaker 02:
Yes.

[00:06:09] Speaker 02:
and so that would be as alleged in the complaint it would be the point-of-sale device that receives the customers personal account number or what's referred to as a pan which is the personal credit card information.

[00:06:26] Speaker 02:
So one of the data processing devices at issue in this claim we allege is the point-of-sale device in the McDonald's store.

[00:06:39] Speaker 04:
district court say about that?

[00:06:42] Speaker 02:
Anything?

[00:06:44] Speaker 02:
The district court said that we did not we did not allege that in the complaint.

[00:06:50] Speaker 04:
However, we... Where did district court say that?

[00:07:09] Speaker 04:
And the complaint does not plausibly allege that the data processing devices are a component of the claim system.

[00:07:15] Speaker 02:
Yeah.

[00:07:16] Speaker 02:
Well, I think that's a true statement that it doesn't explicitly call out the point of sale.

[00:07:22] Speaker 02:
Actually, that is not true.

[00:07:23] Speaker 02:
It doesn't explicitly point out this claim language, which we're referring the court to now.

[00:07:30] Speaker 02:
However, we did attach these patents to the complaint.

[00:07:35] Speaker 02:
And if anything,

[00:07:38] Speaker 02:
Mr. Gracia should have been allowed, uh, leave to replede and explicitly incorporate this language.

[00:07:45] Speaker 00:
When, when McDonald's filed, this is a 12b6 motion to dismiss, is that right?

[00:07:49] Speaker 00:
And in response, and I guess that the theme of their motion is every physical piece of this system is in somebody else's hands.

[00:07:57] Speaker 00:
That's a little bit different.

[00:07:59] Speaker 00:
And, and that little bit, little bit of difference makes a giant legal difference from Centillion.

[00:08:05] Speaker 00:
Did you respond and say, ah, premise.

[00:08:08] Speaker 00:
We think you're wrong about centillion, but also the premise of your argument is wrong.

[00:08:15] Speaker 00:
If you read these claims properly, and that's going to be a matter for claim construction later in the proceeding, there is actually a physical component in McDonald's possession.

[00:08:26] Speaker 00:
Did you say that to the district court?

[00:08:28] Speaker 02:
We did, Your Honor.

[00:08:30] Speaker 02:
It's escaping me whether or not that came up in our motion to reconsider or if on the principal motion to dismiss.

[00:08:38] Speaker 02:
But in any event, it wasn't in the complaint, right?

[00:08:43] Speaker 02:
It was not on the claim language portion of this argument that has arisen to date before the court.

[00:08:51] Speaker 02:
We did allege, however, that the McDonald's stores contain these point of sale devices.

[00:08:58] Speaker 02:
We did allege all of this claim language by attaching the patents to the complaint.

[00:09:07] Speaker 04:
When the court granted the motion to dismiss, did you ask to be able to amend your complaint?

[00:09:14] Speaker 02:
Yes, we did, your honor.

[00:09:16] Speaker 04:
And what did the district court say about that?

[00:09:20] Speaker 02:
The district court said that because the

[00:09:26] Speaker 02:
these data processing devices that would, this language in the preamble doesn't extend to the six components, which we cannot allege.

[00:09:38] Speaker 04:
I'm sorry, where do I find that?

[00:09:41] Speaker 04:
We've appealed the denial of... I'm asking, where did the district court say that?

[00:09:47] Speaker 04:
In other words, you're saying, okay, there was the motion to dismiss, the motion to dismiss was granted, we asked to relieve to amend,

[00:09:54] Speaker 04:
and district court denied leave to amend.

[00:09:57] Speaker 04:
I'm just asking where in the record do we find the denial of the motion for leave to amend?

[00:10:04] Speaker 02:
You would find that in on the docket of the district court.

[00:10:09] Speaker 02:
You didn't put it in the appendix here?

[00:10:11] Speaker 02:
We did not, your honor.

[00:10:14] Speaker 04:
And what did he say in denying leave to amend?

[00:10:18] Speaker 02:
Judge Coleman said that it was that because

[00:10:24] Speaker 02:
We had alleged in the original complaint that there was no physical control over the six components and that this preamble language was of no moment and that we could not, even if we amended the complaint, could not plausibly allege use liability under Section 271.

[00:10:50] Speaker 04:
Did you brief the denial of the motion for leave to amend here in your blue brief?

[00:11:00] Speaker 02:
No, Your Honor.

[00:11:00] Speaker 02:
No.

[00:11:01] Speaker 02:
We're appealing the denial of the motion to dismiss based on centillion.

[00:11:08] Speaker 00:
Let me just say, just so you're on the same page I am, I think everybody agrees that on the facts as understood by the district court on the motion to dismiss,

[00:11:21] Speaker 00:
On the facts, the case is a little bit different from Centillion.

[00:11:27] Speaker 00:
To my mind, at least, that leaves the question, should that difference make a legal difference?

[00:11:32] Speaker 00:
And I do not personally find that a particularly easy question.

[00:11:38] Speaker 00:
We have briefs in which the two parties talk about two cases and nothing else.

[00:11:43] Speaker 00:
Nothing about the history of the use term in the statute and the history of the use term in Supreme Court precedent.

[00:11:51] Speaker 00:
you're standing here and saying, well, actually the case really doesn't involve, let's call it the hard question of a pure use of system assertion where the entire system is in somebody other than the user's hands.

[00:12:09] Speaker 00:
If that's a hard question, one reason it might not be necessary to answer that question is if you actually wanted to or tried to plead

[00:12:19] Speaker 00:
or ask for further proceedings on claim construction, but you don't seem to have raised that.

[00:12:25] Speaker 02:
Your Honor, let me address that Gratia is, his position is that Centillion does control here.

[00:12:37] Speaker 02:
In that case, this court held that physical possession of the components has nothing to do with the use analysis.

[00:12:45] Speaker 04:
But you're putting us in a position where we have to decide that issue because you haven't bothered to brief the denial of the motion for leave to amend where, as I understand what you're saying, you did say that McDonald's supplied one of the components, the point of sale device.

[00:13:13] Speaker 03:
So what is the component at the point of sale?

[00:13:16] Speaker 03:
A computer, right?

[00:13:17] Speaker 03:
Yes.

[00:13:18] Speaker 03:
And did the court address that and find that those components that you also enumerated, that they're not claimed components?

[00:13:28] Speaker 03:
When you look at the claims, they don't speak about a computer.

[00:13:31] Speaker 03:
They talk about different modules and not a computer.

[00:13:37] Speaker 02:
Yes, Your Honor.

[00:13:39] Speaker 03:
Let's take Centellian, for example, where the customer... Answer my question as to the claims and what they say.

[00:13:47] Speaker 02:
Well, the preamble is itself limiting.

[00:13:51] Speaker 02:
No, it's not limiting.

[00:14:01] Speaker 02:
Our position that it is limiting, Your Honor.

[00:14:04] Speaker 02:
Okay.

[00:14:05] Speaker 02:
It's claim nine, for example, is defining the system

[00:14:10] Speaker 02:
listing the modules and as a separate component, this plurality of data processing devices in which these modules operate.

[00:14:23] Speaker 02:
The modules don't operate in isolation, but rather they need these other elements of the claim, part of which is the data processing devices, which McDonald's does physically possess,

[00:14:40] Speaker 02:
and which sends the query to the back end of the system, just like in Centillion.

[00:14:47] Speaker 04:
OK, but can I understand this?

[00:14:49] Speaker 04:
Are you saying that the only module provided by McDonald's, the point of sale device, is only referenced in the preamble and not in the body?

[00:15:01] Speaker 02:
That's correct.

[00:15:02] Speaker 04:
All right.

[00:15:06] Speaker 04:
We're out of time.

[00:15:07] Speaker 04:
I'll give you two minutes for a bottle.

[00:15:08] Speaker 04:
Thank you.

[00:15:19] Speaker 01:
Mr. Rice?

[00:15:20] Speaker 01:
Good morning, Your Honors.

[00:15:21] Speaker 01:
To address briefly the threshold question that was raised here, whether there's a fact issue, I'd like to address that.

[00:15:30] Speaker 01:
That's been waived.

[00:15:31] Speaker 01:
There was no argument in opposition to the motion to dismiss

[00:15:36] Speaker 01:
that the preamble created a limitation for a point-of-sale device that McDonald's... Well, I think they would agree with that.

[00:15:44] Speaker 04:
They said they moved for leave to amend after the motion to dismiss was granted and raised this point.

[00:15:51] Speaker 04:
Is that correct?

[00:15:52] Speaker 01:
There was a motion for reconsideration of the dismissal.

[00:15:56] Speaker 04:
Did they ask for a leave to amend this pardon?

[00:15:58] Speaker 01:
They did ask for a leave to amend and that was denied in part on the grounds that it was waived, it wasn't requested in the initial opposition to the motion to dismiss.

[00:16:12] Speaker 00:
Okay.

[00:16:12] Speaker 00:
Is that a rule in the Seventh Circuit?

[00:16:15] Speaker 00:
Is that where we are?

[00:16:16] Speaker 00:
Seventh Circuit, that's correct.

[00:16:16] Speaker 00:
Yeah, in the Seventh Circuit that you have to ask for a leave to amend in the alternative when opposing the motion to dismiss.

[00:16:25] Speaker 01:
Not specifically, Your Honor, but the rule in the Seventh Circuit is on a motion for reconsideration.

[00:16:31] Speaker 01:
You can't raise issues for the first time.

[00:16:34] Speaker 01:
And that was not an issue that was raised in opposition to the original motion.

[00:16:38] Speaker 00:
So when, for example, a district court in the Seventh Circuit dismisses a civil rights complaint for equal, thrombly reasons and

[00:16:53] Speaker 00:
And then the plaintiff says, well, give me leave to amend.

[00:16:55] Speaker 00:
The answer is no, you can't do that.

[00:16:57] Speaker 00:
Cause you didn't say that the first time.

[00:17:00] Speaker 01:
I think your honor, the, the, the rule is, I understand it is that in opposing the motion, you should, you can ask for denial of the motion or in the alternative leave to replete, uh, and raise that issue.

[00:17:12] Speaker 00:
Don't ask the second thing.

[00:17:14] Speaker 00:
You can't ask for it after the motion to, after the dismissal.

[00:17:18] Speaker 01:
You may be able to, your honor, in a motion for leave.

[00:17:21] Speaker 01:
as you suggested, but not in a motion for reconsideration.

[00:17:25] Speaker 01:
I think the procedural context in which that issue came up is a little bit different.

[00:17:30] Speaker 04:
It seems a little bit harsh to say that you asked for leave to amend in the motion for reconsideration instead of in a separate pleading, so it's going to be denied.

[00:17:42] Speaker 04:
Is that what you're saying?

[00:17:43] Speaker 01:
I'm not really arguing that that should be the rule, Your Honor, but I think the way the district court in fact addressed the issue was in the context of a motion responding to the motion for reconsideration.

[00:17:57] Speaker 01:
She cited the Federal Circuit standard for reconsideration motions and had a rather thorough opinion responding to the reconsideration request applying the factors in the Seventh Circuit and found that

[00:18:12] Speaker 01:
there wasn't sufficient grounds for reconsideration.

[00:18:15] Speaker 01:
However, I don't believe that the leave to replete was a primary issue that the court addressed in a significant way in the decision.

[00:18:27] Speaker 03:
Is the denial in that situation, the court's denial, is it with prejudice?

[00:18:33] Speaker 01:
Denial of the motion for reconsideration?

[00:18:36] Speaker 01:
My understanding is it's with prejudice, but

[00:18:42] Speaker 01:
Again, that issue hasn't really come up.

[00:18:44] Speaker 01:
And I think the other point is, and it seemed to me that Mr. Grisha did not raise that issue in the appeal briefs.

[00:18:52] Speaker 01:
Yeah, he agrees.

[00:18:53] Speaker 01:
He didn't.

[00:18:53] Speaker 01:
OK.

[00:18:54] Speaker 01:
So that's not an issue that we briefed or addressed for this court, the claim construction issue with the preamble.

[00:19:03] Speaker 04:
So my understanding- Don't we have a position on that as to whether the preamble is binding his

[00:19:09] Speaker 01:
We have not taken a position on that in the record, Your Honor.

[00:19:13] Speaker 01:
And our view is we hadn't needed to address that issue.

[00:19:17] Speaker 01:
There was no need for claim construction because of the way that complaint was pleaded.

[00:19:21] Speaker 01:
The complaint did not allege any elements of the system other than the six components.

[00:19:28] Speaker 01:
And in fact, the reason why this unusual procedural context arose was because the complaint provided very detailed allegations reading

[00:19:39] Speaker 01:
the claims and the claimed system components onto the credit card system.

[00:19:45] Speaker 01:
And so the complaint, in other words, laid out essentially a claim chart where McDonald's didn't appear.

[00:19:52] Speaker 01:
And based on that, we moved to dismiss saying this is a legal question.

[00:19:57] Speaker 01:
Mr. Grisha opposed it, and that's basically how the issue comes before the court today.

[00:20:02] Speaker 03:
So your opponent says, well, what we did do is we did have a complaint and we attached to the

[00:20:08] Speaker 03:
complaint the patent, and in a way it's almost as if it's up to the court to find this limiting factors in claim nine.

[00:20:20] Speaker 03:
Is there authority for that in your circuit and some circuit?

[00:20:25] Speaker 01:
I'm not aware of any authority, Your Honor, that would support the idea that a

[00:20:30] Speaker 01:
an argument that's sort of arguably implicit in some submission to the court is that the court has some obligation to dig that out and figure it out for itself.

[00:20:40] Speaker 01:
My understanding is that the arguments have to be made explicitly and briefed and addressed in a direct way.

[00:20:46] Speaker 01:
And I don't believe that was done in this case.

[00:21:12] Speaker 04:
You can go on and argue the larger question, the more difficult question of what centillion means, but I think the panel would like both parties to brief this question of whether the motion for leave to amend should have been granted and whether the motion for leave to amend brought this case within centillion because

[00:21:38] Speaker 04:
it would then allege that one of the components here was provided by McDonald's.

[00:21:44] Speaker 04:
Do you understand what I'm saying?

[00:21:46] Speaker 04:
Yes, Your Honor.

[00:21:46] Speaker 04:
So why don't we, we'll issue an order, or we may not do it today.

[00:21:50] Speaker 04:
Is a week sufficient for the two of you, simultaneous briefs?

[00:21:57] Speaker 02:
Yes, Your Honor.

[00:21:58] Speaker 04:
Okay, why don't we give you... Yeah, simultaneous briefs.

[00:22:08] Speaker 04:
I think probably do it in five pages, five pages each.

[00:22:13] Speaker 04:
That would be helpful to us.

[00:22:16] Speaker 03:
Yes, Your Honor.

[00:22:17] Speaker 03:
And just to be clear, I don't think we're expecting responses and reply briefs.

[00:22:23] Speaker 03:
Just a single position?

[00:22:24] Speaker 04:
Just one brief each, yeah.

[00:22:26] Speaker 04:
That's fine, Your Honor.

[00:22:28] Speaker 04:
So why don't we move on to the more difficult question.

[00:22:32] Speaker 04:
Maybe it's not more difficult to the question of whether

[00:22:35] Speaker 04:
Centillion, which has been elaborated in intellectual ventures more recently.

[00:22:41] Speaker 04:
Have you read intellectual ventures?

[00:22:45] Speaker 04:
So, Your Honor, the... Did you know about intellectual ventures?

[00:22:50] Speaker 04:
I'm not aware of the discussion of... Well, it's not cited by anybody in the briefs.

[00:22:53] Speaker 04:
It's a more recent case, I think from September.

[00:22:57] Speaker 04:
Judge Toronto and I were on the panel, which elaborates on the meaning of centillion.

[00:23:07] Speaker 04:
So let's talk about whether there's infringement if you use a system and benefit from it without directly controlling any aspect of the system.

[00:23:18] Speaker 01:
Okay.

[00:23:19] Speaker 01:
So your honor, of course, Mr. Grisha relies on the centillion case and McDonald's cites to the Unala case.

[00:23:27] Speaker 01:
They're very similar cases in certain respects, and in fact, they were decided pretty close in time to one another.

[00:23:34] Speaker 01:
And they both address a similar fact situation.

[00:23:37] Speaker 01:
Our view is they need to be reconciled, and there's really only one way to do it.

[00:23:41] Speaker 01:
In both of those cases, there is a system claim, which claims an internet-based system that has a front end and a back end.

[00:23:49] Speaker 01:
The front end is the end user that has a personal computer.

[00:23:53] Speaker 01:
It sends a signal into the back end, the back end... By the way, what's the end user using?

[00:23:59] Speaker 01:
The end user using, in the colloquial sense of the word, is using the personal computer.

[00:24:05] Speaker 01:
The personal computer is sending a signal into the system and the system... The end user of the system.

[00:24:12] Speaker 01:
I'm sorry?

[00:24:12] Speaker 01:
It's not the end user of the system.

[00:24:15] Speaker 01:
I think that a distinction needs to be made between

[00:24:18] Speaker 01:
using in the colloquial sense and using in the sense of infringement for patent law purposes.

[00:24:25] Speaker 01:
And I think the distinction is made by what the claims say.

[00:24:28] Speaker 01:
I think as in every infringement analysis, you start with the language of the claims.

[00:24:33] Speaker 01:
And in both Centillion and in Uniloc, this court properly went first to the claims to see where the boundary lines were drawn.

[00:24:41] Speaker 01:
In the Centillion case, the court said very explicitly that this was

[00:24:47] Speaker 01:
a question of a system that included components within the claim boundaries where they had more than one operator.

[00:24:56] Speaker 01:
There were multiple operators.

[00:24:58] Speaker 01:
And so the court said in that case, we have never directly addressed the issue of infringement for use of a system claim that includes elements in the possession of more than one actor.

[00:25:09] Speaker 01:
And our shorthand word for that is a multiple operator system that is claimed.

[00:25:15] Speaker 03:
So jumping directly to this case,

[00:25:17] Speaker 03:
What are the claim limitations that McDonald practices, if any, in your view?

[00:25:25] Speaker 03:
None, your honor.

[00:25:26] Speaker 03:
So for McDonald's purposes, are you sending data and then receiving back or are you just receiving?

[00:25:35] Speaker 01:
So sending and receiving from a point outside of the claim system.

[00:25:40] Speaker 01:
So McDonald's has a point of service device, like a card reader.

[00:25:45] Speaker 01:
So when someone comes to buy a burger from McDonald's, either the customer will swipe a card or the person behind the register will swipe the card.

[00:25:55] Speaker 01:
A signal gets sent into a system which allegedly practices the claimed invention.

[00:26:00] Speaker 01:
And the six system components in the claim are all at the back end, which is owned by the credit card company, whether it's MasterCard or Visa.

[00:26:09] Speaker 01:
So McDonald's would send a signal and get a verification ultimately back.

[00:26:14] Speaker 01:
The claim addresses a tokenization process, a verification essentially, a security method which is all contained within the six components on the credit card system.

[00:26:28] Speaker 01:
So McDonald's would send a signal into the claim system from outside of it and would receive a signal back.

[00:26:39] Speaker 03:
We hear your opponent's arguments.

[00:26:41] Speaker 03:
Is the argument that McDonald's is a front end user or back end?

[00:26:48] Speaker 01:
I believe Mr. Grish's argument is that McDonald's is on the front end.

[00:26:51] Speaker 01:
And in the Centillion case, the counterpart, the end user, was also on the front end.

[00:26:57] Speaker 01:
But the distinction is, in the Centillion case, the front end components were part of the claimed invention as the claim was drafted.

[00:27:05] Speaker 01:
Here, it's not.

[00:27:06] Speaker 01:
And in that sense, our case is exactly like the Uniloc case.

[00:27:10] Speaker 01:
In Uniloc, Microsoft operated the back end of the system.

[00:27:14] Speaker 01:
Microsoft's customers sent signals in and received signals back, just as in the Centillion case and just as in the present case.

[00:27:22] Speaker 01:
The difference is, in Uniloc, this court went to the claim language.

[00:27:27] Speaker 01:
And claim 19 in the Uniloc case said very clearly that the claimed components included only

[00:27:34] Speaker 01:
Uh, uh, components in the possession and control of Microsoft and not, yeah, not quite the claimed components, right?

[00:27:43] Speaker 00:
Didn't the court say something like there were certain components, the component in the PC that had to be met, but it didn't, but I think the language was, it was the environment within which the other claimed components had to be, um,

[00:28:02] Speaker 00:
used and Microsoft, because it used those other ones in an environment in which there was a PC somewhere in the picture, but there had to actually be a PC somewhere in the picture, so it was a claimed component, that Microsoft was a user.

[00:28:21] Speaker 00:
It didn't say that, because the issue was not presented, whether anybody else might have been the user.

[00:28:29] Speaker 01:
The issue in the case, Your Honor, was that Microsoft was claiming that it did not have use liability because it did not control end users' computers.

[00:28:39] Speaker 01:
And the court, as I read Uniloc, said that while the user computers are part of the operating environment in which the system operates as a whole, the way the claim was written, the components all read onto the Microsoft equipment only.

[00:29:00] Speaker 01:
Right.

[00:29:00] Speaker 00:
And therefore Microsoft was a user.

[00:29:04] Speaker 00:
Correct.

[00:29:05] Speaker 00:
There was no issue in the case about whether Microsoft was the only.

[00:29:14] Speaker 01:
That's correct, your honor.

[00:29:15] Speaker 01:
And I don't believe this court has addressed the situation where multiple parties were considered users of the same system for the same use.

[00:29:25] Speaker 01:
I don't, you're right, that's not in the Uniloc decision and the question there wasn't whether the user, excuse me, whether the end user or PC users were liable.

[00:29:40] Speaker 01:
The question was whether Microsoft was liable.

[00:29:43] Speaker 00:
Can I ask you, because I think I'll repeat my statement that it was frustrating to me that the briefs which are tiny discussed two cases

[00:29:55] Speaker 00:
each one of which is not exactly on point on their facts.

[00:29:59] Speaker 00:
Different language may be pointing in different directions, but I want to put that aside for a minute.

[00:30:05] Speaker 00:
At which point I want to say, well, we'd better widen our field of review to

[00:30:13] Speaker 00:
other sources of law, the statute, the history, what the Supreme Court has said about use and what it means.

[00:30:20] Speaker 00:
And we have none of that, none of that to tell us when we have two relatively recent cases and we now have a slightly new fact pattern, what do we do with it?

[00:30:33] Speaker 00:
So it's not much of a question.

[00:30:34] Speaker 00:
I guess it's more of a word.

[00:30:35] Speaker 01:
I understand your frustration, your honor.

[00:30:37] Speaker 01:
I get the gist of your point and I understand.

[00:30:42] Speaker 01:
My response would be that McDonald's position is the answer from a policy perspective would be you have to look at the claims.

[00:30:52] Speaker 01:
The claims are primary.

[00:30:53] Speaker 04:
The claims define the scope of what the inventor... I think the question is if the claims define a system and the user of the system is not directly controlling any component of it, is use and benefit enough under the statute?

[00:31:12] Speaker 04:
to constitute infringement.

[00:31:14] Speaker 04:
That's the question.

[00:31:15] Speaker 01:
So I think as a policy matter, the answer should be no.

[00:31:18] Speaker 01:
Why is that?

[00:31:19] Speaker 01:
Because it renders the claims.

[00:31:21] Speaker 01:
It undermines the point of the claims.

[00:31:25] Speaker 01:
You can claim a system in many different ways.

[00:31:28] Speaker 01:
You can claim a single component, multiple components.

[00:31:32] Speaker 01:
You can draw the boundary lines wherever you like.

[00:31:35] Speaker 01:
If you take the position that anyone who has some

[00:31:42] Speaker 01:
obtain some benefit from the system, the claim system at some level.

[00:31:48] Speaker 00:
And, and, and, and directly or indirectly controls.

[00:31:51] Speaker 00:
Indirectly or indirectly.

[00:31:53] Speaker 01:
It's a combination that's... That's correct, Your Honor.

[00:31:55] Speaker 01:
So sending a signal into this, sends a signal in, gets a signal back, and gets a benefit.

[00:32:00] Speaker 01:
That's basically what we're talking about.

[00:32:01] Speaker 01:
If we say that person is liable for using the system, then

[00:32:08] Speaker 01:
regardless of where the claim lines are drawn, then we're undermining the role of the claims.

[00:32:13] Speaker 01:
Then we're imposing use liability on someone who is entirely outside the claims, doesn't physically possess or directly control, they can't pull the plug on, they can't change.

[00:32:27] Speaker 00:
They can not send the signal.

[00:32:29] Speaker 00:
That's true.

[00:32:30] Speaker 00:
The signal, I gather, it's a premise for the issue we're discussing.

[00:32:34] Speaker 00:
The signal does in fact

[00:32:36] Speaker 00:
push the first domino and all the other dominoes to fall right behind it.

[00:32:40] Speaker 00:
That there's no question about the rest of Centillion's facts being present.

[00:32:49] Speaker 00:
When McDonald's sends the code into MasterCard, all the rest happens for purposes of this motion.

[00:32:55] Speaker 01:
That's correct, Your Honor, but by the same token then, if we're operating outside the claims and saying someone that does not

[00:33:03] Speaker 01:
directly possessor control is liable than perhaps the customer, maybe the customer and not McDonald's.

[00:33:10] Speaker 01:
Once we're outside the claims, how far do we go and where do we end?

[00:33:15] Speaker 01:
I think McDonald's position is the proper rule is to look at the scope of the claims and our understanding of the Unilock decision is this is what the court did in Unilock, is to say if you look at the claims

[00:33:31] Speaker 01:
you have to distinguish between the greater operating environment, which is not claim specific, and what the claims say.

[00:33:39] Speaker 00:
Simply because... Would I be right in, I guess, wondering about the following?

[00:33:45] Speaker 00:
Lots of patents, I think actually at least one of these has both method and system claims, right?

[00:33:50] Speaker 00:
And if you were operating in a world in which you were worried as to the method claims about divided infringement,

[00:33:59] Speaker 00:
You would write a method claim exactly like these system claims, that is, everything in-house receiving, not sending, so that it's all done by one person.

[00:34:09] Speaker 00:
And then you want to capture exactly the same thing you're saying when you write the system version.

[00:34:15] Speaker 00:
You really shouldn't do that.

[00:34:18] Speaker 00:
You really ought to put in the sending and not just the receiving in order to capture the one who is actually controlling the thing.

[00:34:29] Speaker 00:
indirectly but actually.

[00:34:30] Speaker 00:
Is that odd?

[00:34:32] Speaker 00:
I assume you're going to say it's not odd.

[00:34:34] Speaker 00:
It seems a little matter of drafting.

[00:34:38] Speaker 04:
You're saying that the problem could be solved by claim drafting is basically what you're saying.

[00:34:43] Speaker 04:
Correct.

[00:34:44] Speaker 01:
I think that's right.

[00:34:44] Speaker 01:
I think the problem could be solved by claim drafting and in the case of a system claim you don't have to worry about the divided

[00:34:51] Speaker 00:
infringement issue in the way you do for a... But now the drafting issue requires you actually to write the divided infringement and the system claims differently instead of in parallel.

[00:35:05] Speaker 01:
That's correct.

[00:35:06] Speaker 01:
I'd write them a little differently.

[00:35:07] Speaker 01:
I think that that would solve the problem in a way that the current law, as it's understood, could address the problem without the court having to change anything or make new law on that issue.

[00:35:21] Speaker 03:
So in a recent case of intellectual ventures, which I don't know if you read it.

[00:35:28] Speaker 03:
It wasn't brief.

[00:35:29] Speaker 03:
But assume that we held this, that a benefit must be received from the performance of a reclaimed limitation.

[00:35:38] Speaker 03:
A benefit must be received from the performance of a reclaimed limitation.

[00:35:41] Speaker 03:
Now let's look at the 860 patent.

[00:35:44] Speaker 03:
And at the end of column 16,

[00:35:51] Speaker 03:
Y26.

[00:35:52] Speaker 03:
And there's a similar limitation in the other patent, but here it says a branding module, the branding module writing at least one of the verification token or the identification reference into the metadata.

[00:36:07] Speaker 03:
What benefit does McDonald receive from that?

[00:36:11] Speaker 01:
I'm sorry, could you give me the line number again, please?

[00:36:13] Speaker 03:
26, column 16.

[00:36:15] Speaker 03:
Branding module.

[00:36:16] Speaker 03:
It's on appendix 21.

[00:36:20] Speaker 03:
speaking about the branding module.

[00:36:28] Speaker 01:
That's a good question, Your Honor.

[00:36:29] Speaker 01:
I can't answer that.

[00:36:30] Speaker 01:
I don't know that... Do you know what the branding module is?

[00:36:33] Speaker 01:
I don't believe that there's a branding module.

[00:36:36] Speaker 01:
I know there's not a branding module that is in McDonald's direct control.

[00:36:41] Speaker 00:
I don't know... But what do they allege is the branding module?

[00:36:46] Speaker 01:
Oh, in the complaints.

[00:36:47] Speaker 00:
Yeah, they say...

[00:36:49] Speaker 00:
They map all these elements on.

[00:36:51] Speaker 00:
So what do they say it is?

[00:36:52] Speaker 01:
They map it onto a credit card, something within the server on the credit card system.

[00:37:01] Speaker 04:
It's a token that makes it easier to process a follow-on transaction involving the same credit card.

[00:37:07] Speaker 04:
Correct.

[00:37:08] Speaker 04:
That's basically what it is.

[00:37:09] Speaker 04:
And so Judge Rain is right.

[00:37:11] Speaker 04:
So what benefit do you get out of that?

[00:37:12] Speaker 04:
Oh, I see.

[00:37:14] Speaker 01:
I think under that, I'm not sure.

[00:37:15] Speaker 03:
It makes it easier for Visa to process by recognizing

[00:37:19] Speaker 03:
the identity of prior transactions.

[00:37:22] Speaker 03:
It makes it easier.

[00:37:23] Speaker 01:
I understand.

[00:37:24] Speaker 03:
What benefit do you get out of that?

[00:37:25] Speaker 03:
Does it help you sell more burgers?

[00:37:27] Speaker 01:
I don't believe so, Your Honor.

[00:37:28] Speaker 01:
I don't think that there would be any benefit from McDonald's in that component.

[00:37:31] Speaker 01:
You might want to read Intellectual Ventures.

[00:37:33] Speaker 01:
I will.

[00:37:34] Speaker 01:
Absolutely, Your Honor.

[00:37:36] Speaker 04:
Okay.

[00:37:36] Speaker 04:
We're out of time.

[00:37:37] Speaker 04:
Thank you.

[00:37:44] Speaker 04:
Mr. Warsinger?

[00:37:45] Speaker 02:
Your Honor, I'll just use my two minutes to address Judge Raina's question.

[00:37:51] Speaker 02:
The branding module, as Judge Dyke alludes to, writes the token to be associated with the customer's credit card information.

[00:38:03] Speaker 02:
The token is then used at the point of sale.

[00:38:07] Speaker 02:
And so McDonald's benefits from that in a number of ways, primarily

[00:38:13] Speaker 02:
It's a more secure transaction that is not as susceptible to hacking.

[00:38:20] Speaker 02:
Also, there's a more practical benefit.

[00:38:23] Speaker 04:
If the transaction's hacked, is McDonald's liable for that?

[00:38:27] Speaker 02:
As of October 2015, yes.

[00:38:30] Speaker 02:
Is this in the complaint?

[00:38:33] Speaker 02:
It is not.

[00:38:38] Speaker 00:
But this token from the last element of the claim,

[00:38:43] Speaker 00:
is put into McDonald's hands or into the device that's on McDonald's counters?

[00:38:51] Speaker 02:
Yes.

[00:38:51] Speaker 02:
The token is used to process the transaction.

[00:38:54] Speaker 02:
But it's not in the point of sale device, is it?

[00:38:57] Speaker 00:
You just said it was, but this may not be unimportant.

[00:39:02] Speaker 02:
It's alleged in the complaint that the token is used to process the transaction.

[00:39:07] Speaker 04:
Well, yeah, sure, but by Visa, right?

[00:39:12] Speaker 04:
It's a database maintained.

[00:39:14] Speaker 04:
Is that right?

[00:39:16] Speaker 04:
It's used by Visa to process the transaction.

[00:39:20] Speaker 02:
Correct, but we're dealing with an intangible system.

[00:39:24] Speaker 04:
It shouldn't be that the token is stored in the point of sale device, because then if you went to a different McDonald's with a different point of sale device, the token wouldn't be available.

[00:39:33] Speaker 04:
It's got to be in the Visa system.

[00:39:38] Speaker 02:
This is on a motion to dismiss the complaint.

[00:39:42] Speaker 02:
We're alleging that the token is used to process the transaction.

[00:39:45] Speaker 04:
Well, but it's different than whether it's within the point of sale device.

[00:39:49] Speaker 04:
It just doesn't make sense to me that it would be in the point of sale device.

[00:39:56] Speaker 04:
All right, thank you, Your Honor.

[00:39:58] Speaker 04:
Okay, thank you.

[00:39:59] Speaker 04:
Thank both counsel, the case is submitted.