[00:00:25] Speaker 04:
Is it Manx or Mancus?

[00:00:27] Speaker 03:
Manx, Your Honor.

[00:00:28] Speaker 04:
Mancus.

[00:00:37] Speaker 04:
Ready to proceed, Mr. Biller?

[00:00:39] Speaker 04:
Yes, Your Honor.

[00:00:49] Speaker 03:
Your Honor, my name is Tony Biller.

[00:00:50] Speaker 03:
I represent the appellant Robert Manx in his appeal of

[00:00:54] Speaker 03:
The District Court's invalidation of U.S.

[00:00:56] Speaker 03:
Patent 6477-503 under Section 101 and Alice grounds.

[00:01:04] Speaker 03:
Judge Toronto, it's good to be before you again.

[00:01:06] Speaker 03:
Judge Wallach, Judge Stoll.

[00:01:08] Speaker 03:
Your Honor, this is a Diamond case, specifically the Diamond versus Deer case.

[00:01:14] Speaker 03:
Mr. Manx was a fix-it man for the state of North Carolina, a state employee that was charged with coming in.

[00:01:22] Speaker 03:
fixing problems when there's natural disasters, or there's problems with inventory.

[00:01:27] Speaker 04:
I mean, let me turn to your preemption argument, specifically that there's a lack of preemption.

[00:01:34] Speaker 04:
But Intellectual Ventures says that while preemption could signal patent ineligible subject matter, its absence, absence of complete preemption, doesn't demonstrate eligibility.

[00:01:52] Speaker 04:
If we find that the asserted claims fail under the ALICE framework, what could your preemption argument do?

[00:01:59] Speaker 03:
It doesn't, Your Honor.

[00:01:59] Speaker 03:
If it fails under the ALICE framework, the patent fails under section 101.

[00:02:05] Speaker 04:
But Your Honor, the invention in the blue brief at 18, you argue that claim one, considered as an ordered combination, is more than an abstract idea because steps G, H, and I recite specific steps that enable the

[00:02:18] Speaker 04:
local event server to maintain control over local and internet inventory.

[00:02:24] Speaker 04:
Those steps simply teach communicating and accepting information.

[00:02:28] Speaker 04:
They don't explain how that's accomplished.

[00:02:30] Speaker 04:
How is the information communicated and accepted?

[00:02:34] Speaker 03:
I think the manner in which the local owner server and the active reservation server communicate the inventory levels is not the subject of the invention.

[00:02:47] Speaker 03:
It implements, I think, standard technology in the late 1990s for communications between servers.

[00:02:54] Speaker 04:
What you have here, Your Honor, is not... You're on very thin step one ice then.

[00:02:59] Speaker 03:
Well, I don't think so, Your Honor.

[00:03:01] Speaker 03:
I think when we look at Alice, Alice has to be viewed in light of deer and in light of fluke.

[00:03:10] Speaker 03:
And I think when Alice is construed in light of deer and light of fluke, which I think the court intended

[00:03:17] Speaker 03:
to have happened.

[00:03:18] Speaker 03:
Alice did not replace its jurisprudence on Section 101.

[00:03:22] Speaker 03:
I think it attempted to illuminate it in light of further developments in digital software and electronic technologies.

[00:03:32] Speaker 03:
Diamond versus Deere and Parker versus Fluke give the necessary backdrop to Alice.

[00:03:39] Speaker 03:
In Diamond versus Deere, you take a method for curing rubber, you add a thermocoupler

[00:03:47] Speaker 03:
and a digital means for continually monitoring the temperature.

[00:03:51] Speaker 03:
The addition of the computer technology improved the process such that they could modify the process to something new.

[00:03:58] Speaker 03:
Curing rubber had been around forever, monitoring the temperatures during curing rubber had been around for as long as they've been curing rubber, but continually monitoring the temperatures throughout the process allowed them to modify the process more efficiently.

[00:04:14] Speaker 03:
A computer was involved, software was involved,

[00:04:16] Speaker 03:
But it was a known algorithm, a known calculation for how to measure the temperature.

[00:04:22] Speaker 03:
That wasn't new.

[00:04:23] Speaker 03:
What was new was the use of the computer with the thermocoupler led to a better curing process, patentable.

[00:04:31] Speaker 03:
Parker versus Fluke.

[00:04:34] Speaker 03:
Same catalytic conversion method, same alarm standards, better algorithm.

[00:04:40] Speaker 03:
Same method, same process.

[00:04:42] Speaker 03:
The only thing that was different was the algorithm, or the equation.

[00:04:45] Speaker 03:
The equation specifically called up in the claims, not patentable.

[00:04:49] Speaker 03:
The only thing that was new in Fluke was the equation.

[00:04:54] Speaker 03:
Well, how does that relate to Manx?

[00:04:56] Speaker 03:
If you look at the Manx system, you have a local event server and an active reservation server.

[00:05:02] Speaker 03:
You cannot view this in 2017 eyes.

[00:05:08] Speaker 03:
This might seem obvious now, but in 1999,

[00:05:12] Speaker 03:
There is nothing in the record showing this was standard technology.

[00:05:16] Speaker 04:
How is this different than pure inventory management?

[00:05:26] Speaker 03:
Your Honor, pure inventory management, I think what you had was just a pure abstraction claim.

[00:05:33] Speaker 03:
I don't recall exactly what the claims read in that patent.

[00:05:36] Speaker 03:
In fact, I don't recall.

[00:05:37] Speaker 04:
No, no.

[00:05:38] Speaker 04:
I'm just saying inventory management.

[00:05:42] Speaker 04:
In the old days, in engineering, for example, they taught a PERT method of engineering, right?

[00:05:50] Speaker 04:
And it was simply a management system.

[00:05:54] Speaker 04:
How is this different than what people did by hand?

[00:05:57] Speaker 03:
Well, this is different because it didn't exist until Mr. Manx invented it.

[00:06:02] Speaker 03:
This is a specific method for controlling remote inventory.

[00:06:07] Speaker 03:
By a bit of a backstory, Mr. Manx was a golfer.

[00:06:11] Speaker 03:
And as part of his passion, he assisted golf courses in selling reservations to the golf courses.

[00:06:17] Speaker 03:
And what he realized is golf courses had a real hard time with split inventory.

[00:06:21] Speaker 03:
And the more he looked around, the more he saw it was going out to the state of North Carolina, split inventory was a very old problem in inventory management.

[00:06:30] Speaker 03:
And nobody had solved it.

[00:06:32] Speaker 03:
You had an inventory that was remote, an inventory that was local, and it led to inefficiencies.

[00:06:38] Speaker 03:
And you oftentimes had remote inventory was sold out, whether it was local inventory still left or vice versa.

[00:06:45] Speaker 03:
And he realized with the advent of the internet and servers that people were rolling out online or digital inventory management, but it was all hub servers.

[00:06:57] Speaker 03:
And that's what the prior shows is cited in the patent.

[00:07:01] Speaker 03:
He realized that you could add another layer into inventory management.

[00:07:06] Speaker 03:
You could leave the inventory managed at a local event server that would control and maintain its inventory.

[00:07:13] Speaker 03:
It would allocate it for online sales.

[00:07:16] Speaker 03:
But it would determine whether and to what extent that is the local event server would release inventory to external sales.

[00:07:26] Speaker 03:
The active reservation server

[00:07:30] Speaker 03:
interfaced with the consuming public over the internet.

[00:07:34] Speaker 03:
It regularly updated the event owner server information.

[00:07:37] Speaker 03:
It was read only.

[00:07:38] Speaker 03:
It would convey that local inventory information to internet-based consumers.

[00:07:43] Speaker 03:
This is all claimed.

[00:07:44] Speaker 03:
It was a communication conduit between the consumer and local event owners.

[00:07:49] Speaker 03:
It conveyed the purchase request from the internet consumer to the event server.

[00:07:52] Speaker 03:
And it conveyed acceptance if, in fact, the purchase was accepted.

[00:07:57] Speaker 03:
That is not abstract.

[00:07:59] Speaker 03:
That is not a concept.

[00:08:02] Speaker 03:
It is a specific system for managing inventory, your honor.

[00:08:08] Speaker 03:
And it is a specific system that solved a problem that had plagued reservation inventory providers, or anybody who had an inventory of reservations for movies, for golf courses, that also wanted to use third-party sellers.

[00:08:27] Speaker 03:
There had been no solution up to that time.

[00:08:29] Speaker 03:
It's a very specifically claimed invention.

[00:08:32] Speaker 03:
It's not an abstract idea of using a third party intermediary and using a third party intermediary, as you find in Alice, in the normal and accepted process, but replace that third party with a computer.

[00:08:47] Speaker 00:
So we've had at least a couple of different types of abstract ideas involved in our

[00:08:57] Speaker 00:
cases, one has something to do with selecting and moving on and even analyzing information.

[00:09:04] Speaker 00:
Another has to do with the creation of intangible legal relations, like contracts or property rights.

[00:09:16] Speaker 00:
If the innovation here is in either of those kinds of abstract ideas,

[00:09:27] Speaker 00:
Why does it matter how narrow, or to use your word specific, that innovation in abstract ideas is?

[00:09:41] Speaker 03:
Your honor, I can only frame your question in the context of the precedent that comes to my mind.

[00:09:46] Speaker 03:
And what comes to my mind when you say that are Benson and Bilsky.

[00:09:52] Speaker 03:
Benson was an abstract concept.

[00:09:54] Speaker 03:
I think it was novel for the conversion of basically digital numbers.

[00:10:00] Speaker 03:
I think it was a novel concept, but it was simply automated.

[00:10:04] Speaker 03:
And the only thing that was called out in the patent was an abstract, novel concept.

[00:10:09] Speaker 00:
Very, very narrow, changing decimal, binary representations.

[00:10:14] Speaker 03:
Very narrow.

[00:10:14] Speaker 03:
But at the end of the day, it was an abstract concept that was claimed to be across the board.

[00:10:18] Speaker 00:
And the Supreme Court in Mayo, among other things, says,

[00:10:22] Speaker 00:
Once you're in the ineligible side of the line, it doesn't really matter how narrow the work you're doing over there is.

[00:10:31] Speaker 00:
What you need to do is cross the line and do some inventive work on the eligible side of the line.

[00:10:37] Speaker 00:
And it seems to me what you're talking about here is saying that in the creation of economic relations and the use of information passing around to create those, you've done something

[00:10:50] Speaker 00:
narrow and innovative, but I don't know that that counts.

[00:10:53] Speaker 03:
If he had claimed using an intermediary to manage inventory and communicating with that intermediary, if it had been claimed at a high level of abstraction, I think you're closer to Alice.

[00:11:08] Speaker 03:
I think you're in Bentsen, but that's not what it's claimed.

[00:11:14] Speaker 03:
He claimed a specific

[00:11:16] Speaker 03:
system for using servers with described roles, constrained roles, for communicating within that system.

[00:11:24] Speaker 01:
Is that a different argument for claim one, which is a method?

[00:11:28] Speaker 03:
No, Your Honor.

[00:11:32] Speaker 03:
Your Honor, I see I'm down to five minutes.

[00:11:35] Speaker 03:
You can reserve your time.

[00:11:36] Speaker 03:
I'll reserve my remaining time.

[00:11:38] Speaker 03:
Thank you, Your Honor.

[00:11:45] Speaker 04:
Ms.

[00:11:46] Speaker 04:
Davis?

[00:11:47] Speaker 02:
May it please the court, your honor.

[00:11:50] Speaker 02:
The district court here properly dismissed Manx claims based on this court's instructions for how to review claims with respect to 101 at the Rule 12 stage.

[00:12:05] Speaker 02:
Here, Manx has admitted many of the facts that are relevant to the 101 inquiry.

[00:12:11] Speaker 02:
In fact, this morning at this argument,

[00:12:14] Speaker 02:
Manx admits that his invention is implemented using standard technology for communicating information and standard computers.

[00:12:25] Speaker 02:
In the briefing and here this morning, Manx admits that this was a standard business problem that had arisen well before the development of computer technology with inventory management.

[00:12:37] Speaker 02:
He was trying to solve a business problem and he chose an abstract way to solve that problem.

[00:12:44] Speaker 02:
which is having the local owner, the person who has the tickets or the reservations or the golf tee times, control and keep track of how much inventory is left rather than having the person who's selling it on the internet keep track of how much inventory is left and rather than having each entity have its own separate inventories.

[00:13:09] Speaker 02:
And in solving that business problem,

[00:13:11] Speaker 02:
He admits that the computer architecture in the briefing, he admits that that computer architecture that's used in the invention is the exact same computer architecture that is used in the prior art reservation systems.

[00:13:25] Speaker 02:
He discusses that in his reply brief at page three.

[00:13:29] Speaker 02:
As the district court properly found, there are no factual allegations made in Mank's complaint at all with respect to improving computer functioning

[00:13:40] Speaker 02:
improving computer technology, or really any technological improvement whatsoever.

[00:13:47] Speaker 02:
And there's really nothing in the specification that suggests that this invention improves the computers, improves any technological functioning.

[00:13:56] Speaker 02:
In fact, the specification is replete with references to the fact that it is using standard computers, off-the-shelf technology, conventional internet connections,

[00:14:08] Speaker 02:
and conventional inventory management programs for each industry that's involved.

[00:14:13] Speaker 02:
There's really no argument and I don't think Manx is making the argument that there's any technological improvement represented by this invention.

[00:14:23] Speaker 02:
There are no claim construction issues that have been raised either below or before this court.

[00:14:28] Speaker 02:
And so I think this is under the framework of this court's cases recently addressing the issue of when dismissal is proper under rule 12.

[00:14:38] Speaker 02:
such as the Atrix case and the Berkheimer case, this is one of those cases that is way over on the side where all the factual issues are not in dispute and the patentee is not raising any factual issues that need to be resolved before determining patentability.

[00:14:59] Speaker 02:
If we just go quickly through the Alice analysis here, as Your Honor already pointed out,

[00:15:05] Speaker 02:
This is an abstract idea.

[00:15:06] Speaker 02:
Inventory management is an abstract idea.

[00:15:08] Speaker 02:
It's an old abstract idea.

[00:15:12] Speaker 02:
The invention here falls squarely within the two categories that I believe it was Judge Toronto talked about in terms of the types of abstract ideas this court sees.

[00:15:22] Speaker 02:
It deals with moving information around, adjusting data, and it deals with communicating that information.

[00:15:35] Speaker 02:
And it deals with issues of the legal relationships and it deals with the legal relationships between who's in charge, which of these business parties is in charge of keeping track of the inventory.

[00:15:44] Speaker 02:
Is it the local owner or is it the centralized system that keeps track of the inventory?

[00:15:51] Speaker 04:
Your friend argues that this is innovative.

[00:15:56] Speaker 02:
Well, your honor, first of all, I think this court's law is clear that

[00:16:01] Speaker 02:
whether you have innovation, if it's just an innovation in an abstract idea, a fundamental abstract idea as what we're addressing here, that is not enough to confer patentability.

[00:16:13] Speaker 02:
I mean, if that were so, the argument would always be about the novelty of the abstract idea.

[00:16:19] Speaker 02:
And that's not what this case law, the case law of this court and the Supreme Court teaches.

[00:16:24] Speaker 02:
This is a very analogous to the situation in Alice where it was very similar types of steps.

[00:16:29] Speaker 02:
And in that case,

[00:16:31] Speaker 02:
You know, the court found that electronic record keeping, such as we have here where you're taking data, you're adjusting that data, and you're communicating about that data, is an unpatentable abstract idea, and there's no suggestion.

[00:16:45] Speaker 02:
You could do it with a pencil and paper.

[00:16:46] Speaker 02:
You could do it with a pencil and paper.

[00:16:48] Speaker 02:
In fact, here, Your Honor, in the patent specification itself, at column two, let me find my, in column

[00:16:59] Speaker 02:
two in the specification itself, or actually in column one at the bottom in lines 48 to 52, the specification discusses the fact that you could do this type of invention with making phone calls to the other side.

[00:17:16] Speaker 04:
Phone call or pencil.

[00:17:18] Speaker 02:
That's right.

[00:17:20] Speaker 02:
It says, you know, in the old days, before we had computers, you could adjust the inventory by calling up the central reservation service and saying,

[00:17:28] Speaker 02:
Do you have any more?

[00:17:29] Speaker 02:
I need some more here.

[00:17:30] Speaker 02:
But that was clumsy and difficult because you had to make a phone call.

[00:17:35] Speaker 02:
Now we have computers.

[00:17:36] Speaker 02:
We can use computers.

[00:17:38] Speaker 02:
And that exact kind of computers make things easier in a generic sense that this court and the Supreme Court have repeatedly said does not confer eligibility on an abstract idea.

[00:17:52] Speaker 02:
And then finally, when we talk about the inventive concept analysis at the second step,

[00:17:58] Speaker 02:
Again, Manx has conceded that we're dealing with standard technology here and has not articulated any way in which any of the technology is being used in a non-conventional manner, in a non-routine manner.

[00:18:13] Speaker 02:
There's really no dispute that that's what we have here.

[00:18:16] Speaker 02:
So based upon all of the admissions of Manx, based upon the specification and the patent and the district court's analysis that

[00:18:27] Speaker 02:
Manks had made no factual allegations that would support a finding that this invention is, uh, is non-abstract and is, or is otherwise patent eligible.

[00:18:39] Speaker 02:
Um, we think this is a pretty straightforward application of the Alice analysis and was properly dismissed at rule 12.

[00:18:49] Speaker 02:
Any further questions?

[00:18:52] Speaker 02:
I'll yield the rest of my time.

[00:18:53] Speaker 04:
Thank you, Ms.

[00:18:54] Speaker 04:
Davis.

[00:18:56] Speaker 03:
Mr. Miller.

[00:18:58] Speaker 03:
Your Honor, thank you.

[00:18:59] Speaker 03:
Manx did not concede that the invention at issue is standard technology.

[00:19:06] Speaker 03:
We conceded that the methods that the servers communicated with each other was standard and known in the art.

[00:19:13] Speaker 03:
We also do not concede that an inventory management system is not technical.

[00:19:19] Speaker 03:
We also believe that Fandango misconstrues Alice.

[00:19:23] Speaker 03:
Alice did not end its conclusion saying it's an abstraction

[00:19:27] Speaker 03:
It's a mere concept and therefore not patentable.

[00:19:31] Speaker 03:
Alice rests on the predicate that once you took out the digital technology, all that was left was the known intermediated settlement method.

[00:19:40] Speaker 03:
There was nothing new in Alice once you extracted out the digital technology.

[00:19:46] Speaker 03:
In contrast, like in deer, when you extract out the standard communication protocols, you're still left with a new method

[00:19:56] Speaker 03:
that did not exist prior to Manx, a way for selling remote inventory and having it communicate directly.

[00:20:05] Speaker 01:
I just want to make sure I understand the methodology you're recommending here, which sounds like you're saying that you're supposed to take out the technological steps and then look and see if what's left is new and novel.

[00:20:18] Speaker 03:
The technical by itself, using technology in a new context doesn't carry the day, but if the technology

[00:20:24] Speaker 03:
creates a whole new system, or at least an improved system, like you have in Deere, it is patentable.

[00:20:30] Speaker 03:
And I suggest this panel, that's exactly what Deere stands for.

[00:20:33] Speaker 03:
That's the difference between Deere and Deere.

[00:20:35] Speaker 03:
What's your technological innovation?

[00:20:37] Speaker 03:
It is the configuration of these servers, an active reservation server and a local event server, to control the inventory in the way laid out in the claims.

[00:20:47] Speaker 03:
How do you change the computers?

[00:20:49] Speaker 03:
How do you change the computers?

[00:20:51] Speaker 03:
It does not change the computers.

[00:20:53] Speaker 03:
It's an inventory management system.

[00:20:54] Speaker 03:
We would suggest an inventory management system is as technical and as an important part of technology and industry as computers themselves.

[00:21:07] Speaker 03:
Amazon, Walmart, Fandango.

[00:21:11] Speaker 03:
How do you deal with the telephone and the pencil?

[00:21:15] Speaker 03:
You could not do this with a pencil.

[00:21:19] Speaker 03:
You perhaps could have done it with a telephone, although I don't... Oh, I said both, yeah.

[00:21:27] Speaker 03:
I don't... There's nothing in the art showing this was done.

[00:21:30] Speaker 03:
You have several... I don't think it was routinely.

[00:21:34] Speaker 03:
There's no evidence this was done by telephone.

[00:21:36] Speaker 03:
Column 1 seems to say it.

[00:21:37] Speaker 03:
What's that?

[00:21:38] Speaker 03:
Column 1 seems to say it.

[00:21:40] Speaker 03:
Column 1?

[00:21:41] Speaker 03:
That it was done, albeit inefficiently.

[00:21:43] Speaker 03:
In 1990... I think it says they allocated to resellers.

[00:21:48] Speaker 03:
they conveyed the tickets out.

[00:21:51] Speaker 03:
It doesn't say that they were in regular communication.

[00:21:53] Speaker 03:
If column one said that the intermediary was regularly calling back to the local event server, I don't think column one says that.

[00:22:01] Speaker 03:
It talks about resellers.

[00:22:06] Speaker 01:
They're saying this where it says,

[00:22:08] Speaker 01:
Reallocation of central inventories requires manual intervention through conventional communication sources.

[00:22:15] Speaker 01:
You're saying the difference here is it doesn't say that you repeatedly have to do it after each sale?

[00:22:20] Speaker 03:
I don't think it was done after each sale.

[00:22:22] Speaker 03:
I think the standard was the resellers were literally reselling.

[00:22:25] Speaker 03:
I think that's what the, either that or everything was sold from the central hub.

[00:22:31] Speaker 03:
There was only one server.

[00:22:33] Speaker 01:
And so they just weren't addressing the problem that there might be two different sources selling the same thing?

[00:22:38] Speaker 03:
Yes, your honor.

[00:22:42] Speaker 04:
Anything further counsel?

[00:22:44] Speaker 04:
No, your honor.

[00:22:44] Speaker 04:
Thank you.

[00:22:45] Speaker 04:
Thank you.

[00:22:46] Speaker 04:
That rule stands submitted.