[00:00:03] Speaker 00:
We have five cases on our calendar this morning, two patent cases from the PTAB, a patent case from a district court, a case from the Court of Claims, federal claims, and an employee case from the MSPB.

[00:00:20] Speaker 00:
The first case is Smart Flash versus Samsung, Apple, and Google, 2016, 24, 51, et cetera.

[00:00:32] Speaker 00:
Mr. Panel.

[00:00:40] Speaker 03:
Thank you, Judge Lurie.

[00:00:41] Speaker 03:
May it please the Court.

[00:00:42] Speaker 03:
I'd like to cover two issues this morning, whether the patents are covered business methods within the meaning of the statute, and whether the patents claim eligible subject matter within the meaning of Section 101.

[00:00:56] Speaker 03:
And at the outset, I'd like to address why this Court's decisions in Berkheimer and in Atrix strongly suggest that a fresh look at the patent eligibility issue is warranted here.

[00:01:08] Speaker 03:
Berkheimer holds that... What does fresh look mean?

[00:01:12] Speaker 00:
You mean challenge our own precedent?

[00:01:14] Speaker 03:
Your Honor, what I'm saying is that the decision there should not be entitled to collateral estoppel effect in this case, and the Court should indeed revisit that question because the holding in the precedential decisions in Berkheimer and Atrix establish that whether a claim element or combination of elements is well understood, routine, and conventional,

[00:01:36] Speaker 03:
to a skilled artisan in the relevant field is a question of fact.

[00:01:40] Speaker 03:
And in this case, the board's finding that the Smart Flash patents were ineligible is contrary to that standard.

[00:01:48] Speaker 03:
Because as we explained in our briefs, in our opening brief at 40 to 41 and in our reply brief at 19, it conflicts with the board's determinations in these proceedings and in prior proceedings that the limitations of the Smart Flash patents are not obvious in light of the prior art.

[00:02:05] Speaker 03:
indeed the very limitations that smart flesh.

[00:02:08] Speaker 01:
Can I double check something with you?

[00:02:10] Speaker 01:
My understanding, and tell me if this is wrong, is that the prior art asserted for the 102-103 analysis was not actually the same as the sources that the board relied on to find, let's just use the term, conventionality.

[00:02:27] Speaker 03:
I don't believe that's correct, Your Honor.

[00:02:28] Speaker 03:
In fact, some of the same patents that were cited, or certainly that were relied on by Apple in the

[00:02:35] Speaker 03:
in its brief to suggest that these references were conventional were in fact the same references that were rejected as a basis for initiating on obvious misanticipation in prior proceedings.

[00:02:49] Speaker 01:
Didn't the board rely for its conventionality finding on, let's call them, admissions in your specification and that was not part of the 102-103 case?

[00:03:05] Speaker 03:
I think that the board's analysis and to the extent it relied on the admissions in what you refer to as admissions in the specification.

[00:03:19] Speaker 01:
Descriptions of what was known in the prior art and how we don't need to tell you how to do this because everybody knows that kind of thing.

[00:03:24] Speaker 03:
Well, that goes to whether certain of the elements that were claimed that were part of the combination were known.

[00:03:34] Speaker 03:
And that's really

[00:03:35] Speaker 03:
But the basis for the argument, the basis for the claim that there is a non-conventional inventive concept involved in what is claimed here goes to the particular interaction of elements, the particular way in which the functionalities that are at issue were distributed within the network and were used within the

[00:04:03] Speaker 03:
and the interactions of those elements in the system that was described.

[00:04:08] Speaker 03:
And that is certainly not something that was described in the specification as being conventional or known.

[00:04:14] Speaker 03:
On the contrary, the specification makes clear that the arrangement of elements that was described in the claims offered significant advantages that would permit the secure and convenient distribution of digital content in a way that would also provide for effective

[00:04:33] Speaker 03:
protection of the rights of the content owner.

[00:04:37] Speaker 03:
And that is what was unknown in the prior art.

[00:04:39] Speaker 03:
And I think that if you look at specifically what was found in some of the initiation decisions that are both part of this appeal, part of the record here, and not part of the record here.

[00:04:54] Speaker 03:
For example, if you look in the appendix at page 722,

[00:05:01] Speaker 03:
there is a rejection of GRUCE, one of the prior art patents that was relied on by the petitioners, as a basis for finding that one of the elements was known previously.

[00:05:16] Speaker 03:
And what the board found in the initiation decision was that the petitioner had failed to show sufficiently how the condition for accessing data written into the data carrier

[00:05:29] Speaker 03:
is dependent on the amount associated with the payment data forwarded to the payment validation system, nor does Samsung, in this case, with the petitioner, explain that a person of ordinary skill would find such dependency obvious.

[00:05:44] Speaker 00:
And this is... Mr. Pan, these are financial patents, are they not?

[00:05:47] Speaker 00:
I don't believe so, Your Honor, and that goes to the... Isn't payment written all over them, and isn't payment quintessentially financial?

[00:05:57] Speaker 03:
Your Honor, I think that the distinction here, and it really goes to the specific language that Congress chose to address whether a patent is, in fact, subject to covered business method review.

[00:06:12] Speaker 03:
And what the statute says is that the patents must claim data processing or other operations used in the practice, administration, or management of a financial service.

[00:06:23] Speaker 03:
It is not enough merely that the patents allude to payment.

[00:06:27] Speaker 03:
but instead that the patents be claimed for an improvement in the financial operation.

[00:06:32] Speaker 00:
Payment isn't a financial service?

[00:06:34] Speaker 03:
The question is not whether payment is a financial service.

[00:06:37] Speaker 03:
There are financial services that are adjunct to the system that is claimed here.

[00:06:42] Speaker 03:
And so, for example, the invention of a novel payment validation system might well be, might, would in all likelihood be a covered business method if it weren't a technological invention.

[00:06:56] Speaker 03:
But the point here is that, as I think petitioners, as appellees actually concede in their brief, there is not, the patent does not go to an improvement in that payment validation system.

[00:07:08] Speaker 05:
You mount an attack particularly on claim 11, but that's really irrelevant, isn't it?

[00:07:14] Speaker 05:
Because the board also relied on claims 1 and 4 in the

[00:07:22] Speaker 05:
But on some of them, they rely on claims one and four.

[00:07:28] Speaker 05:
So claim 11 having been used for some of the other initiations is kind of irrelevant, isn't it?

[00:07:34] Speaker 03:
I don't think it's irrelevant, Your Honor, because what it goes to show is that the board was applying the wrong standard.

[00:07:41] Speaker 03:
So the board clearly thought, as it said...

[00:07:46] Speaker 05:
Let's hypothetically assume on 1 and 4, the fact that you contend that they initiated improperly on claim 11 doesn't have any consequence, does it?

[00:07:59] Speaker 03:
Well, I think that as to that initiation decision, that would, in fact, under the ordinary children's... What difference does it make if they properly initiated on number 1 and 4?

[00:08:11] Speaker 03:
Well, Your Honor, as I've said, that it may not provide a basis for reversal of that entire proceeding.

[00:08:18] Speaker 03:
But the reason why we emphasized it in our brief and argued the point is that it is important to see that the board was applying the wrong standard.

[00:08:27] Speaker 03:
Their analysis with respect to claim 11, which contains nothing that is even related to payment, goes to show that the standard was incorrect.

[00:08:36] Speaker 03:
Then there's no question

[00:08:38] Speaker 03:
that to prevail on these proceedings, we do need to be able to show that with regard to the claims that, as Judge Lurie pointed out, do refer to payment and payment data and payment validation, that that is nevertheless not within the definition as it is not, because the statute speaks very specifically.

[00:08:56] Speaker 01:
Well, could you explain that?

[00:08:57] Speaker 01:
I mean, it seems to me that at least the language used in, say, secure access and site sound and blue calypso

[00:09:05] Speaker 01:
is pretty readily satisfied here because there is a financial element in at least one claim of each of the patents, the payment stuff.

[00:09:16] Speaker 01:
Now, so you're making a point that the statute requires more.

[00:09:20] Speaker 01:
Can you define what the more is, what this use in means?

[00:09:25] Speaker 03:
Yes, I think at a minimum for a patent to be used in a financial product or service,

[00:09:33] Speaker 03:
it would have to claim some improvement on the financial product or service.

[00:09:37] Speaker 03:
The service here is the secure and convenient distribution of digital content.

[00:09:44] Speaker 03:
It relies on existing financial infrastructure to achieve that, but it is not providing a financial product or service within the plain language of the statute.

[00:09:54] Speaker 03:
And, you know, we have, in our briefs, we've explained the distinction between the claims here and the claims that were at issue

[00:10:02] Speaker 03:
in Blue Calypso and SightSound.

[00:10:05] Speaker 03:
And I think that secure access... And what is the difference?

[00:10:09] Speaker 03:
The difference is that in Blue Calypso, what was claimed was a method of providing a subsidy, which was, that is, the claim itself was attempting to improve a mechanism for rendering a payment.

[00:10:25] Speaker 03:
And in SightSound, as we pointed out,

[00:10:28] Speaker 03:
the claims themselves referred to a step that involved transmission of money over wires.

[00:10:36] Speaker 03:
Therefore, it involved an actual financial step.

[00:10:41] Speaker 03:
Here, the difference is that the... Payment isn't a financial step.

[00:10:46] Speaker 03:
But what's going on here, payment is not in itself a financial step in these patents, because what is going on in these patents is that payment data

[00:10:58] Speaker 03:
payment validation are used as a mechanism for controlling the secure distribution of digital content.

[00:11:07] Speaker 03:
And for that reason, they are not used in, but instead depend on, existing financial products and services.

[00:11:17] Speaker 00:
And if I can... So what's the consequence then, if it's not a CBM?

[00:11:24] Speaker 00:
We dismiss and you lose at the board?

[00:11:28] Speaker 03:
No, you dismiss and we win, Your Honor, because if they were not properly initiated, then all of the decisions would be nullity, and they'd be vacated.

[00:11:41] Speaker 03:
And we would therefore live to continue to be able to pursue these patents.

[00:11:47] Speaker 03:
And again, I think it does.

[00:11:49] Speaker 01:
Can I ask you a question before your time starts running out?

[00:11:53] Speaker 01:
Oil states.

[00:11:55] Speaker 01:
Oil estates, and I think every one of the other cases that we've had, IPRs.

[00:12:00] Speaker 01:
And I think it's true that in all the cases, including as presented by oil estates in the Supreme Court, the grounds for cancellation, for unpatentability, were the same kinds of grounds that were available since July of 1981.

[00:12:22] Speaker 01:
CBMs on 101 are not like that.

[00:12:27] Speaker 01:
Namely, all the patency sheets since 1981 came with strings attached.

[00:12:31] Speaker 01:
We can re-examine 102, 103.

[00:12:34] Speaker 01:
There hasn't been anything like that, at least on the 101 grounds.

[00:12:43] Speaker 01:
Are you making an argument that that's a potential distinction between whatever the Supreme Court might do?

[00:12:49] Speaker 01:
We don't know what they're going to do.

[00:12:50] Speaker 01:
on IPRs and CBNs?

[00:12:53] Speaker 03:
Yes, Your Honor.

[00:12:53] Speaker 03:
I think that because, to the extent that the Court's reasoning, and I think that's why we were careful to preserve the argument that the Section 101 invalidation may raise an issue that's different from what would occur in an IPR involving

[00:13:14] Speaker 03:
other grounds for invalidation.

[00:13:16] Speaker 01:
But you don't dispute that the rationale that we have used in MCM extends to this case unless and until the Supreme Court reverses that and narrows it or something?

[00:13:29] Speaker 03:
Correct.

[00:13:31] Speaker 03:
And if I can return to the question of eligibility, because I think it does tie into the issue also of the coverage of the CBN statute,

[00:13:44] Speaker 03:
Smart flash patents claim that is indeed an inventive concept is the specific way in which the use of the way in which the data elements are organized on the data carrier and the interactions with existing payment validation systems and content delivery systems permits a different

[00:14:13] Speaker 03:
and better delivery of digital content to a user.

[00:14:18] Speaker 03:
And so, for example, the element that was found to be not disclosed in the prior art in the initiation decisions involved having a use rule on the data carrier that was dependent upon the amount of payment that was associated with the payment validation data.

[00:14:42] Speaker 03:
It's an illustration of the way in which by storing the use rule on the data carrier, the use rule being dependent upon the amount of the payment validation.

[00:14:53] Speaker 01:
You get more if you pay more?

[00:14:54] Speaker 03:
Pardon me?

[00:14:55] Speaker 01:
You get more if you pay more?

[00:14:56] Speaker 01:
Is there something more going on than that?

[00:14:57] Speaker 03:
I think there is something more going on, Your Honor, which is that because the use rule is stored on the data carrier, there's an ability to continue to control access consistent with the amount of payment and the payment validation data.

[00:15:12] Speaker 03:
even when the data carrier is no longer connected to the system.

[00:15:15] Speaker 03:
So unlike, for example, a metering or a streaming system, there are advantages to being able to associate that use rule.

[00:15:25] Speaker 03:
Using that architecture involving the receipt of payment data, using the payment data to retrieve content is a much more flexible system.

[00:15:34] Speaker 03:
It permits the payment validation, the provider of payment validation,

[00:15:40] Speaker 03:
not to curate content and, contrary-wise, for the provider of content not to have to implement its own payment validation system.

[00:15:50] Speaker 00:
Counsel, your time is up, including your rebuttal time.

[00:15:54] Speaker 00:
We'll give you a few minutes for rebuttal.

[00:15:57] Speaker 00:
Thank you, Your Honor.

[00:15:58] Speaker 00:
Mr. Lamarco.

[00:16:02] Speaker 04:
May it please the Court?

[00:16:04] Speaker 04:
I only have a few minutes, Your Honor, so I'll try to be brief.

[00:16:08] Speaker 04:
To address the CBM question, here we believe the board properly deemed the CBM patents and therefore instituted these proceedings.

[00:16:19] Speaker 04:
In fact, in response to Mr. Panner's points, the language used in a financial service and the language, an improvement, improving a financial service, we don't think that's consistent with what the prior case law has instructed us and construed in the statute.

[00:16:35] Speaker 04:
For example,

[00:16:38] Speaker 04:
The Versata case made very clear that the statutory scope is not limited to something in the financial business.

[00:16:45] Speaker 04:
It doesn't have to be a banking transaction.

[00:16:47] Speaker 04:
It doesn't have to be an investment.

[00:16:49] Speaker 00:
What about Secure Access?

[00:16:50] Speaker 04:
And Secure Access is consistent, Your Honor.

[00:16:52] Speaker 04:
If I take you to the Secure Access decision, I think it pretty clearly articulates that the patents that would deem CVM patents in Blue Calypso in Versata, as well as in SightSound,

[00:17:07] Speaker 04:
All of those were good enough to qualify CBM patents.

[00:17:10] Speaker 00:
But there was nothing financial in the secure access patent, was there?

[00:17:15] Speaker 00:
Yeah.

[00:17:15] Speaker 00:
The language wasn't there.

[00:17:17] Speaker 04:
But nevertheless, they found that those claims... You're right.

[00:17:22] Speaker 04:
In the secure access patent, the language financial or payment or something like that or online sale was not in the claim.

[00:17:31] Speaker 04:
And what had happened in that case was

[00:17:33] Speaker 04:
The specification talked about using its authentication.

[00:17:36] Speaker 04:
I think it was a website authentication type.

[00:17:39] Speaker 00:
Your point here is that payment is in these claims.

[00:17:41] Speaker 04:
Exactly, Your Honor.

[00:17:42] Speaker 04:
In these claims, in I think almost every... Which of the cases is it?

[00:17:47] Speaker 01:
Versata, Blue Calypso, SightSound?

[00:17:50] Speaker 01:
Again, Mr. Panner's point is simply requiring payment in the claim doesn't quite do it.

[00:17:58] Speaker 01:
There has to be some contribution of the invention

[00:18:02] Speaker 01:
to the facilitating of the payment as opposed to using the payment to facilitate something else like the delivery of the exchange.

[00:18:10] Speaker 04:
I don't think we agree with that point, Your Honor.

[00:18:12] Speaker 04:
I think if we look at the Versada case law and we look at even SightSound and even Secure Access, it says in Secure Access, the financial in nature, as in Blue Calypso, was an accurate overall description of the challenge claims.

[00:18:29] Speaker 04:
Necessarily,

[00:18:30] Speaker 04:
The statutory definition of a CBN patent requires that the patent have a claim that contains, however phrased, a financial activity element.

[00:18:39] Speaker 01:
But the word there is required.

[00:18:40] Speaker 01:
So that's a necessary condition and we held it wasn't met there.

[00:18:44] Speaker 01:
Mr. Panter's point is that's not a sufficient condition.

[00:18:46] Speaker 01:
So what cases say that merely reciting

[00:18:51] Speaker 01:
something that is clearly financial but not in a way that embeds the technological improvement in the facilitation of that payment is enough.

[00:19:03] Speaker 01:
Is that site sound?

[00:19:04] Speaker 04:
Well, site sound is about an online electronic sale and really that's what we have here.

[00:19:09] Speaker 04:
I mean think about what we've got.

[00:19:11] Speaker 04:
If in the old days, before the internet, if I went into a store and I wanted to purchase a DVD or an audio, I had to pay for it.

[00:19:18] Speaker 04:
I could pay for it with cash

[00:19:20] Speaker 04:
And they would wait until I gave them the money before they gave me the audio tape, or I could use a credit card.

[00:19:27] Speaker 04:
And if I scanned the credit card, what would they do?

[00:19:29] Speaker 04:
They would validate payment by the scanning of my credit card.

[00:19:32] Speaker 04:
And once payment was validated, they would authorize release of the audio tape to me, right?

[00:19:37] Speaker 04:
Now, we've added what have we added?

[00:19:39] Speaker 00:
That kept you at arm's length.

[00:19:41] Speaker 04:
Now we're in the internet.

[00:19:43] Speaker 04:
And what do these claims talk about?

[00:19:44] Speaker 04:
validating payment prior to authorization to access to the data that they can download.

[00:19:50] Speaker 04:
If I want some music or video off the internet and it's posted somewhere and I want to access it, what do these claims do?

[00:19:56] Speaker 04:
What do these inventions do?

[00:19:58] Speaker 04:
They say, oh, you have to first authorize payment, and once you authorize payment, we will give you permission to access what you want.

[00:20:06] Speaker 04:
That is exactly what is in SightSound, an electronic sale.

[00:20:10] Speaker 04:
So I don't see that there's any difference between these claims

[00:20:14] Speaker 04:
in the claims in prior cases where this court has held sufficiently qualifies a CBM patents.

[00:20:19] Speaker 04:
I mean, that's a concrete example.

[00:20:21] Speaker 04:
As far as the test goes, I think, you know, Appellant's point is they believe that the PTO board didn't follow the proper test.

[00:20:30] Speaker 04:
On the contrary, the board tracked the test laid out in Versado very closely.

[00:20:35] Speaker 04:
They tracked the test laid out even in Sight Zone because they said it's a financial activity element.

[00:20:40] Speaker 04:
Here it is.

[00:20:41] Speaker 04:
It's financial in nature.

[00:20:42] Speaker 04:
Those are the exact types of words and language that was used to interpret the statute and apply the statute in those prior cases.

[00:20:49] Speaker 04:
So I don't think there's a problem here that these were properly instituted.

[00:20:53] Speaker 04:
I think they were properly instituted, Your Honor.

[00:20:57] Speaker 04:
That was the limit of the issue that we raised in our brief.

[00:21:00] Speaker 04:
We just wanted, and we use our brief kind of as a roadmap for the court to point to all the aspects of the administrative record reflecting that that test was applied.

[00:21:08] Speaker 04:
If there's no further questions, I'll take my seat.

[00:21:11] Speaker 00:
Thank you, Mr. Lamacca, Mr. Perry.

[00:21:20] Speaker 02:
Thank you, Judge Laurie.

[00:21:22] Speaker 02:
I may please the Court.

[00:21:23] Speaker 02:
This is a case about collateral estoppel.

[00:21:26] Speaker 02:
This Court has decided the eligibility question.

[00:21:29] Speaker 02:
Judge Laurie, you are on the panel.

[00:21:31] Speaker 02:
When Mr. Panner says, take a fresh look, what he says is that this panel should overrule that panel.

[00:21:37] Speaker 02:
He's saying that this court got it wrong the last time.

[00:21:41] Speaker 02:
He filed a petition for rehearing.

[00:21:43] Speaker 02:
It was denied.

[00:21:44] Speaker 02:
He filed a certiorari petition.

[00:21:45] Speaker 02:
It was denied.

[00:21:46] Speaker 02:
There is no reason to go over this again.

[00:21:49] Speaker 02:
The B&B Hardware Court case from the Supreme Court just reminded us of last year.

[00:21:53] Speaker 00:
That was for claims, right?

[00:21:55] Speaker 02:
It was four claims, Your Honor, and it was their obligation, the patentee's obligation, to come forward with a material difference between those claims and these claims.

[00:22:02] Speaker 02:
That's the upshot, for example, of Judge Dike's opinion for the court in Max Linear just recently.

[00:22:07] Speaker 02:
We've submitted a 28-J letter on this.

[00:22:09] Speaker 02:
Collateral estoppel applies to related patent claims.

[00:22:11] Speaker 02:
Remember, these are all from a common application.

[00:22:13] Speaker 02:
They all have a common specification.

[00:22:15] Speaker 01:
I don't think, I don't understand

[00:22:20] Speaker 01:
Smart flash to be arguing that the ordinary requirements for issued preclusion, ordinary requirements, don't apply, that there's any difference.

[00:22:30] Speaker 01:
I think he's saying something has happened in the interim, and one of the standard exceptions to issued preclusion is set forth in Dow against Nova and lots of other cases, a sufficiently great change in the law that the result would have to be different.

[00:22:45] Speaker 02:
Two answers, Judge Roberts.

[00:22:46] Speaker 01:
So why has there not been such?

[00:22:48] Speaker 02:
So I agree with the court's first point, of course.

[00:22:50] Speaker 02:
They have not argued that there's any material difference between the claims.

[00:22:53] Speaker 02:
So then the only question, so Section 27 of the restatement, the standard issue of preclusion applies.

[00:22:58] Speaker 02:
The only question is whether there's an exception.

[00:23:00] Speaker 02:
Section 28-2 is the only exception they've invoked, the change in law exception.

[00:23:04] Speaker 02:
The only change in law cited is Berkheimer and Atrix.

[00:23:07] Speaker 02:
There are two problems with that to start.

[00:23:10] Speaker 02:
First, 28-2 only applies to decisions from a higher court, the unbanked court or the Supreme Court.

[00:23:15] Speaker 02:
It doesn't apply to coordinate decisions at all.

[00:23:17] Speaker 02:
So there's no exception to collateral estoppel for coordinate decision.

[00:23:21] Speaker 02:
So they can't even get into 28-2.

[00:23:24] Speaker 02:
If they could, they would have to show under the first prong of Dow Chemical, which of course Judge Dyke is very familiar with, that there's been a change in law.

[00:23:32] Speaker 02:
Judge Toronto was on the panel in both Berkheimer and Atrix, and can tell us better than I can.

[00:23:36] Speaker 00:
Mr. Perry, a decision of the panel is a decision of the court, and it doesn't help to point out who offered them.

[00:23:43] Speaker 02:
Very well, Your Honor.

[00:23:44] Speaker 02:
My point there is whether there was a change in law or not, the Berkheimer and Atricks panel said they were not changing the law, that the panel decisions in those cases said they were not changing the law.

[00:23:53] Speaker 02:
So 28.2 doesn't apply.

[00:23:55] Speaker 02:
The third point, and probably the most important one, is let's assume they changed the law.

[00:24:00] Speaker 02:
Mr. Panner's point is that therefore non-obviousness becomes the relevant fact that requires overruling the previous panel decision in this case.

[00:24:11] Speaker 02:
That's wrong for three reasons.

[00:24:13] Speaker 02:
Mr. Panner himself forfeited it in this courtroom on December 7, 2016.

[00:24:18] Speaker 02:
Judge Laurie, you asked him, does inventive step essentially mean non-obviousness?

[00:24:23] Speaker 02:
And Mr. Panner responded, doctrinally, this Court has said it's not the same as non-obviousness.

[00:24:28] Speaker 02:
And Chief Judge Prost asked him a similar question, and he again said they're not the same thing.

[00:24:32] Speaker 02:
So the argument they're now making, he waved in smart flash one, which presumably is why the panel didn't address it in the opinion.

[00:24:40] Speaker 02:
even if it were not waived, it is legally irrelevant.

[00:24:44] Speaker 02:
The doctrine of non-obviousness, or novelty for that matter, is separate from 101.

[00:24:49] Speaker 02:
The Supreme Court said that in fluke, in funk, in deer.

[00:24:53] Speaker 02:
It reiterated it in mayo.

[00:24:54] Speaker 01:
Can you now articulate a couple of sentences of your own explaining the difference?

[00:24:58] Speaker 02:
Of course, Your Honor.

[00:24:59] Speaker 02:
Novelty goes to whether it is new in the world.

[00:25:03] Speaker 02:
And 101 says whether it is new in a sense that goes to inventiveness.

[00:25:08] Speaker 02:
Step two, in particular, requires not only that something be disclosed for the first time, but that it is something that is allowed to be patented.

[00:25:16] Speaker 02:
And the reason the Supreme Court has separated those two lines of analysis, and this court made that clear in the IP Engine case, for example, is that something may well be novel and non-obvious, but nevertheless ineligible.

[00:25:29] Speaker 01:
And we can test this very simply because... Right, so it seems to me conceptually I understand quite easily how one can have novel and non-obvious innovations in the abstract realm, and that wouldn't count.

[00:25:45] Speaker 02:
Correct.

[00:25:45] Speaker 01:
Is this that case?

[00:25:46] Speaker 02:
This is that case, Your Honor, and the Court has already held that this is that case in the Smart Flash 1 decision.

[00:25:51] Speaker 02:
In other words, the Court... These are pre-Bilski patents.

[00:25:54] Speaker 02:
These were prosecuted under the old guidelines.

[00:25:56] Speaker 02:
They wouldn't be issued today.

[00:25:58] Speaker 02:
The court in the SmartFlash 1 case looked at these patents and said they are directed only to an abstract element, the payment of money for content.

[00:26:08] Speaker 02:
And they add nothing.

[00:26:09] Speaker 02:
The specification itself discloses that these are conventional elements arranged in a conventional fashion performing their routine functions.

[00:26:17] Speaker 02:
And therefore, they simply do it on a computer claims.

[00:26:20] Speaker 02:
They are Alice claims through and through.

[00:26:22] Speaker 02:
They are Bilsky claims through and through.

[00:26:25] Speaker 02:
And that's what this court recognized the first time around.

[00:26:28] Speaker 02:
And non-obviousness is not relevant to that determination.

[00:26:33] Speaker 02:
In the return mail case, the court confronted exactly this question.

[00:26:40] Speaker 02:
A case out of the PTAB is a declination of institution on 102 and 103 inconsistent with an ineligibility under 101.

[00:26:49] Speaker 02:
And the court said, as a matter of law, it is not.

[00:26:52] Speaker 02:
And that is the same position we have here.

[00:26:54] Speaker 02:
And then factually, even if we could get over the waiver and over that legal irrelevance, Berkheimer and Atrix are essentially prematurity cases, right?

[00:27:04] Speaker 02:
Atrix is a motion to dismiss case, and Berkheimer is a motion for summary judgment case.

[00:27:08] Speaker 02:
And in both of those cases, the court said that there were disputed issues of material fact that precluded resolution at that stage of the 101 question.

[00:27:18] Speaker 02:
This is not a motion to dismiss case.

[00:27:20] Speaker 02:
SmartFlash has had

[00:27:21] Speaker 02:
two trials on the merits on these patents, one in District 4 and one in the PTAB.

[00:27:28] Speaker 02:
In the PTAB, in fact, the SmartFlash objected.

[00:27:37] Speaker 02:
Excuse me, Ron.

[00:27:38] Speaker 02:
SmartFlash, the petitioners put in significant evidence on step two.

[00:27:44] Speaker 02:
And Judge Gerardo, to answer your question, it was different than the 102 evidence.

[00:27:48] Speaker 02:
Exhibit 1315, for example, in the PTAB was offered only for step two and not for obviousness.

[00:27:53] Speaker 02:
And there were others, but that's one example.

[00:27:55] Speaker 01:
Is that that European thing?

[00:27:56] Speaker 02:
That's one of the, it's not the European patent, it's one of the other prior art references.

[00:28:02] Speaker 02:
And SmartFlash objected to the evidence on step two as irrelevant.

[00:28:09] Speaker 02:
And the board, at appendix 641 and one of the final written decisions and elsewhere,

[00:28:13] Speaker 02:
overruled that objection and said that the evidence was relevant to step two and then relied on that evidence as confirmatory of what the specification itself disclosed, which is that these are not eligible patents.

[00:28:25] Speaker 02:
So that there is no disputed question of fact.

[00:28:27] Speaker 02:
Atrix and Berkheimer only say that if there's a disputed question of material fact, and we, of course, would dispute that obviousness is a material fact, but even if it were, there is no dispute because they had a trial in the PTAB.

[00:28:38] Speaker 02:
The PTAB considered all the evidence.

[00:28:40] Speaker 02:
SmartFlash didn't put in any evidence.

[00:28:43] Speaker 02:
on step two, other than the specification and the claims.

[00:28:48] Speaker 02:
And so there's no disputed question of fact in this case.

[00:28:52] Speaker 02:
So that the only exception that they have invoked to collateral estoppel 28.2, the change in law, the only cases they've cited, Berkheimer and Atricks, which apply to disputed questions of material fact, simply don't get them there.

[00:29:05] Speaker 02:
Because in this case, there is no disputed question of material fact.

[00:29:09] Speaker 02:
The board decided the facts, and they haven't challenged them.

[00:29:12] Speaker 02:
And it's not material.

[00:29:14] Speaker 02:
And as I said, Smart Flash waived it the first time around.

[00:29:17] Speaker 02:
So with that exception gone, we're right back into B&B hardware and the ordinary rules of collateral estoppel, which is to say, this court doesn't sit to revisit decisions it has already made.

[00:29:31] Speaker 02:
As the Supreme Court told us in B&B hardware, it wastes litigants' resources and adjudicators' time.

[00:29:37] Speaker 02:
And this is an example of that.

[00:29:40] Speaker 02:
And Judge Laurie, you asked my colleague

[00:29:42] Speaker 02:
You know, what happens if the institution decisions are invalidated?

[00:29:46] Speaker 02:
He said, well, they're going to go and enforce these patents in district court against somebody else.

[00:29:50] Speaker 02:
Well, that's, again, what collateral estoppel is designed to enforce.

[00:29:53] Speaker 02:
These patents are done.

[00:29:55] Speaker 02:
This court has decided the case.

[00:29:57] Speaker 02:
We should not be here today.

[00:30:00] Speaker 02:
And this is a case in which this court ought to, we submit, make clear that its determinations are binding.

[00:30:08] Speaker 02:
One more point on this.

[00:30:10] Speaker 02:
This is a problem of SmartFlash's making.

[00:30:13] Speaker 02:
When the two proceedings were proceeding in parallel, Apple came to this court and asked for a stay of the district court proceedings so that the PTAB could go first.

[00:30:22] Speaker 02:
The court denied the stay.

[00:30:23] Speaker 02:
It agreed with SmartFlash.

[00:30:25] Speaker 02:
Then when the district court appeal was pending, Apple came to this court and asked to coordinate the appeal so that they could be decided at the same time.

[00:30:33] Speaker 02:
SmartFlash opposed that motion, and this court agreed with SmartFlash and said the district court appeal should go first.

[00:30:38] Speaker 02:
So the district court appeal went first.

[00:30:41] Speaker 02:
And then SmartFlash lost.

[00:30:43] Speaker 02:
And then SmartFlash dragged its feet.

[00:30:45] Speaker 02:
It took every possible day to file for rehearing and to file its notice of appeals and so forth in the PTAB proceedings in the hopes that something would change so that it could come to this court and essentially ask for rehearing of the decision that it already lost.

[00:30:59] Speaker 02:
It's over now.

[00:31:00] Speaker 02:
It's done.

[00:31:01] Speaker 02:
They lost.

[00:31:02] Speaker 02:
They lost rehearing.

[00:31:03] Speaker 02:
They lost certiorari.

[00:31:04] Speaker 02:
This court should not go back and give them a second bite at the same apple.

[00:31:09] Speaker 02:
Thank you very much.

[00:31:10] Speaker 00:
Thank you, Mr. Perry.

[00:31:12] Speaker 00:
Mr. Pan, you have two minutes for rebuttal.

[00:31:16] Speaker 03:
Thank you, Your Honor.

[00:31:17] Speaker 03:
I appreciate that.

[00:31:22] Speaker 05:
I do think that we are, I agree with Mr. Perry with respect to the fact that- Are you, on final stop, are you arguing that the claims that were invalidated in the earlier case are revived?

[00:31:35] Speaker 05:
No.

[00:31:36] Speaker 05:
No.

[00:31:37] Speaker 05:
It, we have not, that's race judicata.

[00:31:39] Speaker 05:
Just that the decision can't be applied to the.

[00:31:42] Speaker 03:
That the court.

[00:31:43] Speaker 03:
Claims that weren't involved in the earlier.

[00:31:44] Speaker 03:
Exactly, your honor.

[00:31:45] Speaker 03:
And the, and the are, and, and I, I do think that the, the argument has been well, well aired that the point is that there has been a significant development in the law, a precedential decision of this court that ought to be applied.

[00:31:57] Speaker 03:
The court ought to, ought equitably to consider that.

[00:32:00] Speaker 03:
The issue.

[00:32:00] Speaker 05:
Does that mean that every single 101 case that we decided.

[00:32:04] Speaker 05:
before Burkheimer and Atrex is no longer collateral estoppel?

[00:32:09] Speaker 03:
Not at all, Your Honor, because it would really depend on the nature of the decision and whether there were, in fact.

[00:32:14] Speaker 03:
In other words, the question, first of all, it would not revive any final judgment by any stretch.

[00:32:21] Speaker 03:
That's not what we're arguing with regard to in this case.

[00:32:25] Speaker 03:
What we're arguing in this case is that

[00:32:27] Speaker 03:
Because there are claims before you and an administrative decision before you that has not been reviewed before, the question is whether the court ought to... I'm not really answering my question.

[00:32:35] Speaker 05:
My question is, does your argument lead to the conclusion that every single case before those two decisions in Berkheimer and Hittrex is no longer flat on stock?

[00:32:51] Speaker 03:
Certainly.

[00:32:52] Speaker 03:
The implication is that if the basis for the decision is

[00:32:56] Speaker 03:
inconsistent with this Court's presidential decisions in Atrix and Berkheimer, the Court would at least have to look at that.

[00:33:03] Speaker 03:
The Court might determine there is no inconsistency and therefore collateral estoppel applies, but if there is an inconsistency as we've argued here, then in other words, the basic requirement, and I want to be clear that there's a distinction between the collateral estoppel issue and then on the merits, but the collateral estoppel issue goes to

[00:33:22] Speaker 03:
whether the result would have been different in light of the precedential decision that this Court has issued.

[00:33:29] Speaker 03:
And what we see here, there's a tremendous irony to the fact that Mr. Perry insists upon the existence of a prior trial, because indeed there was a trial.

[00:33:40] Speaker 03:
And in that trial, these patents were found to be valid.

[00:33:45] Speaker 03:
As a matter of fact, they were found to be novel and non-obvious.

[00:33:48] Speaker 03:
And that is something that when Apple appealed that judgment, they did not even claim that there was inadequate evidence to support.

[00:33:57] Speaker 03:
They had other challenges, but they did not claim there was inadequate evidence to support that.

[00:34:02] Speaker 00:
Thank you, counsel.

[00:34:03] Speaker 00:
Thank you, counsel, but your time has concluded.

[00:34:05] Speaker 00:
Thank you very much, Your Honor.