[00:00:00] Speaker 03:
The next argued case for today is number 202318 in Ray Singhal.

[00:00:06] Speaker 03:
Mr. Davis, when you're ready.

[00:00:09] Speaker 00:
May it please the court?

[00:00:25] Speaker 00:
Good afternoon now.

[00:00:26] Speaker 00:
The board's analysis in this case comes up short with respect to ALICE step one and step two.

[00:00:35] Speaker 00:
With respect to step one, there are a lot of similarities between this case and the TechSec case.

[00:00:41] Speaker 00:
And like the claims in TechSec, the current claims are non-abstract because they improve a basic function of computer network, and that is security.

[00:00:52] Speaker 00:
And that improvement is done in a technological way.

[00:00:56] Speaker 00:
What is that claimed improvement, the claimed advance?

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So you have a cellular wireless device that belongs to a customer in close proximity to a merchant's terminal, receives a very specific partial payment authorization transaction record from that terminal.

[00:01:18] Speaker 00:
Thereafter, after a brief authentication with the central system,

[00:01:24] Speaker 00:
The cellular wireless device, the customer transmits that specific transaction record to the central system.

[00:01:34] Speaker 00:
What does all of that do?

[00:01:35] Speaker 00:
What it does is it enables the customer to purchase goods from the merchant without having to provide the merchant with sensitive customer information like check card number or credit card number, things like that.

[00:01:54] Speaker 00:
board in this case that their mistakes started early on and the big issue is that they characterize the claims as merely being directed to securely processing payments.

[00:02:10] Speaker 04:
I just want to understand the technology that the main difference that you claim is that that you avoid you know

[00:02:20] Speaker 04:
vulnerabilities with respect to security by sending information to a central server rather than to a merchant, right?

[00:02:27] Speaker 04:
That's the key.

[00:02:30] Speaker 00:
That's part of the key, Your Honor.

[00:02:33] Speaker 00:
Very specifically, what the claims say is that you have a wireless device, a cellular wireless device of a customer that's in proximity to the merchant's terminal.

[00:02:42] Speaker 00:
And that device sends the information to the central system.

[00:02:47] Speaker 00:
The central system, of course, being a completely new system, a new component.

[00:02:54] Speaker 00:
Historically, what would happen, of course, you go into the store and you provide your credit card and the merchant is going to contact whoever it is, the credit card company or some other entity.

[00:03:10] Speaker 04:
So you're saying it's the fact that the user or the purchaser is standing there with the cellular technology and that technology sends the message to the central server?

[00:03:24] Speaker 00:
Not well, that's again that that that's part of it.

[00:03:28] Speaker 00:
So it's this is the advances Sort of the the entire system.

[00:03:34] Speaker 00:
So the claims do require a cellular wireless device Okay, and that's the device want to the customer is going to receive information

[00:03:42] Speaker 00:
from the merchant's terminal and then it's going to pass on that specific transaction record to a central system.

[00:03:51] Speaker 00:
All that stuff, even though it's easy to understand, it's technological.

[00:03:56] Speaker 00:
You could not perform the claims without technology.

[00:04:02] Speaker 04:
Right, but is anything about the technology that you're referring to other than off-the-shelf technology?

[00:04:09] Speaker 00:
If you look at individual components, and that's exactly what the board did, individual components such as the sales terminal, that's going to be off the shelf wherever that shelf is.

[00:04:26] Speaker 00:
You have a cell phone.

[00:04:28] Speaker 00:
Certainly the programming is going to, it has to be different and there are different components to the hardware to make sure that you can receive the transaction record from a short distance but those individual components, perhaps they are off the shelf but it's the combination, it's the ordered combination of all the components working together.

[00:04:50] Speaker 00:
That's the key here.

[00:04:55] Speaker 02:
Let me just say,

[00:05:00] Speaker 02:
Tell me what's wrong with thinking about it the following way.

[00:05:03] Speaker 02:
If you and I want to make a transaction and we want to do it through a third party intermediary who's going to handle the taking of money from me and the sending of money to you, that third party is going to need some information of yours and some information of mine.

[00:05:21] Speaker 02:
and there are a variety of options of getting to that third party the required information.

[00:05:26] Speaker 02:
I can give you mine and then you can communicate with the third party or you can give me yours and I can communicate with the third party.

[00:05:34] Speaker 02:
This basically says let's do a second thing if I'm the customer and you're the merchant and use available communication technology.

[00:05:44] Speaker 02:
Bluetooth

[00:05:45] Speaker 02:
cellular service, whatever it is, none of which has been changed.

[00:05:50] Speaker 02:
They're all just being used as communication tools in their ordinary course.

[00:05:55] Speaker 02:
To do something that I think it's fair to say, Alice says, namely the use of an intermediary for handling a payment transaction is abstract because it's a familiar economic practice.

[00:06:12] Speaker 00:
Your Honor, I believe that what was happening in Alice is something that's much different than here.

[00:06:18] Speaker 00:
Alice related to intermediate, intermediated settlement risk.

[00:06:24] Speaker 02:
And perhaps that is... The follow-on cases all talk about just the decisions about financial transactions and the routes through which they go and the information put into them created.

[00:06:39] Speaker 02:
shadow accounts in some of our successor cases.

[00:06:43] Speaker 02:
That's all in the realm of familiar business practices using an intermediary to accomplish a transaction between the two parties.

[00:06:53] Speaker 02:
And information has to be selected to allow the intermediary to do that.

[00:06:58] Speaker 02:
Why is that not all on the abstract side of the line, and then the only thing that's left here is using one rather than another of several different off-the-shelf communication mechanisms?

[00:07:11] Speaker 00:
Well, a couple of points, Your Honor.

[00:07:14] Speaker 00:
If I may, I believe that it's a bridge too far.

[00:07:18] Speaker 00:
Again, sticking with Alice and the immediate, an immediate settlement risk there, that that is a different thing than here.

[00:07:28] Speaker 00:
With Alice at settlement risk, here you're talking about security risk.

[00:07:33] Speaker 00:
Alice, in fact, referred to that intermediate settlement risk.

[00:07:39] Speaker 00:
The other term they used was clearinghouse.

[00:07:42] Speaker 00:
That's a much different concept than what we're dealing with here.

[00:07:45] Speaker 00:
In fact, if you look at the patent application at issue here, you can go to the figures such as, I believe it's figure

[00:08:02] Speaker 00:
You can see right in the figure, there is an automated clearinghouse, of course.

[00:08:07] Speaker 00:
Automated clearinghouse is involved in credit card transactions, but that's not the central system.

[00:08:17] Speaker 00:
that's claimed as being part of the claimed advance.

[00:08:21] Speaker 00:
Central system is item 10.

[00:08:23] Speaker 00:
The clearinghouse is item 36.

[00:08:25] Speaker 00:
This to me is a way that helps explain the differences between something that would be an intermediate settlement risk slash clearinghouse versus

[00:08:40] Speaker 00:
The combination of elements involving a wireless cellular device, central system, merchant's terminal of the claimed invention.

[00:08:55] Speaker 00:
So just like the district court in TechSec, the board in this case disregarded the elements of the claims.

[00:09:04] Speaker 00:
that the specification makes clear are important parts of the claimed advance in a combination of elements.

[00:09:09] Speaker 00:
Again, what the board said that the claims were directed to merely securely processing payments in order to form a proper step one directed to analysis.

[00:09:23] Speaker 00:
That depends on an accurate characterization of what the claims require of what the patent research to be the claimed advance.

[00:09:29] Speaker 00:
And the board claim would not do that here.

[00:09:31] Speaker 00:
In fact, they didn't even go

[00:09:32] Speaker 00:
beyond the first four words of the preamble.

[00:09:36] Speaker 00:
And using that broad, huge box, they took that short-term securely processing payments and said that that was a fundamental economic practice.

[00:09:47] Speaker 00:
That's not surprising.

[00:09:49] Speaker 00:
I mean, they drew the biggest box in the universe and declared it a fundamental economic practice.

[00:09:54] Speaker 00:
But if the board, and I can't really speculate on what the board would do if they looked at it

[00:10:00] Speaker 00:
Properly but but if they I'd like to believe that if they had properly characterized the claim to actually Be directed to the claimed advance that there's no way that they would have found that to be a fundamental economic practice at a minimum they certainly did not establish that in order to establish that they would have had to establish for example that that it's it's a

[00:10:27] Speaker 00:
is something that is long prevalent in our system of commerce.

[00:10:32] Speaker 00:
It's not enough to just say that, hey, this is an economic practice.

[00:10:36] Speaker 00:
It must be a fundamental economic practice.

[00:10:38] Speaker 02:
Can you address universal secure registry, the decision from a week or two ago?

[00:10:46] Speaker 00:
I can.

[00:10:46] Speaker 00:
Is there something specific you'd like to ask me?

[00:10:48] Speaker 00:
No.

[00:10:48] Speaker 02:
Well, why is this case materially different from that case?

[00:10:57] Speaker 02:
I know that there are differences in specifics, but why does the analysis of that case not carry over to this case?

[00:11:05] Speaker 00:
Well, Your Honor, thank you.

[00:11:07] Speaker 00:
And I certainly anticipated that you would ask about universal secure registry.

[00:11:14] Speaker 00:
There are a few reasons.

[00:11:15] Speaker 00:
First and foremost, as in most patent cases, we start with the claims, so that the claims are different.

[00:11:23] Speaker 00:
They are significantly different.

[00:11:25] Speaker 00:
And Universal Secure Registry, of course, there were four patents, so various claims.

[00:11:33] Speaker 00:
But none of the claims have the claimed advance and the improvement that I've mentioned here with respect to the cellular wireless device of the customer in proximity to the sales terminal that receives the specific record and then transmits it wirelessly to a central system.

[00:11:52] Speaker 00:
that structure is just plainly missing from Universal Secured Registry and in fact, Your Honor, Judge Toronto, I listened to the arguments that were made in that case and I think at the very beginning of the case you were asking questions of Appellants Council for, I forget the numbers, but the first patent that's discussed in the case and I think you

[00:12:18] Speaker 00:
You quite correctly pointed out, you know, is there anything in here that limits it to a particular environment, a particular structure?

[00:12:27] Speaker 00:
And the Council had a hard time with that question.

[00:12:31] Speaker 00:
I don't have a hard time like that here because the structure is all there.

[00:12:35] Speaker 00:
All these items that we've been talking about, it's there.

[00:12:42] Speaker 00:
Now, it's a significant difference between this situation and the situation of Universal Secure Registry.

[00:12:48] Speaker 04:
But the significant difference, that's what I'm trying to understand.

[00:12:50] Speaker 04:
So your significant difference is the user's use of the mobile phone to generate the process?

[00:13:03] Speaker 00:
That's one part of the system.

[00:13:06] Speaker 00:
The system includes several components.

[00:13:09] Speaker 00:
You're going to need your cellular wireless device.

[00:13:11] Speaker 00:
You're going to need the sales terminal of the merchant.

[00:13:14] Speaker 00:
You're going to need the central system.

[00:13:16] Speaker 04:
But which of those was not necessary in Universal Secure Registry?

[00:13:23] Speaker 00:
By the claims, none of them are necessary.

[00:13:25] Speaker 00:
If you look at the claim language, and I think Your Honors would agree that that's what matters here.

[00:13:32] Speaker 00:
The other point that I would make with respect to universal secure registry, in reading that,

[00:13:44] Speaker 00:
So some of what I read is what got my wheels spinning about the difference between intermediate and immediate settlement risk and security risk.

[00:13:54] Speaker 00:
So I would, without rehashing it, I would point that out as well and say that what we're talking about here is that versus the settlement risk, two completely different things.

[00:14:07] Speaker 00:
And it's too far of a leap to

[00:14:10] Speaker 00:
Take that holding in Alice and try to apply it to a system with structure like this On on step two The board does not provide

[00:14:28] Speaker 00:
Any evidence that the ordered combination of elements beyond the allegedly abstract ideas well understood routine and conventional?

[00:14:37] Speaker 00:
None none whatsoever If the board did us any favors here It's it's that it did identify certain limitations that it viewed as being beyond the abstract idea so I'll just accept those limitations and

[00:14:52] Speaker 00:
for now.

[00:14:53] Speaker 00:
And those limitations were cellular wireless device, the servers of the central system, and the interfaces over a global computer network.

[00:15:02] Speaker 00:
They said, they admitted, this is beyond the abstract idea.

[00:15:06] Speaker 00:
And then what they did is they pointed to an area in the spec that reportedly said that each of those elements is well understood, routine, and conventional.

[00:15:19] Speaker 00:
What they didn't do was really go in and explain why the ordered combination of those elements would be well understood, routine, and conventional.

[00:15:32] Speaker 00:
It's missing completely.

[00:15:35] Speaker 00:
I would also point out.

[00:15:37] Speaker 04:
So you're saying what we ought to do is remand for a better explanation or at least consideration of those questions?

[00:15:44] Speaker 00:
I believe a reversal is appropriate because I do think that an inventive concept exists, but short of a reversal, a remand so that the board could do its job.

[00:15:56] Speaker 00:
Yes, absolutely.

[00:15:57] Speaker 04:
Can I clarify that you're not separately addressing claims?

[00:16:08] Speaker 04:
you direct yourself really to only certain of the claims, but then there's the separate question of the claims that you don't even address in this appeal, which I think are 11 through 20, or is that right?

[00:16:24] Speaker 00:
That's correct, Your Honor.

[00:16:26] Speaker 04:
OK, so you're really only

[00:16:28] Speaker 04:
looking at the claims 1, 8, and 9?

[00:16:33] Speaker 00:
That's the focus, Your Honor, correct.

[00:16:36] Speaker 04:
And what depends from those?

[00:16:38] Speaker 04:
Correct.

[00:16:39] Speaker 04:
OK, thank you.

[00:16:40] Speaker 00:
That's correct.

[00:16:41] Speaker 03:
OK, let's hear from the other side.

[00:16:44] Speaker 03:
We will save your advance today.

[00:16:46] Speaker 00:
Thank you, Your Honor.

[00:17:01] Speaker 01:
Good morning, Your Honors, and may it please the court.

[00:17:11] Speaker 01:
I think we can really focus on one key issue here, and that's whether or not these claims provide sufficient specificity to constitute an improvement to computer functionality.

[00:17:23] Speaker 01:
And here, Singhal's claims do not.

[00:17:25] Speaker 01:
There is no improvement to the cellular device.

[00:17:29] Speaker 01:
There is no improvement to the central computer system.

[00:17:31] Speaker 01:
And there is no improvement to the network.

[00:17:34] Speaker 01:
As appellant makes clear, the only improvement offered by the claimed invention is bypassing transmission of certain personal information to a merchant's computer system during a payment transaction.

[00:17:49] Speaker 01:
But much like the claims that issue in Alice,

[00:17:52] Speaker 01:
Universal Secure Registry, Boom Payments, Interval Holdings, using a third-party intermediary to mitigate such information risk is an abstract idea and cannot serve as an inventive concept.

[00:18:05] Speaker 04:
Is there a problem that there wasn't really a discussion of the ordered combination?

[00:18:10] Speaker 01:
Your Honor, the Board did discuss the ordered combination.

[00:18:16] Speaker 01:
First, I will note that the board looked at the claim as a whole in determining whether or not the abstract idea was recited.

[00:18:24] Speaker 01:
And I think that's one issue that the appellant had during his opening.

[00:18:27] Speaker 01:
But as to the order combination at step two, the board indicated that looking at the individual claim elements individually as an order combination, these limitations don't go beyond the abstract idea that they found.

[00:18:43] Speaker 01:
The cellular device, the servers, the interfaces, the global network are all used in their routine and conventional manner.

[00:18:49] Speaker 01:
And what the board did there is look at the specification and noted how the specification described each of these components, and described each of these components as simply containing off-the-shelf technology.

[00:19:00] Speaker 01:
And so there is no inventive concept here.

[00:19:03] Speaker 01:
And furthermore, the improvement is simply addresses an abstract idea.

[00:19:08] Speaker 01:
If there is any improvement here, it is to the abstract idea itself and not to any underlying technological component.

[00:19:18] Speaker 01:
And these claims are completely analogous to those that were at issue at Universal Secure Registry, as well as other cases that this court has decided, including boom payments and interval holdings.

[00:19:31] Speaker 01:
And if there are no other questions, I'll yield the rest of my time.

[00:19:42] Speaker 03:
Thank you, Mr. Davis, for three minutes.

[00:19:56] Speaker 00:
That was fast.

[00:20:00] Speaker 00:
Thank you, your honor.

[00:20:03] Speaker 00:
The PTO here did the same thing that the board did just now, and that is focused on individual elements.

[00:20:16] Speaker 00:
My colleague went through each of the individual major structural limitations of the claim and said that those were known, essentially.

[00:20:27] Speaker 00:
With respect to Judge O'Malley's question, with respect to the order combination, I believe where my colleague was paraphrasing from is Appendix 12.

[00:20:40] Speaker 00:
And that's where the board purportedly was addressing an order combination.

[00:20:45] Speaker 00:
But if you look at that language, it quickly becomes clear that there's no addressing the order combination.

[00:20:52] Speaker 00:
It reads, first analyzing the claim limitations individually and as an order combination.

[00:20:58] Speaker 00:
We note, as we did above, that the limitations beyond the abstract idea include the cellular wireless device, the servers of the central system, and the interfaces over a global network.

[00:21:10] Speaker 00:
As explained above, these claimed elements appear to be used in a routine and conventional manner to implement the claim secure payment processing system.

[00:21:21] Speaker 00:
That's it.

[00:21:22] Speaker 00:
That's talking about the individual components.

[00:21:25] Speaker 00:
And when you go back up and look above, and I can only speculate where they're talking about, it appears to be the page before Appendix 11, that's a discussion of the individual elements.

[00:21:36] Speaker 00:
No discussion whatsoever of an order combination.

[00:21:38] Speaker 00:
It's just simply not there.

[00:21:40] Speaker 04:
And in that regard... So is it your position that they simply took those individual things that they found to be conventional

[00:21:50] Speaker 04:
And then only combine those, not combine everything else in the claim.

[00:21:57] Speaker 00:
It's my position that they took those individual things, the limitations that they admit that are beyond the abstract idea, and looked at those individual things as individuals.

[00:22:10] Speaker 00:
They had no contemplation of them as an ordered combination, other than just simply to use the words in order combination.

[00:22:18] Speaker 00:
And that doesn't pass mustering.

[00:22:22] Speaker 00:
If you don't have any other questions, I'll see you for a second.

[00:22:27] Speaker 03:
All right.

[00:22:28] Speaker 03:
Thank you.

[00:22:29] Speaker 03:
Thanks to both counsels.

[00:22:30] Speaker 03:
The case is taken under submission.

[00:22:33] Speaker 03:
And that concludes this panel's audit cases for today.

[00:22:38] Speaker ?:
All rise.

[00:22:40] Speaker ?:
The honorable court is adjourned for this afternoon.