Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-01612/USCOURTS-casd-3_13-cv-01612-1/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ADVANCED AUCTIONS LLC,

Plaintiff,

CASE NO. 13CV1612 BEN (JLB)

ORDER GRANTING MOTION

FOR JUDGMENT ON THE

PLEADINGS

[Docket No. 71]

vs.

EBAY INC.,

Defendant.

Before the Court is Defendant eBay, Inc.’s Motion for Judgment on the

Pleadings. (Docket No. 71.) Defendant eBay assertsthat Plaintiff Advanced Auctions

LLC’s patent, U.S. Patent No. 8,266,000 (’000 Patent), claims unpatentable subject

matter under 35 U.S.C. § 101 — the abstract idea of an auction lacking any additional

inventive concept that would make it patent eligible. Advanced Auctions has filed an

Opposition and eBay has filed a Reply. (Docket Nos. 72-73.) The Court heard oral

argument on December 12, 2014.

BACKGROUND

The ’000 Patent claims a two-mode computer-based Internet auction. During the

first mode, the item being sold is displayed, bids can be placed, and a user receives

updated information on the status of the auction by a manual request, i.e. manually

refreshing the page. At a predetermined set time, the auction moves into a second

mode. During the second mode, information about the status of the auction is updated

automatically without the user manually requesting the update. 

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Claim 1 of the ’000 Patent recites:

A method of hosting a computer-based auction over the internet,

comprising:

using a computer to produce information representing a webpage

indicative of an electronic auction, where said webpage shows bid

amounts and accepts bids over the internet;

said computer producing second information as part of said information

representing a webpage, said second information having a first

parameter indicative of an ending time for said electronic auction;

said computer also storing a predetermined set time before the ending

time;

prior to said set time before said ending time, said computer carrying out

the auction in a first mode, in which information that represents a

webpage with information about the auction is updated only based

on a manual request for update received from a client over the

internet and is not automatically updated;

after said set time before said ending time, said computer changing a

mode of carrying out the auction to a second mode, wherein said

second mode, said computer automatically updating said

information that represents the webpage to have new information

and automatically sending said new information over the internet

to each of a plurality of clients, in a way that causes said each of

said plurality of clients to automatically display said new

information without making a request for said new information.

’000 Patent , 10:1-29

The remainder of the claims vary this basic structure, including for example:

starting the second mode an hour before the end of the auction; automatically

refreshing only the price and highest bidder; and use of streaming video for an update. 

DISCUSSION

I. Judgment on the Pleadings

“After the pleadings are closed—but early enough not to delay trial—a party

may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). “Judgment on the

pleadings is properly granted when, accepting all factual allegations in the complaint

as true, there is no issue of material fact in dispute, and the moving party is entitled to

judgment as a matter of law.” Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir.

2012). The standard for a Rule 12(c) motion is “substantially identical” to Rule

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12(b)(6). Id. 

II. Unpatentable Subject Matter

Section 101 definesthe subject matter eligible for patents, but “[l]aws of nature,

natural phenomena, and abstract ideas are not patentable.” Ass’n for Molecular

Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013) (emphasis added). 

“The concepts covered by these exceptions are ‘part of the storehouse of knowledge

of all men . . . free to all men and reserved exclusively to none.” Bilski v. Kappos, 561

U.S. 593, 602 (2010) (quoting Funk Brothers See Co. v. Kalo Inoculant Co., 333 U.S.

127, 130 (1948)). “[T]he underlying concern is that ‘patent law not inhibit further

discovery by improperly tying up the future use of these building blocks of human

ingenuity.’” buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1352-53 (Fed. Cir. 2014)

(quoting Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347, 2354 (2014)). 

Under the Supreme Court’s two-step analytical framework, the Court “first

determine[s] whether a claimis‘directed to’ a patent-ineligible abstract idea.” Content

Extraction and Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343,

1346 (Fed. Cir. 2014) (quoting Alice Corp., 134 S. Ct. at 2355). If it is an abstract idea,

the Court moves to the second step, “the search for an ‘inventive concept.’” DDR

Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014) (quoting

Alice Corp., 134 S. Ct. at 2355). The Court “must determine whether the claims

contain ‘an element or combination of elements that is sufficient to ensure that the

patent in practice amounts to significantly more than a patent upon the ineligible

concept itself.’” Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 714 (Fed. Cir. 2014)

(quoting Alice Corp., 134 S. Ct. at 2354). 

As explained below, the Court finds the ’000 Patent claims the abstract idea of

an auction and the generic computer implementation of that idea on the Internet

without the addition of any inventive concept.

A. Abstract Idea

“The Supreme Court has not delimited the precise contours ofthe ‘abstract ideas’

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category.” Content Extraction, 776 F.3d at 1346 (quoting Alice Corp., 134 S. Ct. at

2355). Mathematical formulas and algorithms have been found to be abstract ideas

ineligible for patent protection under § 101, but a concept need not be a “preexisting,

fundamental truth” or reducible to a mathematical formula to constitute an abstract 1

idea. Alice Corp., 134 S. Ct. at 2355-56. “[F]undamental economic practice[s] long

prevalent in our system of commerce” are abstract ideas. Id. at 2356. In Alice and

Bilski, the Supreme Court found hedging financial risk and intermediated settlement

qualified as fundamental economic practices. Id. Recent decisions from the Federal

Circuit have built on these precedents. In buySAFE and Ultramercial, the court found

transaction performance guarantees and using advertising as currency were abstract

ideas. buySAFE, 765 F.3d at 1355; Ultramercial, 772 F.3d at 715. 

Here, eBay argues that the claims are directed to a fundamental economic

practice, an auction. In opposition, Advanced Auctions seems to assert that what is

claimed must completely preempt the entire abstract idea, i.e. squarely match the

abstract idea, to be directed to that abstract idea. Similarly, Advanced Auctions also

argues that the claims are directed to something distinguishable from an auction.2

Generally, both of these arguments are more appropriately considered at the second

step in the search for an inventive concept. See Ultramercial, 772 F.3d at 715 (“any

In Parker v. Flook, the Supreme Court found a mathematical formula to adjust

1

alarm limits for temperature and pressure in a catalytic conversion process was

ineligible and the computer implementation was conventional. Alice Corp., 134 S. Ct.

at 2358 (discussing Parker v. Flook, 437 U.S. 584 (1978)). However, the claims in

Diamond v. Diehr were patent eligible, despite relying on a mathematical formula,

because additionalsteps — recording temperature measurements inside a rubber mold

and using the measurements to repeatedly recalculate the cure time using the

mathematical formula — improved a technological process, i.e. added an inventive

concept. Id. (discussing Diamond v. Diehr, 450 U.S. 175 (1981)).

Advanced Auctions also relies heavily on eBay’s patent activities, but eBay’s patents 2

are not before this Court and Advanced Auctions cites no authority for this Court to use eBay’s

patents in the analysis of the patent actually before this Court. That eBay’s patents may also

be directed to an abstract idea is not at issue in this case. Additionally, the particular ways

eBay has attempted to add inventive concepts in its own patents is also not an issue for this

Court to resolve. See McRO, Inc. v. Atlus U.S.A., No. SACV 13-1870, 2014 WL 4772196, *7

(N.D. Cal. Sept. 22, 2014) (noting the validity of a defendant’s patent was not before it and

reasoning that “it is hard to fault anyone for seeking patents that may turn out to be invalid

where the application standards are shifting and uncertain”). 

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novelty in implementation of an idea is a factor to be considered only in the second step

of the Alice analysis”); see Enfish, LLC v. Microsoft Corp., -- F. Supp. 3d --, 2014 WL

5661456, *5 (C.D. Cal. 2014) (“If the court finds the claim’s purpose abstract as step

one, it must then determine whether there is an inventive concept that appropriately

limits the claim such that it does not preempt a significant amount of inventive

activity”). 

To the extent Advanced Auctions is arguing that its patent must claiman auction

with no variation to be directed to the abstract idea of an auction, the Court disagrees. 

The inquiry at this first step is “whether the claims at issue are directed to one of those

patent-ineligible concepts,” i.e. an abstract idea. Alice Corp., 134 S. Ct. at 2355

(emphasis added). The Court must consider if the claims are “drawn to the concept of”

an auction. Id. at 2356 (“the claims before us are drawn to the concept of intermediated

settlement”). A variation on the abstract idea does not mean it is not directed to that

abstract idea. buySAFE, 765 F.3d at 1355 (The “narrowing of [a] long-familiar

commercial transaction[] does not make the idea non-abstract for section 101

purposes”). 

Although the Court acknowledges that at some point what a patent claims

becomes different enough from the abstract idea that it is not directed or drawn to that

idea, that is not the case here. Contrary to Advanced Auctions assertion, the ’000

Patent does more than simply mention an auction. Putting aside the extensive

discussion of the auction in the specification, the claims substantively describe an

auction and make absolutely clear the ’000 Patent is directed to an auction. (’000

Patent, Claim 1 (“A method of hosting a computer-based auction over the internet”);

Claim 10 (“A method of interacting with a computer-based auction over the internet”);

Claim17 (“A computer product comprising a processor and memory storing executable

instructions that when executed, implement a computer auction based program”)). 

Even if the claims and specification did not explicitly identify an auction, it would still

be directed or drawn to the abstract idea of an auction because that is what the claims

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describe. See Ultramercial, 772 F.3d at 712, 715 (finding patent claimed abstract idea

of “using advertising as an exchange or currency” even though the claims do not

specifically identity it as such). 

The two-part structure of the auction claimed also does not make the idea

claimed non-abstract. The claims describe a silent auction followed by live auction. 

Whether the Court considers the claims directed to an auction or directed to a silent

auction followed by a live auction, the result is the same. The claims are directed to

an abstract idea.

Like hedging financial risk, intermediated settlement, or using advertising as

currency, an auction is a “fundamental economic practice long prevalent in our system

of commerce.” Alice Corp., 134 S. Ct. at 2356. The claims at issue are drawn or

directed to the abstract idea of an auction. Because the Court finds the claims of the

’000 Patent are directed to the abstract idea of an auction, the Court must consider

whether the claims add an inventive concept. 

B. Inventive Concept

In Alice, the Supreme Court acknowledged that on some level all inventionsrest

upon laws of nature, natural phenomena, or abstract ideas. 134 S. Ct. at 2354. “An

invention is not rendered ineligible for patent simply because it involves an abstract

concept” because the application of an abstract concept “to a new and useful end . . .

remain[s] eligible for patent protection.” Id. Or put another way, isthe patent claiming

the building blocks (ineligible) or “integrat[ing] the building blocks into something

more” (eligible)? Id. At this step the Court asks “what else is in the claims” beyond

the ineligible concept itself? Id. at 2355. The Court must “consider the elements of

each claim both individually and as an ordered combination to determine whether the

additional elementstransformthe nature ofthe claiminto a patent-eligible application.”

Id. 

Advanced Auctions points to ways the claims of the ’000 Patent differ from an

auction and argues it has made online auctions more successful and efficient by

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achieving a technological balance. Advanced Auctions pointsto the following features

of the claims that add the requisite inventive concept: using two-modes; starting the

second mode one hour before or at some other predetermined set time before the end

of the auction; and only updating a portion of a complete webpage. Viewing the claims

individually and in combination, the claims do not add an inventive concept.

“[T]he transformation of an abstract idea into patent-eligible subject matter

‘requires more than simply stating the abstract idea while adding the words apply it.’” 

Ultramercial, 772 F.3d at 715 (quoting Alice Corp., 134 S. Ct. at 2357). Significantly

more is required. Alice Corp., 134 S. Ct. at 2355. Here, the claims simply implement

a two-part auction, the Internet equivalent of a silent auction followed by a live auction. 

“[G]eneric computer implementation” does not “transform that abstract idea into a

patent-eligible invention.” Id. at 2357. Nor doesimplementing the abstract idea on the

Internet. Ultramercial, 772 F.3d at 716 (“the use of the Internet is not sufficient to

save otherwise abstract claims from ineligibility under § 101”); see also Alice Corp.,

134 S. Ct. at 2358 (finding “limit[ing] the use of the idea to a particular technological

environment” does not make it patent eligible). 

Advanced Auctions characterizesthe features noted above asimprovements, but

as acknowledged in the ’000 Patent, the claims simply attempt to carry out an online

auction “more like a real live auction with certain refinements which improve it for use

on the Internet.” (’000 Patent 1:45-49.) The patent itself describes implementing an

existing abstract idea — an auction — refined for implementation on the Internet. 

Two-modes does not change this. Bidders at a silent auction can look themselves to

see the status of bids during the first part of the auction, but when it shifts into a live

auction, the updates come to the bidder quicker and without request, as with an

auctioneer at a live auction. At some point a two-part auction must shift from the first

part to the second. The setting of a time for the shift is a minor variation to

accommodate Internet implementation. Likewise, a partial update ofthe web page with

only minimal information is also just Internet implementation of a “real live auction”

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where a participant would receive only the current bid price and possibly the identity

of the bidder. Individually and collectively these variations do not make the abstract

idea described patent eligible. 

Additionally, to the extent these variations are anything more than generic

Internet implementation of the abstract idea, they are “‘well-understood, routine,

conventional activity.’” Id. at 2355 (quoting Mayo Collaborative Servs. v. Prometheus

Laboratories, Inc., 132 S. Ct. 1289, 1297-98 (2012). This is not sufficient. The claims

“must include additionalfeatures” beyond “conventional steps, specified at a high level

of generality.” Id. at 2355, 2357. “[I]nsignificant ‘[pre]-solution activity’ . . . is also

not sufficient to transform an otherwise patent-ineligible abstract idea into

patent-eligible subject matter.” Ultramercial, 772 F.3d at 716 (quoting Mayo, 132 S.

Ct. at 1298). 

DDR Holdings does not compel a different conclusion. 773 F.3d 1245 (Fed. 3

Cir. 2014). In DDR Holdings, the court found the claims were patent eligible under §

101. “[T]he claimed solution [was] necessarily rooted in computer technology in order

to overcome a problem specifically arising in the realm of computer networks.” Id. at

1257. When a consumer clicks on a third-party advertisement on a host website, the

consumer is directed to an automatically generated hybrid web site instead of being

directed to the third-party’s website. Id. at 1257. The hybrid website looks like the

host page, but contains the third-party’s product information associated with the

advertisement. Id. at 1257. This allows the host to retain the consumer rather than

losing them to the third-party’s website. Id. 

DDR Holdings is unique among Supreme Court and post-Alice Federal Circuit

precedent in that the claims at issue changed “how interactions with the Internet are

manipulated to yield a desired result — a result that overrides the routine and

conventional sequence of events.” Id. at 1258. Additionally, the claims were not

The Federal Circuit issued its DDR Holdings decision after briefing on the

3

motion was complete. However, both parties address the decision’s application at oral

argument.

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directed to implementation of a “business practice known fromthe pre-Internet world.” 

Id. at 1257.

Advanced Auctions assertsthat the claims of the ’000 Patent address bandwidth

constraints, a problem specific to the Internet. Advanced Auctions claims its approach

to an online auction minimizes server use. Requiring the user to request an update to

the page during the first mode conserves server use because the demand to update is

only triggered when the user refreshes as opposed the greater server demand associated

with automatic updates in the second mode. That greater demand in the second mode

is itself reduced when only a partial update to the page is provided. First, the Court

notes that the ’000 Patent does not identify server bandwidth as a problem to be solved

by the Patent. However, even if it were, it is only a incidental benefit to generic

implementation of the ’000 Patent claims. Unlike the claims in DDR Holdings, the

claims here do not override any routine sequence of events. The only variations on the

abstract idea are refinements for Internet implementation. Additionally, unlike the

claims in DDR Holdings, the claims here are directed to implementation of a preInternet world business practice.

The claims in DDR Holdings also attempted to solve an Internet-specific

challenge, but that alone was not enough to make the claims patent-eligible. Id. at

1258. Relying on Ultramercial, the court specifically cautioned that “not all claims

purporting to address Internet-centric challenges are eligible for patent.” Id. The

claims here are more in line with those at issue in Ultramercial. The Ultramercial

court found claims describing an Internet user viewing media online in exchange for

requesting to view an online advertisement attempted to claim the abstract idea of

“using advertising as currency.” Ultramercial, 772 F.3d at 716. That this abstract idea

wasInternet-specific did not save it because narrowing an “abstract idea to a particular

technological environment . . . is insufficient to save a claim.” Id. Additionally, the

court found the claims only added “routine additionalsteps such as updating an activity

log, requiring a request fromthe consumer to view the ad, restrictions on public access,

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and use of the Internet.” Id. These steps did “not transform an otherwise abstract idea

into patent-eligible subject matter.” Id. The steps recited in the ’000 Patent claims do

not add an inventive concept. Rather, the variations identified by Advanced Auctions

are more akin to routine additional steps insufficient to transform the abstract idea into

patent-eligible subject matter. 

CONCLUSION

For the reasons set forth above, the claims of the ’000 Patent are invalid as

patent-ineligible under § 101. The motion for judgment on the pleadings is

GRANTED. 

IT IS SO ORDERED.

DATED: March 26, 2015

Hon. Roger T. Benitez

United States District Judge

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