Court Opinion

ID: 2807422
Source: CourtListenerOpinion
Date Created: 2015-06-11 15:01:22.948887+00
Date Added: 2024-06-11T12:12:21.472638
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

            OIP TECHNOLOGIES, INC.,
                 Plaintiff-Appellant

                           v.

                AMAZON.COM, INC.,
                  Defendant-Appellee
                ______________________

                      2012-1696
                ______________________

   Appeal from the United States District Court for the
Northern District of California in No. 12-CV-1233, Judge
Edward M. Chen.
                ______________________

                Decided: June 11, 2015
                ______________________

    MATTHEW D. POWERS, Tensegrity Law Group, LLP,
Redwood City, CA, argued for plaintiff-appellant. Also
represented by STEVEN CHERENSKY, PAUL EHRLICH,
STEFANI SMITH, AARON MATTHEW NATHAN.

    GREGORY G. GARRE, Latham & Watkins LLP, Wash-
ington, DC, argued for defendant-appellee. Also repre-
sented by GABRIEL BELL, MATTHEW J. MOORE; RICHARD
GREGORY FRENKEL, Menlo Park, CA; JEFFREY H. DEAN,
Amazon.com., Inc., Seattle, WA.
                ______________________
2                 OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.

    Before TARANTO, MAYER, and HUGHES, Circuit Judges.
    Opinion for the court filed by Circuit Judge HUGHES.
      Concurring opinion filed by Circuit Judge MAYER.
HUGHES, Circuit Judge.
    OIP Technologies alleges that Amazon.com infringes a
patent that relates to a method of price optimization in an
e-commerce environment. The district court granted
judgment on the pleadings, concluding that the patent
does not claim patentable subject matter under 35 U.S.C.
§ 101. Because we agree with the district court that the
patent-in-suit claims no more than an abstract idea
coupled with routine data-gathering steps and conven-
tional computer activity, we affirm.
                              I
     In March 2012, OIP Technologies filed suit against
Amazon.com alleging infringement of U.S. Patent No.
7,970,713, which claims computer-implemented methods
for “pricing a product for sale.” See, e.g., ’713 patent col.
16 ll. 2–39 (claim 1). The ’713 patent explains that tradi-
tionally merchandisers manually determine prices based
on their qualitative knowledge of the items, pricing expe-
rience, and other business policies. In setting the price of
a particular good, the merchandiser estimates the shape
of a demand curve for a particular product based on, for
example, the good itself, the brand strength, market
conditions, seasons, and past sales. Id. at col. 1 ll. 62 –
col. 2 l. 2; col. 2 ll. 62–66. The ’713 patent states that a
problem with this approach is that the merchandiser is
slow to react to changing market conditions, resulting in
an imperfect pricing model where the merchandiser often
is not charging an optimal price that maximizes profit.
Id. at col. 2 ll. 13–19.
    Accordingly, the ’713 patent teaches a price-
optimization method that “help[s] vendors automatically
OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.          3

reach better pricing decisions through automatic estima-
tion and measurement of actual demand to select prices.”
Id. at col. 8 l. 15–17. Claim 1 recites:
   1. A method of pricing a product for sale, the
   method comprising:
       testing each price of a plurality of prices
       by sending a first set of electronic messag-
       es over a network to devices;
           wherein said electronic messages
           include offers of said product;
           wherein said offers are to be pre-
           sented to potential customers of
           said product to allow said poten-
           tial customers to purchase said
           product for the prices included in
           said offers;
           wherein the devices are pro-
           grammed to communicate offer
           terms, including the prices con-
           tained in the messages received by
           the devices;
           wherein the devices are pro-
           grammed to receive offers for the
           product based on the offer terms;
           wherein the devices are not con-
           figured to fulfill orders by provid-
           ing the product;
           wherein each price of said plurali-
           ty of prices is used in the offer as-
           sociated with at least one
           electronic message in said first set
           of electronic messages;
4                OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.

        gathering, within a machine-readable me-
        dium, statistics generated during said
        testing about how the potential customers
        responded to the offers, wherein the sta-
        tistics include number of sales of the
        product made at each of the plurality of
        prices;
        using a computerized system to read said
        statistics from said machine-readable me-
        dium and to automatically determine,
        based on said statistics, an estimated out-
        come of using each of the plurality of pric-
        es for the product;
        selecting a price at which to sell said
        product based on the estimated outcome
        determined by said computerized system;
        and
        sending a second set of electronic messag-
        es over the network, wherein the second
        set of electronic messages include offers, to
        be presented to potential customers, of
        said product at said selected price.
Id. at col. 16 ll. 2–39. Thus, claim 1 has the following
relevant limitations: (1) testing a plurality of prices; (2)
gathering statistics generated about how customers
reacted to the offers testing the prices; (3) using that data
to estimate outcomes (i.e. mapping the demand curve over
time for a given product); and (4) automatically selecting
and offering a new price based on the estimated outcome.
The dependent claims add various computer elements
such as including webpages as advertisements in the
second set of messages and generating statistics. See,
e.g., id. at col. 16 ll. 56–60 (claim 5), col. 18 ll. 1–22
(claims 17-18) .
OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.             5

    Amazon filed a motion to dismiss OIP’s complaint, ar-
guing that the ’713 patent is drawn to patent-ineligible
subject matter. The district court granted Amazon’s
motion, finding that the asserted claims merely use a
general-purpose computer to implement the abstract idea
of “price optimization” and is therefore ineligible for
patent protection under 35 U.S.C. § 101. J.A. 22. The
district court reasoned that without the “insignificant
computer-based limitations,” the claims merely “describe
what any business owner or economist does in calculating
a demand curve for a given product.” J.A. 28.
    OIP appeals. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
                              II
    We apply regional circuit law to the review of motions
to dismiss. K-Tech Telecomms., Inc. v. Time Warner
Cable, Inc., 714 F.3d 1277, 1282 (Fed. Cir. 2013). The
Ninth Circuit reviews appeals of a dismissal for failure to
state a claim under Federal Rule of Civil Procedure
12(b)(6) de novo. Id. Our review “is generally limited to
the face of the complaint, materials incorporated into the
complaint by reference, and matters of judicial notice.”
Id. Patent eligibility under 35 U.S.C. § 101 is an issue of
law reviewed de novo. Accenture Global Servs. v. Guide-
wire Software, Inc., 728 F.3d 1336, 1340–41 (Fed. Cir.
2013).
    A patent may be obtained for “any new and useful
process, machine, manufacture, or composition of matter,
or any new and useful improvement thereof.” 35 U.S.C.
§ 101. The Supreme Court has “long held that this provi-
sion contains an important implicit exception: Laws 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) (quoting Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct.
6                OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.

1289, 1293 (2012)). Under the now familiar two-part test
described by the Supreme Court in Alice, “[w]e must first
determine whether the claims at issue are directed to a
patent-ineligible concept,” such as an abstract idea. Alice
Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355
(2014). If so, we must then “consider the elements of each
claim both individually and ‘as an ordered combination’ to
determine whether the additional elements ‘transform the
nature of the claim’ into a patent-eligible application.” Id.
(quoting Mayo, 132 S. Ct. at 1298, 1297).
    Here, the claims are directed to the concept of offer-
based price optimization. Claim 1 broadly recites a
“method of pricing a product for sale,” and the specifica-
tion describes the invention as an “automatic pricing
method and apparatus for use in electronic commerce.”
’713 patent col. 2 ll. 49–50; id. at col. 1 ll. 27–31. This
concept of “offer based pricing” is similar to other “funda-
mental economic concepts” found to be abstract ideas by
the Supreme Court and this court. See, e.g., Alice, 134
S. Ct. at 2357 (intermediated settlement); Bilski v. Kap-
pos, 561 U.S. 593, 611 (2010) (risk hedging); Ultramercial,
Inc. v. Hulu, LLC, 772 F.3d 709, 715 (Fed. Cir. 2014)
(using advertising as an exchange or currency); Content
Extraction & Transmission LLC v. Wells Fargo Bank,
Nat’l Ass’n, 776 F.3d 1343, 1347 (Fed. Cir. 2014) (data
collection); Accenture Global Servs., GmbH v. Guidewire
Software, Inc., 728 F.3d 1336, 1346 (Fed. Cir. 2013)
(generating tasks in an insurance organization). And that
the claims do not preempt all price optimization or may be
limited to price optimization in the e-commerce setting do
not make them any less abstract. See buySAFE, Inc. v.
Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014) (collect-
ing cases); Accenture, 728 F.3d at 1345.
    Beyond the abstract idea of offer-based price optimi-
zation, the claims merely recite “well-understood, routine
conventional activit[ies],” either by requiring conventional
OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.               7

computer activities or routine data-gathering steps. Alice,
134 S. Ct. at 2359 (quoting Mayo, 132 S. Ct. at 1294)
(alterations in original). Considered individually or taken
together as an ordered combination, the claim elements
fail “to ‘transform’ the claimed abstract idea into a patent-
eligible application.” Id. at 2357 (quoting Mayo, 132
S. Ct. at 1294, 1298). For example, claim 1 recites “send-
ing a first set of electronic messages over a network to
devices,” the devices being “programmed to communi-
cate,” storing test results in a “machine-readable medi-
um,” and “using a computerized system . . . to
automatically determine” an estimated outcome and
setting a price. Just as in Alice, “all of these computer
functions are ‘well-understood, routine, conventional
activit[ies]’ previously known to the industry.” Alice, 134
S. Ct. at 2359 (quoting Mayo, 132 S. Ct. at 1294) (altera-
tions in original); see also buySAFE, 765 F.3d at 1355
(“That a computer receives and sends the information
over a network—with no further specification—is not
even arguably inventive.”). Moreover, the claims are
exceptionally broad and the computer implementation
limitations do little to limit their scope. Indeed, the
specification makes clear that this “programming” and
the related computer hardware “refers to any sequence of
instructions designed for execution on a computer sys-
tem.” ’713 patent col. 6 ll. 31–33.
    At best, the claims describe the automation of the
fundamental economic concept of offer-based price optimi-
zation through the use of generic-computer functions.
Both the prosecution history and the specification empha-
size that the key distinguishing feature of the claims is
the ability to automate or otherwise make more efficient
traditional price-optimization methods. For example, the
specification states that a core advantage of the invention
is reducing the “extremely high testing costs” of “[b]rute
force live price testing.” Id. at col. 3 ll. 10–11. Likewise,
8                OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.

the patentee distinguished traditional pricing research,
by emphasizing that “the techniques described in [the
prior art] generally cost more and take more time, and are
less accurate than the technique recited in [the claims].”
J.A. 393. And “automatically determining an estimated
outcome using each of the plurality of prices for the prod-
uct . . . means that pricing decisions are made with more
granularity.” J.A. 525. But relying on a computer to
perform routine tasks more quickly or more accurately is
insufficient to render a claim patent eligible. See Alice,
134 S. Ct. at 2359 (“use of a computer to create electronic
records, track multiple transactions, and issue simultane-
ous instructions” is not an inventive concept); Bancorp
Servs., L.L.C. v. Sun Life Assur. Co. of Can. (U.S.), 687
F.3d 1266, 1278 (Fed. Cir. 2012) (a computer “employed
only for its most basic function . . . does not impose mean-
ingful limits on the scope of those claims”); cf. DDR Hold-
ings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1258–59
(Fed. Cir. 2014) (finding a computer-implemented method
patent eligible where the claims recite a specific manipu-
lation of a general-purpose computer such that the claims
do not rely on a “computer network operating in its nor-
mal, expected manner”).
    Nor does the claims’ recitation of “present[ing] [offers]
to potential customers” and “gathering . . . statistics
generated during said testing about how the potential
customers responded to the offers” provide a meaningful
limitation on the abstract idea. These processes are well-
understood, routine, conventional data-gathering activi-
ties that do not make the claims patent eligible. See
Alice, 134 S. Ct. at 2359; Mayo, 132 S. Ct. at 1298. Like
the claims in Mayo, which added only the routine steps of
administering medication and measuring metabolite
levels for the purposes of determining optimal dosage,
here the addition of steps to test prices and collect data
based on customer reactions does not add any meaningful
OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.               9

limitations to the abstract idea. Mayo, 132 S. Ct. at
1297–98; see also Alice, 134 S. Ct. at 2357 (“‘Simply ap-
pending conventional steps, specified at a high level of
generality,’ was not ‘enough’ to supply an ‘inventive
concept.’”) (quoting Mayo, 132 S. Ct. at 1300, 1297, 1294);
see also Ultramercial, 772 F.3d at 716 (“[T]he steps of
consulting and updating an activity log represent insignif-
icant ‘data-gathering steps,’ . . . and thus add nothing of
practical significance to the underlying abstract idea.”)
(citations omitted).
    On appeal OIP focuses its arguments on comparing
the claimed invention to the invention found patent
eligible in Diamond v. Diehr, 450 U.S. 175 (1981). How-
ever, we must read Diehr in light of Alice, which empha-
sized that Diehr does not stand for the general proposition
that a claim implemented on a computer elevates an
otherwise ineligible claim into a patent-eligible improve-
ment. Alice, 134 S. Ct. at 2358. Rather, Diehr involved “a
‘well-known’ mathematical equation . . . used . . . in a
process designed to solve a technological problem in
‘conventional industry practice.’” Id. (quoting Diehr, 450
U.S. at 177, 178). Just as Diehr could not save the claims
in Alice, which were directed to “implement[ing] the
abstract idea of intermediated settlement on a generic
computer”, Alice, 134 S. Ct. at 2358–59, it cannot save
OIP’s claims directed to implementing the abstract idea of
price optimization on a generic computer. See id. at
2359–60 (“Nor do [the claims] effect an improvement in
any other technology or technical field.”) (citing Diehr, 450
at 177–78).
                              III
    We have considered all of OIP’s arguments and find
them unpersuasive. Because the ’713 patent claims the
abstract idea of offer-based price optimization and lacks
an “inventive concept” sufficient to “transform” the
10              OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.

claimed subject matter into a patent-eligible application
of that idea, we affirm.
                      AFFIRMED
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

             OIP TECHNOLOGIES, INC.,
                  Plaintiff-Appellant

                            v.

                 AMAZON.COM, INC.,
                   Defendant-Appellee
                 ______________________

                        2012-1696
                 ______________________
MAYER, Circuit Judge, concurring.
     I write separately to address the argument advanced
by OIP Technologies, Inc. that the district court erred in
resolving the patent eligibility issue on the pleadings.
Failure to recite statutory subject matter is the sort of
“basic deficiency,” that can, and should, “be exposed at the
point of minimum expenditure of time and money by the
parties and the court,” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 558 (2007) (citations and internal quotation
marks omitted). Addressing 35 U.S.C. § 101 at the outset
not only conserves scarce judicial resources and spares
litigants the staggering costs associated with discovery
and protracted claim construction litigation, it also works
to stem the tide of vexatious suits brought by the owners
of vague and overbroad business method patents. Accord-
ingly, where, as here, asserted claims are plainly directed
to a patent ineligible abstract idea, we have repeatedly
sanctioned a district court’s decision to dispose of them on
the pleadings. See, e.g., Content Extraction & Transmis-
2                OIP TECHNOLOGIES, INC.   v. AMAZON.COM, INC.

sion LLC v. Wells Fargo Bank, 776 F.3d 1343, 1349 (Fed.
Cir. 2014); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709,
717 (Fed. Cir. 2014); buySAFE, Inc. v. Google, Inc., 765
F.3d 1350, 1352 (Fed. Cir. 2014). I commend the district
court’s adherence to the Supreme Court’s instruction that
patent eligibility is a “threshold” issue, Bilski v. Kappos,
561 U.S. 593, 602 (2010), by resolving it at the first oppor-
tunity.