Thomas Brown | January 27, 2015
DDR Holding, LLC v. Hotels.com, L.P.
December 5, 2014
Panel: Wallach, Mayer, and Chen (Circuit Judges). Precedential Opinion by Chen, Dissenting Opinion by Mayer.
While not all claims purporting to address Internet-centric challenges are eligible for patent, a claimed solution that is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks constitutes patent eligible subject matter.
The defendants, collectively NLG, appealed a final judgment of the United States District Court for the Eastern District of Texas entered in favor of DDR Holdings. The jury found that NLG infringed two of DDR’s patents, U.S. Patent Nos. 6,993,572 and 7,818,399 and also found that these patents were not invalid. On appeal the CAFC found the ‘572 patent was anticipated under 35 U.S.C. § 102(a) and, remanded the case to the district court in order to determine the damages and prejudgment interest attributable solely to NLG’s infringement of the ’399 patent.
The ‘399 patent is directed to generating a composite web page that combines certain visual elements of a host website with content of a third-party merchant when an user clicks a hyperlink, for example an advertisement for the third-party merchant, on the host website. The composite web page allows the host to retain the user traffic and avoid a user from being lured away to a third-party merchant website. The generated composite web page is able to combine the logo, background color, and fonts of the host website with product information from the merchant. Representative claim 19 of the ’399 patent recites:
19. A system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising:
(a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements, which visually perceptible elements correspond to the plurality of first web pages;
(i) wherein each of the first web pages belongs to one of a plurality of web page owners;
(ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and
(iii) wherein the selected merchant, the outsource provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other;
(b) a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to:
(i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages;
(ii) automatically identify as the source page the one of the first web pages on which the link has been activated;
(iii) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and
(iv) using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page.
It has been a rough ride for business method or ecommerce patent owners since the Supreme Court decision in Alice v. CLS Bank last year. However, this case certainly provides some good news with the CAFC finding that the claims of the ‘399 patent are directed to patent-eligible subject matter. To determine eligibility, the two part test set forth by the Supreme Court is applied. Specifically:
Step 1-whether the claims at issue are directed to a patent ineligible abstract idea; and
Step 2-whether the elements of each claim, both individually and as an ordered combination, transform the nature of the claim into a patent-eligible application of that abstract idea – so called “significantly more” or “inventive concept.”
Chen begins his discussion by providing a background of § 101 cases and noting that distinguishing between claims that do or do not meet Step 2) can be difficult. Chen notes that back in the days of State St. Bank any computer-implemented invention was considered patentable as long as it produced a “useful, concrete and tangible result.” However, from Alice it is clear that implementing an abstract idea, such as intermediated settlement, on a generic computer is no longer enough, since such claims do not ensure that the claim in practice amounts to “significantly more” than a patent on an ineligible concept.
Applying Step 1) to the claims of the ‘399 patent, Chen acknowledges “that identifying the precise nature of the abstract idea is not as straightforward as in Alice or some of our other recent abstract idea cases,” and cites NLG numerous characterizations of the underlying abstract idea as a good illustration of this. However, Chen is not concerned with identifying the abstract idea in step 1), since the claims of the ‘399 patent satisfy Mayo/Alice step two.
However, Mayer in his dissent characterizes the abstract idea as an entrepreneurial goal “that an online merchant’s sales can be increased if two web pages have the same ‘look and feel.’” Here, Mayer is clearly trying to label the ‘399 patent as a business method patent.
A. Pre-Internet Technology
Applying Step 2), Chen notes that the claims of the ‘399 patent “stand apart” from the recent cases, such as Ultramercial, “because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.” “Instead, the patent claims call for an ‘outsource provider’ having a web server which directs the visitor to an automatically-generated hybrid web page that combines visual ‘look and feel’ elements from the host website and product information from the third-party merchant’s website related to the clicked advertisement.’”
In his dissent, Mayer argues that this “store within a store” concept, such as a warehouse store that contains a kiosk for selling a third-party partner’s cruise vacation packages, is the pre-Internet analog of the ’399 patent’s asserted claims. However, Chen’s does a good job of dismissing Mayer’s argument by noting that “[t]here is, however, no possibility that by walking up to this kiosk, the customer will be suddenly and completely transported outside the warehouse store and relocated to a separate physical venue associated with the third-party.”
Chen distinguishes the claims of the ‘399 Patent from the claims of Ultramercial, which were recently decided to be drawn to the patent-ineligible abstract idea of “offering media content in exchange for viewing an advertisement,” along with “routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet,” by finding that “[u]nlike the claims in Ultramercial, the claims at issue here specify how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink.”
C. Technology Art Test (Alice)
In his dissent, Mayer asserts that “Alice articulated a technological arts test for patent Eligibility”- explaining that the claims fell outside section 101 because it did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field”).” Mayer further asserts that “DDR’s patents fail to meet the demands of section 101 because they describe a goal—confusing consumers by making two web pages look alike—but disclose no new technology, or ‘inventive concept,’” and that DDR’s computer limitations are merely generic since the claims describe use of a “data store,” a “web page having a link,” and a “computer processor,” which are all conventional elements long-used in ecommerce.
However, Mayer appears to ignore the features recited in part (b) of claim 19, which requires that the computer server at the outsource provider … automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page. That is, these features do appear to disclose a new technology, or inventive concept and “effect an improvement in any other technology or technical field” and do not appear to be conventional elements long-used in ecommerce.
Chen finds that the claims of the ‘399 Patent do not preempt “the idea of increasing sales by making two web pages look the same” and instead “recite a specific way to automate the creation of a composite web page by an ‘outsource provider’ that incorporates elements from multiple sources in order to solve a problem faced by websites on the Internet.”
Mayer argues that “[t]he potential scope of DDR’s patents is staggering, arguably covering vast swaths of Internet commerce,” which seems like quite an overstatement since the jury only awarded DDR damages of $750,000 for infringement.
Claims directed to post internet technology that solve a specific technical feature, even if directed to ecommerce, should be patent eligible under Alice.