Craige Thompson – DDR Holdings v Digital River Case Study. What makes Software Patentable in the US.
Guest post by Craige Thompson
I’d like to tell you today about a very important case from 2014. This is part of our post-Alice software series of Litigation Quality PatentCasts because it’s about an important decision that’s often cited in prosecution and in litigation in favor of patent eligibility for software claims in certain circumstances.
“Alice” is the pivotal U.S. Supreme Court decision that shifted the landscape for software patents in 2014. In our post-Alice software series of Litigation Quality PatentCasts, we break down the impacts of this decision because it is often cited in prosecution and in litigation. The “Alice Analysis” determines whether a claim to software is even eligible for patent protection. At TPL, we regularly crack the Alice code, and one way to do that successfully is by using an analogy to patent software.
In Alice, the Supreme Court established a two-step test for analyzing whether claims are patent-eligible subject matter, or whether they’re too abstract to be patentable. A great case study to use to analogize in favor of software patent eligibility is known affectionately as the “DDR” case.
DDR Holdings v Digital River
DDR Holdings v Digital River is interesting because it’s cited a lot. It’s an oldie, but a goodie. I just wanted to get this one in because it’s kind of a classic, go-to case that we can analogize to when you’re trying to get patent claims through the Patent Office. Or keep them found valid and eligible and keep your patent together, from falling apart.
DDR Holdings was the patent owner. There were several plaintiffs: Hotels.com, Travelocity.com, Expedia.com, some cruise websites, Orbits, and Digital River. Several defendants, most of them settled out before trial, but a couple of them didn’t, such as NLG and Digital River.
An interesting footnote on obviousness is footnote number five of the DDR opinion. Addressing a very common question about what is patentable:
“On a fundamental level, the creation of new compositions and products based on combining elements from different sources has long been the basis for patentable inventions.” That’s from a US Supreme Court case from 1880. “Modern inventions very often consist merely of a new combination of old elements or devices where nothing is or can be claimed except the new combination.” And KSR, a 2007 Supreme Court case, which was very important to the law of obviousness, said, “[I]nventions in most, if not all, instances rely upon building blocks long since uncovered, and claimed discoveries almost of necessity will be combinations of what, in some sense, is already known.”
This is something I explain to a lot of clients and a lot of people are surprised by: A, B, and C are known, is A, B, and C combined, patentable? It’s a very important principle, I just found it interesting that it happened to be in this case.
For more information, check out the benefits of a Prior Art Search.
SOFTWARE ISSUES IN THIS CASE. WHAT’S THIS PATENT ABOUT?
DDR Holdings v Digital River is about a composite website software. Mind you, the original parent application was initially filed back in September of 1998. The internet was still young.
Basically, I think of it like Amazon, where you have a host website that has a look and feel to it, some design elements, some visual elements, logo, color scheme, the look and feel, background, and that would come from the host site. Just picture an Amazon page.
Then you’ve got all this information from other merchants, catalogue information about products from various merchants that are selling different stuff. For example, I bought this microphone that I’m talking to you on at Amazon, and there are several microphones from different merchants on Amazon’s website.
At the time, what was conventional, to help you understand what the technology is, when you clicked on a link for a product, say on that microphone, you would typically to go to that microphone manufacturer’s website. You would leave the website you were on, the host website, and you would go to the merchant’s website. Hosts didn’t like that.
The Facebooks and Googles of the world focus on trying to keep you on their internet properties and not leave. They’re trying to give you reasons to stay on their property so they can present ads to you. This DDR patent is really solving a problem for these host sites, from having merchants and products lure visitors off their website when you click on their links.
The software technology that’s claimed here in this patent is a way to create the hybrid, or composite webpage. When you click on that link saying, “Yes, I want more information about that microphone,” you do not leave the host website. Instead, it generates a new page dynamically that is a hybrid page, or composite webpage, that has the host background color and logo. You’re still on their website, but it also merges in the catalog product information for the microphone. That’s what the claims were directed to.
There were two patents that DDR had that were at issue here, and this was in the Eastern district of Texas before all the cases pretty much left the Eastern district of Texas, or largely probably wouldn’t be brought there today.
In the Eastern district of Texas, the jury said both patents were valid and infringed. This was after there was an Ex Parte reexamination where the Patent Office confirmed the validity of these claims on these two patents.
The defendants, represented by NLG and Digital River, appealed to the Federal Circuit as a judgement as a matter of law to overturn the jury verdict, basically saying, “Well, it should’ve been invalid, and they shouldn’t be infringed.”
I’ll just cut to the chase. One of the patents’ representative claim was half a page long. And I’m making a Litigation Quality Patent practice tip/pointer right now, just as an observation and a sidebar, this claim was half a page long for the first patent, the 572 patent, and it was found anticipated by prior art. A lot of people say, “Oh, I don’t like long claims, I like short claims. Give me a short claim because they’re better.”
If by better you mean invalid, I guess you’re right. That claim was found anticipated by the Federal Circuit here, so it died. The half page long claim, in this case, didn’t make it. A similar claim that was about 1.2 pages long, a little bit longer than a page, was found valid and infringed by the Federal Circuit.
Just an example, short claims aren’t always better because there are fewer limitations, and thus fewer features that you can distinguish the prior art. If you can’t distinguish the prior art, the claims will be found invalid because you don’t have something in there that’s new, what I call the Point of Novelty. This hopefully illustrates that point because I get that question a lot.
Why do we typically have longer claims? I want your claims to be valid and infringed, not just short, anticipated, and dead. These claims were drafted very well and very skillfully. I was impressed. They used similar drafting techniques that I’m familiar with and use all the time. It was valid and infringed, an excellent claim. The claim was a little bit long, but that’s ok, it did its job.
WHAT IS THE CHALLENGE OF THE 101 ISSUE?
What is the challenge of the 101 issue, or whether the claim is eligible subject matter under 35 USC 101? That’s the Alice challenge to patent eligibility.
Let me just give you the background of the 101 issue. The Supreme Court laid down this framework, under section 101, to distinguish patents that claim patent-ineligible subject matter (laws of nature, natural phenomenon, and abstract ideas) from those that are patent-eligible. Courts look at the nature of the invention and they determine whether the claims are patent-eligible or not, using this Alice framework. It’s a two-step test.
First, consider the elements of each claim both individually and as an ordered combination. And in DDR Holdings v Digital River, it was the ordered combination that saved these claims and they were found patent-eligible. In the second step they’re searching for an inventive concept. If it’s an abstract idea (law of nature, natural phenomenon, mathematical formulas, those types of things are typically challenged as too abstract), distinguishing between claims that recite patent-eligible inventions and claims that add too little to be patent-eligible can be difficult.
The lines are not always clear. That’s why we analyze case by case. By analogizing to cases like this one, DDR, which is a classic, we can determine whether the new fact pattern matches something like DDR’s fact pattern with the composite webpage in this case.
To give you a little bit of history, at one time computer implemented invention was considered patent-eligible so long as it produced a useful, concrete, and tangible result. That was the State Street Bank decision. Back in 1998, finding a machine that transformed data, by a series of mathematical calculations to a final share price, was patent-eligible back then. The view then was that those inventions surpassed the eligibility threshold because they were technological by nature and historically you could get a patent for those inventions.
That’s where we got the Machine or Transformation test, where an idea had to be tied to a particular machine or apparatus and that’s all you needed to do to worry about 101. In subsequent years, there was the Bilski decision that threw out the Machine or Transformation test.
Today, if your patent claim is tied to a machine or causes a transformation, that’s interesting and maybe sheds some light on whether it’s 101 eligible, but it’s not enough. The Machine or Transformation test is essentially worthless; it doesn’t get you there anymore. It’s not really used very much, although they did argue it, as it was a helpful factor to consider in this case.
Here’s a point about inventive concept. Simply implementing a mathematical principle on a physical machine, namely a computer, is not a patentable application of a principle. That was the Gottschalk v. Benson, a very famous 1972 case, one of the original cases in the 101 law. And since Alice, there’s no doubt that just reciting generic computer limitations does not make an otherwise ineligible claim patent-eligible. The fact that a computer exists in the physical, rather than the purely conceptual realm, is beside the point and irrelevant.
SUPREME COURT PRECEDENTS OF WHETHER SOMETHING IS PATENT ELIGIBLE
Here are some other points to give you a flavor. I want to take this opportunity to finish the historical fleshing out of where this all came from, so you can really understand whether something is patent-eligible. You can start to figure it out. There’re some important principles to know:
- We know that mathematical algorithms, including those executed on a generic computer, are abstract ideas and can’t be patented.
- We know that some fundamental economic and conventional business practices are also abstract, that was the Bilski case.
- In Bilski, they said a “fundamental economic practice” of hedging is not eligible. In some instances, patent-ineligible, abstract ideas are plainly identifiable and divisible from the generic computer limitations recited by the remainder of the claim.
- In Alice, the Supreme Court determined that the claims “simply instruct[ed] the practitioner to implement the abstract idea of intermediated settlement on a generic computer.”
- In Ultramercial v. Hulu in 2014, “the claims merely recited the abstract idea of using advertising as a currency as applied to the …technological environment of the Internet, which is not patent-eligible.
- In Buysafe v. Google in 2014, “the claims recited no more than using a computer to send and receive information over a network … to implement the abstract idea of creating a ‘transaction performance guarantee.’”
- In Accenture Global, that’s in 2013, “the claims merely recited ‘generalized software components arranged to implement an abstract concept [of generating insurance-policy-related tasks based on rules to be completed upon the occurrence of an event] on a computer.’”
- And in Bankcorp Services, that was in 2012, “the claims recited no more than the use of a computer ‘employed only for its most basic function, the performance of repetitive calculations,’ to implement the abstract idea of managing a stable-value protected life insurance policy.”
These Supreme Court precedents all have the commonality that they were “recited too broadly and generically to be considered sufficiently specific and meaningful applications of their underlying abstract ideas.” You want to describe a specific technical application, not the abstract concept. You want to apply a specific way of getting to a result, not just claiming the result.
As I often say, “The game is won or lost by the level of abstraction. Too high, it’s ineligible. You have to be more specific and more detailed.”
ALICE STEP ONE
Let’s turn to the first DDR patent here in our case. Using the Alice step one, the court determined whether the computer-implemented claims are directed to a patent-ineligible abstract idea. Here the claims do not recite a mathematical algorithm, and they’re not a fundamental economic or longstanding commercial practice. Even though the claims do address a business challenge, which is keeping your website visitors from jumping ship by clicking on a product and leaving your website property, it is a challenge particular to the internet.
The fact that it’s a solution to a business problem doesn’t mean you can’t get a patent on it. The claim is properly constructed as a technical solution. That’s why this works. So that’s why you analogize to DDR. It’s not just the facts, you must construct the claim on the same principle.
These claims stand apart from all those other ones that weren’t patent-eligible that I mentioned because they do not merely recite the performance of some business practice known from the pre-internet world and just say, “We’ll do it on the internet,” or, “Do it with a computer.”
The solution that is being claimed in this patent is necessarily rooted in computer technology to overcome a problem specifically arising in the realm of computer networks. And that’s the principle that DDR Holdings v Digital River often gets cited for. These claims address the problem of retaining website visitors that would normally, under a conventional operation of the internet as of 1998, be instantly transported off the host’s website after clicking on an advertisement and activating a hyperlink.
The claim itself, which I think is brilliantly drafted, is about the merchant and the webpage owners, and who owns which computers.
For example, “The first webpage belongs to one of the plurality of webpage owners.” I don’t even know if that has any patentable weight whatsoever, but it makes the claim longer and it helps focus the claim on an application, so it wins. It does the job.
I’m going skip over some of that language and just tell you the technological part that I think really matters, although I think the other stuff about the merchant, the owner, and the outsource provider is interesting in how the three parties work together to accomplish this.
This is “a system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising … A computer server at the outsource provider, which computer server is coupled to the computer store,” which is the memory, “and programmed to 1) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first webpages; 2) automatically identify as the source page the one of the first webpages on which the link has been activated; 3) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and 4) using the data retrieved, automatically generate and transmit to the web browser, a second webpage that displays: a)information associated with the commerce object,” that’s your product information, “associated with the link that has been activated, and b) the plurality visually perceptible elements visually corresponding to the source page.” That’s the look and feel of the host site.
That is a well-put-together claim. A good example to model.
NOT ALL THE CLAIMS THAT PURPORT TO ADDRESS INTERNET-CENTRIC CHALLENGES ARE PATENT ELIGIBLE
The court cautioned that not all the claims that purport to address internet-centric challenges are patent-eligible. For example, in the recently decided Ultramercial decision back in 2014, “the patentee argued that its claims were directed to a specific method of advertising and content distribution that was previously unknown and never employed on the internet before. But this alone could not render its claims patent-eligible.”
I’m giving you the positives and the negatives of what works and what doesn’t work.
“The court found the claims to merely recite the 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.’”
In modern cases, like this year there’s a lot of talk about the Burkheimer memo, the language has evolved into what’s well known, well understood, routine, and conventional in the industry. That’s the buzz phrase now that wasn’t fully developed a few years back when this case came out.
These claims are different enough in substance from those in Ultramercial because they do not broadly and generically claim the use of the internet to perform an abstract business practice with insignificant post-solution activity.
Unlike Ultramercial, the claims in the DDR patent specified how interactions with the internet are manipulated to yield a desired result. They detail that when you get a click, you’ve picked this data associated with X information and in response to that you do the other thing, a very good formulation for a claim. This overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink. It’s basically not conventional, and not ordinary or routine.
Instead of the computer network operating in its normal, expected manner by sending the website visitor to a third-party website that appears to relate to the advertisement, the claimed system generates and directs the visitor to the above described hybrid webpage that presents product information from the third party and the visual look and feel of the host. That was unique and different and specific, how they did it. There are other ways to do it. They’re not claiming every way to do it, so there was no preemption problem. They were not attempting to stop everybody from creating a hybrid webpage, they just had a process or sequence of steps in that ordered combination that was specific enough of an application that it was patent-eligible.
I want to just say this is a great case, it still has a lot of legs to it, even though the language it uses and the rhetoric of how we argue this has been polished and refined a little bit since the DDR decision came out. DDR Holdings v Digital River has a lot of good principles in it. It’s foundational, with some good historical background so you can appreciate what works and what doesn’t work. It also does a lot of contrasting with things that are not patent-eligible, so you can see where this case came from and how it crosses over from the patent ineligible to the patent-eligible.
And with that, I want to wish you a profitable day!
The original article was published here https://thompsonpatentlaw.com/case-study-ddr/