Versata Dev. Grp., Inc. v. SAP Am., Inc.

793 F.3d 1306

115 U.S.P.Q.2d 1681

VERSATA DEVELOPMENT GROUP, INC., Appellant

v.SAP AMERICA, INC., SAP AG, Appellees.

Under Secretary of Commerce for Intellectual Property, Director of the United States Patent and Trademark Office, Intervenor.

No. 2014–1194.

United States Court of Appeals, Federal Circuit.

July 9, 2015.

Jeffrey A. Lamken, MoloLamken LLP, Washington, DC, argued for appellant. Also represented by Nancy Jo Linck, Martin Moss Zoltick, Robert Danny. Huntington, Brian S. Rosenbloom, Rothwell, Figg, Ernst & Manbeck, P.C., Washington, DC.

Erika Arner, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Reston, VA, argued for appellees. Also represented by J. Michael Jakes, Michael A. Morin, Washington, DC; Edward R. Reines, Weil, Gotshal & Manges LLP, Redwood Shores, CA.

Melissa N. Patterson, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for intervenor. Also represented by Stuart F. Delery, Mark R. Freeman; Scott Weidenfeller, Nathan K. Kelley, Joseph Matal, William LaMarca, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA.

Dan L. Bagatell, Christopher S. Coleman, Perkins Coie LLP, Phoenix, AZ, for amici curiae Intel Corporation, Asustek Computer, Inc., Broadcom Corporation, HTC Corporation, ZTE (USA) Inc.

Ann A. Byun, Hewlett–Packard Company, Wayne, PA, for amicus curiae Hewlett–Packard Company.

Daryl Joseffer, Ashley Charles Parris, King & Spalding LLP, Washington, DC, for amicus curiae The Internet Association.

Michael E. Joffre, Melanie L. Bostwick, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC, for amici curiae Dell Inc., eBay Inc., Facebook, Inc., Limelight Networks, Inc., Newegg Inc., QVC, Inc., Rackspace Hosting, Inc., Red Hat, Inc., SAS Institute Inc., Vizio, Inc., Xilinx, Inc. Dell Inc. also represented by Anthony Peterman, Dell Inc., Round Rock, TX.

Suzanne Michel, Google Inc., Washington, DC, for amicus curiae Google Inc.

Barbara A. Fiacco, Donald Ross Ware, Sarah Burg, Foley Hoag LLP, Boston, MA, for amici curiae 3M Company, Caterpillar Inc., Eli Lilly and Company, General Electric Company, Johnson & Johnson, The Procter & Gamble Company, Amgen Inc., BP America, Inc., Glaxosmithkline LLC, Illinois Tool Works, Inc., Pfizer Inc., Qualcomm Incorporated, Sanofi US.

Before NEWMAN, PLAGER, and HUGHES, Circuit Judges.

Opinion for the court filed by Circuit Judge PLAGER.

Opinion concurring in part and dissenting in part filed by Circuit Judge HUGHES.

PLAGER, Circuit Judge.

Introduction

This is a covered business method (“CBM”) patent case, under § 18 of the Leahy–Smith America Invents Act (“AIA”), Pub.L. No. 112–29, 125 Stat. 284 (2011). It comes to us as an appeal of a final written decision of the Patent Trial and Appeal Board (“PTAB”),¹ the recently-created adjudicatory arm of the United States Patent and Trademark Office (“USPTO” or “Government”).² The case originated as a petition to the USPTO, submitted by appellees SAP America, Inc. and SAP AG (collectively, “SAP”), pursuant to the provisions of the AIA.

SAP requested that the USPTO institute review of the validity of certain claims in U.S. Patent No. 6,553,350 (“'350 patent”). The '350 patent is owned by the appellant, Versata Development Group, Inc. (“Versata”), who had sued SAP for infringing the patent. In its petition to the USPTO, SAP alleged that the patent was a covered business method patent.

Covered business method patents are subject to the special provisions of AIA § 18. See 125 Stat. at 329–31.³ Section 18 establishes a separately-designated transitional program⁴ under which the USPTO conducts post-grant review proceedings concerning the validity of covered business method patents. As the title suggests, the special program provided by § 18 is available only for “covered business method patents,” as that term is defined by the statute. However, for purposes of conducting proceedings thereunder, § 18 is considered a part of the broader chapter 32 provisions of title 35, U.S.Code, governing post-grant review (“PGR”), 35 U.S.C. §§ 321 –329 ; § 18 expressly incorporates, with certain exceptions not relevant here, the standards and procedures found in that chapter.⁵ § 18(a)(1).

In addition to the merits of the decision rendered by the PTAB (which held the claims at issue invalid), the parties to the appeal dispute several predicate issues. These include:

• if the PTAB makes an initial determination under § 18 of the AIA that the patented invention qualifies for “covered business method” treatment under § 18, may a court review that issue when reviewing as part of a final written decision the invalidation of claims under the authority of § 18?

• if the answer is yes, for purposes of post-grant review by the USPTO how is the term “covered business method patent” to be understood, and does the patent at issue here qualify as a CBM patent?

• if the PTAB correctly determines that under § 18 of the AIA a patent comes within the definition of a CBM patent, what are the criteria for determining whether the patent is excluded from review under § 18 because the patent falls within the statutorily-excepted category of “technological invention,” and how do those criteria apply to the '350 patent ?

• if, in deciding the merits of the case—the validity of the challenged claims in the patent—the PTAB is called upon to engage in claim construction, does the PTAB apply the USPTO's general rule of the “broadest reasonable interpretation,” or does it apply the judicial standard of the “one correct construction”?

• finally, on appeal at the final written decision stage to this court, during which we must decide whether the PTAB applied the substantive tests for validity correctly, may a court determine whether as an initial matter the PTAB chose the correct substantive tests to apply, and did the PTAB apply them correctly here?

After determining the answers to these queries, contested by the parties, as explained below, we address their application to the '350 patent at issue.

Background

The '350 Patent

Versata owns the '350 patent, entitled “method and apparatus for pricing products in multi-level product and organizational groups.” '350 patent, col. 1, ll. 1–3. The “invention operates under the paradigm of WHO (the purchasing organization) is buying WHAT (the product).” Id. at col. 3, ll. 24–25. An example of the WHO/WHAT paradigm, known in the prior art according to the patent, is depicted in Figure 1 of the '350 patent, reproduced below:

See id. at col. 4, ll. 17–18.

The '350 patent, however, states that prior art pricing tables for WHO/WHAT required large data tables. See id. at col. 1, ll. 52–59. The patent is said to improve upon the prior art and reduce the need for large data tables by, inter alia, arranging customers (purchasing organizations) into a hierarchy of customer groups and products into a hierarchy of product groups. Id. at col. 3, ll. 24–27, 41–42, 66—col. 4, l. 14. WHO is defined by the creation of an organizational hierarchy of organizational groups, where each group represents a characteristic of the organizational group. Id. at col. 3, ll. 24–27. Figure 4A of the patent, below, shows an example of an arrangement of an organizational group:

See id. at col. 4, ll. 24–25.

Similarly, a product group hierarchy is defined that can be applied to products (WHAT). Id. at col. 3, ll. 41–42. Pricing information is then associated with the customer and product groups. Id. at col. 8, ll. 17–25. Special pricing adjustments may be defined as applying to all members of a specific customer group or a specific product group. Id. at col. 3, ll. 26–49.

We are concerned with claims 17 and 26–29. Claim 17 recites a “method for determining a price of a product offered to a purchasing organization” comprising certain steps. Id. at col. 20, l. 66—col. 21, l. 29. Claim 26 recites a “computer readable storage media comprising: computer instructions to implement the method of claim 17.” Id. at col. 21, ll. 61–62. Claim 27 recites a “computer implemented method for determining a price of a product offered to a purchasing organization” comprising certain steps. Id. at col. 21, l. 63—col. 22, l. 12. Claim 28 recites a “computer readable storage media comprising: computer instructions to implement the method of claim 27.” Id. at col. 22, ll. 13–14. Claim 29 recites an “apparatus for determining a price of a product offered to a purchasing organization” comprising certain limitations. Id. at col. 22, ll. 15–35.

Claim 17 is representative:

A method for determining a price of a product offered to a purchasing organization comprising: arranging a hierarchy of organizational groups comprising a plurality of branches such that an organizational group below a higher organizational group in each of the branches is a subset of the higher organizational group; arranging a hierarchy of product groups comprising a plurality of branches such that a product group below a higher product group in each of the branches in a subset of the higher product group; storing pricing information in a data source, wherein the pricing information is associated, with (i) a pricing type, (ii) the organizational groups, and (iii) the product groups; retrieving applicable pricing information corresponding to the product, the purchasing organization, each product group above the product group in each branch of the hierarchy of product groups in which the product is a member, and each organizational group above the purchasing organization in each branch of the hierarchy of organizational groups in which the purchasing organization is a member; sorting the pricing information according to the pricing types, the product, the purchasing organization, the hierarchy of product groups, and the hierarchy of organizational groups; eliminating any of the pricing information that is less restrictive; and determining the product price using the sorted pricing information.

Id. at col. 20, l. 66—col. 21, l. 29.

Prior Litigation

On April 20,...