Case: Document: 58 Page: 1 Filed: 09/28/ (Application No. 13/294,044) IN RE: MARIO VILLENA, JOSE VILLENA,

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1 Case: Document: 58 Page: 1 Filed: 09/28/ (Application No. 13/294,044) UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT IN RE: MARIO VILLENA, JOSE VILLENA, Appellants. Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board. USPTO S RESPONSE TO APPELLANTS PETITION FOR REHEARING AND REHEARING EN BANC THOMAS W. KRAUSE Deputy Solicitor ROBERT J. MCMANUS BENJAMIN HICKMAN Associate Solicitors Office of the Solicitor U.S. Patent and Trademark Office Mail Stop 8, P.O. Box 1450 Alexandria, Virginia (571) September 28, 2018 Attorneys for the Director of the United States Patent and Trademark Office

2 Case: Document: 58 Page: 2 Filed: 09/28/2018 TABLE OF CONTENTS STATEMENT OF THE ISSUE... 1 ARGUMENT... 2 CONCLUSION i

3 Case: Document: 58 Page: 3 Filed: 09/28/2018 TABLE OF AUTHORITIES Cases Page(s) Alice Corp. Pty. Ltd. v. CLS Bank Int l, 134 S. Ct (2014)... passim Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (Fed. Cir. 2015) Automated Tracking Solutions, LLC v. Coca-Cola Co., 723 F. App x 989 (Fed. Cir. 2018)... 7 Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018)... 2, 4, 6 Bilski v. Kappos, 561 U.S. 593 (2010)... 3, 6 Burnett v. Panasonic Corp., No , 2018 WL (Fed. Cir. Jul. 16, 2018)... 7 buysafe, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014)... 5, 7 Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat l Ass n, 776 F.3d 1343 (Fed. Cir. 2014)... 4 Eberra, In re, 730 F. App x 916 (Fed. Cir. 2018)... 7 Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016)... 9 Intellectual Ventures I LLC v. Capital One Bank, 792 F.3d 1363 (Fed. Cir. 2015)... 4, 5 Maxon, LLC v. Funai Corp., Inc., 726 F. App x 797 (Fed. Cir. 2018)... 7 Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012)... 3, 6, 9, 10 ii

4 Case: Document: 58 Page: 4 Filed: 09/28/2018 Move, Inc. v. Real Estate Alliance Ltd., 721 F. App x 950 (Fed. Cir. 2018)... 5 OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359 (Fed. Cir. 2015)... 3, 5, 7, 10 SAP America, Inc. v. Investpic, L.L.C., 898 F.3d 1161 (Fed. Cir. 2018)... 4, 7 Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138 (Fed. Cir. 2016) TLI Commc ns LLC Patent Litig., In re, 823 F.3d 607 (Fed. Cir. 2016)... 4 iii

5 Case: Document: 58 Page: 5 Filed: 09/28/2018 STATEMENT OF THE ISSUE Villena s claimed system uses generic computers to run algorithms that estimate real property values and to distribute those values. Villena did not invent the recited algorithms known as automated valuation method or AVM or even a new type of AVM. Villena s specification states that AVMs had been used in the real estate industry to estimate values for at least a decade at the time the application was filed and that users of the claimed system can employ any of those known AVMs. Villena s claims do not recite a technological improvement to the recited generic computer functionality. Villena simply uses computers to do what computers do run algorithms, store data, display it, etc. for real estate estimates. The Examiner accordingly rejected claims in Application No. 13/294,044 ( the 044 application ) under 35 U.S.C. 101 as reciting unpatentable subject matter. See Appx The Board affirmed the 101 rejection in its initial decision and upon rehearing. See Appx29-35; Appx1-8. This Court, in a non-precedential decision, affirmed the 101 conclusion. 1 The non-precedential decision here affirming the 101 conclusion does not merit rehearing by the panel or the entire Court. The decision neither breaks new 1 In a prior appeal, this Court affirmed without opinion the USPTO s rejection of similar claims for distributing real estate information in particular, AVM values on multiple bases, including 101. See In re Villena, No , ECF No. 87 (Oct. 13, 2016). 1

6 Case: Document: 58 Page: 6 Filed: 09/28/2018 ground in 101 jurisprudence nor runs afoul of it. Villena s rehearing petition, which inappropriately seeks to reargue the initial appeal, should be denied. ARGUMENT The decision here addresses the patent eligibility inquiry as a question of law and reviews it de novo, as have prior decisions from the Supreme Court and this Court. See Op See, e.g., Berkheimer v. HP Inc., 881 F.3d 1360, 1365, rehearing en banc denied, 890 F.3d 1369 (Fed. Cir. 2018). The panel correctly articulates the two-step framework for determining whether recited subject matter passes 101 scrutiny articulated by the Supreme Court s Alice decision. Op. 3. First, we must determine whether the claims at issue are directed to a patent-ineligible concept such as an abstract idea. Op. 3-4 (citing Alice Corp. Pty. Ltd. v. CLS Bank Int l, 134 S. Ct. 2347, 2355 (2014)). Second, if the claims are directed to an abstract idea, we must 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. Op. 4 (quoting Alice, 134 S. Ct. at 2357) (internal quotations omitted). Applying Alice step one, the panel decision concludes that Villena s claims recite a fundamental economic practice, specifically the familiar concept of 2 The Court s non-precedential panel decision is cited here as Op. Villena s rehearing petition is cited as Pet. The Director s merits brief is cited as RB. 2

7 Case: Document: 58 Page: 7 Filed: 09/28/2018 property valuation. Op. 4. The decision explains that this conclusion follows from the claims similarity to other methods for organizing human activity that were identified in Alice and Bilski as involving a fundamental economic practice long prevalent in our system of commerce. Op. 4 (quoting Alice, 134 S. Ct. at 2356 (quoting Bilski v. Kappos, 561 U.S. 593, 611 (2010))). Both the Supreme Court and this Court have endorsed the type of analysis conducted here under the Alice step one inquiry. See, e.g., Alice, 134 S. Ct. at ; Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 72 (2012); OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, (Fed. Cir. 2015). Villena s specification admits that those in the real estate industry have been estimating property values long before the application here was filed, yet Villena asserts that rehearing is required because the panel failed to cite factual evidence from the record to support its conclusion under Alice step one. Pet No decision either from this Court or the Supreme Court holds that Alice step one requires a court to provide a pinpoint citation to the record to identify something as a fundamental economic practice, and certainly not when the fundamental nature of that economic practice is indisputable. Even in Alice, where step one was disputed, the Court did not require record evidence to support its abstract idea conclusion. Pet. 7. The Court is an appellate body whose review is limited to the record below, and the Federal Circuit s en banc 3

8 Case: Document: 58 Page: 8 Filed: 09/28/2018 judgment affirmed by the Court in Alice did not cite to record evidence to support the conclusion that the claims were directed to an abstract idea. See Alice, 134 S. Ct. at Rather, the Court explained that it follows from our prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea. Id. The two textbooks and one scholarly article (only one of which was prior art) were offered by the Court only as examples of the conclusion, (e.g., [t]he use of a thirdparty intermediary (or clearing house ) is also a building block of the modern economy ). Id. Villena erroneously suggests that Berkheimer holds that there must be evidence supporting a conclusion under Alice step one. Pet This Court in Berkheimer held that Alice step two could contain underlying disputed questions of fact, but engaged in the same type of legal analysis when it addressed Alice step one as that employed by the panel here. See Berkheimer, 881 F.3d at (affirming the Alice step one conclusion because [t]hese claims are similar to claims we held directed to an abstract idea in prior cases, discussing In re TLI Commc ns LLC Patent Litig., 823 F.3d 607 (Fed. Cir. 2016), and Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat l Ass n, 776 F.3d 1343 (Fed. Cir. 2014)). Thus, like Berkheimer, this Court routinely affirms a lower tribunal s holding under Alice step one without requiring citation to record evidence. See, e.g., SAP America, Inc. v. Investpic, L.L.C., 898 F.3d 1161, (Fed. Cir. 2018); Intellectual Ventures I LLC v. Capital One Bank, 792 4

9 Case: Document: 58 Page: 9 Filed: 09/28/2018 F.3d 1363, (Fed. Cir. 2015); OIP Techs., 788 F.3d at ; buysafe, Inc. v. Google, Inc., 765 F.3d 1350, 1353 (Fed. Cir. 2014); see also Move, Inc. v. Real Estate Alliance Ltd., 721 F. App x 950, (Fed. Cir. 2018) (non-precedential) (affirming summary judgment holding that claims reciting method for collecting and organizing information about available real estate properties and displaying this information on a digital map embody abstract idea). Even if there could be a case where the Alice step one analysis required reliance on record evidence, this is not that case. Villena s specification admits that AVMs had been used to estimate real property values for nearly a decade when the subject application was filed. Appx7 (quoting Appx741 ( 15)). Villena s specification teaches that an artisan can use any of the known AVMs for that purpose. See Appx747 ( 36). And it is beyond genuine debate that individuals have been estimating the value of property whether real or intellectual, in their minds or using computer-implemented algorithms for many years, because that is how commerce works. Op. 4; see Appx33. This case is thus a poor vehicle for entertaining any changes to this area of the law. The non-precedential decision here also comports with settled precedent on Alice step two. The decision assesses whether the limitations in claim 57, either individually or as an ordered combination, transform the nature of the claims into a patent-eligible application of the abstract idea. Op. 4-5 (quoting Alice, 134 S. Ct. at 5

10 Case: Document: 58 Page: 10 Filed: 09/28/ , which quotes Mayo, 566 U.S. at 78)). Contrary to Villena s suggestion that the panel decision ignores limitations in claim 57 (Pet. 8-9), the decision acknowledges the claims basic steps of receiving user input, producing property valuations, and providing display information as well as the pre-processing limitations upon which Villena focuses in their Petition and correctly concludes that the limitations present a classic case of implementing an abstract idea on a computer, which is not eligible under Alice as a matter of law. Op. 5; Alice, 134 S. Ct. at 2358 ( These cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. ); see Mayo, 566 U.S. at 82 ( [S]imply appending conventional steps, specified at a high level of generality, to laws of nature, natural phenomena, and abstract ideas cannot make those laws, phenomena, and ideas patentable. ); Bilski, 561 U.S. at Villena incorrectly protests that the decision here violates Berkheimer by failing to identify evidence supporting the Alice step two conclusion. Pet The decision here correctly observes that, per Berkheimer, [n]ot every 101 determination contains genuine disputes regarding underlying facts material to the 101 inquiry. Op. 5 (citing Berkheimer, 881 F.3d at 1368). So it is here. There are no genuine disputes here on any possible factual questions under Alice step two. Pet. 6; see Op. 6 ( Applicants do not point to any unresolved factual disputes on Alice step two); ECF No. 37 (USPTO FRAP 28(j) response to Villena s post-briefing letter citing 6

11 Case: Document: 58 Page: 11 Filed: 09/28/2018 Berkheimer). Villena concede[d] before the Board that the claimed invention uses general purpose computers. Appx5-6; see Appx20. The plain claim language and specification confirm that the claimed invention uses standard, routine computer technology to implement the abstract idea of estimating property values, whether to generate values, store values, update data, display values on a map, etc. See Appx3-6; Appx743 ( 20-21). Thus, the Court here correctly concludes that Alice compels the conclusion that using a computer to perform routine computer activity does not impart subject matter eligibility to an otherwise abstract idea. Op. 5. Moreover, the conclusion here is consistent with scores of decisions (both before and after Berkheimer was decided on February 8, 2018) recognizing that the Alice step two inquiry may not involve any factual disputes. See, e.g., SAP America, 898 F.3d at ; Burnett v. Panasonic Corp., No , 2018 WL (Fed. Cir. Jul. 16, 2018) (non-precedential); In re Eberra, 730 F. App x 916, 918 (Fed. Cir. 2018) (non-precedential); Maxon, LLC v. Funai Corp., Inc., 726 F. App x 797, (Fed. Cir. 2018) (non-precedential); Automated Tracking Solutions, LLC v. Coca-Cola Co., 723 F. App x 989, 995 (Fed. Cir. 2018); OIP Techs., 788 F.3d at ; buysafe, 765 F.3d at For many of these same reasons, the two precedent-setting question[s] of exceptional importance proffered by Villena for en banc consideration are not implicated by this decision. Pet. 1. The non-precedential decision here did not hold 7

12 Case: Document: 58 Page: 12 Filed: 09/28/2018 or suggest that the USPTO need not comply with the APA in making 101 rejections. Id. As an initial matter, the issues reflected in Villena s first question such as whether the USPTO failed to supply evidence for any fact-bound questions in the 101 analysis here go to the merits of Villena s appeal from the Board. The non-precedential decision here rejected those challenges to the extent properly raised during merits briefing. See, e.g., Op. 5 ( Nor are we persuaded by Applicants argument that the Board failed to provide substantial evidence to support its [ 101] rejection. ). En banc rehearing is not a mechanism for receiving a second merits appeal of these types of case-specific grievances. In any event, the USPTO s patent-eligibility analysis comports with the law. First, the USPTO addressed all relevant claim limitations, both individually and collectively. Pet.4-5. See, e.g., RB at 15-18; Appx4-7; Appx32-35; Appx Second, there are no genuinely disputed questions of fact requiring substantial evidence on Alice step two, as already discussed. Granting rehearing en banc to address whether implementing an abstract idea using known computer technology recites patent eligible subject matter is also unnecessary. Pet. 1, Contrary to Villena s suggestion, neither the non-precedential decision of this Court nor the USPTO Board decision here holds that claims using computers are, per se, patent ineligible. Alice makes clear that the mere recitation of a generic computer cannot transform a patent-ineligible abstract 8

13 Case: Document: 58 Page: 13 Filed: 09/28/2018 idea into a patent-eligible invention. 134 S. Ct. at 2358 (discussing precedent like Mayo, Benson, Flook, and Diehr) (emphasis added). Alice also distinguishes between the patent-ineligible use of generic computer technology as a tool to implement the abstract idea (as in Alice), and the potentially patent-eligible recitation of improvements to the functionality of computer technology. See, e.g., Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016). These issues as they pertain to Villena s claims were explored during the administrative proceedings and on appeal; the panel correctly concludes that the computer technology limitations in Villena s claims, either considered individually or collectively, simply recite an abstract idea executed using computer technology and are thus ineligible under 101. Op. 5; see, e.g., RB at 17-23; Appx5-6 (explaining why Villena s claims are unlike those, for example, in Enfish). Lastly, Villena incorrectly asserts that the non-precedential decision contravenes Alice because it completely decouples preemption from the exceptions to patent eligibility. Pet. 2, The Supreme Court explained in Mayo that the preemption concern reflected in the 101 inquiry is a relative one: how much future innovation is foreclosed relative to the contribution of the inventor. Mayo, 566 U.S. at (observing that even narrow applications of patent-ineligible subject matter nevertheless impermissibly inhibit future research). The Court made clear that patent eligibility does not turn on how broadly or narrowly the subject 9

14 Case: Document: 58 Page: 14 Filed: 09/28/2018 claims may preempt. Id.; see OIP Techs., 788 F.3d at Mayo explained that the question is whether the additional features provide practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself. Mayo, 566 U.S. at 77. The Court in Alice recognized that its application of patent-ineligibility principles to claims like those here reciting an abstract idea with instructions to simply implement it using generic computer technology accords with the pre-emption concern that undergirds our 101 jurisprudence. Alice, 134 S. Ct. at 2358; see also Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015) ( When a patent s claims are deemed only to disclose patent ineligible subject matter..., preemption concerns are fully addressed and made moot. ). This remains true whether or not the deciding court expressly discusses preemption principles. By extension, the Supreme Court and this Court have both recognized that proper application of 101 principles does not turn on the application of either 102 or 103. See, e.g., Mayo, 566 U.S. at 89-90; Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016). The panel decision here abides by the law on

15 Case: Document: 58 Page: 15 Filed: 09/28/2018 CONCLUSION The non-precedential decision of this Court in this case does not conflict with governing precedent. And Villena fails to identify a question of exceptional importance mandating the consideration of the full Court. The request for rehearing should be denied. Respectfully submitted, September 28, 2018 /s/ Robert J. McManus THOMAS W. KRAUSE Deputy Solicitor ROBERT J. MCMANUS BENJAMIN HICKMAN Associate Solicitors Office of the Solicitor U.S. Patent and Trademark Office Mail Stop 8 P.O. Box 1450 Alexandria, Virginia robert.mcmanus@uspto.gov Attorneys for the Director of the United States Patent and Trademark Office 11

16 Case: Document: 58 Page: 16 Filed: 09/28/2018 RULE 32(g) CERTIFICATE OF COMPLIANCE I certify pursuant to Fed. R. App. P. 32(g) that the foregoing USPTO S RESPONSE TO APPELLANTS PETITION FOR REHEARING AND REHEARING EN BANC complies with the type-volume limitation required by the Court s rule. The total number of words in the foregoing response is 2,456 words as calculated using the Word software program. /s/ Robert J. McManus Robert J. McManus Associate Solicitor U.S. Patent and Trademark Office

17 Case: Document: 58 Page: 17 Filed: 09/28/2018 CERTIFICATE OF SERVICE I hereby certify that on September 28, 2018, I electronically filed the foregoing USPTO S RESPONSE TO APPELLANTS PETITION FOR REHEARING AND REHEARING EN BANC using the Court s CM/ECF filing system. Counsel for appellant was electronically served by and through the Court s CM/ECF filing system per Fed. Cir. R. 25(e). /s/ Robert J. McManus Robert J. McManus Associate Solicitor Office of the Solicitor U.S. Patent and Trademark Office Mail Stop 8 P.O. Box 1450 Alexandria, Virginia robert.mcmanus@uspto.gov