UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE PATENT TRIAL AND APPEAL BOARD. REDFIN CORPORATION Petitioner

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1 Paper No. 12 Date Entered: March 20, 2014 UNITED STATES PATENT AND TRADEMARK OFFICE BEFORE THE PATENT TRIAL AND APPEAL BOARD REDFIN CORPORATION Petitioner v. CORELOGIC SOLUTIONS, LLC Patent Owner Case CBM Before, MICHAEL P. TIERNEY, JONI Y. CHANG, and BRIAN J. McNAMARA, Administrative Patent Judges. McNAMARA, Administrative Patent Judge. DECISION Institution of Covered Business Method Patent Review 37 C.F.R

2 BACKGROUND Pursuant to 35 U.S. C. 321 and section 18 of the Leahy-Smith America Invents Act 1, Redfin Corporation. ( Petitioner ) filed a Petition requesting that the Patent Trial and Appeal Board initiate a covered business method patent review to review claims 1-20 (the challenged claims) of U.S. Patent No. 5,361,201 (the 201 Patent) 2. Paper 5 ( Pet. ). Corelogic Solutions, LLC ( Patent Owner ) filed a Patent Owner Preliminary Response. Paper 11 ( Prelim. Resp. ). We have jurisdiction under 35 U.S.C The standard for instituting a covered business method patent review is the same as that for a post-grant review. AIA 18(a)(1). The standard for instituting post-grant review is set forth in 35 U.S.C. 324(a), which provides: THRESHOLD The Director may not authorize a post-grant review to be instituted unless the Director determines that the information presented in the petition filed under [35 U.S.C. ] 321, if such information is not rebutted, would demonstrate that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable. Some of the claims of the 201 Patent challenged by Petitioner in this proceeding were the subject of a final decision and judgment in CBM , entered on January 30, Interthinx, Inc. v. Corelogic Solutions, LLC, CBM (PTAB Jan. 30, 2014) (Final Written Decision) (Paper 58). In CBM , we held that the 201 Patent meets the definition of a covered business method patent under 37 C.F.R and (a), that claims 1, 6, 9, and 10 of the 201 Patent recite unpatentable subject matter under 35 U.S.C. 101, and that claims 1, 6, 9 and 10 are anticipated under 35 U.S.C Thus, 1 Leahy-Smith America Invents Act, Pub. L. No , 125 Stat. 284, 329 (2011) ( AIA ). 2 Patent Owner disclaimed claim 5 in CBM

3 Petitioner s challenges to claims 1, 6, 9 and 10 under 35 U.S.C. 101, 102 and 103 in this proceeding are moot. In this proceeding, we address Petitioner s challenges to claims 2-4, 7, 8, and Petitioner s sole challenge is that claims 2-4, 7, 8, and fail to comply with the patentable subject matter requirements of 35 U.S.C Pet Claim 2 depends from claim 1, which we determined qualifies the 201 Patent for covered business method patent review under 37 C.F.R and 37 C.F.R (a). CM (PTAB Jan. 31, 2013) (Dec. to Institute) (Paper 16). We are persuaded that Petitioner has demonstrated it is more likely than not that claims 2-4, 7, 8, and do not recite patentable subject matter under 35 U.S.C. 101, and we institute a trial on these claims. PENDING LITIGATION A person may not file a petition under the Transitional Program for Covered Business Method Patents unless the person or the person s real party in interest or privy has been sued for infringement or has been charged with infringement under that patent. See AIA 18(a)(1)(B). Petitioner represents that it has been sued for infringement of the 201 Patent by Patent Owner in CoreLogic Information Solutions, Inc. v. Redfin Corporation, Civil Action No. 2:12-cv-305 (E.D. Texas). THE 201 PATENT (EXHIBIT 1001) Noting that traditional statistical techniques, such as multiple linear regression and logistical regression, have been tried in the past, the 201 Patent identifies uncertainty as to the optimal temporal and geographical sample size among the difficulties of applying a regression model to the appraisal problem. Ex. 1001, co1. 1, l col. 2, l. 16. The 201 Patent addresses these problems with a model development component and a property valuation component 3

4 implemented on a computer. Id. at col. 6, ll Using predictive modeling techniques, such as neural networks and regression modeling, the model development component uses training data describing a number of real estate properties, characteristics, and prices to build models containing information representing learned relationships among a number of variables and to develop error models, which are typically regression models, to estimate error in predicted sales prices. Id. at col. 6, ll The property valuation component feeds input data describing the subject property and its geographic area to the neural network models and error models to generate price estimates, error ranges, and other codes to be output to a display device, printer, or database for future access. Id. at col. 6, ll Challenged independent claims 3, 7 and 14 are method claims. Claim 3 is similar to claim 1 with the additional steps of developing and storing lower and higher percentile error models and, responsive to those models, generating signals representing an upper bound and lower bound of the property being appraised. Independent claim 7 recites an iterative process that includes applying the input data to a predictive model and ranking the results based on a measure of quality. Claim 14 recites a similar method in which a relative contribution for each element of the appraised property is determined, and a signal for a code for each contributing element is generated. Claims are apparatus claims. Independent claim 15 recites a system with training data and area data input means, individual property input means, a model development component, which trains the predictive model, and coupling to the predictive model. Dependent claim 17 recites the added limitation that the modeling component trains an error model. Dependent claim 19 recites that the modeling component trains an upper and lower percentile error model. 4

5 Claim 15 is illustrative: ILLUSTRATIVE CLAIM 15. A system for appraising a real estate property, comprising: a predictive model for determining an appraised value for the real estate property; training data input means, coupled to the predictive model, for obtaining training data; training data aggregation means, coupled to the training data input means, for aggregating the training data into training data sets, each training data set describing a plurality of sales within a geographic area; a model development component, coupled to the predictive model, for training the predictive model from the training data; a storage device for storing the trained predictive model; individual property data input means, coupled to the predictive model, for obtaining individual property data and sending the individual property data to the predictive model; area data input means, coupled to the individual property data input means and to the predictive model, for selecting a geographic area surrounding the real estate property, obtaining area data, and sending the area data to the predictive model; and an output device, coupled to the predictive model, for generating a signal indicative of the appraised value. CLAIM CONSTRUCTION We apply the same constructions as those we applied in CBM We note the 201 Patent is expired and that these are the same constructions applied by the district court in CoreLogic Information Solutions, Inc. v. Fiserv, Inc., No. 2:10-CV-132-RSP (E.D. Tex. Oct. 2, 2012). 5

6 101 SUBJECT MATTER ELIGIBILITY In CBM , a major point emphasized by Patent Owner is that the claims of the 201 Patent recite a computer-implemented method. Patent Owner reiterates that argument with respect method claims 2-14 in this proceeding. Prelim. Resp. 6. Patent Owner also argues that claims 15-20, which are drawn to a system, recite a different statutory class of claims under 35 U.S.C Id. at 4. The fact that a claim relies on a method that is implemented on a computer is not a per-se indicator of patentability. Rather, a challenged claim, properly construed, must incorporate enough meaningful limitations to ensure that what is claimed is more than just an abstract idea and is not a mere drafting effort designed to monopolize [an abstract idea] itself. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1297 (2012). In order for a machine to impose a meaningful limitation on the scope of a method claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly. SiRF Tech., Inc. v. Int l Trade Comm n, 601 F.3d 1319, 1333 (Fed. Cir. 2010). Claims that recite a method of doing business on a computer, and do no more than merely recite the use of the computer for its ordinary function of performing repetitive calculations, are not patent eligible. Bancorp Servs., L.L.C. v. Sun Life Assurance Co., 687 F.3d 1266, (Fed. Cir. 2012) (finding computer used for its most basic function, the performance of repetitive calculation, does not impose a meaningful claim limitation). Our inquiry is directed to whether the claims involve an intangible abstract concept and, if so, whether meaningful limitations in the claim make it clear that the claim is not to the abstract idea itself, but to a non-routine application of the idea. Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, 1349 n.2 (Fed. Cir. 2013). 6

7 A claim is not patent eligible if, instead of claiming an application of an abstract idea, the claim instead is drawn to the abstract idea itself. Ultramercial, 722 F.3d at In CBM , we held that the claimed development of a model to predict a value for a real estate property and an error model to assess the error range around the predicted value, as recited in claims 1 and 10, is an abstract concept. Interthinx, Inc. v. Corelogic Solutions, LLC, CBM , slip op. at Similarly, we held that claims 6 and 9, which recite limitations that bound the geographic area from which data is obtained to develop the model, recite the abstract and well-known concept of examining the geographic area around the subject property so that relevant samples can be obtained to predict the price of the property. Id. Challenged claim 2 further limits claim 1 by reciting that the error model is a regression model. Further limiting claim 1 to such a well-known modeling technique does not render claim 2 any less abstract than the method recited in claim 1. Thus, we are persuaded it is more likely than not that claim 2 recites subject matter that is not patentable under 35 U.S.C We reach a similar conclusion with respect to claim 11, which depends from claim 10, and also recites that the error model is a regression model. Independent claim 3 and dependent claim 4 recite a method similar to that of claim 1 with the added feature that the error model developed is an upper and lower percentile model (claim 3) and is implemented as a neural network (claim 4). Characterizing the error as a fixed number, a percent or a percentile, merely defines the type of output number. The type of output from the error model recited in claim 3, as recited in claim 4, does not change the abstract nature of using an error model with a predictive model to assess a possible range around the 7

8 predictive model s result. The 201 Patent describes a neural network as one in which a number of interconnected neuron-like processing elements send data to each other along connections whose strengths are represented by weights. Ex. 1001, col. 6, ll The model learns from examples by repeating input/output tasks, comparing the output to a desired output to measure error, and adjusting the weights to reduce the error. Id. at col. 7, ll Using real estate information as inputs to this well-known modeling approach to produce property appraisals merely limits the abstract modeling to the field of real estate appraisal, and is not an improvement to neural networking itself. Limiting an abstract modeling concept to a particular field of use alone does not result in patentable subject matter under 35 U.S.C See Parker v. Flook, 437 U.S. 584 (1978). Thus, we are persuaded that Petitioner has demonstrated that claims 3 and 4 recite subject matter that is not patentable under 35 U.S.C Independent claim 7 recites a method of appraising real estate using a model similar to that recited in claim 1, but applies some of the steps in developing the predictive model iteratively to rank, qualitatively, the outputs and adjust the model. Claim 7 merely recites the abstract concept of repeating the appraisal process to refine the model, but does not recite any steps that render the modeling less abstract and does not recite patentable subject matter. Where claim 4 recites a neural network model, dependent claim 8, which depends from claim 7, recites the individual steps described in the 201 Patent specification as implementing a neural network model. Thus, for the same reasons as those discussed above with respect to claim 4, we are persuaded that it is more likely than not that claim 8 recites subject matter that is not patentable under 35 U.S.C For the same reasons as those discussed above with respect to claims 3 and 4, we are persuaded that it is more likely than not that Petitioner will succeed in 8

9 demonstrating that claims 12 and 13, respectively, do not recite patentable subject matter. Claim 14 recites a method similar to that of claim 1, with the added limitations that the relative contributions of elements of the individual property that contribute to determining its appraised value are identified and coded. Generating a signal indicative of the reason code does not alter the abstract nature of the model itself. Generating such a signal provides the model the ability to produce an additional output display for the user, but does not render the process of appraising real estate any less abstract. Therefore, we are persuaded that Petitioner will more likely than not succeed at demonstrating that claim 14 recites subject matter that is not patentable under 35 U.S.C Claims are system claims. The specification of the 201 Patent describes the system as a having a central processing unit (CPU) that, in a conventional manner, accepts input from input device 105, uses program and data storage memory, and provides signals to an output device. Ex. 1001, col. 3, l. 59- col. 4, l. 31. These elements operate together to provide neural network models for appraisal as well as error models for generating error ranges for the appraised values. Id. at col. 2, ll The 201 Patent does not disclose any unconventional computing hardware. The specification also discloses that regression models and neural networks discussed in the specification are conventional. Id. at col.5, ll , col. 6, ll As discussed above, the 201 Patent discloses a model development component using training data 904 to build the model, e.g., a neural network model, and property valuation component 902 that feeds input data describing property 905 and geographic area data 906 to the predictive model and the error model. Ex. 1001, col. 6, l. 33 col. 11, l. 60 9

10 (discussing the model development component); id. at col. 11, l. 61 col. 14, l. 58 (discussing the property valuation component). Claim 15 recites that the model development component is coupled to the predictive model. The recited predictive model is used for determining an appraised value of real estate and is coupled to a training input means. We understand the corresponding structure for training input means, individual property data input means, and the area data input means recited in claim 15 to be input device 205. We understand the training data aggregation means coupled to the training data input means to be in CPU 101. Claim 15 does not recite any particular form of coupling or provide any details of the coupling. Thus, the coupling recited in claim 15 is a functional limitation that relates to providing information between the coupled elements, such as programming in CPU 101. Although it is possible for a programmed device to constitute patentable subject matter, we are persuaded that is not the case with respect to claim 15 of the 201 Patent. As previously discussed, we are persuaded that the models themselves are abstractions that are not patentable subject matter under 35 U.S.C 101. The limitations in claim 15 that recite coupling between the models, or between various elements of the models, are functional input-output limitations that do not contribute patentable subject matter. Thus, we are persuaded that it is more likely than not that claim 15 recites subject matter that is not patentable under 35 U.S.C We reach a similar conclusion with respect to system claims Claim 16 recites a neural network, which, as we discussed above, more likely than not does not add patentable subject matter. Claim 17 recites an error model, and claim 18 limits the error model to a regression model, which, as discussed above, more likely than not does not contribute patentable subject matter. Claim 19 is similar to 10

11 claims 3 and 4, but in the context of a system recites coupling between the models. As discussed with respect to claim 15, the recitation of such coupling more likely than not does not provide patentable subject matter. Claim 20 recites neural network models with percentile limitations on the error model. For the same reasons as discussed above, this combination of claim elements more likely than not does not recite patentable subject matter. SUMMARY The Petition is GRANTED as to the grounds asserted that claims 2-4, 7, 8, and are unpatentable under 35 U.S.C The Petition is DISMISSED as moot as to the ground asserted against claims 1, 6, 9, and 10 under 35 U.S.C. 101; and The Petition is DISMISSED as moot as to the grounds asserted against claims 1, 6, 9, and 10 under 35 U.S.C. 102 and 35 U.S.C ORDER In consideration of the foregoing, it is hereby: ORDERED that the Petition is granted FURTHER ORDERED that pursuant to 35 U.S.C. 324(a) a covered business method patent review of the 201 Patent is hereby instituted, commencing on the entry date of this Order, and pursuant to 35 U.S.C. 324(d) and 37 C.F.R. 42.4, notice is hereby given of the institution of a trial. FURTHER ORDERED that the trial is limited to the grounds identified in the above Summary, and no other grounds are authorized. 11

12 FURTHER ORDERED than an initial conference call with the Board is scheduled for 2:00 PM Eastern Time on April 23, The parties are directed to the Office Trial Practice Guide, 77 Fed. Reg. 48,756, 48, (Aug. 14, 2012) for guidance in preparing for the initial conference call, and should be prepared to discuss any proposed changes to the scheduling order entered herewith and any motions the parties anticipate filing during the trial. 12

13 PETITIONER: Richard T. Black Joel B. Ard FOSTER PEPPER, PLLC PATENT OWNER: W. Karl Renner David L. Holt Thomas A. Rozylowicz 13