eBay Inc.v.Paid, Inc.Download PDFPatent Trial and Appeal BoardSep 16, 201511755659 (P.T.A.B. Sep. 16, 2015) Copy Citation Trials@uspto.gov Paper No. 37 571-272-7822 Entered: September 16, 2015 UNITED STATES PATENT AND TRADEMARK OFFICE _____________ BEFORE THE PATENT TRIAL AND APPEAL BOARD ____________ EBAY, INC., Petitioner, v. PAID, INC., Patent Owner. ____________ Case CBM2014-00127 Patent 7,930,237 ____________ Before JAMES P. CALVE, THOMAS L. GIANNETTI, and KRISTINA M. KALAN, Administrative Patent Judges. CALVE, Administrative Patent Judge. FINAL WRITTEN DECISION 35 U.S.C. § 328(a) and 37 C.F.R. § 42.73 CBM2014-00127 Patent 7,930,237 2 I. INTRODUCTION A. Background eBay, Inc. (“Petitioner” or “eBay”) filed an Amended Petition (Paper 4) seeking institution of a covered business method patent review of claims 1–19 (all claims) of U.S. Patent No. 7,930,237 B1 (Ex. 1001; “the ’237 Patent”) pursuant to 35 U.S.C. § 321. Paid, Inc. (“Patent Owner”) filed a Preliminary Response. Paper 12 (“Prelim. Resp.”). Based on these papers, we instituted trial as to claims 1–19. Paper 15 (“Institution Decision”). After institution, Patent Owner filed a Response (Paper 22, “PO Resp.”) and Petitioner filed a Reply (Paper 25, “Pet. Reply”). The parties also rely on fact and expert testimony. Petitioner proffered the Declaration of Philip Greenspun, Ph.D. (Ex. 1003, “Greenspun Decl.”) with the Petition. Patent Owner proffered the Declaration of Alfred Weaver, Ph.D. (Ex. 2003, “Weaver Decl.”) with its Response. A transcript of Dr. Weaver’s deposition (Ex. 1023, Weaver Dep.”) was submitted by Petitioner. Patent Owner relies also on a declaration of co-inventor Richard Rotman (Ex. 2004, “Rotman Decl.”) and a supplemental declaration of Mr. Rotman (Ex. 2086, “Rotman Suppl. Decl.”). The Rotman Supplemental Declaration includes Exhibits 2035–2085, which are subject to a motion to exclude (Paper 27). See infra. This case is related to three other Board proceedings involving related patents. These proceedings and the patents involved are CBM2014-00125 (U.S. Patent No. 8,352,357), CBM2014-00126 (U.S. Patent No. 8,521,642), and CBM2014-00128 (U.S. Patent No. 8,635,150). These cases were consolidated for argument but are decided separately. Oral Hearing for all four cases was held on June 9, 2015. A transcript of the argument is entered in the record as Paper 36 (“Hearing Tr.”). CBM2014-00127 Patent 7,930,237 3 We have jurisdiction under 35 U.S.C. § 6(c). This Final Written Decision is entered pursuant to 35 U.S.C. § 328(a). For reasons that follow, we conclude that Petitioner has demonstrated by a preponderance of the evidence that claims 1–19 of the ʼ237 patent are unpatentable because they are directed to patent-ineligible subject matter under 35 U.S.C. § 101. We also conclude that Petitioner has demonstrated by a preponderance of the evidence that claims 1–19 are unpatentable under 35 U.S.C. § 103(a). B. Related Matters Petitioner states that it was sued for infringement of the’237 patent in PAID, Inc. v. eBay Inc., No. 4:13-cv-40151-TSH (D. Mass.). Pet. 4 (citing Ex. 1004). The complaint in that action included U.S. Patent Nos. 8,352,357 (“the ’357 patent”) and 8,521,642 (“the ’642 patent”), and was amended to include U.S. Patent No. 8,635,150 (“the ’150 patent”). Exs. 1004, 1005. In addition, as noted above, Petitioner has filed Petitions for covered business method patent review of the ’357 patent (CBM2014-00125), the ’642 patent (CBM2014-00126), and the ’150 patent (CBM2014-00128). Decisions on those proceedings are being issued with this decision. C. The ’237 Patent (Ex. 1001) The ʼ237 patent relates to improvements in on-line auctions. 1 The ’237 patent discloses that conventional online auctions do not offer the buyer complete information about the real cost of the auction. Ex. 1001, 4:4–6. This is because they do not specify exact shipping cost information. Id. at 1 The ’237 patent discloses that the term “auction” includes situations where a seller offers goods online via a bidding process as well as reverse auctions and direct online product offerings. Ex. 1001, 1:61–66; Weaver Decl. ¶ 25. CBM2014-00127 Patent 7,930,237 4 4:6–7. According to the ʼ237 patent, the improved auction method and system include a shipping calculator. The shipping calculator can prompt a potential buyer to enter information necessary to determine shipping cost. Id. at 4:7–13. That information may include entry of the ZIP code of the buyer on a screen display. When the buyer enters ZIP code information, the buyer may initiate the shipping calculator by clicking a display button. Id. at 4:16–19. Figure 14, reproduced below, illustrates the calculator operations. Figure 14 is a flow chart of a process for generating shipping rates. At step 1402, the system initiates a rate engine in response to a buyer input, such as clicking on the calculator button appearing on the computer screen. See Ex. 1001, Fig. 5. Next, at step 1403, the system retrieves the seller shipping preferences from a data storage facility. If multiple items are purchased, the system recognizes this at step 1404. Id. at 10:53–11:5. At step 1407, the system queries the seller’s preferences to determine whether the shipping rate is a fee-based rate. If so, the fee-based rate is CBM2014-00127 Patent 7,930,237 5 calculated at step 1409. If not, at step 1408, an algorithm is applied to determine the packaging for the items to be shipped. Id. at 11:13–32. At step 1410, the system determines the location of the seller and the buyer based on data entered in interaction with the servers of the system. At step 1412, the system calculates and stores a rate factor based on the location of the buyer and seller. Id. at 11:35–39. At step 1414, the system queries whether weight is a factor in the calculation, and if so, the system at step 1418 calculates and stores a weight factor for the item. At step 1420, the system queries whether taxes apply and at step 1422, calculates and stores a tax factor. Id. at 11:39–45. At step 1424, the system queries whether insurance charges apply, and if so calculates and stores an insurance factor at step 1428. At step 1430, the system queries whether a handling charge by the seller and, at step 1432, the system calculates and stores a handling factor. Once all of these factors are determined, the system calculates a rate at step 1434. Id. at 11:45–59. D. Illustrative Claim Claim 1, the sole independent claim, is reproduced below. 1. A method for calculating shipping rates for an online open-bidding auction, comprising: receiving a seller’s shipping preferences via a computer network, the seller’s shipping preferences to be stored at least one first storage facility, wherein the seller’s shipping preferences comprise a preference to ship one or more auction items, a preference to ship from one or more seller shipping locations, and a preference to ship via one or more shipping methods, wherein the seller’s shipping preferences are electronically selected by the seller to be utilized in one or more online open-bidding auctions initiated by the seller; CBM2014-00127 Patent 7,930,237 6 receiving shipping characteristics of at least one auction item, the shipping characteristics to be stored at least one second storage facility, wherein the shipping characteristics comprise at least one physical characteristic of the at least one auction item; receiving auction listing characteristics of the at least one auction item, the auction listing characteristics to be stored at least one third storage facility, wherein the auction listing characteristics comprise a description of the at least one auction item; providing an online auction listing for the at least one auction item in an online open-bidding auction initiated by the seller, wherein the online auction listing comprises the auction listing characteristics of the at least one auction item, at least one entry option to allow a buyer to enter of an indicator of a buyer’s shipping location, and at least one request option to allow a buyer to request a shipping rate calculation; receiving a buyer’s request via the online auction listing to calculate at least one shipping rate for the at least one auction item in the online open-bidding auction; electronically calculating the at least one shipping rate based at least in part upon at least one selected shipping method, at least one selected seller shipping location, the buyer’s shipping location, the shipping characteristics of the at least one auction item, and an amount of at least one auction bid associated with the at least one auction item, wherein the amount of the at least one auction bid is based upon at least one bid amount provided by one or more of the buyer, the seller, and a third party; and electronically presenting the at least one calculated shipping rate to the buyer; wherein the at least one shipping rate may be calculated at any time during the online open-bidding auction for electronic presentation to the buyer. E. The Asserted Grounds The following prior art is relied upon by Petitioner: CBM2014-00127 Patent 7,930,237 7 1. PCT Pub. WO 01/55931 A1, published August 2, 2001 (Ex. 1010, “Van Zandt”). 2. Screenshots of the iShip.com Web site, www.iShip.com, obtained through the Wayback machine (Exs. 1011–1014, “iShip.com”). 3. Screenshots of the PriceGrabber.com Web site, www.pricegrabber.com, obtained through the Wayback machine (Ex. 1015, “PriceGrabber.com”). 4. U.S. Patent No. 5,960,411, issued September 28, 1999 (Ex. 1016, “Hartman”). 5. PCT Pub. No. WO 00/70519, published November 23, 2000 (Ex. 1017, “Falic”). 6. Applicant’s Admitted Prior Art (“AAPA”). Trial was instituted on the following grounds: 1. Whether claims 1–19 are directed to patent-ineligible subject matter under 35 U.S.C. § 101. 2. Whether claims 1–9 and 16–19 are unpatentable over Van Zandt and iShip.com under 35 U.S.C. § 103(a). 3. Whether claims 12 and 13 are unpatentable over Van Zandt, iShip.com, and Hartman under 35 U.S.C. § 103(a). 4. Whether claims 1–9 and 16–19 are unpatentable over Van Zandt, iShip.com, and PriceGrabber.com under 35 U.S.C. § 103(a). 5. Whether claims 12 and 13 are obvious over Van Zandt, iShip.com, PriceGrabber.com, and Hartman under 35 U.S.C. § 103(a). 6. Whether claims 10, 11, and 14–16 are unpatentable over Van Zandt, iShip.com, and Falic under 35 U.S.C. § 103(a). CBM2014-00127 Patent 7,930,237 8 7. Whether claims 1–9 and 16–18 are unpatentable over AAPA and iShip.com under 35 U.S.C. § 103(a). 8. Whether claims 10–15 and 19 are unpatentable over the AAPA, iShip.com, and Falic under 35 U.S.C. § 103(a). 9. Whether claims 1–9 and 16–18 are unpatentable over the AAPA, iShip.com, and PriceGrabber.com under 35 U.S.C. § 103(a). 10. Whether claims 10–15 and 19 are unpatentable over the AAPA, iShip.com, Falic, and PriceGrabber.com under 35 U.S.C. § 103(a). II. ANALYSIS A. Claim Construction The Board interprets claims using the broadest reasonable construction. Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,766 (Aug. 14, 2012); 37 C.F.R. § 42.300(b). There is a “heavy presumption” that a claim term carries its ordinary and customary meaning. CCS Fitness, Inc. v. Brunswick Corp., 288 F.3d 1359, 1366 (Fed. Cir. 2002). In instituting trial, we interpreted three claim terms. Institution Decision 9–11. Patent Owner argues that Petitioner’s “proposed claim constructions . . . attempt to read distinctly claimed elements out of the claims” and should be rejected. PO Resp. 10. These arguments are not persuasive for the reasons set forth in the Institution Decision, and we thus adopt the interpretations provided therein. Based upon the submissions of the parties and their respective positions regarding Van Zandt, discussed infra, we determine that it is necessary to construe an additional claim term. “at least one shipping rate” (claim 1) Patent Owner asserts that the “shipping rate” “is the rate that the user is charged to ship—i.e., transport—the item.” PO Resp. 34. Patent Owner CBM2014-00127 Patent 7,930,237 9 contrasts this rate with the total cost to a buyer, which includes, for example, item price, shipping, handling, taxes, and insurance. Id. at 34–36. Patent Owner, relying on Figure 13 of the ’237 patent and the testimony of its expert, Dr. Weaver, further defines shipping rate as “what it costs to move a package from place to place,” in contrast with “shipping cost” or “total cost,” which encompass other preferences of the buyer or seller. Hearing Tr. 80:22–81:24; Weaver Dep. 67:14–22, 107:19-109:5. Relying on Figures 10 and 14 of the ’237 patent, Petitioner asserts that “shipping rate” refers to more than transportation cost and also may include tax, insurance, and handling. Pet. Reply 7–8; see Hearing Tr. 9:15–25. Under the broadest reasonable interpretation standard, the “claims should always be read in light of the specification and the teachings of the underlying patent.” Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292, 1297–98 (Fed. Cir. 2015). We interpret the term “shipping rate” to mean “the overall or total cost of sending an auction item to a buyer.” This interpretation is consistent with the ’237 patent specification’s disclosure of shipping calculator system 1000 and its rate engine 1024 for calculating shipping rates as shown in Figure 10, reproduced below. Ex. 1001, 6:29–33. CBM2014-00127 Patent 7,930,237 10 Figure 10 shows a computer-based system with a shipping calculator. The ’237 patent discloses that rate engine 1024 includes modules that calculate factors contributing to the “overall shipping rate” like shipping rate engine 1028, tax rate engine 1030, insurance rate engine 1032, packaging algorithm engine 1033, and fee-based rate engine 1034. Id. at 7:36–41. Shipping rate engine 1028 calculates a basic shipping rate for an item based on the distance between seller and buyer locations, the weight of the item, the weight of any packaging, and method of shipment. Id. at 8:25–33. Tax rate engine 1030 determines applicable taxes. Id. at 8:34–35. Insurance rate engine 1032 calculates a cost of insurance that is added to the shipping rate based on buyer and seller preferences. Id. at 8:42–46. Because packaging is an important factor in shipping cost, packaging algorithm engine 1033 determines the packaging based on seller preferences and the size, weight, or shape of the item and applies a factor to the shipping rate. Id. at 7:55–8:5. Fee-based engine 1034 calculates rates based on seller inputs such as rates charged for shipping and handling above the rates from common carriers and may include a flat rate for shipping, or per item shipped. Id. at 8:6–20. Rate engine 1024 integrates inputs from the calculations of these other modules and engines, and applies whatever discounts or other factors are required if the components are not simply added, “to obtain a shipping rate based on the various inputs.” Id. at 8:47–51 (emphasis added). The ’237 patent also discloses that the shipping rate may be a flat rate from fee-based engine 1034, a rate calculated from the other engines, or a rate from a combination of different types of calculations. Id. at 8:51–54. Thus, the ’237 patent discloses rate engine 1000 calculating a “shipping rate” that CBM2014-00127 Patent 7,930,237 11 includes not only a basic transportation cost but also many other costs that contribute to the total cost to send an item to a buyer. Figure 14, which is reproduced above, illustrates this process. Figure 14 is described as “a flow diagram showing a server process for generating shipping rates for an online auction.” Id. at 2:43–44 (emphasis added). The ’237 patent discloses that system 1000 determines the locations of seller 102 and buyer 104 and calculates and stores a rate factor based on the locations. Id. at 11:35–39. System 1000 also determines if weight, taxes, insurance charges, or handling charges apply and, if so, calculates and stores factors for those charges. Id. at 11:39–51. Once all factors are determined, system 1000 calculates a “rate” at step 1434 by addition, or by combining factors according to any algorithm to determine the “cost of shipping.” Id. at 11:51–55. Shipping may be “free” if the buyer is within a given distance of the seller, if the order is over $100, or if the order is within a given time frame and system 1000 can apply this to the overall rate. Id. at 11:55–59. Finally, system 1000 serves a rate to buyer via rate calculator 500. Id. at 11:60–61. Thus, the ’237 patent discloses a system and process that calculate a shipping rate based on transportation costs, packaging, weight, taxes, insurance, packaging, and other factors. Id. at 8:47–51. Patent Owner’s position and its expert testimony are inconsistent with the patent specification. The basic shipping rate calculated by shipping rate engine 1028 is only one part of the shipping rate that is calculated and provided to buyers. Id. at 11:52–61, 10:42–57. After an auction ends, system 1000 determines the winner and makes appropriate calculation of “the cost of shipping based on the winning bid, locations of seller 102 . . . and buyer 104 . . . the weight of the items, packaging factors, taxes, and the CBM2014-00127 Patent 7,930,237 12 like.” Id. at 9:28–36, Fig. 11; see Ex. 2017, 4–5; Ex. 2018; see Rotman Decl. ¶ 47. Interpreting “shipping rate” to mean the total cost of shipping an item including packaging, tax, insurance, and handling also is consistent with the problem to which the ’237 patent states that it is directed: providing online buyers with advance information about the “real shipping costs” for items that they purchased at auction. Id. at 1:42–45; see Weaver Decl. ¶¶ 26–27. Interpreting this term to include only a transportation cost to ship an item(s) and exclude other factors like packaging, tax, and insurance that contribute to the total shipping rate that is presented to the buyer, would undermine the problem to be solved and would not provide an accurate estimate of the actual or total cost to ship an item(s). Our interpretation is consistent with the language of claim 1, which recites a shipping rate based on at least one shipping method, at least one seller shipping location, a buyer’s shipping location, shipping characteristics of the at least one auction item, and an amount of the at least one auction bid associated with the at least one auction bid. The bid amount is not used to determine the basic cost to transport an item. The ’237 patent discloses that shipping rate engine 1028 calculates a “basic shipping rate” for an item based on the distance between the seller and buyer locations, the weight of the item and packaging, and method of shipment. Id. at 8:25–33. Shipping rate engine 1028 does not use the item value or bid amount to calculate a basic shipping rate. Instead, the bid amount is used to calculate insurance rates and sales tax. Rotman Decl. ¶¶ 33–34 (insurance and sales taxes are calculated based on the item price); Ex. 1024 (“Rotman Dep.”), 217:5–9. Read in light of the specification, the claims support Petitioner’s position CBM2014-00127 Patent 7,930,237 13 that “shipping rate” refers to more than just transportation cost, but instead reflects other costs to the buyer, including packaging, taxes, and insurance. We are not persuaded by Patent Owner’s argument based on Figure 13. This analysis ignores the disclosures of Figures 10 and 14, which show the shipping rate as including taxes and other costs. Figure 13 is related to system 1000, depicted in Figure 10. 2 Ex. 1001, 10:29–30. Patent Owner points to nothing in the specification limiting the shipping rate calculation to just transportation costs and excluding the other costs to ship an item that system 1000 calculates and includes in the shipping rate that is presented to a buyer. Absent such a limitation, we interpret “shipping rate” to mean “the overall or total cost of sending an auction item to a buyer,” as disclosed in Figures 10 and 14. See Broadcom Corp. v. Emulex Corp., 732 F.3d 1325, 1333 (Fed. Cir. 2013) (“[A]n interpretation which ‘excludes a [disclosed] embodiment from the scope of the claim is rarely, if ever, correct.’”). Thus, we interpret the term “shipping rate” to mean “the overall or total cost of sending an auction item to a buyer.” B. Unpatentability of Claims 1–19 Under 35 U.S.C. § 101 1. Overview Section 101 of the Patent Statute (35 U.S.C. § 101) defines the subject matter eligible for patenting. Recently, in Versata Development Group v. SAP America, Inc., 793 F.3d 1306, 1330 (Fed. Cir. 2015), the Federal 2 Patent Owner describes Figure 10 as a shipping rate calculator system that “includes a rate engine for calculating shipping rates based on various inputs” and Figures 12–21 as embodiments of the online shipping calculator including “how the rate engine determines the shipping rate based on all the various inputs.” Prelim. Resp. 15, 17 (emphasis added). CBM2014-00127 Patent 7,930,237 14 Circuit confirmed that the Board is permitted to consider challenges to patentability under § 101 in covered business method patent reviews. 2. Patentability Under 35 U.S.C. § 101 Section 101 of the Patent Statute defines the subject matter eligible for patenting: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101. The Supreme Court, however, has “long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2354 (2014) (quoting Assoc. for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013) (internal quotation marks omitted)). “The ‘abstract ideas’ category embodies the longstanding rule that ‘[a]n idea of itself is not patentable.’” Alice Corp., 134 S. Ct. at 2355 (quoting Gottschalk v. Benson, 409 U.S. 63, 67 (1972) (quotations omitted)). In Alice Corp., the Supreme Court emphasized the importance of the so-called “Mayo framework” that provides “a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts.” Id. (citing Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1298 (2012)). Under the Mayo framework, “[w]e must first determine whether the claims at issue are directed to a patent-ineligible concept.” Id. Next, “we consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the CBM2014-00127 Patent 7,930,237 15 additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id. (citing Mayo, 132 S. Ct. at 1297). Under Mayo, to be patentable, a claim must do more than simply state the law of nature or abstract idea and add the words “apply it.” Mayo, 132 S. Ct. at 1294; Benson, 409 U.S. at 67. Furthermore, “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” Alice Corp., 134 S. Ct. at 2358. “Thus, if a patent’s recitation of a computer amounts to a mere instruction to ‘implemen[t]’ an abstract idea ‘on . . . a computer,’ that addition cannot impart patent eligibility.” Id. (internal citation omitted). Thus, we first analyze the claims of the ʼ237 patent to determine if the claims embody an abstract idea. If they do, then we proceed to determine whether the claims are meaningfully limited to a patent-eligible application of an abstract idea or cover nothing more than the abstract idea itself. 3. Claims 1–19 Are Directed to an Abstract Idea Petitioner contends that the abstract idea claimed in the ʼ237 patent is “providing a shipping rate estimate to a buyer in an online auction.” Pet. 16–17; Pet. Reply 1; see PO Resp. 22–23. In our Institution Decision, we observed that this description is consistent with the ʼ237 patent specification, which explains that “a need exists for the parties to online auctions to have access to better information in advance about the real shipping costs for their items.” Ex. 1001, 1:42–45; Institution Decision 18. Patent Owner responds that the ʼ237 patent claims “embody, use, reflect, rest upon, or apply the abstract idea of determining shipping rates.” PO Resp. 23 (internal quotation marks omitted). Patent Owner argues that the claims are “not directed to the idea itself.” Id. Patent Owner contends: CBM2014-00127 Patent 7,930,237 16 [the claims] are directed to a specific application of the idea, one that takes place in a specific context (an online auction) between specific entities (a seller and a buyer) for a specific purpose (to rapidly and accurately calculate shipping rates based on a variety of ever-changing inputs) using a specific series of steps involving both computer and human action (including inputting data, receiving and storing data, making calculations, and transmitting information online to buyers over a computer network). Id. (emphases omitted). We are not persuaded by Patent Owner’s argument that the ʼ237 patent does not claim an abstract idea merely because it is directed to online auctions. PO Resp. 23; Hearing Tr. 56:10–12. As the Federal Circuit recently reminded us, “[a]n abstract idea does not become nonabstract by limiting the invention to a particular field of use or technological environment such as the Internet.” Intellectual Ventures I LLC v. Capital One Bank (US), 792 F.3d 1363, 1366 (Fed. Cir. 2015) (citations omitted). We are, therefore, not convinced by Patent Owner’s argument that the claims are not abstract because they are limited to a specific application. Patent Owner further contends that, unlike the claims in Bilski 3 and Alice, the ʼ237 patent’s claims “had never before been achieved.” PO Resp. 23–24. As evidence of this, Patent Owner points to the fact that Petitioner’s prior art challenge relies on obviousness and not anticipation. Id. at 24, n.2 (“eBay has not been able to find or assert against the claims a single anticipatory reference.”). This argument is unavailing. As the Supreme Court observed in Diamond v. Diehr, 450 U.S. 175, 190 (1981), “[t]he 3 Bilski v. Kappos, 561 U.S. 593 (2010). CBM2014-00127 Patent 7,930,237 17 question therefore of whether a particular invention is novel is wholly apart from whether the invention falls into a category of statutory subject matter.” Despite Patent Owner’s arguments to the contrary, we see little difference between determining shipping rates and tax rates for auctioned items and the type of fundamental economic practices considered to be abstract ideas in Alice Corp. and Bilski. 4 As established by the record, both conventional auctions and shipping rate calculations existed long before the Internet. See, e.g., Rotman Decl. ¶¶ 4–8; Greenspun Decl. ¶¶ 31–40; Hearing Tr. 56:17–21. We conclude, therefore, that Petitioner has demonstrated that the ʼ237 patent claims, like the claims in Bilski and Alice, are directed to an abstract idea, namely, determining shipping rates for online auction sales. 4. Claims 1–19 are Not Meaningfully Limited Under 35 U.S.C. § 101 The second step of the Supreme Court’s “Mayo framework” requires that we consider the elements of the claim and determine whether there is an “element or combination of elements that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the 4 In Alice Corp., the Supreme Court determined that the claims at issue were “drawn to the concept of intermediated settlement,” i.e., the use of a third party to mitigate settlement risk. Id. at 2356. Furthermore, the Supreme Court determined that “[l]ike the risk hedging in Bilski, the concept of intermediated settlement is ‘a fundamental economic practice long prevalent in our system of commerce.’” Id. (citations omitted). With respect to the first step of the “Mayo framework,” the Supreme Court concluded in Alice Corp. that “there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement” in Alice Corp., and that “[b]oth are squarely within the realm of ‘abstract ideas’ as we have used that term.” Alice Corp., 134 S. Ct. at 2357. CBM2014-00127 Patent 7,930,237 18 [ineligible concept] itself.’” Alice Corp., 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct. at 1294). A challenged patent claim, properly construed, must incorporate enough meaningful limitations to ensure that it claims more than just an abstract idea and not just a mere “‘drafting effort designed to monopolize the [abstract idea].’” Alice Corp., 134 S. Ct. at 2357 (quoting Mayo, 132 S. Ct. at 1297). “Simply appending conventional steps, specified at a high level of generality,” is not “enough” for patent eligibility. Id. (quoting Mayo, 132 S. Ct. at 1297, 1300). Step two of the “Mayo framework” analysis, therefore, may be described as a search for an “inventive concept”—i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself. Id. (citing Mayo, 132 S. Ct. at 1294). At the final hearing, Patent Owner acknowledged that the holdings in Bilski and Alice could not be avoided simply by showing that a computer was involved in the patented invention. Hearing Tr. 62:12–17; 68:6–7 (“Without being on the Internet, the claims might not be patentable.”). Instead, Patent Owner focused its argument on the speed necessary for processing the high volume of transactions in Internet auctions: [THE BOARD]: What is unique to the Internet about an auction? [PATENT OWNER’S COUNSEL]: Your Honor, the auction had previously been done not on the Internet. It had been done manually, just like the Rotmans did, through mail order, maybe in person live. Once it got moved to the Internet, once it had been implemented on the Internet, it greatly increased the scope, the connectability and frankly the number of transactions CBM2014-00127 Patent 7,930,237 19 that could be processed. It rendered traditional calculations impossible. They could no longer be done. Hearing Tr. 56:17–57:2. Patent Owner contends that when auctions moved to the Internet, a “new problem” was created due to the need to calculate shipping costs “in realtime.” Hearing Tr. 67:23–68:2. But that which Patent Owner identifies as a “new problem” was recognized in conventional auctions, and could have in fact been handled by doing the same calculations manually, albeit at a slower speed, before automation of the auction process. Rotman Dep. 127:19–128:5. We are not persuaded by Patent Owner’s argument for patentability under § 101. First, the claims of the ʼ237 patent do not reflect the asserted “inventive concept” identified by Patent Owner, namely, the ability to calculate shipping rates and tax rates in real time. Patent Owner asserts that the reference in the claims to an “online auction” accomplishes this. Hearing Tr. 62:18–20. But, as Petitioner points out, the claims do not recite any form of real-time calculations. The claims simply recite steps that were done manually before the filing date of the patent. Hearing Tr. 7:16–22; Rotman Dep. 127:19–128:5; Rotman Decl. ¶¶ 21–25, 46. The claims of the ʼ237 patent specify that a shipping rate be calculated “at any time.” Patent Owner relies on this as evidence that the claims embody the asserted inventive concept of providing speedy shipping rate calculations. Hearing Tr. 69:9–22. We are not convinced by this argument. As Patent Owner’s counsel agreed, the language does not indicate how long the calculation takes, only when it may occur. Id. at 70:20–71:5. More fundamentally, however, simply adding a computer limitation to claims covering an abstract concept, without more, is insufficient to render CBM2014-00127 Patent 7,930,237 20 the claim patentable under § 101, even if the use of a computer enables faster operation. Bancorp Services, L.L.C. v. Sun Life Assur. Co. of Canada, 687 F.3d 1266, 1278 (Fed. Cir. 2012). In order for the addition of a machine to impose a meaningful limit on the scope of a 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, i.e., through the utilization of a computer for performing calculations. SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1333 (Fed. Cir. 2010). Likewise, “the use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under § 101.” Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 716 (Fed. Cir. 2014). For these reasons, Patent Owner’s argument based on meeting the asserted speed and other requirements of online auctions fails. We are not convinced by the other arguments of Patent Owner. For example, Patent Owner’s policy-based arguments (PO Resp. 11–22) ignore the Supreme Court’s holdings in Bilski and Alice and the Federal Circuit’s recent decisions in cases such as Ultramercial and Intellectual Ventures. Likewise, Patent Owner’s alternative argument that the claims are meaningfully limited because they recite steps such as receiving and storing information is unavailing. PO Resp. 25–26; Hearing Tr. 66:4–18. We are not convinced that reciting these standard computer operations imposes meaningful limitations on the abstract idea. As the Supreme Court held in Gottschalk v. Benson, 409 U.S. 63 (1972), claims do not become patent- eligible under § 101 simply for reciting a known, general purpose computer. See id. at 67 (invalidating as patent-ineligible claimed processes that “can be CBM2014-00127 Patent 7,930,237 21 carried out in existing computers long in use, no new machinery being necessary,” or “can also be performed without a computer.”). And in Alice Corp., the Supreme Court rejected a similar argument, determining that “the claims at issue amount to ‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.” Alice Corp., 134 S. Ct. at 2360 (quoting Mayo, 132 S. Ct. at 1298). More recent, and to the same effect, is Ultramercial, 772 F.3d at 716: “Adding routine additional steps . . . does not transform an otherwise abstract idea into patentable-eligible subject matter.” Nor are we persuaded by Patent Owner’s cited authorities that the requirements of § 101 are met here. For example, Patent Owner’s reliance on the outcome in Diamond v. Diehr, 450 U.S. 175 (1981), is misplaced. PO Resp. 28–29. As recently explained by the Federal Circuit in Versata, 793 F.3d at 1332–33, Diehr involved the use of a well-known mathematical equation to solve a technological problem (curing rubber) in conventional industry practice. Here, in contrast, the problem purportedly addressed by the ʼ237 patent, the need for faster transaction times in Internet auctions, is a business need, not a technological problem. Likewise, the Federal Circuit’s decision in DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), is not apposite. Hearing Tr 66:19–32. As explained by the Federal Circuit in Versata, DDR Holdings “drew a distinction between the patent-eligible claims at issue and patent- ineligible claims in the past that had merely recited commonplace business methods aimed at processing business information, applying known business processes to particular technological environments.” 793 F.3d at 1333. CBM2014-00127 Patent 7,930,237 22 In relying on DDR Holdings, Patent Owner asserts that moving conventional auctions (which they acknowledge is “something that been done previously”) to the Internet created “an Internet-centric solution.” Hearing Tr. 72:10–13. This argument fails, for it ignores the distinction made in DDR Holdings between technical solutions and claims reciting “commonplace business methods,” such as auctions. Unlike the claims in DDR Holdings, there is nothing in Patent Owner’s claims that makes them “Internet-centric.” As discussed supra, a mere reference in the claims to online auctions does not suffice. The claims “are not rooted in computer technology to solve a problem specifically arising in some aspect of computer technology.” Versata, 793 F.3d at 1334. Finally, we address Patent Owner’s argument that the claims should stand under § 101 because there is no preemption. PO Resp. 16; Hearing Tr. 64:14–17. We are not convinced that this argument has merit. As the Federal Circuit recently explained in Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015) “questions on preemption are inherent in and resolved by the § 101 analysis.” Thus, “[w]hile preemption may signal patent ineligible subject matter, the absence of complete preemption does not demonstrate patent eligibility.” Id. Thus, the issue of preemption is “resolved” by our analysis and resolution of the § 101 issues, and Patent Owner’s separate argument based on the asserted absence of preemption is unavailing. In summary, Petitioner has demonstrated by a preponderance of the evidence that the claims of the ʼ237 patent are not patentable because they are directed to ineligible subject matter under 35 U.S.C. § 101. CBM2014-00127 Patent 7,930,237 23 C. Asserted Grounds of Unpatentability Under 35 U.S.C. § 103 1. Overview Under 35 U.S.C. § 103(a), an invention is not patentable if the differences between the claimed subject matter and the prior art are such that the subject matter, as a whole, would have been obvious at the time the invention was made to a person of ordinary skill in the art to which said subject matter pertains. KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007). The question of obviousness is resolved based on underlying factual determinations including: (1) the scope and content of the prior art; (2) any differences between the claimed subject matter and the prior art; (3) the level of skill in the art; and, (4) where in evidence, secondary considerations such as commercial success, long-felt but unsolved needs, failure of others, and unexpected results. Graham v. John Deere Co., 383 U.S. 1, 1718 (1966). 2. Asserted Obviousness of claims 1–9 and 16–19 over Van Zandt and iShip.com a. Van Zandt (Ex. 1010) Van Zandt discloses a comprehensive logistics support service that manages a global shipment from door-to-door for any number of vendors and can provide buyers of products with a guaranteed, upfront cost quote that takes all shipping-related costs, international duties, and taxes into account for the shipment. Ex. 1010, 1. 5 Van Zandt discloses this service for merchant-type business format 40 and for auction-type format 50 where a web site sponsor acts as an exchange for matching participating sellers 54 with interested buyers 42. Id. at 14, Fig. 1. 5 For the purposes of this Decision, we refer to the original page numbers of the relevant documents rather than Petitioner’s inserted page numbers. CBM2014-00127 Patent 7,930,237 24 Van Zandt discloses a system that uses the following three automated service components: (1) landed cost shipment quote generation engine 62; (2) shipment booking engine 64; and (3) shipment tracking engine 66. Id. Quoting engine 62 provides a landed cost shipment quote based on item information provided by sellers 54 for items to be sold, buyer information, seller information, shipment costs, shipping mode, additional shipping services, and pickup and delivery locations. Id. at 15–16, Fig. 2A. Quoting engine 62 also determines insurance costs, duties, and taxes for the shipment based on shipment origin and destination information, Harmonized Tariff System (HTS) code, product size, weight, and value. Id. at 16–21; Figs. 2F, 2G, 3. Quoting engine 62 sends the final quote to host server 30, which uses the shipment quote to determine a total price (i.e., product price + shipping price) to display to buyer 42. Id. at 34:23–35:10. b. iShip.com (Exs. 1011–1014) iShip.com helps sellers provide bidders with actual shipping charges up front. Ex. 1011. Sellers enter shipping information to include package weight, seller zip code, and preferred carriers. Id. The iShip.com website automatically creates a unique URL that sellers can paste into their auction descriptions. Id. During the auction, bidders can click on the iShip.com link for a free shipping estimate. Id. To complete the estimate, a bidder enters a delivery zip code and selects delivery options, and iShip.com presents a grid with accurate shipping rates from a seller’s zip code to a buyer’s zip code for all carriers chosen by the seller. Id.; Ex. 1013. Sellers can enter shipment and packaging weight and carrier information, packaging dimensions, and whether to provide insurance against carrier loss or damage. Ex. 1012. CBM2014-00127 Patent 7,930,237 25 c. Analysis Petitioner asserts that claims 1–9 and 16–19 are obvious over Van Zandt and iShip.com. Pet. 27–43. Petitioner supports its contentions with detailed claim charts and expert testimony presented through the Declaration of Philip Greenspun, Ph.D. Greenspun Decl. ¶¶ 46–56. Patent Owner argues that it would not have been obvious to combine iShip.com and Van Zandt to facilitate international sales, because iShip.com is only for shipments in the United States. PO Resp. 30–31. Patent Owner also argues that iShip.com’s domestic shipping teaches away from its use on an international platform. Id. at 31. Patent Owner further argues that using iShip.com for international shipping would be unpredictable and render Van Zandt unsuitable for its intended use in international shipping. Id. at 31–32. Finally, Patent Owner argues that the only reason to combine Van Zandt and iShip.com is hindsight, because both references use item price to determine duties or shipping and handling charges, not a shipping rate. Id. at 32–33. First, we are persuaded by Petitioner’s arguments, as supported by Dr. Greenspun’s 6 testimony, that it would have been obvious to modify Van Zandt according to techniques of iShip.com because both references address the provision of a shipping rate calculator for online auctions so buyers can obtain a shipping estimate at any point during an online auction. Pet. 29–31. We are persuaded by Petitioner’s arguments and Dr. Greenspun’s testimony that a skilled artisan would have been motivated to embed a link to shipping 6 Dr. Greenspun holds a Ph.D. in Electrical Engineering and Computer Science from MIT. He has authored five computer science textbooks. He has taught at MIT and has over 20 years of experience in computer software engineering. Greenspun Decl. ¶¶ 3–16. We determine that Dr. Greenspun is an expert in the field relevant to this patent and credit his testimony. CBM2014-00127 Patent 7,930,237 26 information in Van Zandt’s interfaces, as taught by iShip.com’s unique URL that a seller pastes into item descriptions, to increase Van Zandt’s flexibility and provide multiple shipping options. Pet. 29–31; Pet. Reply 5; Greenspun Decl. ¶ 56 (iShip.com allows seller to add a form to another’s web site); Ex. 1020 ¶ 10c (user interfaces are freely borrowed from different websites). We also do not credit Patent Owner’s argument limiting Van Zandt’s teachings to international shipping. PO Resp. 30–32. Van Zandt provides a comprehensive logistics services system and method, including providing landing cost quoting (62), to integrate logistics vendors “across any industry, at any time, no matter what vendor carrier . . . or mode of transportation is to be used and no matter what country the shipment is being handled in or delivered to.” Ex. 1010, Abstract (emphasis added). Van Zandt’s system can calculate “any shipment duties and taxes.” Id. at 22 (emphasis added); see also id. at 32:11–17. Nothing in Van Zandt discredits or disallows the calculation of domestic taxes as a component of its calculation of “any shipment duties and taxes.” iShip.com does not criticize, discredit, or discourage the use of its shipping calculator hyperlink with online auction systems for international shipping. See In re Fulton, 391 F.3d 1195, 1201 (Fed. Cir. 2004) (prior art that did not criticize, discredit, or discourage the claimed solution did not teach away). Van Zandt and iShip.com allow buyers to obtain a shipping estimate at any time during an online auction. Ex. 1010, Abstract; Ex, 1011. Petitioner proposes to embed iShip.com’s request URL in Van Zandt’s user interfaces to provide a menu of shipping options. Pet. 31–32; Pet. Reply 5; Greenspun Decl. ¶ 56; Ex. 1020 ¶¶ 10c, 18, 19. iShip.com discloses that it “supports packages shipped from the U.S.” Ex. 1012. CBM2014-00127 Patent 7,930,237 27 We thus do not credit Patent Owner’s arguments that the combination of iShip.com’s shipping estimator URL with Van Zandt would have been unpredictable or would have rendered Van Zandt unsuitable for its intended purpose. PO Resp. 31–32. We credit the testimony of Dr. Greenspun, who states that iShip.com allows an auction seller to add a form to a website even without any cooperation of the auction site operator and it would have been a straightforward modification for a skilled artisan to add an HTML form of iShip.com to Van Zandt’s web site. Greenspun Decl. ¶ 56. Dr. Greenspun states that user interfaces are borrowed freely from web site to web site even when the functions and internals of sites differ. Ex. 1020 ¶ 10c. In addition, Dr. Weaver states that “iShip is a simple, low-overhead tool for generating HTML code that can then be embedded in a seller’s web page.” Weaver Decl. ¶ 46. Petitioner proposes to embed such a code/link in Van Zandt’s user interface with Van Zandt’s other features to increase Van Zandt’s flexibility. Pet. 30–31; Greenspun Decl. ¶ 56; Pet. Reply 5–6. Such changes were common at the time of the invention. Ex. 1020 ¶¶ 10c, 16, 18, 19. We determine that Petitioner has presented sufficiently articulated and persuasive reasoning supported by rational underpinnings for combining the teachings of Van Zandt and iShip.com to render the claims obvious. Patent Owner contends that Van Zandt and iShip.com do not disclose calculating at least one shipping rate based on an amount of an auction bid. PO Resp. 33–34. In particular, Patent Owner argues that the “shipping rate” is a rate a user is charged to “transport” an item, and neither Van Zandt nor iShip.com discloses this element. Id. at 34. Patent Owner argues that Van Zandt uses a “product’s value” to search for the lowest insurance premium and determine duties and taxes for a shipment, but Van Zandt does not use a CBM2014-00127 Patent 7,930,237 28 product’s value to determine a shipping rate for an item. Id.; Weaver Decl. ¶ 37. Patent Owner argues that iShip.com discloses a “handling charge” that may be a fixed cost or percentage of the item cost, and carrier loss protection based on the value of an item, which is not an auction bid amount or item price used to determine shipping rates. PO Resp. 35–38. These arguments are not persuasive in view of our interpretation of “shipping rate” to mean the total cost of sending an item to a buyer. Patent Owner acknowledges that Van Zandt uses a product’s value to determine a total shipping cost based on insurance premiums, duties, and taxes. Id. at 34–35; Weaver Decl. ¶ 37. Van Zandt calculates this total shipping cost as follows. If a buyer requests a shipping quote, web site 34 gathers purchase price information from a merchant or an auction database and information from buyer 42. Ex. 1010, 15:3–16:13. Web page 36 (Online Quoting) is presented to buyer 42 to obtain this information including shipment value 246. Id. at 16:14–21:17, Fig. 3. Buyer 42 clicks “Quote” button 248 to obtain a shipment quote. Id. at 21:18–20. Quoting engine 62 uses shipment origin and information, HTS code, product size, weight, and product value to search look up tables of insurance vendors to determine the lowest cost insurance premium. Id. at 32:4–9, Fig. 2F (step 166). Quoting engine 62 uses product size, weight, and product value to determine duties and taxes for the shipment. Id. at 32:10–17, Fig. 2G (step 170). Quoting engine 62 adds pre-shipment charges (e.g., packaging costs), a calculated door-to-door freight charge, a determined insurance premium, and duties and taxes, and sends this quote to host server 30. Id. at 32:18–33:3, Fig. 2G (steps 172, 174). Host server 30 uses the shipment quote to determine a total price— product price + shipment price—to display to buyer 42. Id. at 33:7–10. Van CBM2014-00127 Patent 7,930,237 29 Zandt thus calculates and displays a total cost to ship an item based, in part, on the item’s value. Greenspun Decl. ¶¶ 47–50; Ex. 1020 ¶ 10b, 20–22. Dr. Weaver’s testimony that Van Zandt does not determine a shipping rate based on an item’s value is not persuasive in view of our interpretation of shipping rate to mean the total cost of shipping. See Weaver Decl. ¶¶ 36–38. For similar reasons, Patent Owner’s arguments regarding iShip.com are not persuasive. iShip.com calculates auction item shipping charges that can include protection for carrier loss and damage based on the value of an auction item. Ex. 1012, 1; Ex. 1013, 1; Pet. 29. Sellers can add a “handling charge” to the shipping cost, as a fixed rate, a percentage, or both. Ex. 1018, 135. We credit Dr. Greenspun’s testimony that a skilled artisan would understand “as a percentage” to be a percentage of an item price from a current high bid or other user input. Greenspun Decl. ¶ 54. Dr. Greenspun also states that a skilled artisan would understand that an auction seller could use a reserve bid or an anticipated winning bid as the item value to calculate insurance costs. Id. ¶ 55. Dr. Weaver’s statement that iShip.com’s “value” field is used to calculate insurance costs and handling charges rather than the claimed shipping rate (Weaver Decl. ¶¶ 39–42) is not persuasive in view of our interpretation of “shipping rate” to include such costs. Therefore, the combination of Van Zandt and iShip.com discloses a “shipping rate” as we have construed the term. Patent Owner’s argument that claims 2–9 and 16–19 are nonobvious because they depend from claim 1 (PO Resp. 39) is not persuasive in view of the foregoing and Petitioner’s evidence and contentions that Van Zandt and iShip.com render obvious claims 2–9 and 16–19. See Pet. 27–43. CBM2014-00127 Patent 7,930,237 30 3. Other Asserted Grounds Presented under 35 U.S.C. § 103 Patent Owner argues that neither Van Zandt nor iShip.com calculates a shipping rate based on item price, and AAPA, Falic, Pricegrabber.com, and Hartman do not disclose this feature. PO Resp. 38–39. Patent Owner’s arguments as to Van Zandt and iShip.com are not persuasive for the reasons discussed above. Patent Owner’s arguments as to the other references are not persuasive as detailed below. Petitioner relies on Hartman to disclose calculation of shipping costs for combined shipments as recited in claims 12 and 13 where Van Zandt allows shipping cost requests at any time. Pet. 31, 39, 44–47. Falic is relied upon to disclose features of claims 10, 11, and 14–16. Pet. 50, 52–54. Thus, Dr. Weaver’s assertion that Hartman and Falic do not display a calculated shipping rate (Weaver Decl. ¶¶ 54, 57–59) is not persuasive as Hartman and Falic are not relied on by Petitioner to disclose this feature. We credit Dr. Greenspun’s testimony that skilled artisans would have combined features disclosed in Hartman and Falic with Van Zandt’s website and its shipping calculator. Greenspun Decl. ¶¶ 61–64; Ex. 1020 ¶¶ 13–16. Petitioner relies on the AAPA to teach conventional online auction features, including sellers setting a minimum price for goods and showing a current bid 402. Pet. 54, 59–60. Petitioner provides detailed claim charts to supports its contentions that AAPA and iShip.com render obvious claims 1– 9 and 16–18. Pet. 54–64. Petitioner explains these teachings are modified by teachings of Falic to render obvious claims 10–15 and 19. Id. at 64–69. Dr. Weaver’s testimony that AAPA and iShip do not calculate a shipping rate based on a bid amount is not persuasive in view of our interpretation of shipping rate to mean a total cost to ship an item. Weaver Decl. ¶ 53. CBM2014-00127 Patent 7,930,237 31 Petitioner relies on PriceGrabber.com to disclose a shipping calculator as part of a product listing page that permits a potential buyer to enter a zip code and request a shipping estimate directly from a product listing page. Pet. 48. Dr. Weaver asserts that PriceGrabber.com is not combinable with Van Zandt because it does not calculate a shipping rate based on an auction bid. Weaver Decl. ¶¶ 43, 44. This argument is not persuasive as Petitioner relies on PriceGrabber.com to show how to embed a shipping cost request field on a single page with an item description. See Pet. 48–50; Greenspun Decl. ¶ 59; Ex. 1015; Ex. 1020 ¶ 17. Thus, Pricegrabber.com is relied on to teach the embedding of shipping cost codes so that a buyer can request an itemized quote with sales tax, shipping, and item price directly from a product page. Dr. Greenspun testifies that it would have been obvious to combine this feature with Van Zandt’s e-commerce system, which already provides shipping costs based on auction bid amount. Greenspun Decl. ¶ 59. 4. Secondary Evidence of Non-Obviousness Patent Owner argues that evidence of long-felt need, failure of others, extensive copying, industry praise, and commercial success establishes the nonobviousness of the claimed invention. PO Resp. 40–42. We consider this evidence (sometimes referred to as objective evidence or indicia) with the foregoing evidence and contentions of the parties in reaching our final determination as to the obviousness of claims 1–19. Secondary considerations may include any of the following: long-felt but unsolved needs, failure of others, unexpected results, commercial success, copying, licensing, and praise. Graham, 383 U.S. at 17. Patent Owner argues that several objective indicia relating to the development of its CBM2014-00127 Patent 7,930,237 32 own online shipping calculator demonstrate the non-obviousness of its claimed invention. It is not sufficient that a product or its use merely be within the scope of a claim in order for secondary evidence of non-obviousness tied to that product to be given substantial weight. There must be a causal relationship, termed a “nexus,” between the evidence and claimed invention. Merck & Co., Inc. v. Teva Pharms. USA, Inc., 395 F.3d 1364, 1376 (Fed. Cir. 2005). A nexus is required to establish that the evidence relied upon traces its basis to a novel element in the claim, not to something in the prior art. Institut Pasteur & Universite Pierre et Marie Curie v. Focarino, 738 F.3d 1337, 1347 (Fed. Cir. 2013). Objective evidence that results from something that is not “both claimed and novel in the claim,” lacks a nexus to the merits of the invention. In re Kao, 639 F.3d 1057, 1068 (Fed. Cir. 2011). All types of objective evidence of non-obviousness must be shown to have such a nexus. In re GPAC Inc., 57 F.3d 1573, 1580 (Fed. Cir. 1995) (nexus generally); see also Rambus Inc. v. Rea, 731 F.3d 1248, 1256 (Fed. Cir. 2013) (long-felt need); Wm. Wrigley Jr. Co. v. Cadbury Adams USA LLC, 683 F.3d 1356, 1364 (Fed. Cir. 2012) (copying); In re Huang, 100 F.3d 135, 140 (Fed. Cir. 1996) (commercial success). The stronger the showing of nexus, the greater weight is accorded objective evidence of non-obviousness. See Ashland Oil, Inc. v. Delta Resins & Refractories, Inc., 776 F.2d 281, 306 (Fed. Cir. 1985). a. Long-Felt Need and Failure of Others Patent Owner argues that the invention of the ’237 patent met the needs of merchants and customers to determine shipping and handling costs accurately and in a timely fashion for online sales. PO Resp. 42–43. Patent Owner also argues that industry leaders such as eBay and Amazon lacked CBM2014-00127 Patent 7,930,237 33 solutions for calculating shipping costs and had to charge flat shipping rates, which were inherently unfair. Id. at 43–44. Patent Owner further argues that other merchants tried to charge actual shipping costs but incurred higher transaction costs to do so and faced the possibility of losing sales by disclosing actual shipping costs too late in the transaction. Id. at 43–46. Patent Owner also contends that merchants who offered free shipping had problems with sales margins. Id. at 46. Patent Owner asserts that its own automated shipping calculator addressed these problems. Id. These arguments are not persuasive for several reasons. To establish evidence of a long-felt but unresolved need, a patent owner must show that there was a persistent problem that was recognized by those of ordinary skill in the art. In re Gershon, 372 F.2d 535, 538 (CCPA 1967). The problem must not have been solved previously by another, and the claimed invention must, in fact, satisfy the long-felt need. See Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.2d 757, 768 (Fed. Cir. 1988). Furthermore, the evidence of secondary considerations must be commensurate in scope with what is claimed. See In re Kao, 639 F.3d at 1068 (citing In re Tiffin, 448 F.2d 791, 792 (CCPA 1971)). As noted by Petitioner, the claimed shipping calculator does not require accurate, efficient, timely, or fair shipping rates. Pet. Reply 9–10. Claim 1, for example, calculates a shipping rate based on seller and buyer shipping locations, shipping characteristics of an item, and an amount of an auction bid for the item. Claim 1 recites that the shipping rate is calculated “at any time during the online open-bidding auction for . . . presentation to the buyer” but does not address how quickly the calculation is performed or presented to a buyer when a quote is requested by a buyer. Thus, Patent CBM2014-00127 Patent 7,930,237 34 Owner has not established a nexus between the claimed shipping calculator and alleged need for accurate, efficient, timely, or fair shipping rates. Providing a shipping rate quote at any time, as claimed, means that a shipping rate calculation presented to a bidder before an auction ends may not be accurate if the final purchase price differs from the bid amount used to calculate that shipping rate, as the ’237 patent acknowledges. Ex. 1001, Fig. 7 (shipping rate based on “Anticipated Winning Bid” so “Please note that final winning bid price may affect shipping total.”), Fig. 8 (same). The ’237 patent discloses that “the shipping calculator provides buyer 104 with an accurate estimate of shipping cost, based on the location of the buyer, the cost of the item, and the manner of shipment.” Ex. 1001, 4:56–58 (emphasis added), Abstract (same), 7:8–12 (shipping rate server presents buyer 104 with “estimates of shipping costs for the auction in question”), Fig. 5 (“For a shipping estimate, please use the above shipping calculator form”), Fig. 6 (“To receive a shipping charge estimate” using the “Anticipated Winning Bid”), Fig. 7 (same), Fig. 8 (same); Pet. Reply 10. Second, Van Zandt, Pricegrabber.com, and iShip.com disclose prior art shipping calculators that provided shipping cost estimates for online shoppers. Exs. 1010–1015. iShip.com provided shipping estimates based on item(s) weight, dimensions, packaging, locations (zip codes) of buyers and sellers, preferred carriers, handling charges, and carrier loss or damage protection based on an item’s value. Exs. 1011–1014. Van Zandt calculated shipping charges for auctions 50 or merchant 40 transactions based on these factors, and on insurance, duties, and taxes that were calculated based on an item’s value. Ex. 1010, 15:4–33:10, Figs. 1–3. Pricegrabber.com’s shipping calculator calculates shipping, taxes, and total item price. Ex. 1015. Patent CBM2014-00127 Patent 7,930,237 35 Owner has not shown a nexus between any need for a shipping calculator and novel or nonobvious features of the claimed shipping rate calculator. Third, the evidence indicates that merely calculating shipping costs, as the claimed shipping calculator does, does not meet the most pressing needs of online merchants or consumers. For merchants, order fulfillment—taking orders, managing inventory, timely shipping of items, and returns—was the biggest impediment to online shopping. The Rotman Declaration discusses “articles [that] do not necessarily deal with calculating shipping costs, [but] show that delivery of goods was a key concern for merchants – including merchants selling in online auctions – as ecommerce expanded.” Rotman Decl. ¶ 50 (discussing Exs. 2035–44) (emphasis added). These articles discuss the need of online retailers for inventory, shipping, and fulfillment solutions and the trend to outsource such operations to Federal Express (FedEx) and United Parcel Service (UPS). See Exs. 2036–2044. Other evidence presented by Patent Owner also indicates that online shoppers wanted lower shipping costs, as acknowledged by the Rotman Declaration. Rotman Decl. ¶ 57 (“one of the primary reasons – if not the primary reason – that consumers would discontinue an online purchase . . . was shock at the cost of shopping”). 7 The claimed shipping calculator of the ’237 patent does not solve this problem, either. The claimed shipping calculator calculates “at least one shipping rate” but does not claim to identify the lowest or best shipping rate, or to compare 7 The Rotman Declaration discusses articles about shoppers abandoning online purchases due to high shipping costs. Ex. 2004 ¶ 51; see Exs. 2045– 53, 2072–82. Other articles discuss the need to choose shipping costs that do not lose customers or undermine profits of businesses. See Exs. 2054–56. CBM2014-00127 Patent 7,930,237 36 rates to find the best rate. Presenting a plurality of shipping rates, as recited in claims 12, 13, and 16, does not indicate that any of the rates is the least expensive rate. iShip.com presents a grid or table of shipping alternatives to a buyer with a plurality of accurate shipping rates. See Ex. 1011; Ex. 1014. Patent Owner’s long-felt need argument relies heavily on a failed attempt to convince eBay to adopt its online shipping calculator. PO Resp. 46–51. We are not persuaded by this evidence. Patent Owner argues that eBay’s acknowledged need for a shipping solution was “still unresolved” in 2001 when eBay and Patent Owner discussed Patent Owner’s shipping calculator. PO Resp. 46–47. But the evidence of record shows that the need (to the extent it existed) was met by others, including iShip.com and UPS and therefore does not support this assertion. As early as 1999, eBay offered shipping solutions that allowed sellers to insert a link to iShip.com in an auction listing so bidders could get a free shipping estimate. Ex. 1018, 135. By 2000, eBay had partnered with FedEx and UPS to lower shipping costs for its customers. Rotman Decl. ¶ 54f (discussing Ex. 2062). By December 2001, Patent Owner was aware of iShip.com’s shipping calculator. Rotman Dep. 252:6–257:7. In 2003, eBay chose UPS to provide a comprehensive shipping solution that integrated a shipping calculator into eBay’s site. Exs. 2068–2071; PO Resp. 47–48. The evidence indicates that eBay’s shipping needs changed rapidly in a few years. 8 When iShip.com’s shipping calculator did not meet eBay’s need for integrated shipping solutions, other solutions were available. Thus, 8 Initially, eBay took a hands-off approach and allowed buyers and sellers to work out payment and shipping issues. See Rotman Decl. ¶¶ 28, 52, 54c, 54g, 54h, 54i; PO Resp. 43. CBM2014-00127 Patent 7,930,237 37 eBay chose UPS’s shipping solutions with an integrated shipping calculator at Petitioner’s website. Rotman Decl. ¶ 67. Later, eBay required its customers to use its standard tools that were integrated into eBay’s web site and blocked users from using third party shipping calculators. PO Resp. 55; Rotman Decl. ¶ 68. In light of this history, we are not persuaded that there was a long-felt need by eBay or others for the claimed shipping calculator that others failed to meet. Nor do we perceive any failure by eBay to “develop technology.” PO Resp. 48. eBay simply chose to use solutions developed by others. b. Copying Patent Owner asserts that eBay copied Patent Owner’s invention. PO Resp. 51–52. Copying, as objective evidence of non-obviousness, requires evidence of effort to replicate a specific product. Wyers v. Master Lock Co., 616 F.3d 1231, 1246 (Fed. Cir. 2010); Iron Grip Barbell Co., Inc. v. USA Sports, Inc., 392 F.3d 1317, 1325 (Fed. Cir. 2004). Patent Owner argues that eBay wanted to view Patent Owner’s technology because eBay “struggled” to implement a shipping solution to improve its user’s ability to determine actual shipping costs for transactions. PO Resp. 51. Patent Owner argues that once eBay accessed Patent Owner’s technology, eBay cut off communications with Patent Owner and developed its own version of Patent Owner’s calculator. Id. at 51–52. Patent Owner argues that the shipping calculator debuted by eBay in June 2004 bore a “striking resemblance” to the version that Patent Owner had demonstrated to eBay but lacked advanced features that Patent Owner had developed in the intervening year. Id. at 52. From this, Patent Owner concluded that eBay copied Patent Owner’s invention. Id. CBM2014-00127 Patent 7,930,237 38 Patent Owner relies on the Rotman Declaration (Ex. 2004) as the factual support for its copying claim. Mr. Rotman testifies that eBay was interested in integrating a shipping calculator into its platform and arranged for Patent Owner to demonstrate Patent Owner’s calculator. Rotman Decl. ¶¶ 60–62. Patent Owner’s demonstration to eBay involved cutting-and- pasting printouts of Patent Owner’s AuctionInc website into printouts of eBay’s website to create the “look and feel” of how Patent Owner’s calculator would appear if it was integrated into eBay’s website. Id. ¶ 63. Mr. Rotman testifies that Patent Owner presented a live demonstration of its non-integrated shipping calculator to eBay. Id. ¶ 64. Later, in the spring of 2002, Patent Owner made the demonstration available online to eBay. Id. ¶ 65. Ultimately, however, eBay did not show any further interest in Patent Owner’s shipping rate calculator. Id. A year and a half later, eBay announced introduction of its own shipping calculator. Id. ¶ 67. Patent Owner’s contention that eBay’s shipping calculator “bore a striking resemblance to the earlier version Paid demonstrated to eBay” by itself does not establish a nexus to the claimed invention. PO Resp. 52. Patent Owner’s proofs do not include any direct evidence of copying or otherwise establish that eBay copied the patented shipping calculator or a commercial product that used the patented technology. Record evidence indicates that eBay’s access to Patent Owner’s calculator was very limited: a mock-up and online demonstration. See supra; Exs. 2032, 2033. Patent Owner has not provided sufficient evidence that Petitioner had access to any details or copied the patented technology. Moreover, at the final hearing, counsel for Patent Owner confirmed that the shipping calculator for eBay’s site was provided by UPS. Hearing CBM2014-00127 Patent 7,930,237 39 Tr. 51:14–52:8. This effectively rebuts any assertion of copying of Patent Owner’s product by eBay, and, in fact, demonstrates that suitable alternative calculators were available. See supra. We are not persuaded by Patent Owner’s assertions that eBay copied the patented shipping calculator. c. Commercial Success Evidence of commercial success “is only significant if there is a nexus between the claimed invention and the commercial success.” Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311–12 (Fed. Cir. 2006). To establish a nexus between a claimed invention and the commercial success of a product, a patent owner must offer “proof that the sales [of the allegedly successful product] were a direct result of the unique characteristics of the claimed invention—as opposed to other economic and commercial factors unrelated to the quality of the patented subject matter.” In re Huang, 100 F.3d at 140. Patent Owner argues that its shipping calculator was a commercial success that led to the growth of Rotman Auction as one of the largest sports memorabilia vendors and a Top 200 seller on eBay. PO Resp. 53. Patent Owner argues that its AuctionInc technology includes a shipping calculator and is used by a core of customers. Id. Patent Owner argues that its use of the automated shipping calculator allowed Patent Owner to grow sales and revenues by eliminating customer inquiries about shipping and post-auction bottlenecks of calculating shipping costs. Id. at 54. Patent Owner asserts that its technology was used by other online merchants and eBay users until eBay blocked the use of such third-party shipping calculators. Id. at 55. We are not persuaded by Patent Owner’s evidence because Patent Owner has not established a nexus between its commercial product and the novel and non-obvious features of its claimed calculator. Patent Owner’s CBM2014-00127 Patent 7,930,237 40 AuctionInc technology includes many features besides a shipping calculator. Patent Owner has not shown that the shipping calculator in the AuctionInc technology embodies the claimed invention or that sales of AuctionInc resulted from novel, non-obvious features of the claimed shipping calculator rather than other features. See Ormco Corp., 463 F.3d at 1312–13 (evidence did not show commercial success was due to claimed and novel features). Mr. Rotman testified that he did not attribute success in selling products on eBay to the shipping calculator. Rotman Dep. 59:22–60:8, 236:15–237:12. Even if Patent Owner had established a nexus between its AuctionInc technology and the claimed shipping calculator, however, its commercial success argument would not be persuasive. Patent Owner has not provided evidence of the market share held by its AuctionInc technology or shipping calculator. See PO Resp. 53. Assertions that Patent Owner cultivated 1,050 customers and a stable core of customers for AuctionInc technology does not address whether this represents a substantial share of the relevant market. See PO Resp. 53, 55; Rotman Decl. ¶¶ 68–69; In re Huang, 100 F.3d at 140 (“evidence related solely to the number of units sold provides a very weak showing of commercial success, if any”). d. Conclusion Having considered all of the evidence and contentions of the parties regarding the unpatentability of claims 1–19 under grounds 2–10, including secondary evidence of non-obviousness presented by Patent Owner, we determine that Petitioner has established by a preponderance of evidence that claims 1–19 are unpatentable under the asserted grounds. The relatively weak evidence of non-obviousness including weak nexus is not sufficient to overcome the relatively strong evidence of obviousness. See Ohio Willow CBM2014-00127 Patent 7,930,237 41 Wood Co. v. Alps South, LLC, 735 F.3d 1333, 1344 (Fed. Cir. 2013) (requisite nexus between secondary indicia and invention must be shown for evidence to be accorded substantial weight, and where a claimed invention represents no more than the predictable use of prior art elements according to established functions, evidence of secondary indicia is often inadequate to establish non-obviousness) (citations omitted); Rothman v. Target Corp., 556 F.3d 1310, 1322 (Fed. Cir. 2009) (strong prima facie obviousness showing may stand even with considerable evidence of secondary factors). D. Petitioner’s Motion to Exclude Petitioner contends that Exhibits 2035–2085 should be excluded as inadmissible hearsay under Federal Rule of Evidence 802 and for lack of authentication under Federal Rule of Evidence 901. Paper 27 (“Motion”). Petitioner also seeks to exclude testimony in the Rotman Declaration (Ex. 2004) that relies on Exhibits 2035–2085. Motion 1. Petitioner argues that the exhibits are printouts of websites, articles, and press releases of third- parties relied upon to establish the truth of the matters asserted therein in support of Patent Owner’s allegations of secondary evidence of non- obviousness. Id. at 2. Patent Owner opposes, arguing that the challenged exhibits are not offered to prove the truth of the matters asserted therein. Patent Owner contends they are authentic reproductions of publicly-available sources. Opposition 1–2 (Paper 31); see Rotman Supp. Decl. ¶ 12. In reaching our decision on patentability, we reviewed the challenged evidence and determined that it was insufficient on the issue of obviousness. See supra. In view of our disposition of this case, we do not find it necessary to address the motion to exclude and therefore dismiss it as moot. CBM2014-00127 Patent 7,930,237 42 III. ORDER In consideration of the foregoing, it is hereby ORDERED that claims 1–19 of U.S. Patent No. 7,930,237 are unpatentable; and FURTHER ORDERED that this is a Final Decision. Parties to the proceeding seeking judicial review of the decision must comply with the notice and service requirements of 37 C.F.R. § 90.2. CBM2014-00127 Patent 7,930,237 43 PETITIONER: Timothy Riffe riffe@fr.com Leland Gardner CBM25357-0024CP1@fr.com PATENT OWNER: Robert King rking@hunton.com Yisun Song ysong@hunton.com David Kelly dkelly@hunton.com Michael O’Shea moshea@hunton.com Copy with citationCopy as parenthetical citation