Ex Parte Schierholt

Board of Patent Appeals and Interferences

Mar 17, 2011

10137713 (B.P.A.I. Mar. 17, 2011)

UNITED STATES PATENT AND TRADEMARK OFFICE
UNITED STATES DEPARTMENT OF COMMERCE
United States Patent and Trademark Office
Address: COMMISSIONER FOR PATENTS
P.O. Box 1450
Alexandria, Virginia 22313-1450
www.uspto.gov
APPLICATION NO. FILING DATE FIRST NAMED INVENTOR ATTORNEY DOCKET NO. CONFIRMATION NO.
10/137,713 04/30/2002 Karsten Schierholt 6741P055 9409
45062 7590 03/18/2011
SAP/BSTZ
BLAKELY SOKOLOFF TAYLOR & ZAFMAN LLP
1279 OAKMEAD PARKWAY
SUNNYVALE, CA 94085-4040
EXAMINER
NELSON, FREDA ANN
ART UNIT PAPER NUMBER
3628
MAIL DATE DELIVERY MODE
03/18/2011 PAPER
Please find below and/or attached an Office communication concerning this application or proceeding.
The time period for reply, if any, is set in the attached communication.
PTOL-90A (Rev. 04/07)

UNITED STATES PATENT AND TRADEMARK OFFICE
____________

BEFORE THE BOARD OF PATENT APPEALS
AND INTERFERENCES
____________

Ex parte KARSTEN SCHIERHOLT
___________

Appeal 2009-008217
Application 10/137,713
Technology Center 3600
____________

Before MURRIEL E. CRAWFORD, HUBERT C. LORIN, and
BIBHU R. MOHANTY, Administrative Patent Judges.

LORIN, Administrative Patent Judge.

DECISION ON APPEAL1

1 The two-month time period for filing an appeal or commencing a civil
action, as recited in 37 C.F.R. § 1.304, or for filing a request for rehearing,
as recited in 37 C.F.R. § 41.52, begins to run from the “MAIL DATE”
(paper delivery mode) or the “NOTIFICATION DATE” (electronic delivery
mode) shown on the PTOL-90A cover letter attached to this decision.
Appeal 2009-008217
Application 10/137,713

2
STATEMENT OF THE CASE
Karsten Schierholt (Appellant) seek our review under 35 U.S.C. § 134
(2010) of the final rejection of claims 11-28. We have jurisdiction under 35
U.S.C. § 6(b) (2010). Claim 1-10 and 29-53 have been canceled.

SUMMARY OF DECISION
We REVERSE and enter a NEW GROUND of rejection under 37
C.F.R. 41.50(b). 2

THE INVENTION
This invention is a method and system “for applying adaptive pricing
techniques to product manufacturing.” Specification 1:7-8.
Claims 11 and 20, reproduced below, are illustrative of the subject
matter on appeal.
11. A profit optimization method comprising:
monitoring actual product demand and
allocation reservations for product components;
comparing the actual product demand and
component allocation reservations with demand
forecasts at predetermined intervals, the demand
forecasts to predict future unknown product
demand;
dynamically assigning component
allocations for preferred customer segments
according to a comparison of the forecasted and
monitored actual demand;

2 Our decision will make reference to the Appellant’s Appeal Brief (“App.
Br.,” filed Jul. 22, 2008) and Reply Brief (“Reply Br.,” filed Dec. 19, 2008),
and the Examiner’s Answer (“Answer,” mailed Oct. 28, 2008).

Appeal 2009-008217
Application 10/137,713

3
dynamically assigning an allocation priority
to a component of a product;
selecting the component for use in
manufacturing the product based on the allocation
priority; and
manufacturing the product for the preferred
customer segments before manufacturing the
product for other customer segments.

20. A profit optimization method comprising:
dynamically monitoring actual product
demand and component allocation reservations;
comparing the monitored actual product
demand and component allocation reservations to a
forecasted demand, the forecasted demand to
predict future unknown product demand;
offering customers at least one less
expensive substitute component of the product in
place of a requested component based on a priority
of the at least one less expensive substitute
component in comparison with a priority of
another substitute component of the product; and
manufacturing the product for a first price if
the substitute component is accepted, or
manufacturing the product for a second, higher
price if the substitute component is not accepted.

THE REJECTIONS
The Examiner relies upon the following as evidence of
unpatentability:
Aram
Boyd
Peachey-Kountz
US 2002/0072988 A1
US 2002/0123930 A1
US 6,463,345 B1
Jun. 13, 2002
Sep. 5, 2002
Oct. 8, 2002
Appeal 2009-008217
Application 10/137,713

4
Hegde
Wijaya
US 7,197,469 B2
US 7,233,914 B1
Mar. 27, 2007
Jun. 19, 2007

The following rejections are before us for review:
1. Claims 113 and 20 are rejected under 35 U.S.C. § 101 as being
directed to non-statutory subject matter.
2. Claims 11-19 are rejected under 35 U.S.C. § 103(a) as being
unpatentable over Peachey-Kountz and Hegde.
3. Claims 20, 24, and 28 are rejected under 35 U.S.C. § 103(a) as
being unpatentable over Peachey-Kountz, Aram, and Wijaya.
4. Claims 21-23 and 25-27 are rejected under 35 U.S.C. § 103(a)
as being unpatentable over Peachey-Kountz, Aram, Wijaya, and
Boyd.

ISSUES
The first issue is whether claims 11 and 20 are directed to non-
statutory subject matter under 35 U.S.C. § 101. Specifically, the issue is
whether the claims are directed to an abstract idea.
The second issue is whether claims 11-19 are unpatentable under 35
U.S.C. § 103(a) over Peachey-Kountz and Hegde. Specifically, the issue is
whether the prior art teaches a step of “selecting the component for use in
manufacturing the product based on the allocation priority.”

3 The Answer states that claim 1, instead of claim 11, is rejected under 35
U.S.C. § 101. However, claim 1 is not pending in the application. We
assume that the rejection should have listed method claim 11 and that the
inclusion of claim 1 was a typographical error.
Appeal 2009-008217
Application 10/137,713

5
The third issue is whether claims 20, 24, and 28 are unpatentable
under 35 U.S.C. § 103(a) over Peachey-Kountz and Aram. Specifically, the
issue is whether the prior art teaches a step of “offering customers at least
one less expensive substitute component of the product in place of a
requested component based on a priority of the at least one less expensive
substitute component in comparison with a priority of another substitute
component of the product.” The rejection of claims 21, 23, 25, and 27 under
35 U.S.C. § 103(a) as being unpatentable over Peachey-Kountz, Aram and
Boyd also turn on this issue.
The fourth issue is whether claims 22 and 26 are unpatentable under
35 U.S.C. § 103(a) over Peachey-Kountz, Aram and Boyd. Specifically, the
issue is whether the prior art teaches a step of “determining a change in price
according to a price sensitivity function.”

FINDINGS OF FACT
We find that the following enumerated findings of fact (FF) are
supported by at least a preponderance of the evidence. Ethicon, Inc. v.
Quigg, 849 F.2d 1422, 1427 (Fed. Cir. 1988) (explaining the general
evidentiary standard for proceedings before the Office).
1. Hegde states: “To assemble the modules and cards (or other end
product), a Bill of Material is need to specify the required
components used in the assembly of each particular part number
(PN) produced within the manufacturing system.” Col. 1, ll. 57-
61.
2. Peachey-Kountz teaches that, in instances of shortfalls, parts could
be substituted. Col. 2, ll. 55-60.
Appeal 2009-008217
Application 10/137,713

6
3. Arma describes providing a customer with “suggestions for
substitute parts, which may be available faster or which may have
a different price or specification.” Arma [0154].
4. Wjaya’s column 5, lines 18-54 describes a method for substituting
an available item for an unavailable item when filling a grocery
order.
5. Boyd’s paragraph [0003] describes that a business may adjust
prices to encourage sales.
6. Boyd’s paragraph [0011] describes that the present invention
allows businesses to “better understand customer price sensitivity.”
7. Boyd’s paragraph [0105] describes an evaluation module that
cooperates with a demand forecasting application and separates
demand changes from sale changes due to a promotion.

ANALYSIS
The rejection of Claims 11 and 20 under 35 U.S.C. § 101) as being directed
to non-statutory subject matter
As discussed below, we find that claims 11-14 and 20-23 are directed
to non-statutory subject matter. However, since our reasoning below differs
from that of the Examiner, we designate the rejection as a new grounds of
rejection pursuant to 37 C.F.R. § 41.50(b).

The rejection of Claims 11-19 under 35 U.S.C. § 103(a) as being
unpatentable over Peachey-Kountz and Hegde
The Appellant argues that neither Peachey-Kountz nor Hegde teaches
the steps of “dynamically assigning an allocation priority to a component of
Appeal 2009-008217
Application 10/137,713

7
a product” and “selecting the component for use in manufacturing the
product based on the allocation priority.” App. Br. 9-11 and Reply Br. 3-4.
In response the Examiner reproduces the rejection. Answer 9-10.
In the rejection, the Examiner admits that Peachy-Kountz does not
teach these steps (Answer 9) and relies upon Figures 7 and 8, and column 6,
line 57 – column 7, line 49 of Hedge to teach both of these steps. Answer 9-
10 and 19-20.
However, we fail to see how the cited passage and Figures of Hegde
teach the step of “selecting the component for use in manufacturing the
product based on the allocation priority.” The components in Hedge seem to
be pre-established on a Bill of Materials. See FF 1. See Reply Br. 4. We
note that the Examiner does not include another explanation of how one of
ordinary skill in the art would have been led by the prior art or the general
knowledge of one of ordinary skill in the art to the claimed step of selecting
the component based on the allocation priority. The Examiner has failed to
establish a prima facie showing of obviousness.
Independent claim 15, recites an article that store executable
instruction that cause a computer to perform the step at issue. Independent
claim 19 recites a system that has a processer that has a structure that is
operable to perform the step at issue. For the same reasons as discussed
above, we find that the Examiner failed to establish a prima facie showing of
obviousness in rejecting claims 15 and 19. Accordingly, we find that the
Appellant has overcome the rejection of claims 11, 15, and 19, and claims
12-14 and 16-18, dependent thereon, under 35 U.S.C. § 103(a) over
Peachey-Kountz and Hegde.

Appeal 2009-008217
Application 10/137,713

8
The rejection of claims 20, 24, and 28 under 35 U.S.C. § 103(a) as being
unpatentable over Peachey-Kountz, Aram, and Wijaya.
The Appellant argued claims 20, 24, and 28 as a group. App. Br. 13-
14 and Reply Br. 4-7. We select claim 20 as the representative claim for this
group, and the remaining claims 24 and 28 stand or fall with claim 20. 37
C.F.R. § 41.37(c)(1)(vii) (2010).
Claim 20 recites “offering customers at least one less expensive
substitute component of the product in place of a requested component based
on a priority of the at least one less expensive substitute component in
comparison with a priority of another substitute component of the product.”
The Appellant argues that none of Peachey-Kountz, Aram, and
Wijaya teaches this limitation. App. Br. 13-14 and Reply Br. 5-7.
Specifically, the Appellant argues that Wijaya does not teach the limitation
at issue because Wijaya teaches substituting a product and not a component.
Reply Br. 5-7.
A claimed invention is unpatentable if the differences between it 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 having ordinary skill
in the art.” 35 U.S.C. § 103(a) (2000); KSR Int’l v. Teleflex Inc., 127 S.Ct.
1727 (2007); Graham v. John Deere Co., 383 U.S. 1, 13-14 (1966). The
mere existence of differences between the prior art and the claim does not
establish nonobviousness. Dann v. Johnston, 425 U.S. 219, 230 (1976). The
issue is "whether the difference between the prior art and the subject matter
in question 'is a difference sufficient to render the claimed subject matter
unobvious to one skilled in the applicable art.'" Dann, 425 U.S. at 228-29,
(citation omitted) (finding system for automatic record keeping of bank
Appeal 2009-008217
Application 10/137,713

9
checks and deposits obvious in view of nature of extensive use of data
processing systems in banking industry and "closely analogous" patent for
an automatic data processing system used in a large business organization
for keeping and updating system transaction files for each department of the
organization).
First, we note that both Peachey-Kountz and Aram teach offering a
substitute for a component of a product. FF 2-3. While it is true that the
cited passages of Wijaya describe a method of substituting a product (FF 4)
and not a component of a product, we are not persuaded that this difference
renders the claim unobvious. “A person of ordinary skill is also a person of
ordinary creativity, not an automaton.” KSR Int'l Co. v. Teleflex Inc., 550
U.S. 398, 421 (2007). See also Allvoice Computing PLC. V. Nuance
Communications, Inc., 504 F.3d 1236, 1242 (Fed. Cir. 2007).
Further, as to the Appellant’s argument that “[i]t is evidence that the
substitution aspect of finished product managed by Wijaya’s system cannot
simply be included into Peachey’s system of manufacturing a product from
its constituent parts” (Answer 7), the Appellant’s argument seems to be
arguing that the substitution method Wijaya of cannot be bodily
incorporated into Peachey-Kountz’s system.
The test for obviousness is not whether the features of a
secondary reference may be bodily incorporated into the
structure of the primary reference; nor is it that the claimed
invention must be expressly suggested in any one or all of the
references. Rather, the test is what the combined teachings of
the references would have suggested to those of ordinary skill
in the art.
In re Keller, 642 F.2d 413, 425 (CCPA 1981).
Appeal 2009-008217
Application 10/137,713

10
Accordingly, we find that the Appellant has not overcome the
rejection of claims 10, 24, and 28 under 35 U.S.C. § 103(a) over Peachey-
Kountz, Aram, and Wijaya.

The rejection of claims 21-23 and 25-27 under 35 U.S.C. § 103(a) as being
unpatentable over Peachey-Kountz, Aram, Wijaya, and Boyd
Claims 21, 23, 25, and 27
We also shall sustain the standing 35 U.S.C. § 103(a) rejection of
dependent claims 21, 23, 25, and 27 as being unpatentable over Peachey-
Kountz, Aram, Wijaya, and Boyd since the Appellant has not challenged
such with any reasonable specificity, thereby allowing claims 21, 23, 25, and
27 to stand or fall with parent claims 20 and 24 (see In re Nielson, 816 F.2d
1567, 1572 (Fed. Cir. 1987)).

Claims 22 and 26
Claim 22 recites “determining a change in price according to a price
sensitivity function.” Claim 26 recites a similar limitation. The Appellant
argues that paragraphs [0003], [0011], and [0105] do not teach this
limitation. App. Br. 15-16 and Reply Br. 8-9
Boyd’s paragraph [0003] describes that a business may adjust prices
to encourage sales. FF 5. Boyd’s paragraph [0011] describes that the
present invention allows businesses to “better understand customer price
sensitivity.” FF 6. Boyd’s paragraph [0105] describes an evaluation module
that cooperates with a demand forecasting application and separates demand
changes from sale changes due to a promotion. FF 7.
Appeal 2009-008217
Application 10/137,713

11
We find that these cited passages fail to teach that the change in price
is according to a price sensitivity function. We note that the Examiner does
not include another explanation of how one of ordinary skill in the art would
have been led by the prior art or the general knowledge of one of ordinary
skill in the art to the claimed step. Accordingly, we find that the Appellant
has overcome the rejection of claims 22 and 36 under 35 U.S.C. § 103(a) as
being unpatentable over Peachey-Kountz, Aram, Wijaya, and Boyd.

NEW GROUND OF REJECTION
Pursuant to 37 C.F.R. § 41.50(b), we enter a new ground of rejection
on claims 11-14 and 20-23.
We find that claims 11-14 and 20-23 are drawn to non-statutory
subject matter as they encompass an abstract idea. The law in the area of
patent-eligible subject matter for process claims has recently been clarified
by the Supreme Court in Bilski v. Kappos, 130 S. Ct. 3218, No. 08-964,
2010 WL 2555192 (U.S. June 28, 2010). The Court held that the term
“process” as used in 35 U.S.C. § 101, does not categorically exclude
business methods. Bilski, 130 S. Ct. at 3228-3229.
The Court is unaware of any argument that the
“ordinary, contemporary, common meaning,”
Diehr, supra, at 182, 101 S.Ct. 1048, of “method”
excludes business methods. Nor is it clear what a
business method exception would sweep in and
whether it would exclude technologies for
conducting a business more efficiently.
Bilski, 130 S. Ct. at 3222.
“At the same time, some business method patents raise special
problems in terms of vagueness and suspect validity.” Bilski, 130 S. Ct. at
Appeal 2009-008217
Application 10/137,713

12
3229. (citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 397
(2006))(Kennedy, J., concurring).
In searching for a limiting principle, this Court's
precedents on the unpatentability of abstract ideas
provide useful tools. See infra, at 12-15. Indeed, if
the Court of Appeals were to succeed in defining a
narrower category or class of patent applications
that claim to instruct how business should be
conducted, and then rule that the category is
unpatentable because, for instance, it represents an
attempt to patent abstract ideas, this conclusion
might well be in accord with controlling precedent.
Bilski, 130 S. Ct. at 3229 (2010).
Claims 11-14 and 20-23 are drawn to business methods. Taking claim
11 as representative, the broadest reasonable construction of the claimed
process in light of the Specification as it would be interpreted by one of
ordinary skill in the art is that it provides a series of instructions that do no
more than: monitor actual demand and allocation reservations; compare the
demand and reservations with a demand forecast at predetermined intervals;
dynamically assign component allocations according to the comparison;
dynamically assign an allocation priority; and select the component based on
the allocation priority. The claim encompasses any use of the concept of
monitoring actual demand and allocation reservations; comparing the
demand and reservations with a demand forecast at predetermined intervals;
dynamically assigning component allocations according to the comparison;
dynamically assigning an allocation priority; and selecting the component
based on the allocation priority.
We now turn to the question of whether the claimed process subject
matter is patent-eligible under 35 U.S.C. § 101. Various factors must be
Appeal 2009-008217
Application 10/137,713

13
considered and weighed when analyzing claims as a whole before reaching a
conclusion on patent subject matter eligibility.
The factors relevant in this case are the lack of an express or implied
recitation in the claims to a particular machine or transformation and that the
claims are a mere statement of a general concept. Claim 11 requires no
machine.
Claim 11 recites manufacturing the product, which the Appellant
argues is a transformation (Reply Br. 2). However, this is not a particular
transformation and is at best a nominal recitation of a transformation.
However, “Flook stands for the proposition that the prohibition against
patenting abstract ideas ‘cannot be circumvented by attempting to limit the
use of the formula to a particular technological environment’ or adding
‘insignificant postsolution activity.” Bilski, 130 S. CT 3218, 3230 (quoting
Diamond v. Diehr, 450 U.S. 175, 191-192 (1981)). The recitation of
manufacturing the selected product is insignificant postsolution activity.
As we have reasonably broadly construed it, the subject matter of claim 1 is
a series of instructions for monitoring actual demand and allocation
reservations; comparing the demand and reservations with a demand forecast
at predetermined intervals; dynamically assigning component allocations
according to the comparison; dynamically assigning an allocation priority;
selecting the component based on the allocation priority; and manufacturing
the product. The vague instructions listed in the claim do no more than
instruct how business should be conducted; that is to monitor actual demand
and allocation reservations; compare the demand and reservations with a
demand forecast at predetermined intervals; dynamically assign component
allocations according to the comparison; dynamically assign an allocation
Appeal 2009-008217
Application 10/137,713

14
priority; and select the component based on the allocation priority. The
claim covers any use of this concept. In the words of Gottschalk v. Benson,
409 U.S. 63, 72 (1972), the claimed process “would wholly pre-empt the
[concept of monitoring actual demand and allocation reservations;
comparing the demand and reservations with a demand forecast at
predetermined intervals; dynamically assigning component allocations
according to the comparison; dynamically assigning an allocation priority;
and selecting the component based on the allocation priority] and in practical
effect would be a patent on the [concept] itself.”
For the foregoing reasons, based upon consideration of all the relevant
factors with respect to claims 11-14 and 20-23 as a whole, claims 11-14 and
20-23 are held to claim an abstract idea and are therefore rejected as
ineligible subject matter under 35 U.S. C § 101.

DECISION
The decision of the Examiner to reject claims 11-19, 22, and 26 is
reversed and to reject claims 20, 21, 23-25, and 27-28 is affirmed. We enter
a new ground of rejection on claims 11-14 and 20-23.
This decision contains a new ground of rejection pursuant to
37 C.F.R. § 41.50(b) (effective September 13, 2004, 69 Fed. Reg. 49960
(August 12, 2004), 1286 Off. Gaz. Pat. Office 21 (September 7, 2004)). 37
C.F.R. § 41.50(b) provides “[a] new ground of rejection pursuant to this
paragraph shall not be considered final for judicial review.”
37 C.F.R. § 41.50(b) also provides that the Appellant, WITHIN TWO
MONTHS FROM THE DATE OF THE DECISION, must exercise one of
Appeal 2009-008217
Application 10/137,713

15
the following two options with respect to the new ground of rejection to
avoid termination of the appeal as to the rejected claims:
• (1) Reopen prosecution. Submit an appropriate amendment of the
claims so rejected or new evidence relating to the claims so rejected,
or both, and have the matter reconsidered by the examiner, in which
event the proceeding will be remanded to the examiner . . . .
• (2) Request rehearing. Request that the proceeding be reheard under
§ 41.52 by the Board upon the same record . . . .

REVERSED; 37 C.F.R. § 41.50(b)

mev

SAP/BSTZ
BLAKELY SOKOLOFF TAYLOR & ZAFMAN LLP
1279 OAKMEAD PARKWAY
SUNNYVALE CA 94085-4040