`Tel: 571-272-7822 Entered: August 25, 2014
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
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`SALESFORCE.COM, INC.
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`Petitioner
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`v.
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`VIRTUALAGILITY, INC.
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`Patent Owner
`____________
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`Case CBM2013-00024
` Patent No. 8,095,413
`____________
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`Record of Oral Hearing
`Held: July 14, 2014
`____________
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`Before JAMESON LEE, CHRISTOPHER KAISER,
`and GEORGIANNA W. BRADEN, Administrative Patent Judges.
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`APPEARANCES:
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`ON BEHALF OF THE PETITIONER:
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`MICHAEL T. ROSATOS, ESQUIRE
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`Wilson Sonsini Goodrich & Rosati
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`701 Fifth Avenue, Suite 5100
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`Seattle, Washington 98104-7036
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`Case No. CBM2013-00024
`Patent No. 8,095,413
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`JUDGE LEE: Welcome to the Board.
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`Judge Braden, can you hear us?
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`JUDGE BRADEN: Yes, I can. Can you hear me?
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`JUDGE LEE: Yes.
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`Welcome to the Board. This is the final hearing for
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`CBM2013-00024, captioned Salesforce.Com, Inc. versus VirtualAgility, Inc.
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`Each side has a total of one hour for argument and the sequence will be
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`Petitioner, then Patent Owner and back to Petitioner again. So the Petitioner
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`would have to split its one - hour time between the main session and the
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`rebuttal, whereas the Patent Owner gets to use all or any part of it in one shot
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`with no reservations for a second time up.
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`Anytime the Petitioner's counsel is ready, you may begin.
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`ON BEHALF OF THE PATENT OWNER:
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`CECIL KEY, ESQUIRE
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`JAY KESAN, ESQUIRE
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`GREGORY GONSALVES, ESQUIRE
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`Law Office of Cecil Key
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`1934 Old Gallows Road, Suite 350
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`Vienna, Virginia 22182
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`The above-entitled matter came on for hearing on Monday, July 14,
`2014, commencing at 1:00 p.m., at the U.S. Patent and Trademark Office,
`600 Dulany Street, Alexandria, Virginia.
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`P R O C E E D I N G S
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`Patent No. 8,095,413
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`MR. ROSATO: Thank you, Your Honor. It's an honor to be here
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`and, Judge Braden, can you hear me okay, am I speaking loud enough?
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`JUDGE BRADEN: Yes, I can. Thank you.
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`MR. ROSATO: Thank you. So, Your Honors, do we want
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`introductions to the parties?
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`JUDGE LEE: Yes, please.
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`MR. ROSATO: Okay. So my name is Michael Rosato. I'm
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`appearing on behalf of the Petitioner. I have co-counsel, Jose Villarreal,
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`present and I also have counsel at or for who is much more technically
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`inclined in helping me with the computer here at the table. His name is Joel
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`Boehm, Your Honor.
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`JUDGE LEE: Thank you. And counsel for Patent Owner, would
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`you like to introduce yourself and your colleagues?
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`MR. KEY: Yes, Your Honor. My name is Cecil Key as counsel
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`for Patent Owner VirtualAgility, and with me are Jay Kesan and Gregory
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`Gonsalves.
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`JUDGE LEE: Thank you.
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`MR. KEY: Your Honor, before we start, just a point of
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`clarification. We do have the motion -- contingent motion to amend. Will I
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`be permitted to reserve time for reply on that or do you want me to cover
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`that as well during the time?
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`JUDGE LEE: Yes, you're right. I'm glad you brought that up.
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`I'm not sure we addressed that in the trial hearing order. Did we omit that in
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`the trial hearing order?
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`MR. KEY: I don't believe so, Your Honor. My understanding
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`was that it would be a reply, a short reply, if I reserve time --
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`JUDGE LEE: Yes, you are entitled to have the last word strictly
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`on the motion to amend. So let me change what I said previously.
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`MR. KEY: Thank you, Your Honor.
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`JUDGE LEE: You can split your time two ways, but your second
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`time up would only be with respect to the motion to amend.
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`MR. KEY: That's my understanding, Your Honor, yes.
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`MR. ROSATO: Okay. Thank you, Your Honor. And as the
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`preliminary question, we have the overhead projector here. As backups,
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`we've brought hard copies, if you prefer hard copies.
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`JUDGE LEE: Yes, I do like that very much.
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`MR. ROSATO: May I?
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`JUDGE LEE: Please.
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`MR. ROSATO: I think we have to mail yours, Judge Braden.
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`JUDGE BRADEN: That's perfectly okay. I have a copy of the
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`slides. If you would just make sure that when you refer to a slide, that you
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`refer to the slide number so I know where you are and I can follow along.
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`MR. ROSATO: Absolutely.
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`Okay. Well, starting with slide 2, then, just very brief comments
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`on what has happened thus far. Now, the original petition was filed with a
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`number of grounds, including 101, unpatentability to all claims of the patent,
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`anticipation in view of Ito for all claims, and then, further, prior art grounds
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`in view of Lowery and then the combination. And as the Board knows,
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`institution included unpatentability on all claims under 101 and anticipation
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`in view of Ito.
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`The other prior art grounds were not instituted, including Lowery,
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`and as the reasoning set forth was identified that Petitioner did not explain
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`one of the hierarchies that was being cited to, and we certainly respect that
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`finding and I pointed it out just because it becomes relevant with regard to
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`the motion to amend.
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`And turning to slide 3, Your Honors, and just looking at the key
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`disputes here, I'll try to focus on what I can see from the briefing seems to be
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`the points of dispute. Obviously if there are any questions, we're happy to
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`address any parts of that.
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`Well, looking at the key disputes, the first issue is the 101 ground
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`and we believe that the patent claims are, in fact, directed to ineligible
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`subject matter, because they're directed to an abstract idea and there just are
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`not enough meaningful limitations to the claims to salvage those claims to
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`eligibility.
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`With regard to the prior art, you know, the anticipation over Ito
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`remains. There's basically two points of dispute on -- I'm sorry, point --
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`limitations in Ito that the Patent Owner disputes as being present. One is the
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`model itself, which we believe the papers show is present, and the user
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`aspect of viewing the model entities as ordered by a value of information as
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`recited in those claims, and we'll talk about both of those points and address
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`why we believe that those points are clearly met by the prior art.
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`In turning to slide 4, Your Honor, I want to briefly comment on
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`CBM standing, and I only comment on this because there's a fair amount of
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`briefing in the Patent Owner's response about whether or not the '413 patent
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`is a covered business method patent.
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`They're coming for Judge Braden.
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`JUDGE BRADEN: I apologize, you can hear out my window.
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`MR. ROSATO: That's okay.
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`So with regard to the CBM standing, again, I only point this out
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`because it was briefed in the Patent Owner's response. They request that the
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`Board reconsider this determination and we will point out, you know, just
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`two points, one, no request for rehearing under Rule 71 was actually filed, so
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`they're bringing this up now and, two, as -- we believe the briefing is clear
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`on this issue, the decision instituting trial is sound and the reasons for
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`standing remand and are not at issue here.
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`Turning to slide 5, and this addresses the first point of ineligible
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`subject matter under Section 101 for all of the patent claims. As the Board
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`may recall, the Supreme Court recently issued their decision in the Alice
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`Corp. case and there were some additional minor briefing in this case to
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`update the Board on that law and just provide an indication of whether
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`anything had changed based on that decision and following its institution,
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`and the answer is no.
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`The test the Board applied instituting trial has not changed. It
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`remains -- the reasoning set forth in the decision instituting trial remains
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`sound and we don't think that there's any legal developments that warrant a
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`different outcome than was reached in the decision instituting.
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`A few other things to note, and that is that the Supreme Court has
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`now vacated the Ultramercial decision in light of Alice, whereas some of the
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`other decisions that had been briefed throughout this case, Accenture,
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`Bancorp., those decisions have been untouched.
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`And turning to slide 6, Your Honor, and getting into the
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`mechanics of the 101 application, you know, step 1 -- and this follows the
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`analysis that was argued in the petition and applied by the Board, but Mayo
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`Step 1, which it also follows with the subsequent Alice Corp. decision,
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`requires a determination of whether the claims at issue are directed to a
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`patent-ineligible concept, in this case an abstract idea.
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`And as set forth in the petition briefing, you know, while the '413
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`patent claims are -- they're verbose, those claims fail to substantially limit
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`the subject matter beyond the abstract notion of managing or modeling a
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`collaborative activity using a hierarchy.
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`JUDGE BRADEN: Counsel?
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`MR. ROSATO: Yes.
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`JUDGE BRADEN: Counsel, what do you say to Patent Owner's
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`argument that these claims, which you consider to be verbose, actually
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`contain concrete steps and limitations that take it away from an abstract idea
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`and tie it to a concrete conventional activity, which would follow under the
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`Mayo case?
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`MR. ROSATO: Yeah, that would be Step 2 of Mayo that you're
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`referring to, Your Honor, and I'm glad you asked, because we can jump right
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`ahead. What I want to clarify here is that Step 1, identification of the
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`abstract idea, as you pointed out really isn't the point of dispute here. The
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`Patent Owner doesn't really dispute that there's an underlying abstract idea
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`there and slide 7 identifies the abstract idea as identified by the Board. Slide
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`8, you know, notes that this is not -- as Your Honor has pointed out, this is
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`not really the point of dispute. The dispute turns on whether or not there are
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`meaningful limitations, okay, and that is certainly where we want to spend
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`our time speaking.
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`So let's look at those limitations. I wanted to draw attention to
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`slide 9. Okay. So on the left side we're using Claim 1 as a representative
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`claim here, and on the left side of the column, as we set forth in the petition,
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`there are really two basic components to their claims. Component 1 is a
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`model of a collaborative activity that includes entities in a hierarchy
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`arrangement.
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`Part 2 or component 2 is this graphical user interface that allows a
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`user to -- you know, controls the access to the model, allows the user to
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`create, modify or delete entities, assigning model entity to a location in the
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`hierarchy, access or modify the information in the model entity, view model
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`entities as ordered by the hierarchy or ordered by a value. These are the
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`basic limitations.
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`The short answer to your question, Your Honor, and we'll get into
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`the very specifics, is, no, these are not meaningful limitations and we'll walk
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`through each one of those starting with the model. The basic model is a
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`conventional and well-known data organization scheme. There is nothing
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`even remotely new about that. It's a very pervasive and widely implemented
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`data management organizational tool.
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`With regard to the steps, you know, we'll walk through those.
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`JUDGE BRADEN: I would like you to maybe clarify something
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`for me, because I believe the Patent Owner argued that a person of ordinary
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`skill in the art would consider this management information system, such as
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`the one claimed in the '413 patent, to be specialized, to be a specialized
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`computer.
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`A, how do you respond to that and is there anything in the record
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`that would indicate that a management information system would not be a
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`specialized computer?
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`MR. ROSATO: Well, this management information system, if
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`that's what we're calling it, is not a specialized computer, and we can only go
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`with what is recited in the claims. They may allege that, but we do look at
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`what limitations are there in the claims that make this specialized or bring it
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`-- bring down the scope beyond these broad abstract concepts to something
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`concrete, and that's where we don't arrive in walking through the claim
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`limitations.
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`So they may certainly assert that. I think they have no choice but
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`to argue that, but neither the evidence in the record nor the language of the
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`claims support that and we can walk -- I'm happy to walk through both, but
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`looking at the claims, you know, again the language in the claim is a model
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`entity that's capable of belonging to a first hierarchy of one type, and I'm
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`paraphrasing here, and a second hierarchy of another type.
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`So you've got a model entity. A model entity is organized in a
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`hierarchy and you've got a model entity that's capable of belonging to one
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`hierarchy and another. That's as far as it goes. Okay. So we have, you
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`know, testimony from both experts actually I believe. There is no evidence
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`here that illustrates that this is a -- is some specialized data arrangement and
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`common sense alone dictates that it's not.
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`I mean, you can think of how many, many things are organized in
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`the computer arts in hierarchy-based arrangements. We can think of any
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`case decisions. You can look at some of the cases that are briefed and
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`address hierarchies. You can think of basic website organization where you
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`have a home page and linked subordinate pages in hierarchy arrangement.
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`If you want to talk about PRPS in the Patent Office website, not to
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`throw salt on anybody's wounds, I actually like the site, but that's an
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`example, right? I mean, it's a basic organizational scheme for managing
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`data, pricing information, credit -- I mean, the list goes on and on and on.
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`There is no evidence here that putting model entities in a hierarchy is some
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`new way or nonconventional way to organize data. There's just nothing in
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`the record to support that.
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`JUDGE LEE: Counsel, can that be done without the computer?
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`Take the computer out of it and just still use the same data structure, put it in
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`the same hierarchies.
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`MR. ROSATO: Yeah, that's a great question, Your Honor. In
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`fact, that question came up during cross examination of one of the technical
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`experts, and some of that testimony -- I direct your attention to slide 14,
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`Your Honor. Dr. Alexander testified that, in fact, many of the basic
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`operations in the context of information management systems can, in fact, be
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`performed without the use of a computer.
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`In fact, he testified in the development stage of -- in these types of
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`systems, that's exactly what people did is that they would organize these out
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`on a white board and draw these types of relationships with diagrams and
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`data charting and modeling.
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`So the basic organization alone -- and, again, that's all we have
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`from the claim, the basic organizational structure is, in fact, something that
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`can be done without the use of a computer. While a computer obviously will
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`make it much faster, it does not change the fundamental nature of that basic
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`data scheme and the claim does not limit that organization beyond that basic
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`scheme.
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`So I want to also look at the operations. We talked about the
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`model and if there are any other questions on that, I'm happy --
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`JUDGE LEE: Yeah, I'd like to know -- there seems to be two
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`competing thoughts that if you have a specialized computer, somehow that's
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`okay to get past the 101, but we also have case authority that says you can't
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`just say here's an idea and go ahead and do it on a computer. That's not
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`enough.
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`So it seems to me like those two ideas are pulling in different
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`directions with the same facts, like here's my data model, here's my
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`management information system. You can do it on paper in your mind, but
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`go ahead and do it on the computer, have computer entries, computer
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`outputs, computer manipulation. So that's -- according to case law, that's
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`just, say do it on a computer, that shouldn't be enough.
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`But, on the other hand, you have what the Patent Owner argues,
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`we now have a specialized computer, because the data structures are now
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`implemented on a general purpose computer. So by definition, this is a
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`specialized computer and that should be enough. So can you help us or just
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`to fall on one side or the other and tell us the arguments?
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`MR. ROSATO: Yeah. So I don't -- they are using the term
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`"specialized computer." I have yet to see the specialization that's present in
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`a computer that would conduct these operations, certainly for the model,
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`Your Honor.
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`JUDGE LEE: Well, I think from their perspective anything a
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`computer does makes it a specialized computer, unless it's a general purpose
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`thing with no purpose. Once you give it an assignment and say do it, it
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`becomes a specialized computer. That's how I read their brief.
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`MR. ROSATO: And I agree, Your Honor, that's how I read their
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`briefing as well is that once you make a computer do something, it becomes
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`specialized, but that just simply doesn't square with where, for example, the
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`Supreme Court just came out. If that were the case, none of these claims
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`that we've seen in Alice or Accenture or any of the many other numerous
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`decisions where claims have been invalidated as lacking patent eligibility, if
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`that were, indeed, the test, all those claims would have survived, but it's not
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`the test. Just making a computer do something is not enough to make it a
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`specialized computer.
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`Here, putting a basic data organization onto a computer is not
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`enough. So the question turns on what is on this particular -- what does this
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`claim require for a computer to make it specialized, or is there enough there
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`and, you know, again, this just comes back to the claims and there's simply
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`not enough there.
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`JUDGE LEE: Alright. So I can see where you're coming from,
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`but hypothetically, though, how would you -- this is a hypothetical. You
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`may not know the answer. How would you modify their claims so that it
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`would pass muster, so that it would be a specialized computer executing
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`their idea? What would they need to have, which they don't have in the
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`claims?
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`MR. ROSATO: You know, something that moves it beyond
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`conventional components, whether those are conventional hardware
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`components or conventional software user components, things that would
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`help are making the operations that aren't something that just a user can do.
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`I mean, if you're claiming a system and you say, hey, so the user comes
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`along and uses this system, they can view stuff, right, and those are
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`JUDGE LEE: So are you saying what they have now is just input
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`and output and generalized processing, that's not enough, and you're trying
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`to say they need to have more in the sense of taking it down to another level
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`of detail, such as, oh, check if the hierarchy here has three branches, and if it
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`does, you know, take this branch and move it over there and then -- but not
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`if while that other branch already is a sub-hierarchy of something else. If
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`they have a lot of those conditions within their processing, would that start
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`to get into a more specialized computer?
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`MR. ROSATO: Well, I think as a general matter processing steps,
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`specific algorithm NIC processing steps do help confer patent eligibility.
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`I'm not seeing those here.
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`JUDGE LEE: So do you have anything else to add? I'm trying to
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`see what ideas you would have for a claim that would pass master
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`implementing their idea.
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`MR. ROSATO: Sure. If they want to hire me for prosecution
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`counsel following this case -- no, I'm kidding. Specific ideas, I don't think --
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`I mean, it's hard to -- it's hard for me to comment on what their claim -- what
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`their specification would support them doing. What we know from looking
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`at the case law is that there are things that help and there are things that don't
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`work. So simple listing conventional hardware and user actions and basic
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`operation components do not confer patent eligibility. So I would suggest if
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`they want to rewrite their claims and make them 101 compliant that they
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`start moving into limitations that look more like processing steps that are not
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`basic in conventional to practicing the abstract idea, but move it beyond that,
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`right?
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`So, again, you have to start with the model and data organized in a
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`hierarchy and if you're -- if there are some -- if there is some hypothetical
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`claim out there that could confer patent eligibility, I think it would have to
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`get into algorithmic steps of how to process data and transform it into such
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`that the computer is doing something meaningful that's not conventional and
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`well-known and leaves the claim covering little more than a broad abstract
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`idea.
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`JUDGE BRADEN: Well, let's look, then, taking Judge Lee's kind
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`of train of thought there and looking at some of the dependent claims, such
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`as Claim 13, where you're talking about receiving a third indication of the
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`model entity, receiving a fourth indication and their responding by
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`producing a representation of the information. Are those the types of steps
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`that would take it out of the realm of a general abstract idea and giving it
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`enough concrete ties to take it out of 101?
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`MR. ROSATO: In this case, Your Honor, no. Because if you
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`look at what those are doing, you know, you have a hierarchy. If you just
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`picture a hierarchy, it has multiple representations. So a claim that simply
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`enumerates, hey, there are multiple, you know -- there's an entity here and
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`it's related to one, two, three, four other things, that's not meaningful. Those
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`are basic components of a hierarchy.
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`Simply making basic fundamental operations verbose does not
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`salvage subject matter for patent eligibility, and I think that's exactly what
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`they're doing in every single one of their claims. These are all basic
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`operations.
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`Again, you go back to the fact that we're looking at data entities in
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`a hierarchy and just spelling out aspects of what a hierarchy looks like and
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`the basic things you would do to make any use of that. You'd have to access
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`it, right? You'd have to put something in a hierarchy. You'd have to view its
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`position in the hierarchy. I mean, these are basic steps. There's not -- there's
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`a struggle to find something significant or meaningful beyond the things that
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`you would have to do to simply make use of data organized in a hierarchy.
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`JUDGE LEE: Is there any claim that passes that threshold?
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`MR. ROSATO: I don't think there are any claims in this claim
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`set, Your Honor.
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`So thank you. Actually that gets me through most of the points I
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`wanted to cover on 101 and it's a much more enjoyable way to get through it
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`than walking through a claim -- I'm sorry, a slide deck.
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`I do want to point to just a few other things, slide 11. This is just
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`to emphasize that, you know, there really was no -- we're asking about
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`where is the meaning in this and certainly as far as the computer components
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`go, the -- I'm sorry, Patent Owner's expert really struggled to identify and
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`was not able to identify anything beyond conventional steps here. The buzz
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`word "specialized" is used. The substance of what would make it
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`specialized is what's hard to find.
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`And then moving along, I would like to get to --
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`JUDGE LEE: This is a very important issue, so maybe let me ask
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`you a couple more questions. We're talking about conventional steps, but,
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`on the other hand, you're also talking about general steps that are necessarily
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`required if you're to implement the idea on a computer, such as inputting it,
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`outputting it, do something to it. So you can have something that's still
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`conventional, but be more specific than just input, output and do something,
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`right?
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`Those are really general. Let's say you become a little more
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`specific, but the more specific steps are nonetheless still conventional in the
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`art, so then where are we? Are we still not good within 101 because all
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`these steps are still conventional, even though it is more specific than just,
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`hey, go do it on a computer, input something, output something, do
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`something. So is the test really do they recite something more specific than
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`just IO and do something or is the test -- have they recited something that's
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`nonconventional? Which is it?
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`MR. ROSATO: Well, the test is, you know, the two steps. You
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`identify the abstract idea and evaluate the limitations of the claim to
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`determine whether those limitations meaningfully limit the claimed subject
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`matter beyond, you know, meaningful down to it's not the claims are no
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`longer covering this broad abstract idea.
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`JUDGE LEE: Because I can think of things that are happening in
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`a computer, which are specific and yet still conventional, and that's not
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`abstract at all. Like some things I mentioned before, detach this sub-tree,
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`merge it with that sub-tree only when this happens or -- but all of those are
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`still conventional. You're just removing a pointer, right? This pointer used
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`to hang from here and you just say rewrite it, so the pointer now points over
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`there.
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`So in computer parlance, that is still quite a conventional thing to
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`do, right? You're just rewriting the pointer. Instead of pointing here, it's
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`pointing there, so it's very, very conventional, but yet it is not so generic that
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`it has to happen in a general idea.
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`So I'm struggling with the difference between the two, because
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`you talk about both. All they require is input to the hierarchy or input to the
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`model, output from the model, do something to the model, but you also talk
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`about all the steps are conventional.
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`MR. ROSATO: There's both, and let me clarify. So there are
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`conventional computer components. That is one of the evaluations that you
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`see throughout the case law, are there any known -- of the computer -- and
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`this I guess is easiest with reference to the hardware components.
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`With respect to the hardware, is there anything beyond
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`conventional components, such as a screen or a processor, right? So that is a
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`relevant evaluation in looking through them.
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`JUDGE LEE: Let's say the computer is not new. It's an
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`off-the-shelf computer, but they have special steps to do something that's not
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`necessarily required by the abstract idea, such as, you know, detaching,
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`removing pointers under this condition and doing all of this. All of that are
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`still conventional, but it's more specific, a lot more specific than just IO and
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`do something. So in that situation where are we?
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`MR. ROSATO: Well, in the situation where someone
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`hypothetically has written in specific steps that limit beyond that abstract
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`idea, then I believe we get into patent-eligible subject matter. In this
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`particular instance --
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`JUDGE LEE: I understand. So even if they are conventional
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`steps, it's still maybe patent eligible.
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`MR. ROSATO: I would imagine that's conceivable. I mean, it's
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`not -- again, this is on the hypothetical side rather than the specific side, so
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`in this particular instance I believe that the steps recited are basic steps that
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`--
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`JUDGE LEE: Too general from your perspective.
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`MR. ROSATO: Too general and if we're looking at it data
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`organized in a hierarchy, there's things you have to do to make any
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`meaningful use of it. You have to access it, right? You have to be able to
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`put an entity in a hierarchy. You have to assign it to be able to have your
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`hierarchy. You have to access information in it. These -- when I say basic, I
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`mean things that you couldn't do or you couldn't make use of the abstract
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`idea without doing these things.
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`So, you know, if that's getting mixed between the conventional
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`hardware components, that's not the intention. You know, I could imagine a
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`sequence of very -- you know, if you isolate out a single step and say this is
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`conventional computer arts, but if you're putting it into a algorithmic
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`process, certainly there are scenarios where that could result in patent
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`eligibility in my opinion. In this particular case, I just don't see that
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`happening.
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`JUDGE KAISER: What's the test for a hardware component or a
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`processed step of the described method that's being carried out on a
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`computer to be unconventional? Does it have to be something that nobody's
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`ever dreamed of before or is there some lower bar than that? I mean, where
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`do we draw the line between what I presume you think are unconventional
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`or are perfectly conventional hardware components and process steps recited
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`in these claims and something that would be patent eligible, even though it's
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`a method and provided on a computer?
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`MR. ROSATO: Sure. You know, and, again, the Supreme Court
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`has come out and said, you know, we're not going to give a bright line to
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`move on any of this. That certainly would make things easier in many
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`regards. On the hardware side, I mean, just to be clear in this particular
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`instance, I don't think there's even any real dispute that a processor, just
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`reciting a processor in the claims as is the case here, that that is not really --
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`that is nothing moving beyond a conventional processor.
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`You could certainly im