The Software IP Report

McRO Saves Product Cataloging Patent Claims at Rule 12 Stage

By Charles Bieneman

Categories: Patent Eligibility, Software Patents, The Software IP Report

Patent claims directed to pricing and cataloging products have survived a Rule 12 Motion because the court thought that there was a chance that the patent owner might be able to show a technological improvement as in McRO, Inc. v. Bandai Namco Games Am. Inc. (Fed. Cir. 2016). Vendavo, Inc. v. Price f(x)No. AG et al, 3-17-cv-06930 (N.D. Cal. Oct. 22, 2018).  Regardless of whether you think the patent-eligibility test should be more or less stringently applied, you may find this decision vexing if you share my (admittedly subjective) perspective that the USPTO would not today allow these claims, and that many courts would have invalidated them under 35 U.S.C. § 101 and the Alice patent-eligibility test.

This action includes five patents-in-suit, characterized by the court as follows, with my emphases to point to findings that I believe would have led many judges (whether in U.S. District Court or at the PTAB) and patent examiners to find the claims patent-ineligible:

U.S. Patent No. 7,308,421 is entitled “System and Method for Grouping Products in a Catalog” and discloses application of different types of pricing rules to a product in order to prepare a price quote.. . . The patent asserts use of dynamic collections [and] avoids the need for manual adjustments whenever a product is added to or removed from a group, and thereby offering a significant improvement over prior art systems.

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U.S. Patent No. 8,396,814 is entitled, “Systems and Methods for Index-Based Pricing in a Price Management System” and describes “a flexible pricing method for providing pricing adjustments for a product in a deal in response to price variations in selected indexes.” . . . The method of the ’814 patent monitors an index for changes andautomatically re-prices all deals that include a product.

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U.S. Patent No. 7,912,792 discusses a then-existing need for “pricing models” in view of the data “accessibility” and “volume” issues surrounding “enterprise pricing environments.” In view of these data issues, the ’792 patent purports to disclose methods of “displaying and using predictive structured data,” integrating it into “business policies such as pricing guidance and product configuration suggestions,” and “deploying those policies.”

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U.S. Patent No. 8,412,598 is directed to an “improved causality analyzer.” It purportedly permits changes in revenue or margin to be identified as resulting from factors such as changes in product pricing, volume sold, product mix sold, costs, and other matters.

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U.S. Patent No. 7,640,198 claims an improved system for displaying aggregated index data. . . . The ’198 patent discloses a claimed improvement by generating an index calculation in response to real-time data changes. The system purportedly allows extraction and manipulation of the underlying data, and novel ways to display it.

The patent owner relied “heavily on McRO” to argue that even though each patent “involves calculations, data manipulation, and algorithms,” the claims “nonetheless satisfy the criteria for patentability because the claims are directed at ‘“specific rules’ that purportedly ‘achieve an improved technological result.’” The court acknowledged that the claims may ultimately be found to solve an “entrepreneurial” rather than “technological” problem, but thought that such a determination now would be “premature.”

The court seems to have conflated patent-eligibility with novelty and non-obviousness, reading McRO for the proposition that “[w]here the computerized process described in the claims substantively differs from previously employed processes—beyond the mere fact of computerization—it may be patent eligible.” Thus, the court’s decision rested on its finding that “the evidence and arguments are insufficient to permit a dispositive finding as to whether the methods described in any or all of the claims presently at issue go ‘beyond merely organizing [existing] information into a new form or carrying out a fundamental economic practice.’” (Citing McRO.)

Lessons for Practice

While not new, there are three points to be drawn from this case. First, courts’ applications of patent-eligibility rules remain unpredictable. Second, even though patent-eligibility and prior art invalidity are supposed to be separate questions, they are often conflated; showing novelty or non-obviousness (or a lack thereof if you are the patent owner) can be very important in prevailing on a patent-eligibility motion. Third, if you are the challenger, you have the initial burden to show that there is no technological invention – make copiously clear to the court how that burden is met.