By Joseph Herndon --
Life Technologies Corp. filed a petition requesting covered business method (CBM) patent review of a number of claims of U.S. Patent No. 6,996,538. The PTAB determined that the claims are unpatentable under 35 U.S.C. § 101 as being directed to non-statutory subject matter. Ultimately, the PTAB found that the claims were simply directed to software for inventory management that recited nothing more than fundamental business and economic practices of inventory management that have long been performed manually in our system of commerce.
The '538 patent describes electronic inventory tracking by a third party, for example, via the Internet. The specification states that the present invention improves upon the prior art by shifting the burden of inventory tracking onto a third party; this concept is referred to as vendor managed inventory, or VMI. When a third party provides VMI services for multiple companies, it gains significant buying power which it can use to negotiate better deals, improve supplier responsiveness, and streamline the buying process when additional inventory is deemed necessary.
The '538 patent describes that VMI works by tracking inventory and automatically contacting suppliers, manufacturers, or distributors when additional supplies are needed. While purchasing is a large part of inventory maintenance, the invention of the '538 patent purports to facilitate other transactions, such as allowing customers to resell products or equipment to other businesses, or other communication between customers.
Of the challenged claims, claim 67 is illustrative and is reproduced below (as allowed in ex parte Reexamination Control No. 90/013,050).
67. A method for inventory management, comprising:
(a) collecting and storing, on one or more databases having client software, at least the following data:
(1) customer inventory information, the customer inventory information including a number of items at a customer,
(2) inventory and cost information for a plurality of manufacturers, suppliers, or distributors, the inventory information for the plurality of manufacturers, suppliers, or distributors including: a product identifier and a number of items in manufacturer, supplier or distributor inventory, and
(3) inventory restocking parameters provided by said customer;
(b) evaluating via at least one computer said customer inventory information and inventory or cost information for a plurality of manufacturers, suppliers, or distributors in light of said restocking parameters provided by said customer;
(c) ordering manufacturer, supplier, or distributor inventory which best fulfills said inventory restocking parameters provided by said customer;
(d) tracking inventory items in said databases for (1) the number of items at said customer and (2) the number of items at said manufacturer, supplier, or distributor, as inventory items are added to, restocked to, or removed from said inventories;
(e) updating said data on said one or more databases, using information obtained in said inventory tracking, through at least one software interface to said databases; and
(f) providing access via client software to information in said one or more databases to each said customer, manufacturer, supplier, or distributor,
wherein said client software allows one or more customers, manufacturers, suppliers, or distributors to be classified into groups, and where permissions or roles are assigned to such groups.
Covered Business Method Patent
A "covered business method patent" is a patent that "claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions." AIA § 18(d)(1); 37 C.F.R. § 42.301(a). A patent need have only one claim directed to a covered business method to be eligible for review.
The Petitioner asserted that the challenged claims are directed to "methods and computer systems for activities that are financial in nature, i.e., inventory management to support product sales, including customer interfaces and data management related thereto, as well as tracking and storing cost information related to those products." The Petitioner also pointed to the USPTO's classification of the '538 patent in Class 705, defined as "Data Processing: Financial, Business Practice, Management, or Cost/Price Determination."
However, the Patent Owner argued that patent classification of the '538 patent is misplaced because none of the claims are directed to a financial transaction. The Patent Owner argued that the patent itself distinguishes between the act of ordering inventory, which is claimed, and payment for inventory, which is not. According to the Patent Owner, because the challenged claims deal with inventory tracking and ordering, not payment, they do not recite a covered business method as defined by the AIA.
But, the PTAB stated that the patent claims must only be broad enough to cover a financial product or service in order to be considered for CBM review, and this covers activities that are financial in nature, incidental to a financial activity, or complementary to a financial activity.
The PTAB found that subject matter recited in the challenged claims is at least incidental to a financial activity. The PTAB highlighted some claim language supporting this conclusion, such as "collecting and storing, on one or more databases . . . inventory and cost information" and "inventory restocking parameters provided by said customer," and "ordering . . . inventory which best fulfills said inventory restocking parameters provided by said customer." The terms "cost information" and providing a customer access to that information amounts to a financial service, according to the PTAB.
The technological features of claim 67 include "one or more databases," "client software," and "at least one computer." Thus, the PTAB found that claim 67 does not recite a technological feature that is novel or unobvious over the prior art, and also does not recite any technical solution that solves a technical problem. As a result, the technological exception did not apply and the '538 patent was determined to be eligible for CBM review.
Challenge under 35 U.S.C. § 101
The claims of the '538 patent were challenged under 35 U.S.C. § 101 as being directed to patent-ineligible subject matter.
As for step 1 of the § 101 patentable subject matter determination, the Petitioner asserted that all of the challenged claims recite an abstract idea because they are directed to the fundamental business and economic practice of inventory management, a "fundamental economic practice long prevalent in our system of commerce" under Alice. The PTAB easily agreed.
In defense, the Patent Owner argued that each of the claims recites some form of "ordering," which provides a tangible, real-world impact achieved by the claimed computer technology. But, the Petitioner was able to sufficiently establish that ordering inventory that best fulfills said inventory restocking parameters provided by a customer, as recited in claim 67, for example, was a basic, already well-known aspect of inventory management and corresponds to an action that can be done manually (e.g., by making a telephone call), without benefit of a computer. Also, other features of claim 67 are directed to well-known processes that could be performed manually, or by using already commercially available computer products.
As for step 2 of the § 101 patentable subject matter determination, i.e., whether limitations of the challenged claims individually and as an ordered combination provide additional elements that transform the nature of the claim into a patent-eligible application, the PTAB found that components recited in the claims (databases, software, and computer) were well-known at the time of filing and were found to be routine, conventional activities to implement a method of collecting, storing, and analyzing information or data.
For this determination, the PTAB noted that the specification itself states that the "Inventory System 130" may include software already commercially available to the public, and that "Web Server 220 and Database Server 230" include commercially available software.
In defense of a purported "inventive concept", the Patent Owner argued that the claims describe a specific improvement over existing approaches to electronic VMI by providing "specially programmed computer systems that combine technology in novel ways to address technical inadequacies in existing systems." The alleged novelty was for "dynamically" analyzing information to provide improved, automated decision-making in a multi-seller environment.
But, the PTAB found that the claims do not address problems particular to the use of databases, software, and computers, but rather are directed to the general concept of inventory management.
The PTAB referenced recent decisions by the Federal Circuit including Bascom Global Internet Servs., Enfish, and DDR Holdings, and stated that the "Enfish claims, understood in light of their specific limitations, were unambiguously directed to an improvement in computer capabilities". In comparison, the '538 patent claims are not directed to an improvement of the technical equipment itself, i.e., the recited databases and software. Rather, the PTAB found that any inventive concept comes from knowing what data and information to place, analyze, use, and manipulate on those databases and software, and such concepts fail to improve an existing technological process. As a result, the PTAB found that the claims failed step 2 of the § 101 patentable subject matter determination, and were found to be unpatentable.
Before Administrative Patent Judges Jacqueline Wright Bonilla, Hyun J. Jung, and Neil T. Powell
Final Written Decision by Administrative Patent Judge Bonilla