Netsirv v. Boxbee, Inc. (PTAB 2016)

By Michael Borella --

A post grant review (PGR) is an administrative reconsideration of a recent-granted U.S. patent.  The proceeding is held in the USPTO, before that body's Patent Trial and Appeal Board.  A petition for PGR is timely if it is filed within nine months of the challenged patent's issuance.

To date, there have been 32 PGR petitions filed, only three of which have proceeded to a final written decision.  All of these decisions have involved claims being ruled invalid under 35 U.S.C. § 101.  This case is the third and most recent.

Petitioners Netsirv and Location Motion MN petitioned for PGR of all claims of Boxbee's U.S. Patent No. 8,756,166 on grounds of invalidity under 35 U.S.C. §§ 101, 102, and 103.  The Board instituted the PGR on the § 101 grounds only.

The '166 patent is directed to "storage container tracking and delivery in the physical storage field."  This is unlike pre-existing storage systems, in which a user "rents a single large container (e.g., using the PODS® storage system) and stores various personal property items therein."  The drawbacks to such a system are that the "user may not always need that much storage space, may not remember all that was in that storage space, [and that] large storage containers require specialized equipment to move, such as lifts and trucks."  The '166 patent addresses these issues by tracking "individual items stored in one or more relatively small storage containers," as well as a computerized method of doing so.

Claim 1, the sole independent claim of the '166 patent, recites:

A method for stored item distribution to a user, the user associated with a user identifier, the method comprising:
    by a computing system:
        (a) receiving a delivery request associated with the user identifier comprising a requested time, a requested location, and a requested number of containers;
        (b) facilitating delivery of a set of containers to the requested location at the requested time, the set of containers comprising at least the requested number of containers, each container of the set associated with a unique storage identifier;
        (c) receiving a set of storage identifiers from a delivery device remote from the computing system, each storage identifier of the set of storage identifiers associated with one of the set of containers;
        (d) associating the set of storage identifiers comprising a first storage identifier with the user identifier in response to receipt of the set of storage identifiers from the delivery device;
        (e) receiving a media description in association with the first storage identifier from a user device associated with the user identifier, the user device remote from the computing system;
        (f) storing the media description as a storage description for the first storage identifier;
        (g) setting a fill status of the first storage identifier to packed;
        (h) receiving a removal request comprising storage identifiers associated with empty fill statuses from a pickup device remote from the computing system;
        (i) removing the storage identifiers having an empty fill status from the set of storage identifiers associated with the user identifier;
        (j) receiving a summary request associated with the user identifier;
        (k) in response to receipt of the summary request, sending the storage description of the first storage identifier;
        (l) receiving a retrieval request associated with the user identifier comprising a selection associated with the storage description, a retrieval location, and a retrieval time; and
        (m) facilitating delivery of a first container identified by the first storage identifier to the retrieval location at the retrieval time.

The steps of claim 1 were enumerated by the Board for purpose of reference.

After a brief discussion of claim construction, which involved defining the broadest reasonable interpretation of several terms, the Board moved on to the substantive § 101 issues.

Patent-eligibility under § 101 is determined by whether claims at issue meet the eligibility requirements set forth by the Supreme Court's two prong test in Alice Corp. v. CLS Bank Int'l.  First, one must determine whether a claim is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea.  If so, then one must further determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exception.  Notably, generic computer implementation of an otherwise abstract process does not qualify as "significantly more."

Applying prong one, the Board stated that the '166 patent was related to an abstract bailment scheme using storage containers (a "bailment" involves delivering goods for a particular purpose but without transfer of ownership).  Netsirv argued that claim 1 is "preemptive of the entire containerized storage business that has been around for decades," and that "none of the dependent claims add limitations that save the claims from ineligibility."  Boxbee responded by arguing that the claims are not directed to a "business practice known from the pre-Internet world," and instead recite a previously unknown process as evidenced by the lack of relevant prior art.

The Board reiterated that the invention was in fact directed to a well-known bailment scheme, but cited to support in Diamond v. Diehr for the principle that the § 101 inquiry was separate and distinct from those of §§ 102 and 103.  It went on the state that the "added notion of storage in a particular container does not render the idea any less abstract—it is a particular operating environment."

The Board cited to the recent Enfish v. Microsoft case to support its position that the claims are abstract, noting that "[a] claim for which computers are invoked merely as a tool . . . requires that the analysis proceed to the second step of the Alice inquiry."  It found that "the steps of the '166 patent use computers as a tool to facilitate the receipt, storage, and transmission of information ancillary to operating a bailment scheme—an economic task, or method of conducting business."  Furthermore, "[t]he computer acts as a device to move and hold data, but the computer is used merely in its ordinary capacity."

Moving to prong two of Alice, Netsirv asserted that "the claims generally recite bookkeeping items that do not add meaningful limitations beyond the abstract idea because they are simply those conventional, routine things a bailment business would track to run the business properly," and that these steps "naturally flow from a containerized storage business."  Supposedly-irrelevant prior art came into play, with Netsirv citing (and the Board emphasizing) a patent and a published patent application as allegedly disclosing the claim limitations.  (Oddly, the Board did not institute review under §§ 102 or 103 based on this art, so it remains unclear why the references help Netsirv's case under § 101.)

Nonetheless, the Board pointed to three claimed concepts that go beyond just a bailment scheme.  The first was that the steps of the invention are to be performed by a computing system and involve communication between the computing system and a remote device.  But the Board found that these aspects were merely routine computerization of bookkeeping functions.  Thus, according to the Board, the claims only "provide a solution implemented with generic technical components in a conventional way."

The second involved looking to "the nature of the data passed between the above computers to determine if the data provide an inventive concept."  But this data consisted of just "pickup and delivery instructions (time, location, count) and internal bookkeeping (associations between containers and customers)" as well as media descriptors, digital photographs, and lists of contents.  The Board found all of this data to be conventional, and that it does not "recite any particular use or technological innovation tied to their storage."

The third was the concept of delivering more boxes than requested, as recited in a dependent claim.  But the Board determined that this is just an idea unto itself and "it is not an uncommon business practice to provide more than asked."  Further, this feature was not tied to a technological advance.

As a consequence, the Board concluded that these additional elements did not transform the recited abstract idea into patent-eligible subject matter.  The Board justified this decision by pointing out similarities between the claimed invention and that of Ultramercial v. Hulu -- "[e]ven though some of the steps were not previously employed in this art, that fact was not enough to confer patent eligibility because the steps themselves were conventional steps, specified at a high level of generality, data-gathering steps, or otherwise added nothing of practical significance to the underlying abstract idea."

Boxbee made a last ditch attempt to rescue the claims, arguing that "a human cannot perform the dynamic associations and disassociations with sufficient speed and accuracy to enable method performance," the claims were to "a particular useful application rooted in computer technology," and "the totality of the steps improve the allegedly technical field of storage management."  The Board responded by stating that the claimed steps could be performed with pen and paper, the claims are directed to bookkeeping rather than a technological process, and that storage management is not a technical field.

Thus, the Board ruled that Netsirv had established a preponderance of evidence that the claims were unpatentable under § 101.

This case illustrates an odd nuance of the Alice decision -- let's call it the "Alice conundrum."  In that case, the Supreme Court paid lip service to the clear language of Diehr that prohibits combining the analysis of §§ 101, 102, and 103.  Nonetheless, by requiring that we look for "well-understood, routine, conventional activity" in the claims, prior art analysis has become a typical part of the § 101 inquiry.  In Ultramercial, the Federal Circuit made it clear that one can have claims that were novel and non-obvious, but still too well-understood, routine, and conventional to be eligible subject matter.  But when Ultramercial (the patent holder in that case) attempted to rebut the notion that its claims were well-understood, routine, and conventional, the Federal Circuit shot them down on the grounds that just because some of the steps were arguably novel, that doesn't mean they are not abstract.  A similar line of reasoning was set forth by the Board in this case.

As a consequence, the courts have laid out an intellectually unappealing set of rules: (i) prior art is not relevant in the § 101 analysis, (ii) but if claims are deemed abstract and involve only well-understood, routine, and conventional activities, these claims are ineligible.  Still, there is a way to make sense of this (to the extent that sense is involved in any recent § 101 jurisprudence).  While the terms "well-understood, routine, and conventional activities" seem to invoke prior art undertakings (and many tribunals have used them in this fashion), it is more accurate to think of them as referring to "using technology as a tool."  And even if this use is new and innovative, the courts seem to have taken the position that such innovation does not advance the technological arts.

Or, another way of looking at the Alice conundrum as illustrated herein is to consider the lengths to which the Board went to establish analogies between the claimed invention and a non-computerized bailment scheme.  Any differences were deemed just a conventional use of computing technology.  Thus, use of technology as a tool would be obvious to the skilled artisan.

When viewed in the light, the Board has actually performed a fairly detailed § 103 analysis under the guise of § 101.  If this is how judicial bodies are going to view patent-eligibility, they should stop telling us that Diehr is still good law.

Before Administrative Patent Judges William V. Saindon, Justin T. Arbes, and Christopher L. Crumbley
Final Written Decision by Administrative Patent Judge Saindon

Comments

[EG]

"to the extent that sense is involved in any recent § 101 jurisprudence"

Hey Andrew,

Never were truer words spoken. The Mayo/Alice framework is completely nonsensical, and as you note, improperly conflates 103 with 101. Rather than saying that "Diehr is good law," SCOTUS needs to ditch the Mayo/Alice framework and go back and reaffirm the validity of the principles of Diehr. If SCOTUS won't, Congress should do it for them explicitly.

[MaxDrei]

Do I see this right, that when it comes to the question "Inventive concept Y/N?" this PTAB panel is choosing to work through an analysis not a million miles away from the EPO's approach, namely confining eligible inventive activity to the technological arts (rather than, say, the bookkeeping arts).

Anything new here? Or was this always the way, in the USA?

[Mike Borella]

EG,

No argument from me, though I am scarred for life that you confused me with Andrew. :)

Mike

[Mike Borella]

MaxDrei,

Yep, that seems to be the case, and it is new (since the 2012 Mayo decision) and still evolving.

Mike

[EG]

Hey Michael,

Sorry for the "name confusion," no slight intended!

[Andrew Williams]

Mike – your posts have gotten so good, you are being confused with me – congrats!

[Matzo]

As an EP practitioner, I am comfortable with the idea of using a filter based on technical subject matter as a first pass for patent eligibility, but is this not going to present difficulties in the business method area? I can see it might work if the BM claim was tied to the use of a technical invention.

[Paul F. Morgan]

Thanks for the PGR statistics that "To date, there have been 32 PGR petitions filed, only three of which have proceeded to a final written decision. All of these decisions have involved claims being ruled invalid under 35 U.S.C. § 101." [Even though by now a very large number of patents could have been subjected to PGRs on numerous invalidity grounds not available in IPRs.]
I.e., if not for Alice there might not yet be ANY PGR decisions!
In AIPLA debates before the final version of the AIA PGR was being touted as an effective "opposition system" that would enhance patent validity presumptions if not used. I argued that PGR was almost useless as limited to only the first 9 months after a patent issues, which is long before most patents are ever asserted against anyone. Few companies ever go around attacking patents that are not actually threatened with. Especially with such an expense and inter partes trial system having such a very broad estoppel danger.

[Mike Borella]

Matzo,

Yes, it does, as many business methods are technical solutions to business problems. Part of the claim-drafting challenge these days is to focus on the technical improvement provided by the method, to the extent that it exists under the current regime.

Mike

[MaxDrei]

Mike, I'm another EPO person. The EPO requires a solution to a technical problem. Do I understand you right, that US jurisprudence doesn't?

You see, with ingenuity, you can solve all sorts of non-technical problems using technology, like when best to buy and sell shares in companies. Is that sort of subject matter eligible?