Marketdial Inc v. Applied Predictive Tech Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: MarketDial, Inc. (Delaware)
  • Defendant: Applied Predictive Technologies, Inc. (Delaware)
  • Plaintiff’s Counsel: MASCHOFF BRENNAN GILMORE & ISRAELSEN PLLC
• Case Identification: 2:23-cv-00477, D. Utah, 07/24/2023
• Venue Allegations: Venue is based on Defendant's business activities in Utah, including marketing products and services, and its participation in separate, related litigation against the Plaintiff in the same district.
• Core Dispute: Plaintiff seeks a declaratory judgment that Defendant's reissue patent for optimizing business analytics models is invalid, unenforceable due to inequitable conduct, and subject to Plaintiff's intervening rights.
• Technical Context: The technology involves using machine learning and historical data to optimize the parameters of A/B testing models for retail business initiatives, aiming to improve the accuracy of test results.
• Key Procedural History: The patent-in-suit is a reissue of U.S. Patent No. 8,571,916, which was the subject of prior litigation between the parties. In that earlier case, the District of Utah held all claims of the original patent invalid under 35 U.S.C. § 101 as being directed to an abstract idea. The complaint alleges that the Defendant failed to properly disclose this invalidity ruling to the U.S. Patent and Trademark Office during the subsequent reissue proceedings.

Case Timeline

Date	Event
2004-01-30	Earliest Priority Date for U.S. Patent No. RE49,562
2018-06-28	Original Action filed by APT against MarketDial on parent '916 Patent
2020-11-25	U.S. District Court for the District of Utah holds all claims of parent '916 Patent invalid
2021-04-27	APT files application to reissue the '916 Patent
2023-06-27	U.S. Reissue Patent No. RE49,562 issues
2023-07-20	APT sends cease and desist letter to MarketDial alleging infringement of the '562 Patent
2023-07-24	MarketDial files this declaratory judgment complaint

II. Technology and Patent(s)-in-Suit Analysis

U.S. Reissue Patent No. RE49,562 - METHODS, SYSTEMS, AND ARTICLES OF MANUFACTURE FOR DETERMINING OPTIMAL PARAMETER SETTINGS FOR BUSINESS INITIATIVE TESTING MODELS

• Issued: June 27, 2023.

The Invention Explained

• Problem Addressed: The patent describes that when businesses test new initiatives (e.g., A/B testing price changes), the way analysts set up these tests—such as choosing control stores and time periods—is often based on intuition rather than empirical evidence. This can introduce "noise" and lead to unreliable conclusions about the initiative's potential impact. (’562 Patent, col. 2:5-24).
• The Patented Solution: The invention is a computer-implemented method to improve the reliability of business initiative testing. It first performs "virtual tests" using historical data to identify the optimal "parameter settings" for the testing model itself—specifically, the settings that "best minimize noise." Once these optimal parameters are found, the system uses them to configure a predictive machine-learning model, which can then be used to more accurately analyze actual, future business initiatives. (’562 Patent, Abstract; col. 2:26-49).
• Technical Importance: This approach seeks to replace subjective test design with a data-driven, empirically optimized methodology, promising more reliable predictions for large-scale business decisions. (’562 Patent, col. 2:11-24).

Key Claims at a Glance

• The complaint identifies independent claim 36 as being asserted by the Defendant (Compl. ¶36).
• The essential elements of independent claim 36 are:
  • Identifying a predictive machine-learning model with a set of parameter settings.
  • Selecting a first parameter setting set for a virtual test, where at least one parameter includes a time period.
  • Simulating performance by iteratively performing a "virtual test" on "virtual test sites" (reflecting historical business data where no actual initiative was implemented).
  • Determining actual performance data for the virtual test sites and for a set of control group sites.
  • Determining a "noise value" reflecting the inconsistency between the virtual test site data and the control group site data.
  • Determining a set of "optimal parameter settings" that "best minimize the noise value."
  • Training the predictive model by configuring it with the optimal parameter settings based on the noise value.
  • Executing the trained predictive model.
• The complaint does not mention any dependent claims but seeks a declaration that the '562 Patent, "including at least claim 36 thereof, is invalid" (Compl. ¶41).

III. The Accused Instrumentality

Product Identification

MarketDial's software product for A/B testing (Compl. ¶5).

Functionality and Market Context

• The complaint describes the accused product as software that "helps retail businesses increase efficiency and profitability by automating A/B testing for retail business" (Compl. ¶5). It allows businesses to test ideas on a small scale to predict the full-scale impact (Compl. ¶5).
• The complaint alleges that APT's infringement claim "rests on MarketDial's continued use of the software and system it had made prior to issuance of the '562 Patent" (Compl. ¶47).
• No probative visual evidence provided in complaint.
• The complaint does not provide sufficient detail for a more in-depth technical analysis of the accused product's specific operation.

IV. Analysis of Infringement Allegations

The complaint is a declaratory judgment action and does not contain infringement allegations or an affirmative claim chart. It states that Defendant APT sent a cease and desist letter alleging that "MarketDial is, and demands that MarketDial cease, infringing claim 36 of the '562 Patent" (Compl. ¶36). The complaint does not provide further details on APT's specific infringement theory.

Identified Points of Contention

Based on the patent and the procedural history, the infringement analysis will likely raise several questions.

• Scope Questions (§ 101): The primary dispute is likely to be patent eligibility under 35 U.S.C. § 101, given that the parent '916 patent was invalidated on this ground (Compl. ¶20). A key question for the court will be whether the highly detailed steps in claim 36—such as determining "optimal parameter settings" that "best minimize noise"—add a sufficient inventive concept to transform the abstract idea of using statistical analysis to improve business testing into a patent-eligible application.
• Technical Questions: A central factual question for any infringement analysis will be whether the MarketDial software performs the specific, multi-stage process recited in claim 36. For example, what evidence exists that the MarketDial software performs "virtual tests" on historical data specifically to determine a "noise value," and then uses that noise value to "train" a predictive model with "optimal parameter settings" as required by the claim? The complaint does not provide information to answer this question.

V. Key Claim Terms for Construction

The Term: "noise value"

Context and Importance

This term is central to the claimed invention's optimization step. The method determines "optimal parameter settings" by identifying those that "best minimize the noise value." The construction of this term will define the very target of the optimization process and, therefore, the scope of the claim.

Intrinsic Evidence for Interpretation

• Evidence for a Broader Interpretation: The claim itself defines the term as "reflecting an inconsistency between actual performance data associated with the set of virtual test sites and actual performance data associated with the set of control group sites" (’562 Patent, col. 32:9-15). This could be argued to encompass any statistical measure of deviation or difference.
• Evidence for a Narrower Interpretation: The specification provides a specific example, calculating noise based on the "difference in the sales trends between the test set and control group" (’562 Patent, col. 22:11-14) and provides a specific formula: (1.03/1.025)-1 (’562 Patent, col. 23:33-36). A party may argue the term should be limited to these or similar quantitative comparisons of performance trends.

The Term: "virtual test"

Context and Importance

The entire pre-optimization process of the claimed method hinges on performing these "virtual tests." Its definition is critical to determining whether a given analytical process on historical data meets this claim limitation.

Intrinsic Evidence for Interpretation

• Evidence for a Broader Interpretation: The claim language describes it as a "simulated business initiative test performed on test sites where no actual initiative test has been implemented" (’562 Patent, col. 31:62-65). This could be construed broadly to cover nearly any analysis of historical data that mimics a test.
• Evidence for a Narrower Interpretation: The detailed description outlines a specific process for a virtual test, including randomly selecting a test start date, defining a pre-period and test-period, and collecting historical data for those periods to analyze (’562 Patent, col. 21:1-29). Practitioners may argue that the term should be construed to require this more structured simulation.

VI. Other Allegations

• Unenforceability (Inequitable Conduct): The complaint alleges that the '562 Patent is unenforceable due to inequitable conduct during its prosecution (Compl. ¶¶ 42-45). The specific basis is the allegation that APT, with "deceptive intent," failed to "call to the attention of the [Patent] Office" the district court's prior decision that had invalidated all claims of the parent '916 patent (Compl. ¶¶ 31-32, 43).
• Intervening Rights: The complaint seeks a declaratory judgment that MarketDial has intervening rights under 35 U.S.C. § 252 (Compl. ¶¶ 46-50). The basis for this claim is the allegation that APT's infringement threat is based on MarketDial's software and system that it "had made prior to issuance of the '562 Patent," and that it would be inequitable to allow APT to obtain relief (Compl. ¶¶ 47-48).

VII. Analyst’s Conclusion: Key Questions for the Case

• A central legal question will be one of patent eligibility: Did the addition of new, detailed limitations in the '562 reissue patent, particularly in claim 36, introduce a sufficient "inventive concept" to overcome the prior judicial determination that its parent patent was directed to an unpatentable abstract idea under 35 U.S.C. § 101?
• A critical issue for the patent's survival will be one of enforceability: Does the evidence show that APT's failure to explicitly highlight the district court's invalidity ruling during the reissue proceedings amounted to a material omission made with an intent to deceive the Patent Office, thereby rendering the '562 patent unenforceable for inequitable conduct?
• A key defensive question will be one of intervening rights: Assuming the patent is deemed valid and infringed, can MarketDial establish that its accused software was made or used before the reissue patent's grant date, and that the circumstances of the case entitle it to either absolute or equitable intervening rights to continue its business activities under 35 U.S.C. § 252?