PTAB

CBM2013-00052

Callidus Software Inc v. Versata Development Group Inc

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Petition
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1. Case Identification

2. Patent Overview

  • Title: Method and Apparatus for Performing Collective Validation of Credential Information
  • Brief Description: The ’326 patent describes a computer-implemented method for determining compensation eligibility in industries like financial services. The system collectively validates product distributor credentials (e.g., licenses) and product distribution transactions against a set of rules before generating compensation data.

3. Grounds for Unpatentability

Ground 1: Claims 1-22 are Unpatentable as an Abstract Idea under 35 U.S.C. § 101.

  • Supporting Authority Relied Upon: The challenge is based on §101 and relies primarily on legal precedent and expert testimony rather than traditional prior art patents. Key authorities cited include Supreme Court and Federal Circuit decisions such as Gottschalk v. Benson, Parker v. Flook, CyberSource Corp. v. Retail Decisions, Inc., and Bancorp Services, L.L.C. v. Sun Life Assurance Co. of Canada, along with declarations from industry experts (DeHaven and McGuffey).
  • Core Argument: Petitioner asserted that all claims of the ’326 patent are directed to the patent-ineligible abstract idea of “validating transactions and validating distributors before calculating compensation.” The core of this argument is structured as follows:
    • Fundamental Business Practice: Petitioner argued that the claimed method is a decades-old, fundamental business practice that can be, and historically has been, performed by humans using pen and paper. The process of verifying a sales agent’s credentials and transaction details before paying a commission is a long-standing and legally required prerequisite in the insurance and financial services industries.
    • Lack of Inventive Concept: The petition contended that the claims do nothing more than take this abstract idea and apply it using a generic computer system. Reciting conventional computer functions—such as obtaining, storing, processing, and generating data—does not transform the abstract idea into a patent-eligible application. The use of a computer was argued to only increase the speed and efficiency of an otherwise unpatentable mental process, which is insufficient to confer patentability.
    • Failure of Machine-or-Transformation Test: Petitioner argued the claimed method fails both prongs of the machine-or-transformation test. It is not tied to a particular machine, as the specification discloses only a general-purpose computer. Furthermore, it does not transform any physical article into a different state or thing; it merely manipulates data by collecting, analyzing, and outputting it in a different format (e.g., "results data" and "compensation data").
    • Insignificant Dependent Claim Limitations: The petition asserted that dependent claims 2-22 fail to add any meaningful limitations to the abstract idea of claim 1. These claims were categorized as adding only:
      • Basic computer functions and data-gathering steps (e.g., loading data from a file, using database connections, denormalizing data), which are conventional activities.
      • Rudimentary data manipulation (e.g., filtering or defining rules), which is inherent to the underlying abstract idea.
      • Insignificant post-solution activity (e.g., claim 7’s step of computing an amount of compensation), which is a basic mathematical operation.
      • Field-of-use limitations (e.g., specifying compensation as a "commission" or distributors as "sales agents"), which do not make the underlying abstract concept patentable.

4. Key Claim Construction Positions

Petitioner proposed constructions for key terms under the Broadest Reasonable Interpretation (BRI) standard to support its §101 arguments.

  • "credential information": Petitioner proposed the construction "data representative of any internal or external constraint, regulation, requirement, policy or objective for receiving compensation." This broad construction was argued to be supported by the prosecution history, where the applicant stated the term was not limited to formal licenses but could encompass any company policy or definable constraint required for a sales representative to be compensated.
  • "denormalizing": Petitioner proposed the construction "creating a redundant copy." This was explained as a well-known database optimization technique where data from multiple tables is duplicated into a single table to improve query performance, which does not add a patentable technological concept.

5. Key Technical Contentions (Beyond Claim Construction)

A central pillar of the petition was the argument that the ’326 patent is not a "technological invention" and is therefore eligible for review as a Covered Business Method (CBM) patent.

  • Petitioner contended that the claimed invention fails to satisfy the two-prong test for the technological invention exception. First, it argued that any allegedly novel features of the claims are non-technological, relating to the business logic of validating credentials rather than an improvement in computer technology itself. The claims merely recite generic computer components to perform these business steps. Second, it argued the patent does not solve a technical problem with a technical solution. The stated problem of minimizing processing time for license and appointment data was framed as one of organizational management, not a technical computer problem, and the solution offered is merely the application of the abstract validation idea on a computer.

6. Relief Requested

  • Petitioner requests the institution of a Covered Business Method (CBM) patent review and the cancellation of claims 1-22 of Patent 7,904,326 as unpatentable under 35 U.S.C. § 101.