Callidus Software Inc v. Versata Development Group Inc

1. Case Identification

• Case #: CBM2013-00054
• Patent #: 7,908,304
• Filed: August 30, 2013
• Petitioner(s): Callidus Software Inc.
• Patent Owner(s): Versata Software, Inc. and Versata Development Group, Inc.
• Challenged Claims: 1, 12-25, 30-32, and 42-43

2. Patent Overview

• Title: Method and System for Managing Distributor Information
• Brief Description: The ’304 patent discloses a computer-implemented system for managing business relationships in industries like financial services. The system manages distributor information, validates licensing and selling agreements, and determines compensation and payments for sales agents.

3. Grounds for Unpatentability

Ground 1: Unpatentability of Claims 12-25, 30-31, and 42-43 Under 35 U.S.C. §101

• Legal Basis: Claims are directed to the patent-ineligible abstract idea of validating a distributor to begin selling products.
• Core Argument for this Ground:
  • Abstract Idea Identification: Petitioner argued that independent claim 12 recites the fundamental business practice of verifying that a sales agent (distributor) is authorized to sell products. This involves checking that the agent has a valid license and is operating under a valid selling agreement, a long-standing prerequisite in regulated industries like finance and insurance. Petitioner contended this process is a quintessential abstract idea that has historically been performed manually.
  • Lack of Inventive Concept: Petitioner asserted that the claim limitations do not add "significantly more" to the abstract idea. The "database source" was described as a generic data repository, and the "distributor management engine" was characterized as conventional software merely configured to perform the abstract function of obtaining data and making a determination. Petitioner argued these are nothing more than general-purpose computer components used for their basic functions of storing and processing data, which does not transform the abstract idea into a patent-eligible application.
  • Key Aspects: Petitioner emphasized that the claimed process could be, and was, accomplished by hand using paper records and checklists long before the patent. The claims fail the machine-or-transformation test because they are not tied to a particular machine and only manipulate data without transforming any article to a different state or thing. The dependent claims were argued to add only insignificant limitations, such as routine data gathering, processing, and post-solution reporting, or to improperly limit the abstract idea to a specific field of use (financial services).

Ground 2: Unpatentability of Claim 1 Under 35 U.S.C. §101

• Legal Basis: Claim 1 is directed to the patent-ineligible abstract idea of determining compensation for a validated distributor.
• Core Argument for this Ground:
  • Abstract Idea Identification: Petitioner contended that claim 1 recites the abstract idea of calculating payment for a sales agent after confirming they are licensed for a given transaction. This core concept involves simple arithmetic (calculating commission) and verification steps that are fundamental to business and can be performed mentally or with pen and paper.
  • Lack of Inventive Concept: Petitioner argued that the claim’s recitation of a "processor," "memory," and a plurality of software "modules" (selling agreements, commission, licensing, payment) are generic computer components performing their conventional functions. The modules were described as functional software blocks that simply automate discrete steps of the abstract idea (e.g., determine commission, check license, determine final payment) without adding any technological improvement or inventive concept beyond the idea itself. The generation of a selling agreement was characterized as a token, ancillary step that does not make the claim less abstract.

Ground 3: Unpatentability of Claim 32 Under 35 U.S.C. §101

• Legal Basis: Claim 32 is directed to the same abstract idea as claim 1: determining compensation for a validated distributor.
• Core Argument for this Ground:
  • Abstract Idea Identification: Petitioner asserted that claim 32, like claim 1, recites the abstract business method of calculating compensation for a properly credentialed sales distributor. The core function is determining if a distributor complies with industry regulations and then calculating their commission.
  • Lack of Inventive Concept: The argument paralleled the challenge to claim 1. Petitioner stated that the additional limitations in claim 32—an "interface," a "database source," a "commission engine," and various "modules"—are all conventional, general-purpose computing elements. The interface was described as a generic gateway for a user, and the engine and modules were argued to be functional software components that perform the abstract steps without any specific, inventive algorithm. Petitioner maintained that claim 32 adds no meaningful limitations beyond implementing the abstract idea with generic software on a general-purpose computer.

4. Key Claim Construction Positions

• "Module" / "Modules": Petitioner proposed the construction "software application that performs a stated function." This construction supports the argument that the claims merely recite generic software components defined by their function, rather than any specific, inventive structure.
• "Engine": Petitioner proposed the construction "software that processes data for a stated function." This reinforces the contention that terms like "distributor management engine" and "commission engine" are simply generic software performing the abstract steps of the claimed method.
• "Backbone": Petitioner proposed the construction "software through which engines, modules, and databases can exchange information." This construction frames the backbone as a conventional software framework for data communication, not a specific technological implementation.
• "Interface": Petitioner proposed the construction "browser-based gateway for a user to manage the DMSS applications," arguing it is a generic user interface without inventive features.

5. Key Technical Contentions (Beyond Claim Construction)

• Problem Solved is Not Technical: Petitioner argued that the ’304 patent does not solve a technical problem but rather a business management problem. The specification was cited as describing challenges in "managing sales and distribution channels" and administering incentive programs, which are business, not technical, issues.
• Allegedly Novel Features Are Not Technological: Petitioner contended that the features asserted as novel during prosecution—such as determining if a distributor has a valid license—are functional business rules, not technological innovations. The patent claims the what (the business logic) rather than a specific, technical how. The solution is merely the application of generic software to automate a known business process.

6. Relief Requested

• Petitioner requested institution of a Covered Business Method patent review and cancellation of claims 1, 12-25, 30-32, and 42-43 of the ’304 patent as unpatentable under 35 U.S.C. §101.