Callidus Software Inc v. Versata Development Group Inc

1. Case Identification

• Case #: CBM2014-00118
• Patent #: 7,958,024
• Filed: April 17, 2014
• Petitioner(s): Callidus Software Inc.
• Patent Owner(s): Versata Development Group, Inc.
• Challenged Claims: 3-34

2. Patent Overview

• Title: Distributor Management System Suite
• Brief Description: The ’024 patent discloses a computer-implemented method for processing sales transaction data. The system determines if sales representatives comply with a set of regulatory conditions before computing and executing compensation payments.

3. Grounds for Unpatentability

Ground 1: Claims 3-34 are directed to non-patentable subject matter under 35 U.S.C. §101.

• Prior Art Relied Upon: Not applicable. This ground is based on patent ineligibility under §101.
• Core Argument for this Ground: Petitioner asserted that all challenged claims are directed to the abstract idea of compensating sales representatives for transactions only if they conform to regulatory conditions. The claims merely add the instruction to "apply" this abstract idea using a general-purpose computer, which does not confer patent eligibility.
  • Claim 1 as an Abstract Idea: The petition argued that independent claim 1, from which all challenged claims depend, recites the core abstract idea. The steps of "capturing" data, "determining" conformity, "computing" compensation, and "executing" payment were described as quintessential mental processes or fundamental business practices that have existed for decades. Petitioner contended that these steps, even when performed by a "distributer management system," do not add an inventive concept and fail to tie the claim to a specific, non-conventional application. The claimed steps were characterized as merely reflecting the natural result of the underlying abstract business method.
  • Implementation on a General-Purpose Computer: The petition asserted that the claimed "distributer management system" is nothing more than software running on a general-purpose computer. It argued the ’024 patent lacks any disclosure of specific hardware or a novel technological configuration. The use of a computer was framed as simply lending speed and efficiency to an otherwise abstract process, which is insufficient to make an abstract idea patentable. The claims were argued to lack any meaningful limitations tying the abstract idea to a particular machine or apparatus, thus failing the machine-or-transformation test.
  • Process Can Be Performed by Hand: A central contention was that the claimed method is not only capable of being performed manually but has been a historical fact in the insurance and financial services industries for decades. Petitioner provided declarations stating that payroll and license compliance, including capturing transaction data, checking credentials against regulatory rules, calculating commissions, and issuing payments, were performed manually long before the patent's filing date. This demonstrated that the claims are a computer implementation of a purely mental or manual process, which is unpatentable.
  • Dependent Claims Add No Inventive Concept: Petitioner argued that dependent claims 3-34 fail to add any meaningful limitations to the abstract idea of claims 1 and 2. The limitations were categorized as merely specifying the abstract idea to a particular field of use (e.g., checking specific license or appointment requirements) or adding insignificant post-solution activity (e.g., generating a selling agreement). These additions were described as conventional and routine, failing to transform the abstract idea into a patent-eligible application. It was also noted that many of the dependent claims were identical to each other, creating an issue of statutory double patenting.

4. Key Claim Construction Positions

• distributer management system: Petitioner accepted the Board’s prior construction of this term as "software for managing information about a sales force." This construction supports the argument that the claims are not tied to any particular machine or hardware but rather to a generic software application.
• regulatory conditions applicable to said sales: Petitioner adopted the Board's prior construction of this term as "any internal or external constraint, regulation, requirement, policy or objective with which a sales representative must comply to receive compensation[s] for said sales." This broad construction was used to argue that the claims cover the fundamental business practice of ensuring compliance before payment, reinforcing its abstract nature.
• executing a payment process: Construed as "distributing payment," this term was argued to represent insignificant post-solution activity. Petitioner asserted that distributing payment is a conventional result of the compensation calculation and does not transform the claimed subject matter into a patentable process.

5. Relief Requested

• Petitioner requests institution of a Covered Business Method patent review and cancellation of claims 3-34 of the ’024 patent as unpatentable under 35 U.S.C. §101.