ⓘ DDR Holdings v. Hotels.com
DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, is the first United States Court of Appeals for the Federal Circuit decision to uphold the validity of computer-implemented patent claims since the Supreme Courts decision in Alice Corp. v. CLS Bank International. Both Alice and DDR Holdings are legal decisions relevant to the debate about whether software and business methods are patentable subject matter under Title 35 of the United States Code §101. The Federal Circuit applied the framework articulated in Alice to uphold the validity of the patents on webpage display technology at issue in DDR Holdings.
In Alice, the Supreme Court held that a computer implementation of an abstract idea, which is not itself eligible for a patent, does not by itself transform that idea into something that is patent eligible. According to the Supreme Court, in order to be patent eligible, what is claimed must be more than the abstract idea. The implementation of the idea must be something beyond the "routine," "conventional" or "generic." In DDR Holdings, the Federal Circuit, applying the Alice analytical framework, upheld the validity of DDRs patent on its webpage display technology.
DDR Holdings, LLC "DDR" was formed by inventors Daniel D. Ross and D. Delano Ross, Jr. following the asset sale of their dot-com company, Nexchange which was formed to utilize their invention. DDR filed a lawsuit against twelve entities including Hotels.com, National Leisure Group, World Travel Holdings, Digital River, Expedia, Travelocity.com, and Orbitz Worldwide for patent infringement. DDR settled with all but three of these defendants prior to an October 2012 jury trial in the United States District Court for the Eastern District of Texas. The jury found that neither of the patents at issue were invalid, that National Leisure Group, Inc. and World Travel Holdings, Inc. collectively "NLG" directly infringed both these patents, that Digital River directly infringed one of the patents, and that DDR should be awarded $750.000 in damages.
Following the verdict, the district court denied defendants’ motions for Judgment as a matter of law JMOL and entered final judgment in favor of DDR, consistent with the jurys findings. Defendants appealed, however, by the time of oral argument, DDR settled with Digital River, and Digital Rivers appeal was subsequently terminated. NLG continued its appeal.
1.1. Background Patents-in-suit
DDR is the assignee of U.S. Patent Nos. 7.818.399 "the 399 patent" and 6.993.572 "the 572 patent", both of which are continuations of an earlier patent - U.S. Patent No. 6.629.135 "the 135 patent". The courts § 101 analysis focused on the 399 patent, entitled "Methods of expanding commercial opportunities for internet websites through coordinated offsite marketing."
1.2. Background The Invention
The 399 patent addresses a particular problem in the field of e-commerce when vendors advertise their products and services through a hosting page of an affiliate:
instructs an Internet web server of an" outsource provider” to construct and serve to the visitor a new, hybrid web page that merges content associated with the products of the third-party merchant with the stored" visually perceptible elements” from the identified host website.
A case note states that one way to accomplish the function would be with an tag or a tag, which HTML5 allows but no longer supports. The courts opinions use the metaphor of the "store within a store" to describe what the invention does and how it works, stating that the inventors idea was to have an Internet webpage that was like a warehouse store or department store the dissenting opinion uses BJs Wholesale Clubs as an illustrative example; other merchants webpages would function like concessions or kiosks within the department store. A commentator asserted that the courts "store within a store" metaphor may not be the best way to look at this claimed invention, and that it may be more apt to characterize what the invention does as placing a frame around someone elses webpage and incorporating the frame and its content into the hosts webpage. This is the effect that the invention accomplishes:
Representative claim 19 of the 399 patent recites:"19. A system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising: a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements, which visually perceptible elements correspond to the plurality of first web pages; i wherein each of the first web pages belongs to one of a plurality of web page owners; ii wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and iii wherein the selected merchant, the out-source provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other; b a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to: i receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages; ii automatically identify as the source page the one of the first web pages on which the link has been activated; iii in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and iv using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: A information associated with the commerce object associated with the link that has been activated, and B the plurality of visually perceptible elements visually corresponding to the source page."
1.3. Background Legal landscape
Under US law, all patentable inventions meet several general requirements: The claimed invention must be:
- Judicial interpretation of this statute dictates that natural phenomena, laws of nature, and abstract ideas are not themselves patentable although a particular application of a law of nature or an abstract idea might be patent-eligible.
- statutory subject matter
- fully disclosed and enabled.
As is entirely typical, the defendant argued that DDRs patents were invalid under all of these sections, but the primary litigation focus was on § 101 and whether DDRs patents were claiming an abstract idea which would not be patentable subject matter.
In Alice, the Supreme Court clarified its two-prong framework, originally set forth in Mayo Collaborative Servs. v. Prometheus Labs., Inc., for evaluating the patent-eligibility of a claim under § 101. First one must determine whether the claim is directed to a patent-ineligible law of nature, natural phenomenon, or abstract idea. If so, then one determines whether any additional claim elements transform the claim into a patent-eligible application that amounts to significantly more than the ineligible concept itself. Under Alice, Mayo, and Ultramercial, claims are patent-ineligible under § 101 if they are directed to patent-ineligible subject matter and do not contain an inventive concept that sufficiently transforms the claim into an application of the underlying idea that restricts the claim to something significantly different from the ineligible subject matter it is directed to. This embodiment must be something more than typical operations performed on a generic computer. Following the Alice decision, several cases invalidated patents covering computer-implemented inventions as ineligible abstract ideas, including Ultramercial. Because the analyses in these decisions are somewhat ambiguous, many inventors, bloggers, scholars, and patent lawyers have struggled with determining their full implication, especially as they relate to software claims, and some have even questioned the patentability of computer-implemented inventions in general.
Judge Chen authored the opinion of the Federal Circuit, joined by Judge Wallach, which invalidated DDRs 572 patent as anticipated overruling the District Court and affirmed the District Court’s denial of NLG’s renewed motions for JMOL on invalidity and noninfringement of the 399 patent. The Federal Circuit Court held that the relevant claims of the 399 patent were directed to patent eligible subject matter and that the jury was presented with substantial evidence on which to base its finding that NLG infringed the 399 patent. Judge Mayer authored a dissenting opinion, arguing that the 399 patent was "long on obfuscation but short on substance to account for the ephemeral nature of an Internet location’ or the near-instantaneous transport between these locations made possible by standard Internet communication protocols, which introduces a problem that does not arise in the brick and mortar’ context."
2.1. Decision Dissent
Judge Mayer in his dissent proposed a brick and mortar analog to the claimed invention where an individual shop within a larger store had the same decor as the larger shop to "dupe" shopper to believing he/she was in the larger store. Hence, the claimed invention did not address a unique problem to the internet.
3.1. Significance and reception Commentary
Professor Crouch, in the Patently-O blog, commented: "The case is close enough to the line that I expect a strong push for en banc review and certiorari. Although Judge Chen’s analysis is admirable, I cannot see it standing up to Supreme Court review and, the holding here is in dreadful tension with the Federal Circuit’s recent Ultramercial decision."
Gene Quinn, a patent lawyer and blogger at IPWatchdog, doubts that this case can be reconciled with Ultramercial, despite the Federal Courts attempt to distinguish the two. Quinn found the difference between DDR and Ultramercial "thin" and one "that is not at all likely to lead to a repeatable and consistent test that can be applied in a predictable way."
Michael Borella, a patent attorney, said in the Patent Docs blog: "Not only does this case give us another data point of how a computer-implemented invention that incorporates an abstract idea can be patent-eligible Diamond v. Diehr is the other notable example, but it also provides the first appellate use of the second prong of the Alice test to do so."
3.2. Significance and reception District courts
As one professorial commentator noted, "Because DDR Holdings is the only post- Alice Federal Circuit decision so far to uphold a patent against a § 101 challenge, patentees have been quick to cite it and accused infringers have found ways to distinguish it." Among the district court cases interpreting and applying DDR Holdings are:
- Intellectual Ventures I LLC v. Symantec Corp., 100 F. Supp. 3d 371 D. Del. 2015, reversed in pertinent part, 838 F.3d 1307 Fed. Cir. 2016 – "The Federal Circuit in DDR Holdings, 773 F.3d at 1259, held that the Internet-centric claims at issue there were patent eligible. Claim 7 of the 610 patent is Internet-centric. In fact, the key idea of the patent is that virus detection can take place remotely between two entities in a telephone network. This is advantageous because it saves resources on the local caller and calling machines and more efficiently executes virus detection at a centralized location in the telephone network. Claims that purport to improve the functioning of the computer itself or effect an improvement in any other technology or technical field may be patentable under § 101. Alice."
- MyMedicalRecords, Inc. v. Walgreen Co., 2014 U.S. Dist. LEXIS 176891 C.D. Cal. Dec. 23, 2014 – "Unlike the claims in DDR these claims are directed to nothing more than the performance of a long-known abstract idea from the pre-Internet world - collecting, accessing, and managing health records in a secure and private manner - on the Internet or using a conventional computer. The patent claims are not rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks networks. DDR Holdings, 773 F.3d at 1257. Rather, as noted above, the problem of transmitting confidential information using unsecure communication methods has existed for centuries, long before the advent of interactive television networks. Here, as described more fully above in the Courts analysis of the first prong of the Alice test, the `799 Patent does not claim a solution to a problem that arose uniquely in the context of interactive television networks. Furthermore, the `799 Patent claims recite a method that does not go beyond the routine or conventional use of existing electronic components."
- KomBea Corp. v. Noguar L.C., 2014 U.S. Dist. LEXIS 177186 D. Utah Dec. 23, 2014 – "The patents-in-suit are distinguishable from the patents in DDR Holdings. First, the patents-in-suit are not directed toward solving a new problem, unique to a technological field. Rather, the patents-in-suit are directed toward performing fundamental commercial practices more efficiently. Second, the patents-in-suit are not a new solution to a unique problem; they only employ a combination of sales techniques and basic telemarketing technology to create an efficient system. In this case, the fact that Defendant’s patents-in-suit are directed toward abstract ideas that are more efficiently executed with the use of a generic computer does not make the patents eligible for protection. Therefore, the Court finds that the claims, individually and collectively, do not transform the abstract ideas within the claims into an inventive concept. As such, the patents-in-suit fail to transform the abstract ideas they claim into patent-eligible subject matter."
- Messaging Gateway Solns. LLC v. Amdocs, Inc., – F. Supp. 2d – D. Del. Apr. 15, 2015 – "The Court finds that Claim 20 contains an inventive concept sufficient to render it patent-eligible. Like the claims in DDR Holdings, Claim 20 is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks. See id. at 1257. Claim 20 is directed to a problem unique to text-message telecommunication between a mobile device and a computer. The solution it provides is tethered to the technology that created the problem."
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