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St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com October 27, 2015 I .. Michelle K. Lee Director of the USPTO USPTO Madison Building 600 Dulany Street Alexandria, VA 22314 VIA EMAIL ONLY [email protected] Re: Comment on Interim Subject Matter Eligibility Guidance Dear Ms. Lee: I write today to submit a comment regarding the recent guidance on subject matter eligibility (''Guidelines'') found at the following link: http://www.uspto.gov/patent/laws-and-regulations/examination-policy/2014-interim- guidance-subject-matter-eligibility-0 Summary The Court stated in Alice, that if claims include something that the industry had not been able to obtain, they qualify as "significantly more." 134 S. Ct. at 2358 (citing Diehf). The Guidelines provide six categories that qualify as "significantly more. " But, the Guidelines also allow Examiners to make rejections based on case law and without evidence. The result is that Applicant's cited evidence in a response can be ignored by the Examiner who then reiterates a legal conclusion in a second rejection that is now inconsistent with the evidence of record. This is true even if the submitted evidence and argument shows that the claims include: a specific limitation other than what is well-understood, routine and conventional in the field. The result is that the Guidelines allow Examiners to ignore facts in the record because there are no guidelines as to when Applicant has submitted a persuasive argument or evidence of "significantly more." Once the prima facie case is rebutted with evidence, the examiner should not be able to make another rejection without rebutting the evidence. The only way to determine if the industry has or has not been able to obtain a feature is on the evidence. Allowing the Examiner to reiterate a prima facie case based on a legal conclusion without rebutting Applicant's evidence makes the Step 2B analysis cursory such that it nearly impossible to overcome an Alice rejection . This is surely not the intent. Discussion According to the Guidelines, the Claims are "significantly more" than the abstract idea if the claim includes:

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Page 1: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

St Onge Steward Johnston amp Reens LLC

986 Bedford Street +1203324-6155 TEL

Stamford Connecticut +1203327-1096 FAX

06905-5619

ssjrcom

October 27 2015I ~ -~ Michelle K Lee Director of the USPTO USPTO Madison Building 600 Dulany Street Alexandria VA 22314

VIA EMAIL ONLY 2014 _interim _guidanceusptogov

Re Comment on Interim Subject Matter Eligibility Guidance

Dear Ms Lee

I write today to submit a comment regarding the recent guidance on subject matter eligibility (Guidelines) found at the following link

httpwwwusptogovpatentlaws-and-regulationsexamination-policy2014-interimshyguidance-subject-matter-eligibility-0

Summary

The Court stated in Alice that if claims include something that the industry had not been able to obtain they qualify as significantly more 134 S Ct at 2358 (citing Diehf) The Guidelines provide six categories that qualify as significantly more But the Guidelines also allow Examiners to make rejections based on case law and without evidence The result is that Applicants cited evidence in a response can be ignored by the Examiner who then reiterates a legal conclusion in a second rejection that is now inconsistent with the evidence of record This is true even if the submitted evidence and argument shows that the claims include a specific limitation other than what is well-understood routine and conventional in the field

The result is that the Guidelines allow Examiners to ignore facts in the record because there are no guidelines as to when Applicant has submitted a persuasive argument or evidence of significantly more Once the prima facie case is rebutted with evidence the examiner should not be able to make another rejection without rebutting the evidence

The only way to determine if the industry has or has not been able to obtain a feature is on the evidence Allowing the Examiner to reiterate a prima facie case based on a legal conclusion without rebutting Applicants evidence makes the Step 2B analysis cursory such that it nearly impossible to overcome an Alice rejection This is surely not the intent

Discussion

According to the Guidelines the Claims are significantly more than the abstract idea if the claim includes

Michele K Lee Comment on Interim 101 Guidance

October 27 2015 Page 2

bull Improvements to another technology or technical field

bull Improvements to the functioning of the computer itself

bull Applying the judicial exception with or by use of a particular machine

bull Effecting a transformation or reduction of a particular article to a different state or thing

bull Adding a specific limitation other than what is well-understood routine and conventional in the field or adding unconventional steps that confine the claim to a particular useful application or

bull Other meaningful limitations beyond generally linking the use of the judicial exception to a particular technological environment

Without evidence it is impossible to know when a claim element fits into one of the above categories especially when the category requires an understanding of what is wellshyunderstood routine and conventional in the field Examiners need to have guidance on how to determine when Applicant has submitted persuasive arguments

The Court in Alice said

The invention in Diehrused a thermocouple to record constant temperature measurements inside the rubber mold shysomething the industrv ha[dJ not been able to obtain The temperature measurements were then fed into a computer which repeatedly recalculated the remaining cure time by using the mathematical equation These additional steps we recently explained transformed the process into an inventive application of the formula 1

The only way to know if the industry has or has not been able to obtain a feature is with evidence In contrast a claim does not supply significantly more when a hypothetical programmer could be told about the abstract idea and then instructed to write a program to perform said idea During oral argument of Alice Justice Kennedy stated

Well let me put it this way If you describe that to a second year college class in engineering and said heresmy idea now you go home and you program over this weekend my guess isthat would be fairly easy to program2

1 134 sa at 2358 (citations omitted emphasis added) 2 Transcript of Oral Argument at 5 Alice 134 sa 2347 (No 13-298) (See Exhibit A at Page 5 Lines 7-12)

Michele K Lee Comment on Interim 101 Guidance

October 27 2015 Page 3

The basic point Justice Kennedy made is that if someone told a developer to create a computer program to mitigate settlement risk the computer programmer would program the claims The same holds true for why the patent failed in Ultramercial LLC v Hulu LLC and WildTangent No 2010-1544 (Fed Cir 2014) If a computer programmer was told to set up a system that displays advertisements before internet video content the programmer would end up with the Claims in Ultramercial

The Guidelines state that a prima facie case can be made without evidence It appears the reasoning by the Office comes from a reading of Supreme Court opinions as not citing evidence However if something the industry had not been able to obtain is enough to qualify as significantly more there must be evidence in the record for the Supreme Court to know this If Applicant cites evidence that a claim element or combination of claim elements is something the industry had not been able to obtain Applicant has met the burden of rebutting the prima facie case Otherwise the Guidelines would be inconsistent with Diehr

When a prima facie case can be made without evidence and Applicant points to evidence in the specification the examiner returns to the July 2015 update that says that the evidence is not needed for a prima facie case Examiners then submit another nearly identical rejection without evidence The real problem is that the second rejection is inconsistent with the evidence of record cited by Applicant and inconsistent with Diehr

Without guidance on what is persuasive and what examiners must do to respond to evidence examiners cannot know what is a quality rejection and a quality allowance

Thank you for taking the time to consider this letter

Very truly yours-

gt~~ c_Jorfathan A Winter

jwinterssjrcom GSWSBSJAW Enclosure

Exhibit A

1

Official shy Subject to Final Review

1 IN THE SUPREME COURT OF THE UNITED STATES

2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

3 ALICE CORPORATION PTY

4 LTD

5 Petitioners No 13shy298

6 v

7 CLS BANK INTERNATIONAL

8 ET AL

9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

10 Washington DC

11 Monday March 31 2014

12

13 The aboveshyentitled matter came on for oral

14 argument before the Supreme Court of the United States

15 at 1004 am

16 APPEARANCES

17 CARTER G PHILLIPS ESQ Washington DC on behalf

18 of Petitioners

19 MARK A PERRY ESQ Washington DC on behalf of

20 Respondents

21 DONALD B VERRILLI JR ESQ Solicitor General

22 Department of Justice Washington DC on behalf of

23 the United States as amicus curiae supporting

24 Respondents

25

Alderson Reporting Company

2

Official shy Subject to Final Review

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 CARTER G PHILLIPS ESQ

4 On behalf of the Petitioners 3

5 ORAL ARGUMENT OF

6 MARK A PERRY ESQ

7 On behalf of the Respondents 26

8 ORAL ARGUMENT OF

9 DONALD B VERRILLI JR ESQ

10 On behalf of the United States as amicus

11 curiae supporting Respondents 44

12 REBUTTAL ARGUMENT OF

13 CARTER G PHILLIPS ESQ

14 On behalf of the Petitioners 53

15

16

17

18

19

20

21

22

23

24

25

Alderson Reporting Company

3

Official shy Subject to Final Review

1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

Alderson Reporting Company

4

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1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

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1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

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Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

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Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

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1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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Official shy Subject to Final Review

13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

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aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

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1215 159 adjusting 3611 analysis 424 281122 3811 4025

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491221 505 advancement 461821 arms 1625 1516 2719

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552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

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9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 2: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Michele K Lee Comment on Interim 101 Guidance

October 27 2015 Page 2

bull Improvements to another technology or technical field

bull Improvements to the functioning of the computer itself

bull Applying the judicial exception with or by use of a particular machine

bull Effecting a transformation or reduction of a particular article to a different state or thing

bull Adding a specific limitation other than what is well-understood routine and conventional in the field or adding unconventional steps that confine the claim to a particular useful application or

bull Other meaningful limitations beyond generally linking the use of the judicial exception to a particular technological environment

Without evidence it is impossible to know when a claim element fits into one of the above categories especially when the category requires an understanding of what is wellshyunderstood routine and conventional in the field Examiners need to have guidance on how to determine when Applicant has submitted persuasive arguments

The Court in Alice said

The invention in Diehrused a thermocouple to record constant temperature measurements inside the rubber mold shysomething the industrv ha[dJ not been able to obtain The temperature measurements were then fed into a computer which repeatedly recalculated the remaining cure time by using the mathematical equation These additional steps we recently explained transformed the process into an inventive application of the formula 1

The only way to know if the industry has or has not been able to obtain a feature is with evidence In contrast a claim does not supply significantly more when a hypothetical programmer could be told about the abstract idea and then instructed to write a program to perform said idea During oral argument of Alice Justice Kennedy stated

Well let me put it this way If you describe that to a second year college class in engineering and said heresmy idea now you go home and you program over this weekend my guess isthat would be fairly easy to program2

1 134 sa at 2358 (citations omitted emphasis added) 2 Transcript of Oral Argument at 5 Alice 134 sa 2347 (No 13-298) (See Exhibit A at Page 5 Lines 7-12)

Michele K Lee Comment on Interim 101 Guidance

October 27 2015 Page 3

The basic point Justice Kennedy made is that if someone told a developer to create a computer program to mitigate settlement risk the computer programmer would program the claims The same holds true for why the patent failed in Ultramercial LLC v Hulu LLC and WildTangent No 2010-1544 (Fed Cir 2014) If a computer programmer was told to set up a system that displays advertisements before internet video content the programmer would end up with the Claims in Ultramercial

The Guidelines state that a prima facie case can be made without evidence It appears the reasoning by the Office comes from a reading of Supreme Court opinions as not citing evidence However if something the industry had not been able to obtain is enough to qualify as significantly more there must be evidence in the record for the Supreme Court to know this If Applicant cites evidence that a claim element or combination of claim elements is something the industry had not been able to obtain Applicant has met the burden of rebutting the prima facie case Otherwise the Guidelines would be inconsistent with Diehr

When a prima facie case can be made without evidence and Applicant points to evidence in the specification the examiner returns to the July 2015 update that says that the evidence is not needed for a prima facie case Examiners then submit another nearly identical rejection without evidence The real problem is that the second rejection is inconsistent with the evidence of record cited by Applicant and inconsistent with Diehr

Without guidance on what is persuasive and what examiners must do to respond to evidence examiners cannot know what is a quality rejection and a quality allowance

Thank you for taking the time to consider this letter

Very truly yours-

gt~~ c_Jorfathan A Winter

jwinterssjrcom GSWSBSJAW Enclosure

Exhibit A

1

Official shy Subject to Final Review

1 IN THE SUPREME COURT OF THE UNITED STATES

2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

3 ALICE CORPORATION PTY

4 LTD

5 Petitioners No 13shy298

6 v

7 CLS BANK INTERNATIONAL

8 ET AL

9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

10 Washington DC

11 Monday March 31 2014

12

13 The aboveshyentitled matter came on for oral

14 argument before the Supreme Court of the United States

15 at 1004 am

16 APPEARANCES

17 CARTER G PHILLIPS ESQ Washington DC on behalf

18 of Petitioners

19 MARK A PERRY ESQ Washington DC on behalf of

20 Respondents

21 DONALD B VERRILLI JR ESQ Solicitor General

22 Department of Justice Washington DC on behalf of

23 the United States as amicus curiae supporting

24 Respondents

25

Alderson Reporting Company

2

Official shy Subject to Final Review

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 CARTER G PHILLIPS ESQ

4 On behalf of the Petitioners 3

5 ORAL ARGUMENT OF

6 MARK A PERRY ESQ

7 On behalf of the Respondents 26

8 ORAL ARGUMENT OF

9 DONALD B VERRILLI JR ESQ

10 On behalf of the United States as amicus

11 curiae supporting Respondents 44

12 REBUTTAL ARGUMENT OF

13 CARTER G PHILLIPS ESQ

14 On behalf of the Petitioners 53

15

16

17

18

19

20

21

22

23

24

25

Alderson Reporting Company

3

Official shy Subject to Final Review

1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

Alderson Reporting Company

4

Official shy Subject to Final Review

1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

Alderson Reporting Company

5

Official shy Subject to Final Review

1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

Alderson Reporting Company

6

Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

Alderson Reporting Company

7

Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

Alderson Reporting Company

8

Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

Alderson Reporting Company

9

Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 3: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Michele K Lee Comment on Interim 101 Guidance

October 27 2015 Page 3

The basic point Justice Kennedy made is that if someone told a developer to create a computer program to mitigate settlement risk the computer programmer would program the claims The same holds true for why the patent failed in Ultramercial LLC v Hulu LLC and WildTangent No 2010-1544 (Fed Cir 2014) If a computer programmer was told to set up a system that displays advertisements before internet video content the programmer would end up with the Claims in Ultramercial

The Guidelines state that a prima facie case can be made without evidence It appears the reasoning by the Office comes from a reading of Supreme Court opinions as not citing evidence However if something the industry had not been able to obtain is enough to qualify as significantly more there must be evidence in the record for the Supreme Court to know this If Applicant cites evidence that a claim element or combination of claim elements is something the industry had not been able to obtain Applicant has met the burden of rebutting the prima facie case Otherwise the Guidelines would be inconsistent with Diehr

When a prima facie case can be made without evidence and Applicant points to evidence in the specification the examiner returns to the July 2015 update that says that the evidence is not needed for a prima facie case Examiners then submit another nearly identical rejection without evidence The real problem is that the second rejection is inconsistent with the evidence of record cited by Applicant and inconsistent with Diehr

Without guidance on what is persuasive and what examiners must do to respond to evidence examiners cannot know what is a quality rejection and a quality allowance

Thank you for taking the time to consider this letter

Very truly yours-

gt~~ c_Jorfathan A Winter

jwinterssjrcom GSWSBSJAW Enclosure

Exhibit A

1

Official shy Subject to Final Review

1 IN THE SUPREME COURT OF THE UNITED STATES

2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

3 ALICE CORPORATION PTY

4 LTD

5 Petitioners No 13shy298

6 v

7 CLS BANK INTERNATIONAL

8 ET AL

9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

10 Washington DC

11 Monday March 31 2014

12

13 The aboveshyentitled matter came on for oral

14 argument before the Supreme Court of the United States

15 at 1004 am

16 APPEARANCES

17 CARTER G PHILLIPS ESQ Washington DC on behalf

18 of Petitioners

19 MARK A PERRY ESQ Washington DC on behalf of

20 Respondents

21 DONALD B VERRILLI JR ESQ Solicitor General

22 Department of Justice Washington DC on behalf of

23 the United States as amicus curiae supporting

24 Respondents

25

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2

Official shy Subject to Final Review

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 CARTER G PHILLIPS ESQ

4 On behalf of the Petitioners 3

5 ORAL ARGUMENT OF

6 MARK A PERRY ESQ

7 On behalf of the Respondents 26

8 ORAL ARGUMENT OF

9 DONALD B VERRILLI JR ESQ

10 On behalf of the United States as amicus

11 curiae supporting Respondents 44

12 REBUTTAL ARGUMENT OF

13 CARTER G PHILLIPS ESQ

14 On behalf of the Petitioners 53

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final Review

1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

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1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

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1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

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1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

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1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

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1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

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address 4121 4317 4511

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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1716 2925 304 4022

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

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6 6 5114 65 3019

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9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 4: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Exhibit A

1

Official shy Subject to Final Review

1 IN THE SUPREME COURT OF THE UNITED STATES

2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

3 ALICE CORPORATION PTY

4 LTD

5 Petitioners No 13shy298

6 v

7 CLS BANK INTERNATIONAL

8 ET AL

9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

10 Washington DC

11 Monday March 31 2014

12

13 The aboveshyentitled matter came on for oral

14 argument before the Supreme Court of the United States

15 at 1004 am

16 APPEARANCES

17 CARTER G PHILLIPS ESQ Washington DC on behalf

18 of Petitioners

19 MARK A PERRY ESQ Washington DC on behalf of

20 Respondents

21 DONALD B VERRILLI JR ESQ Solicitor General

22 Department of Justice Washington DC on behalf of

23 the United States as amicus curiae supporting

24 Respondents

25

Alderson Reporting Company

2

Official shy Subject to Final Review

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 CARTER G PHILLIPS ESQ

4 On behalf of the Petitioners 3

5 ORAL ARGUMENT OF

6 MARK A PERRY ESQ

7 On behalf of the Respondents 26

8 ORAL ARGUMENT OF

9 DONALD B VERRILLI JR ESQ

10 On behalf of the United States as amicus

11 curiae supporting Respondents 44

12 REBUTTAL ARGUMENT OF

13 CARTER G PHILLIPS ESQ

14 On behalf of the Petitioners 53

15

16

17

18

19

20

21

22

23

24

25

Alderson Reporting Company

3

Official shy Subject to Final Review

1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

Alderson Reporting Company

4

Official shy Subject to Final Review

1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

Alderson Reporting Company

5

Official shy Subject to Final Review

1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

Alderson Reporting Company

6

Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

Alderson Reporting Company

7

Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

Alderson Reporting Company

8

Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

Alderson Reporting Company

9

Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

Alderson Reporting Company

10

Official shy Subject to Final Review

1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

Alderson Reporting Company

11

Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

Alderson Reporting Company

12

Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

Alderson Reporting Company

Official shy Subject to Final Review

13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

Alderson Reporting Company

14

Official shy Subject to Final Review

1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

Alderson Reporting Company

15

Official shy Subject to Final Review

1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

Alderson Reporting Company

Official shy Subject to Final Review

16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922

30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207

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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420

1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721

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122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate

1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213

4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814

4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718

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242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825

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earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534

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economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925

economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 5: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

1

Official shy Subject to Final Review

1 IN THE SUPREME COURT OF THE UNITED STATES

2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

3 ALICE CORPORATION PTY

4 LTD

5 Petitioners No 13shy298

6 v

7 CLS BANK INTERNATIONAL

8 ET AL

9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x

10 Washington DC

11 Monday March 31 2014

12

13 The aboveshyentitled matter came on for oral

14 argument before the Supreme Court of the United States

15 at 1004 am

16 APPEARANCES

17 CARTER G PHILLIPS ESQ Washington DC on behalf

18 of Petitioners

19 MARK A PERRY ESQ Washington DC on behalf of

20 Respondents

21 DONALD B VERRILLI JR ESQ Solicitor General

22 Department of Justice Washington DC on behalf of

23 the United States as amicus curiae supporting

24 Respondents

25

Alderson Reporting Company

2

Official shy Subject to Final Review

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 CARTER G PHILLIPS ESQ

4 On behalf of the Petitioners 3

5 ORAL ARGUMENT OF

6 MARK A PERRY ESQ

7 On behalf of the Respondents 26

8 ORAL ARGUMENT OF

9 DONALD B VERRILLI JR ESQ

10 On behalf of the United States as amicus

11 curiae supporting Respondents 44

12 REBUTTAL ARGUMENT OF

13 CARTER G PHILLIPS ESQ

14 On behalf of the Petitioners 53

15

16

17

18

19

20

21

22

23

24

25

Alderson Reporting Company

3

Official shy Subject to Final Review

1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

Alderson Reporting Company

4

Official shy Subject to Final Review

1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

Alderson Reporting Company

5

Official shy Subject to Final Review

1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

Alderson Reporting Company

6

Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

Alderson Reporting Company

7

Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

Alderson Reporting Company

8

Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

Alderson Reporting Company

9

Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

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4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

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9 9 245 9shy0 365

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Official shy Subject to Final Review

1 C O N T E N T S

2 ORAL ARGUMENT OF PAGE

3 CARTER G PHILLIPS ESQ

4 On behalf of the Petitioners 3

5 ORAL ARGUMENT OF

6 MARK A PERRY ESQ

7 On behalf of the Respondents 26

8 ORAL ARGUMENT OF

9 DONALD B VERRILLI JR ESQ

10 On behalf of the United States as amicus

11 curiae supporting Respondents 44

12 REBUTTAL ARGUMENT OF

13 CARTER G PHILLIPS ESQ

14 On behalf of the Petitioners 53

15

16

17

18

19

20

21

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25

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1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

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1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

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1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

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1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

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1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

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1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

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4 4 325 4825 42 1524 1618 44 211

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9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 7: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

3

Official shy Subject to Final Review

1 P R O C E E D I N G S

2 (1004 am)

3 CHIEF JUSTICE ROBERTS Well hear argument

4 this morning in Case 13shy298 Alice Corporation versus

5 CLS Bank International

6 Mr Phillips

7 ORAL ARGUMENT OF CARTER G PHILLIPS

8 ON BEHALF OF THE PETITIONERS

9 MR PHILLIPS Thank you Mr Chief Justice

10 and may it please the Court

11 It is common ground between the parties in

12 this case that Section 101 by its terms and with the

13 sweeping interpretation this Court adopted in Bilski

14 applies directly to the patents here These are system

15 and process patents that speak directly to Section 101

16 The only issue then is whether the

17 judicially recognized exception that this Court adopted

18 many many years ago applies under these circumstances

19 JUSTICE KENNEDY And just repeat it is

20 common ground between the parties that shyshy

21 MR PHILLIPS That shyshy that our shyshy our

22 patents speak directly to the language of Section 101

23 that is they are a process and they are machines and

24 they are shyshy and they are improvements to the process and

25 the machines They dont shyshy they dont dispute that by

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4

Official shy Subject to Final Review

1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

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5

Official shy Subject to Final Review

1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

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Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

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Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

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Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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12

Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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14

Official shy Subject to Final Review

1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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Official shy Subject to Final Review

1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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Official shy Subject to Final Review

16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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Official shy Subject to Final Review

17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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Official shy Subject to Final Review

1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

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approach 226 395 4513 B

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able 1511 167 addressing 181 allows 97 242 appropriate 5122

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aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

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absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

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491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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accounts 823 agent 52 3021 548 278 5322 214 38 2616

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 8: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

4

Official shy Subject to Final Review

1 its terms 101 applies The only argument between the

2 parties is the abstract idea exception that exists and

3 whether that bars us from otherwise satisfying

4 Section 101

5 JUSTICE GINSBURG Mr Phillips on the

6 abstract idea you know that the Bilski case held that

7 hedging qualified as an abstract idea So how is

8 intermediate settlement a less abstract than hedging

9 MR PHILLIPS If our shyshy if our patent

10 merely claimed intermediated settlements although I

11 have to say I dont really know exactly what that means

12 because I dont think thats the same kind of

13 economics shyshy basic economics concept that a hedge risk

14 treatment is But if it claimed that we wouldnt shyshy we

15 wouldnt have a distinction from Bilski

16 What we claim is a very specific way of

17 dealing with a problem that came into being in the early

18 1970s of how to try to eliminate the risk of

19 nonshysettlement in these very massive multiparty problems

20 in which you need to deal with difficulties that exist

21 at different time zones simultaneously and to do it with

22 a computer so that you not only take them on

23 chronologically deal with them sequentially based on

24 the kind software analysis that the patent specifically

25 describes by function

Alderson Reporting Company

5

Official shy Subject to Final Review

1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

Alderson Reporting Company

6

Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

Alderson Reporting Company

7

Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

Alderson Reporting Company

8

Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

Alderson Reporting Company

9

Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

Alderson Reporting Company

10

Official shy Subject to Final Review

1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

Alderson Reporting Company

11

Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

Alderson Reporting Company

12

Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

Alderson Reporting Company

Official shy Subject to Final Review

13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition

4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207

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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 9: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

5

Official shy Subject to Final Review

1 And it goes even further than that and does

2 something that no escrow agent and shyshy and no

3 intermediated settlement that I know of shyshy settler that

4 I know of It actually blocks specific transactions

5 that in the shadow account would violate the terms of

6 the settlement that would ultimately be implemented

7 JUSTICE KENNEDY Well let me put it this

8 way If you describe that to a secondshyyear college

9 class in engineering and said heres shyshy heres my idea

10 now you go home and you program over this weekend my

11 guess is shyshy my guess is that that would be fairly easy

12 to program

13 MR PHILLIPS I dont disagree with it

14 Justice shyshy

15 JUSTICE KENNEDY So the fact that the

16 computer is involved it shyshy it seems to me is necessary

17 to make it work But the shyshy but the innovative aspect

18 is certainly not in the creation of the program to make

19 that work All youre talking about is shyshy if I can use

20 the word shyshy an idea

21 MR PHILLIPS I prefer not to use that word

22 for obvious reasons

23 (Laughter)

24 MR PHILLIPS But shyshy but if you shyshy but if

25 you look at the Solicitor shyshy

Alderson Reporting Company

6

Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

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7

Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

Alderson Reporting Company

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Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

Alderson Reporting Company

9

Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

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25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

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Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 10: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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Official shy Subject to Final Review

1 JUSTICE KENNEDY Or shyshy or a method or a

2 process

3 MR PHILLIPS Right But shyshy and shyshy and

4 obviously methods and processes are precisely what

5 Section 101 permits to be subject shyshy

6 JUSTICE BREYER Why is that less abstract

7 MR PHILLIPS Im sorry

8 JUSTICE BREYER Why is that less abstract

9 I mean imagine King Tut sitting in front of the pyramid

10 where all his gold is stored and he has the habit of

11 giving chits away Good for the gold which is given at

12 the end of the day And he hires a man with an abacus

13 and when the abacus keeping track sees that hes given

14 away more gold than he is in storage he says stop

15 You see

16 Or my mother who used to look at my

17 checkbook when she saw that in fact I had written

18 more checks than I had in the account she would grab

19 it Stop You see

20 So what is it here thats less abstract that

21 the computer says stop

22 MR PHILLIPS It is shyshy

23 JUSTICE BREYER How is that less abstract

24 than King Tut if we had the same thing with a grain

25 elevator if we had the same thing with a reservoir of

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1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

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1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

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systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

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69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

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years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

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watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

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wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 11: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

7

Official shy Subject to Final Review

1 water if we had the same thing with my checkbook You

2 see the point

3 MR PHILLIPS I do see the point Justice

4 Breyer and it seems to me that it goes to the question

5 of the methodology youre going to employ

6 JUSTICE BREYER Methodology is just that

7 you said stop

8 MR PHILLIPS Well we could shyshy

9 JUSTICE BREYER So what we have different

10 here is the computer stops rather than the abacus man

11 stopping or my mother stopping or the guy that the grain

12 elevator has that says stop So just saying what shyshy is

13 that it In other words if you say computer stop you

14 have an invention Useful add shyshy but if you say mother

15 stop you dont

16 MR PHILLIPS No Well I mean again it

17 seems to me that in some ways what shyshy what you described

18 there is a caricature of what this invention is

19 JUSTICE BREYER Of course its a

20 caricature Its a caricature designed to suggest that

21 there is an abstract idea here Its called solvency

22 MR PHILLIPS But shyshy

23 JUSTICE BREYER And what you do is you take

24 the idea of solvency and you say apply it And you say

25 apply it through the computer

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1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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25

Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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Official shy Subject to Final Review

1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

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8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 12: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

8

Official shy Subject to Final Review

1 Is that enough to make it not just the

2 abstract idea And now were at the heart of why I used

3 my exaggerated examples shyshy

4 MR PHILLIPS Right

5 JUSTICE BREYER shyshy because you will tell me

6 why shyshy

7 MR PHILLIPS Right

8 JUSTICE BREYER shyshy this is enough

9 MR PHILLIPS Right Because Justice

10 Breyer the shyshy the shyshy the concept here is not simply to

11 say stop Stop is obviously part of the element of it

12 But its also designed to ensure that at the

13 end of the day this transaction in the midst of

14 literally a global set of shyshy of deals that are going on

15 simultaneously will be implemented at the appropriate

16 time in the appropriate way And whatever else that may

17 be it seems to me its difficult to say thats an

18 abstract idea as implemented

19 JUSTICE SOTOMAYOR Im sorry But shyshy but

20 what it appears to be it sounds like youre trying to

21 revive the patenting of a function You used the word

22 function earlier and thats all Im seeing in this

23 patent is the function of reconciling accounts the

24 function of making sure theyre paid on time But in

25 what particular way other than saying do it through a

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1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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Official shy Subject to Final Review

17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

Alderson Reporting Company

25

Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

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286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

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285shy286 1910 286 5325 287 5325

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viewed 5615 violate 55

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

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8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 13: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

9

Official shy Subject to Final Review

1 computer is this something new and not function

2 MR PHILLIPS Well it does it through shyshy

3 it creates the shadow accounts because of the concerns

4 for security You dont shyshy youre not going to allow

5 somebody to enter into a central banks own accounts

6 You create the shadow accounts You monitor through the

7 software that allows you to do that You evaluate each

8 of the transactions to ensure that the settlement will

9 be available You do it sequentially and you act on it

10 by the end of the day or whenever the transaction is to

11 take place and you implement that transaction

12 JUSTICE SCALIA Why isnt it shyshy why isnt

13 doing it through a computer not enough I mean was the

14 cotton gin not an invention because it just means youre

15 doing through a machine what people used to do by hand

16 Its not an invention Its the same old same old

17 MR PHILLIPS Justice Scalia shyshy

18 JUSTICE SCALIA Why shyshy why is a computer

19 any different in that respect

20 MR PHILLIPS At one level I agree with you

21 completely There is no difference between them

22 This Court has however said on more than a

23 few occasions albeit in dicta that coming up with an

24 idea and then say use a computer is not sufficient

25 And what Im trying to suggest to you is we dont fall

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Official shy Subject to Final Review

1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

Alderson Reporting Company

11

Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

Alderson Reporting Company

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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Official shy Subject to Final Review

1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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Official shy Subject to Final Review

1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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Official shy Subject to Final Review

18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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Official shy Subject to Final Review

1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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20

Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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21

Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

Alderson Reporting Company

23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

Alderson Reporting Company

24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

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address 4121 4317 4511

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

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scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

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286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

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securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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821 228 2813 3418 35517 363 417 5523

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work 51719 1124 2110 312 3322 374

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 14: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

10

Official shy Subject to Final Review

1 within that dicta

2 Now if you dont accept the dicta and you

3 say use a computer is fine then I think were done

4 JUSTICE SCALIA Well Im not saying use a

5 computer is shyshy is much of a novelty I mean thats shyshy

6 that goes to whether its novel or not If you just say

7 use a computer you havent invented anything But if

8 you come up with a serious program that shyshy that does it

9 then you know that may be novel But thats a novelty

10 issue isnt it

11 MR PHILLIPS To be sure Justice Scalia

12 JUSTICE BREYER And this is exactly the

13 question I really would like to you to focus on for me

14 Why is it shyshy and Im not saying this from a point of

15 view but it seems to me pretty clear that if what you

16 did was take the idea of solvency shyshy remember King Tut

17 Thats what I use the exaggeration shyshy and what you say

18 is implemented by having the abacus man keep track and

19 say stop okay shyshy

20 MR PHILLIPS Right

21 JUSTICE BREYER Then we implement it by

22 having somebody with a pencil and a piece of paper and

23 this is all that they add you see Say Have a man

24 with a pencil and a piece of paper keeping track and

25 saying stop or we say implement it in the computer

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1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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Official shy Subject to Final Review

1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

Alderson Reporting Company

25

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

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286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

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securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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821 228 2813 3418 35517 363 417 5523

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work 51719 1124 2110 312 3322 374

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 15: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

11

Official shy Subject to Final Review

1 which will automatically keep track and say stop are

2 they all enough Are some of them enough Whats the

3 rule

4 And you realize I couldnt figure out much

5 in Prometheus to go beyond what I thought was an obvious

6 case leaving it up to you and your colleagues to figure

7 out how to go further Am I making enough shyshy making

8 clear enough whats bothering me And Id really like

9 to get your answer to this

10 MR PHILLIPS And shyshy and look theres

11 no shyshy Ill be the first one to shyshy to confess that trying

12 to use language to describe these things is not all that

13 easy But the way I think you can meaningfully look at

14 this is to say that this is not simply something that

15 was a fundamental truth this is not something that

16 simply says use a computer Its not simply something

17 that says maintain solvency It shyshy it operates in a

18 much more specific and concrete environment where youre

19 dealing with a problem thats been in existence since

20 the 1970s a solution in the 1990s that CLS itself

21 acknowledges needed a solution and came forward with

22 their own solution that looks a lot like ours

23 JUSTICE KENNEDY But my shyshy my initial

24 question and I think I can work this into King Tut

25 is shyshy

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1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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26

Official shy Subject to Final Review

1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 16: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

12

Official shy Subject to Final Review

1 (Laughter)

2 JUSTICE KENNEDY shyshy is shyshy is whether or not

3 you could have patented that system idea process

4 method without attaching a computer program

5 MR PHILLIPS You cannot absolutely cannot

6 do that with this system because it is so complex and

7 so many interrelated parts

8 JUSTICE KENNEDY Suppose I thought shyshy and

9 again its just a thought because I dont have the

10 expertise shyshy that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend Suppose I thought that

13 MR PHILLIPS You mean wrote the code

14 JUSTICE KENNEDY Yes right

15 MR PHILLIPS Well thats absolutely shyshy

16 Im certain thats true

17 JUSTICE KENNEDY Well then shyshy then shyshy

18 MR PHILLIPS But thats true of almost all

19 software

20 JUSTICE KENNEDY Then why is the computer

21 program necessary to make the patent valid

22 MR PHILLIPS Well its shyshy its necessary

23 to make the invention effective As the Solicitor

24 General said the computer is essential to the efficacy

25 of this invention because of the complicated financial

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Official shy Subject to Final Review

13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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14

Official shy Subject to Final Review

1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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Official shy Subject to Final Review

1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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Official shy Subject to Final Review

17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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Official shy Subject to Final Review

1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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20

Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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25

Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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26

Official shy Subject to Final Review

1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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27

Official shy Subject to Final Review

1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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28

Official shy Subject to Final Review

1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

Alderson Reporting Company

Official shy Subject to Final Review

29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

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69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

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462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

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Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

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watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 17: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

13

1 arrangements that exist and that can only be resolved on

2 a shyshy on a realtime basis Your abacus is great if you

3 happen to be waiting for the pyramids to be finished or

4 waiting for the gold to move in and out but it doesnt

5 help with you an abacus if youre dealing with literally

6 thousands of transactions simultaneously going on in

7 different countries at different points in time

8 JUSTICE KENNEDY But thats just an idea

9 hey lets use a computer

10 MR PHILLIPS But its not just shyshy I mean

11 obviously part of it is use the computer Justice

12 Kennedy But more fundamentally it goes beyond that

13 See I shyshy

14 JUSTICE SOTOMAYOR Is your software

15 copyrighted

16 MR PHILLIPS No I dont believe so

17 JUSTICE GINSBURG There is no special

18 software that comes with this shyshy thats part of this

19 patent is it shyshy is there

20 MR PHILLIPS No Justice Ginsburg what

21 we did here is what the Patent and Trademark Office

22 encourages us to do and encourages all software patent

23 writers to do which is to identify the functions that

24 you want to be provided for with the software and leave

25 it then to the software writers who I gather are you

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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Official shy Subject to Final Review

1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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Official shy Subject to Final Review

1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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Official shy Subject to Final Review

1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

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1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 18: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 know quite capable of converting these functions into

2 very specific code

3 JUSTICE KAGAN Mr Phillips could you shyshy

4 could you disaggregate your argument for me Because

5 you just said look this Court has said its not

6 sufficient if you have an idea and then you say use a

7 computer to implement it right So are you saying that

8 your shyshy that shyshy are you saying that youre doing more

9 than saying use a computer to implement it or are you

10 saying that its shyshy that the idea itself is more than an

11 idea

12 MR PHILLIPS Yes Im saying shyshy

13 JUSTICE KAGAN Which part of what shyshy

14 MR PHILLIPS Im saying both actually I

15 mean Im making both of those arguments I shyshy I

16 believe that if you analyze the claims and you dont

17 caricature them and you dont strip them out of the

18 limitations that are embedded in there this is not some

19 kind of an abstract concept This is not some kind shyshy

20 its not an abstract idea Its a vary shyshy

21 JUSTICE KAGAN So putting the computer

22 stuff aside completely shyshy

23 MR PHILLIPS Right

24 JUSTICE KAGAN shyshy youre saying that youve

25 invented something or you shyshy

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1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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16

1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition

4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422

brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922

30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207

dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407

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Official shy Subject to Final Review

disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 19: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

15

Official shy Subject to Final Review

1 MR PHILIPS Yes

2 JUSTICE KAGAN There is something that

3 youve patented that has shyshy that is not just simple use

4 a third party to do a settlement

5 MR PHILLIPS Right

6 JUSTICE KAGAN And what is that putting

7 the computer aside

8 MR PHILLIPS It is shyshy well shyshy and again

9 its difficult to do that because you absolutely need

10 the computer in order to implement this But the key to

11 the invention is the notion of being able

12 simultaneously dealing with it on a chronological basis

13 to stop transactions that will otherwise interfere with

14 the ability to settle on time and under the appropriate

15 circumstances And the only way you can do that in a

16 realtime basis when youre dealing with a global economy

17 is to use a computer It is necessary to the efficacy

18 of this

19 So in that sense I cant shyshy I cant

20 disaggregate it the way in some sense youre suggesting

21 It seems to me its bound up with in shyshy its bounds up

22 with the whole notion of is this an abstract concept

23 JUSTICE BREYER Can you in fact shyshy now

24 this is shyshy look there are 42 briefs in this case I

25 actually read them and I found them very very helpful

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1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

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3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

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acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

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activities 229 ahead 4225 applications 311618 benchmark 522

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3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

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63

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 20: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

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1 up to the point where I have to make a decision because

2 theyre serious I mean you know shyshy now the problem

3 that I came away with is the one that youre beginning

4 to discuss that if you simply say take an idea thats

5 abstract and implement it on a computer there are shyshy

6 youre going to get it much faster youre going to be

7 able to do many many things and if thats good enough

8 there is a risk that you will take business in the

9 United States or large segments and instead of having

10 competition on price service and better production

11 methods well have competition on who has the best

12 patent lawyer You see where Im going on that one

13 MR PHILLIPS Yeah of course

14 JUSTICE BREYER And if you go the other way

15 and say never then what you do is you rule out real

16 inventions with computers

17 MR PHILLIPS Right

18 JUSTICE BREYER And so in those 42 briefs

19 there are a number of suggestions as to how to go

20 between Scylla and Charybdis Now I would like to

21 know shyshy I dont know if you can step back from your

22 representational model Thats a problem Youre all

23 we have now And shyshy and from my point of view I need

24 to know what in your opinion is the best way of sailing

25 between these two serious arms

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1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

Alderson Reporting Company

20

Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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21

Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

Alderson Reporting Company

24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • Exhibit A Guidelines Comment
Page 21: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

17

1 MR PHILLIPS Well Justice Breyer I guess

2 I would suggest to you that you might want to deal with

3 the problem you know as opposed to the problems you

4 dont know at this stage I mean we have had business

5 method patents and software patents in existence for

6 well over a decade and theyre obviously quite

7 significant in number And shyshy and we know what the

8 system is we have And Congress looked at that system

9 right and didnt say no to business methods patents

10 didnt say no to software patents instead said the

11 solution to this problem is to get it out of the

12 judicial process and create an administrative process

13 but leave the substantive standards intact

14 So my suggestion to you would be follow that

15 same advice a liberal interpretation of 101 and not a

16 caricature of the claims analyze the claims as written

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process If you shyshy

19 JUSTICE GINSBURG Mr Phillips let me just

20 stop you there because four Justices of this Court did

21 not read that legislative history the way you do And

22 it was shyshy was in Bilski

23 MR PHILLIPS But this is postshyBilski

24 JUSTICE GINSBURG Justice Stevens went

25 carefully through that and he said Congress was

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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20

Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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26

Official shy Subject to Final Review

1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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Official shy Subject to Final Review

1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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Official shy Subject to Final Review

1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

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5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 22: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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18

1 reacting to a decision It had shyshy it was not addressing

2 101 So there are at least four Justices who say shyshy who

3 didnt buy that argument

4 MR PHILLIPS Well I mean it still seems

5 to me that the shyshy the natural inference is Congress did

6 not change 101 Congress created an entire

7 administrative system to deal with 101 102 and 103

8 And shyshy and I would hope shyshy

9 JUSTICE SCALIA And four is not five

10 anyway right

11 MR PHILLIPS Thats true

12 JUSTICE SCALIA Four is not five

13 MR PHILLIPS And youve exhausted my math

14 skills Your Honor

15 JUSTICE SCALIA By the way we shyshy we have

16 said that you cant take an abstract idea and then say

17 use a computer to implement it But we havent said

18 that you cant take an abstract idea and then say here

19 is how you use a computer to implement it shyshy

20 MR PHILLIPS Exactly

21 JUSTICE SCALIA shyshy which is basically what

22 youre doing

23 MR PHILLIPS And thats the argument were

24 doing and shyshy

25 JUSTICE SCALIA And thats a little

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1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 23: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

19

Official shy Subject to Final Review

1 different

2 MR PHILLIPS shyshy thats the line were

3 asking the Court to draw here

4 JUSTICE KAGAN Well how are you saying the

5 how Because I thought that your computers shyshy that your

6 patents really did just say do this on a computer as

7 opposed to saying anything substantive about how to do

8 it on a computer

9 MR PHILLIPS I would urge the Court to

10 look at Joint Appendix 159 285shy286 where it goes

11 through the flow charts This is shyshy and this is just a

12 specific example of the method by which you stop a

13 transaction and it goes through a varied series of

14 detailed steps and what the computer has to do in order

15 to do that It doesnt actually obviously put in the

16 code but thats what the PTO says dont do Dont put

17 in the code because nobody understands code so shyshy but

18 put in the functions and we know shyshy and we know that

19 someone skilled in the art will be able to put in the

20 code And if they arent if they cant do that then

21 its not enabled and thats a 112 problem

22 To go back Justice Breyer to your

23 question So on the one hand youve got a problem that

24 it seems to me Congress to some extent has said is okay

25 and weve got a solution and that solutions playing

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20

Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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21

Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

Alderson Reporting Company

22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

Alderson Reporting Company

23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

Alderson Reporting Company

24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

Alderson Reporting Company

25

Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

Alderson Reporting Company

26

Official shy Subject to Final Review

1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 24: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

20

Official shy Subject to Final Review

1 through On the other hand if this Court were to say

2 much more categorically either that theres no such

3 thing as business method patents or adopt the Solicitor

4 Generals interpretation which is to say that there

5 cannot be software unless the software somehow actually

6 improves the computer as opposed to software improving

7 every other device or any other mechanism that might be

8 out there

9 What we know is that this would inherently

10 declare and in one fell swoop hundreds of thousands of

11 patents invalid and the consequences of that it seems

12 to me are utterly unknowable And before the Court goes

13 down that path I would think it would think long and

14 hard about whether isnt that a judgment that Congress

15 ought to make And It seems to me in that sense youre

16 essentially where the Court was in Chakrabarty where

17 everybody was saying youve got to act in one way or the

18 other or the world comes to an end and the courts have

19 said well apply 101 directly

20 JUSTICE KENNEDY If we say that theres no

21 software patentability and agree with the Attorney

22 General do you lose in this case

23 MR PHILLIPS Well it would be very hard

24 for me to see how that shyshy how shyshy how I can get around

25 that particular problem because the computer is the

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1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition

4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422

brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 25: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

21

Official shy Subject to Final Review

1 essence of it so shyshy and a portion of it is clearly the

2 software So I think if you say there is no such thing

3 as software patentability I do lose in this case yes

4 Your Honor As do a whole lot of other people

5 JUSTICE KENNEDY Is there any common ground

6 between you and the government shyshy maybe a better

7 question to ask the government shyshy a common ground

8 between you and the government on something in the

9 software area thats patentable other than making the

10 computer itself work You understand the government to

11 say no software patents

12 MR PHILLIPS Thats the way I interpret

13 the governments shyshy the governments brief

14 JUSTICE BREYER It was like shyshy theres a

15 Bloomberg brief out here that was on this that said

16 no you can shyshy you can patent computer software when

17 its an improvement in the computer when its an

18 improvement in software when its an improvement in a

19 technology that is developed out of computers like

20 robotics when it is an improvement in a machine or

21 technology but you cannot improve it where it is simply

22 an improvement in an activity that is engaged in

23 primarily through mental processes But what they mean

24 by that is business finance and similar arts

25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I

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22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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5519 5622 5312 5421 Perry 119 26 physical 3011 3617 outer 2816 5516 562122 26141517 3816 4116 prefer 521 outstanding patentshyeligible 29223 303 pick 4813 491 pretty 1015

4319 4419 3112 3225 picked 491 2810 315 overlap 2317 patentability 331823 343 piece 102224 5614

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371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

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40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

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285shy286 1910 286 5325 287 5325

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viewed 5615 violate 55

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81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

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work 51719 1124 2110 312 3322 374

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1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 26: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

22

Official shy Subject to Final Review

1 know Thats what I want to know what you dont agree

2 with about that because its a little more refined than

3 you suggested

4 MR PHILLIPS I read the Solicitor

5 Generals brief as broader than the Bloomberg brief

6 in shyshy in terms of the approach And IBMs argument is

7 if you knock out software patents you eliminate web

8 browsing word processing cellphones eshymail Those

9 are all activities that I dont think fall within the

10 meaning of the shyshy the meaning of the governments theory

11 of the case

12 JUSTICE BREYER But Im asking you shyshy Im

13 asking you what about this one that I just mentioned

14 You see I went through those five steps shyshy

15 MR PHILLIPS Right

16 JUSTICE BREYER shyshy and four of them you

17 could patent and the fifth one you cant

18 MR PHILLIPS Right But I shyshy and I guess

19 my answer to that is thats nowhere in the statute and

20 it doesnt seem to me to reflect an abstract idea Its

21 a shyshy its a line you draw that takes out business method

22 patents If the Court wants to eliminate business

23 method patents fine But you just said no to that in

24 Bilski two three terms ago

25 Now to be sure give the Solicitor General

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23

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1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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Official shy Subject to Final Review

1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition

4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422

brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 27: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

23

Official shy Subject to Final Review

1 credit he comes here and says to you We didnt like

2 the result in Bilski we want you to say dont use

3 process in order to get there which is a statutory

4 interpretation come up with an extraordinarily

5 complicated way of looking at the exception and use that

6 to get to the exact same result

7 JUSTICE SOTOMAYOR Well youre doing a

8 very good job of proving shyshy

9 JUSTICE GINSBURG In Bilski Justice Breyer

10 did try to say that there wasnt that shyshy a whole lot of

11 distance between the four who thought business methods

12 were not patentable But he shyshy he also said something

13 else in shyshy in the other case Mayo Justice Scalia

14 asked you the question about doesnt that go to novelty

15 but didnt Justice Breyer say in Mayo that novelty can

16 be relevant to patent shyshy to patent eligibility He said

17 theres shyshy theres an overlap

18 MR PHILLIPS Well he said theres an

19 overlap Here in this context I think basically the

20 Respondents theory would mean that they are completely

21 coterminous And I dont think thats what the Court

22 meant And also we know from Diehr that theres got to

23 be at least some significant limitations on the extent

24 to which novelty has to be built into 101 That is the

25 province of 102 and 103 And as I said Congress

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24

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1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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25

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

2524 qualified 47 506 5213 4022 409 4210 program 510 qualifies 4713 realm 3215 reserve 2611 4525

51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

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securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

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systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

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versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

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4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

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watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 28: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

24

Official shy Subject to Final Review

1 modified the system of adjudication to create an

2 administrative mechanism that allows you to get to 102

3 and 103 And at least in context its important to

4 realize there have been 11 cases since that was created

5 9 of the 11 have been knocked down on 102 or 103 grounds

6 and not on 101 grounds And it seems to me thats the

7 answer to this problem is leave 101 as the coarse

8 filter If on its face it states these kinds of broad

9 abstract principles fundamental truths and even if it

10 says use a computer those should be struck down

11 JUSTICE SOTOMAYOR Which of the shyshy which of

12 the opinions below captures your position most

13 accurately

14 MR PHILLIPS I would guess it would be

15 Judge Moores opinion below that would capture ours most

16 correctly

17 JUSTICE SOTOMAYOR And if we were to think

18 your method claim is ineligible do you agree that your

19 systems and shyshy your medium and system claims fail as

20 well Do they rise and fall together

21 MR PHILLIPS No No I dont believe they

22 do rise and fall together I mean I think you could shyshy

23 if you wanted to interpret our medium claim shyshy I mean

24 our shyshy our method claims in a shyshy in particularly

25 abstract way I think you could still say that the

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1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 29: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

25

Official shy Subject to Final Review

1 system claims which clearly are shyshy are how to create a

2 computer system and how to implement it using that

3 method would be a much more concrete version of that in

4 a way that would take it out of 101 That said I

5 obviously believe that all of our claims satisfy 101

6 and should go on to the next stage

7 JUSTICE KAGAN Can I give you a

8 hypothetical Mr Phillips and you tell me how its

9 different or the same Lets say you know 30 years

10 somebody took a look around the world and said a lot of

11 people seem to order products by mail They get the

12 catalogues in the mail and then they send back their

13 return forms And lets say that one of the founders of

14 the Internet said wouldnt this be an amazing system

15 we could actually do this by computer and they had

16 patented that Is that the same

17 MR PHILLIPS I dont know if its the

18 same but I would shyshy I would argue that it could very

19 well be a patentable subject matter because shyshy but it

20 depends on how the claims play out

21 JUSTICE KAGAN No but exactly I mean

22 the claim would have said something along the lines of

23 you know theres this process by which people order

24 products and we want to do it over the Internet we want

25 to do it electronically and we will use a computer to

Alderson Reporting Company

26

Official shy Subject to Final Review

1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

Alderson Reporting Company

27

Official shy Subject to Final Review

1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

Alderson Reporting Company

28

Official shy Subject to Final Review

1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

Alderson Reporting Company

30

Official shy Subject to Final Review

1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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31

Official shy Subject to Final Review

1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 30: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 do that to essentially take the process of mail order

2 catalogues and make it electronic

3 MR PHILLIPS I could certainly shyshy I think

4 I could write a claim shyshy a set of claims that I believe

5 would satisfy 101 And shyshy and to the extent that

6 youd shyshy that youd think those are no different than

7 the ones I have here then my argument is simply I think

8 I satisfy 101 with the claims we have before us Your

9 Honor

10 If there are no further questions then Id

11 like to reserve the rest of my time

12 CHIEF JUSTICE ROBERTS Thank you

13 Mr Phillips

14 Mr Perry

15 ORAL ARGUMENT OF MARK A PERRY

16 ON BEHALF OF THE RESPONDENTS

17 MR PERRY Mr Chief Justice and may it

18 please the Court

19 That path between Scylla and Charybdis was

20 charted in Bilski and Mayo Bilski holds that a

21 fundamental economic principle is an abstract idea and

22 Mayo holds that running such a principle on a computer

23 is quote not a patentable application of that

24 principle Those two propositions are sufficient to

25 dispose of this case

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1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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29

1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

5519 5622 5312 5421 Perry 119 26 physical 3011 3617 outer 2816 5516 562122 26141517 3816 4116 prefer 521 outstanding patentshyeligible 29223 303 pick 4813 491 pretty 1015

4319 4419 3112 3225 picked 491 2810 315 overlap 2317 patentability 331823 343 piece 102224 5614

2319 2021 213 34919 356 pipes 3011 price 1610 4614 351115 3713 place 911 2711

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369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

2524 qualified 47 506 5213 4022 409 4210 program 510 qualifies 4713 realm 3215 reserve 2611 4525

51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

Scalia 91217 serious 108 skeptical 446 3417 35348 2214 2717 918 10411 16225 sketch 2816 3514 452024 3919 4624 189121521 service 1610 skilled 1919 46313 477 Stevens 1724 1825 2313 services 2917 skills 1814 5471821 stood 2712 329 3912 set 814 264 sky 468 55324 stop 6141921

science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

322 44 65 shoes 5517 458111314 406 5416 struck 2410 413 4323 shop 1211 45162125 speed 3014 structured 4421 561 shows 3819 461614 3722 5520

securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

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versa 3924 version 253 versus 34

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weve 1925 484 web 227 weekend 510

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years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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221 232 252424 339 3916 476 4823

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81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

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821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 31: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

27

Official shy Subject to Final Review

1 If Bilski and Mayo stand Alices patents

2 fail Therefore Mr Phillips and his friends are

3 asking this Court to change the standard even though

4 this Court has had three unanimous decisions in the last

5 four terms establishing what the Court called a myriad

6 a wellshyestablished standard

7 On the abstract idea Justice Ginsburg you

8 asked Mr Phillips whats the difference between hedging

9 and this claim There is no difference This is

10 hedging It is hedging against credit default rather

11 than price fluctuation but it is simply hedging

12 And Mr Phillips stood up for 26 minutes and

13 never once referred to the patent Lets look at what

14 the inventor the soshycalled inventor said about this

15 invention This is at JA 293 to 94 in the

16 specification

17 This claim has simply two steps Its very

18 simple First debiting and crediting on a realtime

19 basis the relevant shadow records and second by

20 periodically affecting corresponding payment

21 instructions Those are direct quotes Debit credit

22 and pay Your Honor you cant get much more simple

23 than that

24 Mr Phillips suggests well we have

25 multilateral transactions global things chronological

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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Official shy Subject to Final Review

1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

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approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

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absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

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491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

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5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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accounts 823 agent 52 3021 548 278 5322 214 38 2616

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 32: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

28

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1 time zones and so forth None of those are claimed

2 Your Honor Those are all recited in specification

3 The claims read on a single transaction involving two

4 parties

5 JUSTICE BREYER Can I ask you at some

6 point not necessarily this second to say in my shyshy this

7 is just shyshy you know you have an opinion for a court

8 Different judges can have different interpretations

9 All youre getting is mine okay

10 But I think its pretty easy to say that

11 Archimedes cant just go to a boat builder and say

12 apply my idea All right Everybody agrees with that

13 But now we try to take that word apply and give

14 content to it

15 And what I suspect in my opinion Mayo did

16 and Bilski and the other cases is sketch an outer shell

17 of the content hoping that the experts you and the

18 other lawyers and the shyshy the circuit court could fill

19 in a little better than we had done the content of that

20 shell

21 So so far youre saying well this is

22 close enough to Archimedes saying apply it that we

23 neednt go further

24 Now will you at some point in the next few

25 minutes give me your impression of if it were necessary

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 33: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 to go further what would the right words or example be

2 MR PERRY Your Honor as shyshy Justice

3 Breyer as to abstract ideas the PTO has filled in that

4 shell by listing economic concepts legal concepts

5 financial concepts teaching concepts dating and

6 interpersonal relationships and generally how business

7 should be conducted as examples of those things that are

8 likely abstract which of course all follow directly

9 from Bilski and the discussion this Court had in Bilski

10 And this patent shyshy these patents fall squarely within

11 that

12 Congress in the AIA confirmed that

13 reading Congress in the CBM method said business

14 methods that are subject to special scrutiny shyshy that is

15 dubious patents shyshy include methods and corresponding

16 apparatus which is what we have here that pertain to

17 data processing in the financial services industry and

18 do not offer a technological solution That describes

19 Alices patents to a letter Your Honor So that we

20 have shyshy

21 JUSTICE SOTOMAYOR What do you think is a

22 technological solution

23 MR PERRY Your Honor shyshy

24 JUSTICE SOTOMAYOR How could they if at

25 all written their patents to shyshy to make shyshy to make

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Official shy Subject to Final Review

1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

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69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

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462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

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Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 34: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

30

Official shy Subject to Final Review

1 their software eligible What would shyshy what do they

2 need shyshy would have needed to have added

3 MR PERRY Justice Sotomayor they have no

4 software first Theyve never written software

5 Theyve never programmed a computer So thats a

6 nonexistent set

7 Second there are many technological

8 solutions to trading and settlement problems For

9 example data compression These shyshy these trading

10 platforms involve the movement of very large quantities

11 of data around the world The physical pipes that is

12 the fiber optic cables and data lines are limited

13 There are very sophisticated algorithms for both

14 security and speed to move data through the transmission

15 lines in novel and useful ways that could well be

16 patented

17 Nothing like that is claimed here To come

18 back to where I started if you look for example at

19 Claim 65 in the 510 patent as Mr Phillips reads it

20 it literally reads on a twoshyparty escrow to sell a

21 house so long as the escrow agent is typing this stuff

22 into the HUDshy1 using a computer That has nothing to do

23 with multilevel shyshy

24 CHIEF JUSTICE ROBERTS Well thats a

25 little more complicated He referred us to Joint

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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Official shy Subject to Final Review

1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

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51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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221 232 252424 339 3916 476 4823

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81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

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821 228 2813 3418 35517 363 417 5523

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

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8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 35: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

31

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1 Appendix Page 159 which is not a change in how

2 computers work But it is shyshy constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected And just looking at it it looks

5 pretty complicated There are a lot of arrows and

6 they shyshy you know different things that go shyshy

7 (Laughter)

8 CHIEF JUSTICE ROBERTS Well but I mean

9 you know it shyshy in different directions And I

10 understand him to say that in each of those places

11 thats where the computer is needed

12 MR PERRY Mr Chief Justice Figure 16 has

13 nothing to do with the invention asserted against my

14 client in this case There are two inventions in this

15 patent One invention involving multilateral contract

16 formation is not asserted against my client And all of

17 these drawings pertain to that The only drawings that

18 pertain to the asserted claims are 25 and 33 to 37 And

19 that was established below and its established in this

20 Court And Mr Phillips has never disputed it

21 So the claim hes pointed the Court shyshy the

22 figure hes pointed the Court to has nothing to do with

23 the invention Its for a different invention that is

24 not at issue in this case

25 Remember there are hundreds and hundreds of

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1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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order 1510 41913 4315 1210 214 271224 3019 4119 1914 233 4422 45814 251123 3710 3120 325 precedents 432 251123 261 451618 474 3718 4825 53151719 438 452 338 5223 491025 501 periodically 54112023 precisely 64

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371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 36: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

32

Official shy Subject to Final Review

1 pages of these patents They all pertain to the other

2 invention Thats why in the back of our red brief we

3 excerpted the very little bit that actually pertains to

4 this You sort of tack on patent shyshy the tack on claim

5 that Mr Phillips is asserting here Its 4 columns

6 Its less than five pages in the printed appendix that

7 actually pertains to this invention And it contains no

8 disclosure whatever

9 Justice Scalia to your question about how

10 the computer does it Of course a patent that

11 describes sufficiently how a computer does a new and

12 useful thing whether its data compression or any other

13 technological solution to a business problem a social

14 problem or a technological problem would be within the

15 realm of the shyshy of the patent laws That is what the

16 patent laws have always been for

17 This is not such a patent And the reason

18 for that is this is a preshyBilski set of patents These

19 were prosecuted under the old State Street test where

20 all the applicant had to claim was a result

21 JUSTICE KENNEDY Would you give me shyshy

22 again you already did it once shyshy an example of a

23 business process patent shyshy of a business process idea

24 and invention that is patentable

25 MR PERRY Your Honor there are many

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1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

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2621 277 administrative 3919 4221 26715 4413 basic 413 5515

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4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

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acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

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activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718

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economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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821222324 131720 1719 2157 447 4919 imagine 69 91 1724 239 grounds 2456 holds 262022 4921

functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510

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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

451416 486 2524 issued 4120 3613 37814 knock 227 improving 206 interpersonal issues 4010 3716 3857 knocked 245

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inappropriate 2423 5417 J 425 4329 162212124 5511 551 JA 2715 442101116 17347 1918

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4220 interrelated 4824 5531224 541425 556 ineligible 2418 127 judges 288 429 5625 5513

45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L

4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

397 4424 718 91416 623 736919 156 194 257 4114 4313 47125 5120 122325 1511 723 858919 2521 391120 large 169 3010 5121 5218 2715 311315 9121718 4017 439 Laughter 523 53912 312323 322 104111221 442 121 317

innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312

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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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389 4113 mail 251112 5522 modified 241 nonshysettlement 4821 521011 261 meaning 2210 Monday 111 419

lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

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5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

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processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 37: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

33

Official shy Subject to Final Review

1 examples One would be a technological solution to a

2 business problem So that for example shyshy Ill give a

3 different example There are many applications today

4 The Court may be familiar with streaming video to watch

5 video on your computer

6 It is not possible to get enough data

7 through existing lines in its raw format The data has

8 to be manipulated in order to see live video So if you

9 want to watch TV on your phone for example

10 Those algorithms those inventions are

11 undoubtedly technological And if they are used in a

12 trading platform or a hedging system or something else

13 that wouldnt disable them And this is what the Diehr

14 case shyshy

15 JUSTICE KENNEDY Well I shyshy I shyshy in my

16 language Ive called that mechanical rather than

17 process Can you give me an example of process

18 MR PERRY Yes Your Honor The process in

19 that example would be a computer running the particular

20 data compression algorithm

21 JUSTICE KENNEDY But thats how to make

22 a shyshy thats how to make a machine work better

23 MR PERRY Yes Your Honor

24 JUSTICE KENNEDY Im asking you Is there

25 any business process any business activity that is

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34

1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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Official shy Subject to Final Review

1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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Official shy Subject to Final Review

1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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Official shy Subject to Final Review

1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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Official shy Subject to Final Review

1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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39

Official shy Subject to Final Review

1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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Official shy Subject to Final Review

1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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Official shy Subject to Final Review

1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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42

Official shy Subject to Final Review

1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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Official shy Subject to Final Review

1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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Official shy Subject to Final Review

1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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45

1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

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aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

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1215 159 adjusting 3611 analysis 424 281122 3811 4025

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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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1 susceptible to a patent a pure patent innovations that

2 deserve patents

3 MR PERRY Your Honor again a

4 technological solution to a business problem could well

5 be whether its a method or a process is equivalent

6 Again Congress said method in a corresponding shyshy

7 JUSTICE KENNEDY Can you give me an

8 example

9 MR PERRY I thought the data compression

10 example was a good one Ill try an encryption

11 technology Many of these trading platforms you know

12 dealing with securities and money would require some

13 sort of security devices You could have a process for

14 securely transmitting data would be another computer

15 implemented technological solution to a business

16 problem Again nothing like that claimed here

17 JUSTICE SOTOMAYOR How about eshymail and

18 just word processing programs

19 MR PERRY Your Honor a program shyshy let me

20 try it this way to both of your questions In our view

21 if what is claimed as the inventive contribution under

22 Mayo shyshy in other words if we have an abstract idea as

23 we do here and what is claimed is the inventive

24 contribution for Step 2 is the computer then the

25 computer must be essential to that operation and

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1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

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approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

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aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

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absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

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491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L

4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

397 4424 718 91416 623 736919 156 194 257 4114 4313 47125 5120 122325 1511 723 858919 2521 391120 large 169 3010 5121 5218 2715 311315 9121718 4017 439 Laughter 523 53912 312323 322 104111221 442 121 317

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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

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5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 39: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

35

Official shy Subject to Final Review

1 represent an advancement in computer science or other

2 technology And we know thats not met here Justice

3 Sotomayor because shyshy

4 JUSTICE SOTOMAYOR So youre saying no to

5 eshymail and word processing

6 MR PERRY Your Honor I think at a

7 point shyshy

8 JUSTICE SOTOMAYOR They certainly have

9 functionality and shyshy and improvement of functionality

10 for the user

11 MR PERRY At a point in time in the past

12 I think both of those would have been technological

13 advances that were patentable

14 JUSTICE SOTOMAYOR How

15 MR PERRY Today shyshy because they would have

16 provided a technological solution to a then unmet

17 problem Today reciting and do it on a word processor

18 is no different than and do it on a typewriter or shyshy and

19 do it on a calculator

20 The inventive contribution component which

21 uses specifically the language of conventional and

22 routine and well understood will evolve with

23 technology Thats why its different than the abstract

24 idea component

25 And here we know that these patents dont

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Official shy Subject to Final Review

1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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Official shy Subject to Final Review

1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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45

1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

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address 4121 4317 4511

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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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accounts 823 agent 52 3021 548 278 5322 214 38 2616

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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

4422 4915 1415 162 million 4319 3824 391 limitations machines 323 174 184 mine 289 4119 443

1418 2323 325 212325 2320 minutes 2712 new 91 3211 limited 3012 magic 3823 242223 2521 2825 5315 nonshyexhaustive line 192 2221 392325 4024 318 381818 model 1622 5113

389 4113 mail 251112 5522 modified 241 nonshysettlement 4821 521011 261 meaning 2210 Monday 111 419

lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

135 3020 1177 1415 means 411 914 Moores 2415 noted 4318 3717 219 4719 5616 morning 34 notice 5514

litigation 5413 4816 meant 2322 mother 616 notion 151122 litigations 4321 man 612 710 mechanical 71114 545 little 1825 222 101823 3316 move 134 3014 novel 1069

2819 3025 manipulate 559 mechanism 207 movement 3010 3015 5614 323 manipulated 242 multilateral novelty 1059

live 338 338 medium 2419 2725 3115 23141524 long 2013 3021 manner 3616 2423 multilevel 3023 5212

387 March 111 meet 4311 multiparty 419 nuanced 4015 look 525 616 marginal 445 mental 2123 myriad 275 number 1619

111013 145 1524 1910 2510 2713

MARK 119 26 2615

massive 419

mentioned 2213 5111

merely 410

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O

3018 367 matched 5324 4419 natural 185 O 21 31 5323 5324 met 352 496 534 Oakland 525

looked 178 math 1813 method 61 124 necessarily 286 obvious 522 4015 mathematical 175 1912 4617 115 5219

looking 235 534 203 222123 necessary 516 5616 314 3715 matter 113 241824 253 122122 1517 obviously 64 3819 5322 2519 4621 2913 3456 2825 3722 811 1311

looks 1122 314 573 374 412 4018 176 1915 lose 2022 213 matters 3912 4920 5016 necessity 4524 255 4512 lot 1122 214 Mayo 231315 518 need 420 159 5416

2310 2510 262022 271 methodology 1623 302 occasions 923 315 2815 3422 756 433 4520 occurs 4422

low 3924 36524 396 methods 64 5111 5223 offer 2918 loyalty 518 403 411425 1611 179 needed 1121 offering 372

5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

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4315 2217 231616 path 2013 184111320 possible 336 opposed 173 2713 2910 2619 1823 1929 3610 3811

197 206 3019 3115 pay 2722 2023 2112 postshyBilski optic 3012 324101516 payment 2720 2241518 1723 oral 113 2258 321723 341 pencil 102224 2318 241421 practically

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order 1510 41913 4315 1210 214 271224 3019 4119 1914 233 4422 45814 251123 3710 3120 325 precedents 432 251123 261 451618 474 3718 4825 53151719 438 452 338 5223 491025 501 periodically 54112023 precisely 64

orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

5519 5622 5312 5421 Perry 119 26 physical 3011 3617 outer 2816 5516 562122 26141517 3816 4116 prefer 521 outstanding patentshyeligible 29223 303 pick 4813 491 pretty 1015

4319 4419 3112 3225 picked 491 2810 315 overlap 2317 patentability 331823 343 piece 102224 5614

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369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

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286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

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4 4 325 4825 42 1524 1618 44 211

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6 6 5114 65 3019

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9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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36

Official shy Subject to Final Review

1 claim anything that was not conventional well

2 understood and routine We went through that in great

3 detail and Alice has never disputed a word of it They

4 just say youre not supposed to do that analysis even

5 though the Court 9shy0 in Mayo said we should

6 And in this case its very important to

7 look at what Alices own experts said on the subject

8 This is not our expert This is Alices expert And

9 this is at Page 1327shy28 of the Joint Appendix It is

10 possible to do the business methods of maintaining

11 accounts adjusting accounts and providing an

12 instruction without a computer or other hardware

13 And then Justice Breyer directly to your

14 abacus If someone had thought of this invention

15 soshycalled invention 100 years ago they might have

16 implemented it in a nonelectronic manner using various

17 precomputing tools such as an abacus or handwritten

18 ledgers

19 We know from Benson the Courts seminal

20 computer implementation case that if you can do it by

21 head and hand then the computer doesnt add anything

22 inventive within the meaning of the 101 exception That

23 is the holding of Benson And the Court reiterated that

24 in Mayo

25 Flook said exactly the same thing If you

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1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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45

1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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Official shy Subject to Final Review

1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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Official shy Subject to Final Review

1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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low 3924 36524 396 methods 64 5111 5223 offer 2918 loyalty 518 403 411425 1611 179 needed 1121 offering 372

5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

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order 1510 41913 4315 1210 214 271224 3019 4119 1914 233 4422 45814 251123 3710 3120 325 precedents 432 251123 261 451618 474 3718 4825 53151719 438 452 338 5223 491025 501 periodically 54112023 precisely 64

orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

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369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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4 4 325 4825 42 1524 1618 44 211

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9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
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Official shy Subject to Final Review

1 can do it with pencil and paper then the computer is

2 not offering anything that the patent laws are or should

3 be concerned with

4 It is only where the method will not work

5 without a computer which is not these claims and where

6 the computer itself is doing something that the patent

7 law is willing to protect

8 CHIEF JUSTICE ROBERTS What if shyshy what if

9 you can do it without a computer but its going to

10 take you know 20 people a hundred years In other

11 words theoretically you can replicate what the

12 computer does shyshy

13 MR PERRY Two answers

14 CHIEF JUSTICE ROBERTS shyshy but its

15 impractical without looking to do it on the computer

16 MR PERRY Mr Chief Justice first these

17 claims literally read as Alice reads them on a single

18 transaction between two parties so its not 20 people

19 for a hundred years Its one person sitting in a room

20 so thats not a problem

21 Second if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities if you will of a computer then it would

24 have to be claimed and theres nothing claimed here

25 All that is claimed shyshy and my friend is going to stand

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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

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securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

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821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

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1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
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1 up on rebuttal and tell you all that the expert said

2 well what is claimed is a computer but its just a

3 computer It just says a computer configured too It

4 doesnt say that the computer actually has to shyshy

5 JUSTICE BREYER Yeah but the trouble with

6 that particular test is as I think partly the Chief

7 Justice said how long et cetera and then add to that

8 though you could do it without a computer what happens

9 at the end of the line is the automobile engine goes off

10 or it begins to sputter or it turns left

11 You see its possible to take Archimedes shyshy

12 shyshy you know I use that example purposely to call

13 attention to the problem You can take those things

14 and youre not just saying apply it and youre not even

15 just saying shyshy you are saying use the computer but at

16 the end of the road something physical in the world

17 changes and everybody would say now thats shyshy that

18 will falls within I mean probably I mean my

19 hesitation shows Im looking for the right words

20 MR PERRY Justice Breyer your point is

21 the reason that it is equally fallacious to suggest on

22 the one hand as Alice and IBM does that simply

23 reciting a computer is a magic key that gets you through

24 101 and you never have to any other inquiry and what

25 some of folks the amici on the other side say which

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

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see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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68

146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

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versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

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4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
Page 43: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 is that computers or software are never eligible Both

2 of those things have to be wrong because what the Court

3 said in Bilski was future innovation is too uncertain

4 We are not going to do that as a Court And the Court

5 laid out an approach using abstract ideas in Bilski and

6 inventive contribution in Mayo that is flexible enough

7 to take into account that innovation and to deal with

8 particular claims in context which is why at the end

9 of the day we have to come back to these patents and

10 decide which shyshy

11 JUSTICE KAGAN Mr Perry before we get

12 back to these matters you said to Justice Scalia if a

13 patent sufficiently describes how a computer will

14 implement an idea then its patentable So how

15 sufficiently does one have to describe it What do we

16 want a judge to do at this threshold level in terms of

17 trying to figure out whether the description is

18 sufficient to get you past it

19 MR PERRY If I can answer in two steps

20 Justice Kagan First in the negative What the

21 applicant or patentee must do shyshy must not do is simply

22 describe the desired result That would take us back to

23 State Street That would simply say I claim a magic

24 box that buys high and sells low or vice versa I

25 suppose I claim a magic box for investing Thats what

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Official shy Subject to Final Review

1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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Official shy Subject to Final Review

1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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Official shy Subject to Final Review

1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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Official shy Subject to Final Review

1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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Official shy Subject to Final Review

1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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1 these patents do

2 Then to put it in the affirmative and in the

3 language of Mayo the claim has to recite something

4 significantly more something significantly more than

5 the abstract idea itself That would be a contextual

6 analysis based on the claims and specifications and file

7 history and we know that some devices some methods

8 some programming will pass that

9 It is not going to be a brightshyline rule and

10 thats one of the tugshyofshywar issues that this Court and

11 the Federal Circuit have been having in these cases

12 The Federal Circuit wants brightshyline rules All

13 computers are in or all computers are out

14 This Court has been more contextual This

15 Court has been more nuanced This Court has looked at

16 things in a more robust way

17 JUSTICE KAGAN Youre not suggesting that

18 specific code is necessary

19 MR PERRY No Your Honor I think the shyshy

20 actual description of the programming is a 112 problem

21 I agree with that A 112 issue That is the realm of

22 the written description requirement What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results simply say A magic box that does

25 intermediate settlement And we can tie that back to

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1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420

1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721

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declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213

4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814

4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 45: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

41

Official shy Subject to Final Review

1 this particular prosecution the 510 patent which is

2 the method patent

3 The examiner rejected it Under Section

4 101 the examiner said this is an abstract idea You

5 cant have this patent And the only change that this

6 applicant made was to add in the adjusting step

7 electronic adjustment It put in one word

8 electronic adjustment And under State Street which

9 is what this patent is prosecuted under that was

10 enough because the result of adjusting run through a

11 computer is enough

12 Under current law that cant be enough

13 That just cant get a patent over the line because this

14 Court said in Mayo and I got to quote this language

15 Simply implementing a fundamental principle on a

16 physical machine namely a computer is not a patentable

17 application of that principle Thats all that Alice

18 has done

19 These are preshyBilski patents They never

20 should have been issued General Verrilli will stand up

21 and address that point And certainly under current

22 law shyshy one point on the AIA Congress did not send all

23 this to the administrative process Congress created

24 two avenues the courts and the PTO to use the

25 standards Essentially it ratified Bilski and Mayo and

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42

Official shy Subject to Final Review

1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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Official shy Subject to Final Review

1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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Official shy Subject to Final Review

1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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Official shy Subject to Final Review

1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

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approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

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absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

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491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

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accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

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3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L

4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

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2819 3025 manipulate 559 mechanism 207 movement 3010 3015 5614 323 manipulated 242 multilateral novelty 1059

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387 March 111 meet 4311 multiparty 419 nuanced 4015 look 525 616 marginal 445 mental 2123 myriad 275 number 1619

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5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

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programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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4 4 325 4825 42 1524 1618 44 211

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9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
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Official shy Subject to Final Review

1 said we agree with what you all are doing at the

2 Supreme Court and the existing standards are good enough

3 for us This is a judicial problem And that is a good

4 reason The abstract shyshy

5 JUSTICE GINSBURG The Federal Circuit in

6 this case split in many ways and it had our decisions

7 to deal with You said given Bilski and Mayo this is

8 an easy case What is the instruction that escaped a

9 good number of judges on the Federal Circuit How would

10 you state the rule

11 MR PERRY Your Honor I think theres a

12 significant element to the Federal Circuit that

13 disagrees with Mayo and has been resistant in applying

14 it Chief Judge shyshy former Chief Judge Michelle filed a

15 brief in this Court essentially saying Mayo is a

16 lifeshysciences case You should limit it to that because

17 if you apply it to everything else then these patents

18 are no good

19 Mayo we submit is a technologyshyneutral

20 industryshyneutral exceptionshyneutral framework that can

21 be used to answer all of these questions This is not

22 the death of software patents The software industry is

23 all before this Court saying this is fine with us

24 Every company in the United States practically except

25 for IBM is saying go ahead This will not affect

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1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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Official shy Subject to Final Review

1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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Official shy Subject to Final Review

1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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Official shy Subject to Final Review

1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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Official shy Subject to Final Review

1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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Official shy Subject to Final Review

1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

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211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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weve 1925 484 web 227 weekend 510

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

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watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • Exhibit A Guidelines Comment
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Official shy Subject to Final Review

1 software patents

2 Justice Ginsburg this Courts precedents

3 are clear They are unanimous They just need to be

4 applied To suggest that there is confusion that needs

5 to be addressed by retreating beating a retreat from

6 recent unanimous decisions would simply reward

7 intransigence difficulty refusal to adhere to what are

8 clear precedents because shyshy

9 JUSTICE KAGAN Should we be concerned

10 Mr Perry that there are old patents that in fact could

11 meet the test that you set forth but wont because they

12 were written in a different time and so used much more

13 general language

14 MR PERRY Your Honor the applicant or the

15 patent holder would have the opportunity to institute a

16 reexamination proceeding or some sort of administration

17 process to address that issue

18 And second it should be noted this is a

19 very small problem There are 2 million outstanding

20 patents in the United States In the last four fiscal

21 years there were 22000 infringement litigations

22 instituted but since Bilski there have only been 57

23 district court decisions on Section 101 issues There

24 have only been 12 Federal Circuit decisions total on

25 computer implementation

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1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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Official shy Subject to Final Review

1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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Official shy Subject to Final Review

1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition

4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422

brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922

30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207

dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407

910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322

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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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Official shy Subject to Final Review

disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 48: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

44

Official shy Subject to Final Review

1 We are talking about a group of patents

2 Justice Kagan thats way out at the tail end of

3 distribution Most patents never have a 101 challenge

4 This is not an issue with cotton gins and other things

5 This is a problem for the most marginal

6 most dubious most skeptical patents the ones that this

7 Court in Bilski shyshy and remember what Bilskis holding

8 is The majority said they are processes but it did

9 not say they are eligible

10 Thank you Mr Chief Justice

11 CHIEF JUSTICE ROBERTS Thank you counsel

12 General Verrilli

13 ORAL ARGUMENT OF DONALD B VERRILLI JR

14 ON BEHALF OF THE UNITED STATES AS AMICUS

15 CURIAE SUPPORTING RESPONDENTS

16 GENERAL VERRILLI Mr Chief Justice and

17 may it please the Court

18 An abstract idea does not become

19 patentshyeligible merely by tacking on an instruction to

20 use a computer to carry it out A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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47

Official shy Subject to Final Review

1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

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572 added 302 Alice 13 34 2822 3814 available 99

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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looks 1122 314 573 374 412 4018 176 1915 lose 2022 213 matters 3912 4920 5016 necessity 4524 255 4512 lot 1122 214 Mayo 231315 518 need 420 159 5416

2310 2510 262022 271 methodology 1623 302 occasions 923 315 2815 3422 756 433 4520 occurs 4422

low 3924 36524 396 methods 64 5111 5223 offer 2918 loyalty 518 403 411425 1611 179 needed 1121 offering 372

5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

3222 42 284 3718 3218 342 7381622 84 5017 ones 267 446 partly 386 3525 399 879 921720 pointed 3121

5114 parts 127 401 4119 101120 1110 3122 operates 1117 party 154 421722 431 125131518 points 137 operation 3425 pass 408 5619 431020 441 1222 131016 5320 opinion 1624 patent 4924 4436 4528 1320 14312 police 4913

2415 28715 823 1221 451121 466 141423 155 portion 211 opinions 2412 13192122 466 508 548 158 161317 position 2412 opportunity 1612 2116 5419 554 1711923 5518

4315 2217 231616 path 2013 184111320 possible 336 opposed 173 2713 2910 2619 1823 1929 3610 3811

197 206 3019 3115 pay 2722 2023 2112 postshyBilski optic 3012 324101516 payment 2720 2241518 1723 oral 113 2258 321723 341 pencil 102224 2318 241421 practically

37 2615 341 3726 371 25817 263 4224 4413 3913 41125 people 915 2613 2728 preshyBilski 3218

order 1510 41913 4315 1210 214 271224 3019 4119 1914 233 4422 45814 251123 3710 3120 325 precedents 432 251123 261 451618 474 3718 4825 53151719 438 452 338 5223 491025 501 periodically 54112023 precisely 64

orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

5519 5622 5312 5421 Perry 119 26 physical 3011 3617 outer 2816 5516 562122 26141517 3816 4116 prefer 521 outstanding patentshyeligible 29223 303 pick 4813 491 pretty 1015

4319 4419 3112 3225 picked 491 2810 315 overlap 2317 patentability 331823 343 piece 102224 5614

2319 2021 213 34919 356 pipes 3011 price 1610 4614 351115 3713 place 911 2711

P patentable 219 3716 3820 places 3110 primarily 2123 P 31 2312 2519 391119 4019 plainer 5425 principle 2621 package 542 2623 3224 4211 431014 platform 3312 262224 4115 Page 22 311 3513 3914 person 3719 platforms 3010 4117 565

369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

2524 qualified 47 506 5213 4022 409 4210 program 510 qualifies 4713 realm 3215 reserve 2611 4525

51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

Scalia 91217 serious 108 skeptical 446 3417 35348 2214 2717 918 10411 16225 sketch 2816 3514 452024 3919 4624 189121521 service 1610 skilled 1919 46313 477 Stevens 1724 1825 2313 services 2917 skills 1814 5471821 stood 2712 329 3912 set 814 264 sky 468 55324 stop 6141921

science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

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securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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weve 1925 484 web 227 weekend 510

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

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81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

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821 228 2813 3418 35517 363 417 5523

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1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

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3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 49: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 Thats the test that we believe is most faithful to this

2 Courts precedents in Bilski and Mayo It keeps patents

3 within their traditional and appropriate domain and it

4 is capable of being administered consistently by Courts

5 and by PTO examiners

6 JUSTICE GINSBURG How do you answer the

7 argument that your view would extinguish businessshymethod

8 patents and make all software ineligible for patent

9 protection

10 GENERAL VERRILLI Yeah with shyshy let me

11 address software patents first because that I think is

12 obviously a significant question And its just not

13 correct to say that our approach would make software

14 patenting ineligible Any software patent that improves

15 the functioning of the computer technology is eligible

16 Any software patent that improves shyshy that is used to

17 improve another technology is eligible For example

18 the patent in the shyshy in the Diehr case is one in

19 which shyshy

20 JUSTICE SOTOMAYOR Why do we need to reach

21 this in that shyshy reach software patents at all in this

22 case

23 GENERAL VERRILLI Well shyshy

24 JUSTICE SOTOMAYOR Whats the necessity for

25 us to announce a general rule with respect to software

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1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 50: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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Official shy Subject to Final Review

1 There is no software being patented in this case

2 GENERAL VERRILLI Well I shyshy

3 JUSTICE SOTOMAYOR Theres a systems

4 GENERAL VERRILLI Well I shyshy I think shyshy

5 well they shyshy they shyshy theres a process being and shyshy and

6 one can think of software patents as process patents

7 And I think thats why my friends on the other side are

8 saying the sky is falling because they shyshy they are

9 interpreting what were saying about that when a

10 computer makes shyshy when a computers involvement makes

11 something eligible under 101 its calling those into

12 question and it doesnt

13 JUSTICE SOTOMAYOR Do you think we have to

14 reach the patentability of software to answer this case

15 GENERAL VERRILLI Well I think you can shyshy

16 I think the answer to that question is no not

17 necessarily You can decide it by saying that shyshy that

18 Bilski answers the question whether this is an abstract

19 idea because this form of hedging is really no

20 different than the form of hedging as a conceptual

21 matter at issue in Bilski And then Mayo answers the

22 question of whether the use of a computer in this case

23 adds enough to the abstract idea beyond conventional

24 steps because here all we have after all is just

25 conventional use of computing technology no computer

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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Official shy Subject to Final Review

1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

165 181618 administration answer 119 37 41 144 based 423 406

2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399

2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition

4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422

brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721

426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539

declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613

122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate

1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213

4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814

4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718

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domain 453 eligible 301 evolve 3522 557 fiscal 4320 DONALD 121 391 449 exact 236 five 18912

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factors 5113drawings 3117 embedded 1418 exaggeration flow 1911 541 fail 2419 272 3117 employ 75 1017 549 fairly 511 507 dubious 2915 enabled 1921 examiner 4134 fluctuation faithful 451446 encourages examiners 455 2711 fall 925 229 due 5212 132222 474 4912 focus 1013

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earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534

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economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925

economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

framework Generals 204 238 3410 help 135 2621 277 4220 225 4223918 helpful 1525 2812 3223

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52517 5613 genuine 4724 governments high 3924 414 4418 friend 3725 George 566 211313 2210 hires 612 461923 4921

5512 getting 289 grab 618 historically 499 552 5614 friends 272 479 grain 624 711 history 1721 ideas 293 395

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821222324 131720 1719 2157 447 4919 imagine 69 91 1724 239 grounds 2456 holds 262022 4921

functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510

functions 1323 33217 347 2414 3225 331823 165 181719 141 1918 5011 guy 711 34319 356 252 3914 4425 4924 given 61113 4019 4211 implementation

fundamental 427 5034 H 4314 5412 3620 4325 1115 249 giving 611 habit 610 5624 implemented 2621 4115 5618 hand 915 1923 hope 188 56 81518

fundamentally global 814 201 3621 hoping 2817 1018 3415 1312 1516 2725 3822 host 527 3616 518

further 51 117 go 510 1157 handwritten house 3021 implementing 2610 2823 161419 1922 3617 HUDshy1 3022 4115 291 5225 2314 256 happen 133 human 4812 important 243 5623 281123 291 happens 388 hundred 3710 366 473

future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

G 5416 561010 hardware 3612 312525 3715 G 117 2313 goes 51 74 106 harvesting hypothetical impression

317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517

1224 2022 going 75 814 heart 82 5620 IBM 3822 485 5123 2225 4120 94 136 1666 5621 4225 improvement 4313 441216 1612 37925 hedge 413 545 IBMs 226 2117181820 45102325 394 409 545 idea 4267 59 2122 359 462415 4714 5014 hedging 478 520 72124 4423 471011 472024 482 5115 5222 278101011 8218 924 4712151617

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

451416 486 2524 issued 4120 3613 37814 knock 227 improving 206 interpersonal issues 4010 3716 3857 knocked 245

5013 518 296 4323 3820 391112 know 4611 53 5617 interpret 2112 3920 4017 54 109 141

inappropriate 2423 5417 J 425 4329 162212124 5511 551 JA 2715 442101116 17347 1918

include 2915 interpretation job 238 4562024 1918 209 496 313 1715 Joint 1910 46313 4778 2211 2322

individual 527 204 234 3025 369 4722 4814 2591723 industrial 5310 interpretations JR 121 29 48182224 287 3169 industry 2917 288 4413 5010 511018 3411 35225

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4220 interrelated 4824 5531224 541425 556 ineligible 2418 127 judges 288 429 5625 5513

45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L

4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

397 4424 718 91416 623 736919 156 194 257 4114 4313 47125 5120 122325 1511 723 858919 2521 391120 large 169 3010 5121 5218 2715 311315 9121718 4017 439 Laughter 523 53912 312323 322 104111221 442 121 317

innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312

innovative 517 inventions 1616 138111417 1024 laws 321516 inquiries 5620 3114 3310 1320 14313 keeps 452 5210 372 562122 inquiry 3824 inventive 3421 142124 152 Kennedy 319 lawyer 1612 institute 4315 3423 3520 15623 1614 5715 61 lawyers 2818 instituted 4322 3622 396 1618 17119 1123 1228 leads 471116 instruction inventor 2714 172424 189 12141720 leave 1324

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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

4422 4915 1415 162 million 4319 3824 391 limitations machines 323 174 184 mine 289 4119 443

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389 4113 mail 251112 5522 modified 241 nonshysettlement 4821 521011 261 meaning 2210 Monday 111 419

lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

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5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

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9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 51: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 innovation such that you dont qualify under 101 You

2 could take that approach

3 But it is important to the United States

4 that we shyshy and to our patent examiners that we get some

5 clarity if we can I think the clarity could come from

6 the text that I propose which I want to reiterate shyshy

7 JUSTICE SOTOMAYOR Well shyshy

8 JUSTICE BREYER Could shyshy could shyshy could you

9 go on with that because you were just getting to the

10 point where I think you say a computer improvement that

11 in fact leads to an improvement in harvesting cotton is

12 an improvement through a computer of technology so it

13 qualifies

14 But then I think you were going to say or I

15 got this also from the brief a computer improvement

16 that leads to an improvement in the methods of selling

17 bonds over the telephone is not an improvement in

18 technology reached by the computer Am I right about

19 the distinction youre making

20 GENERAL VERRILLI I dont think theres a

21 yes or no answer to that question

22 JUSTICE BREYER What is your view Yeah

23 what is shyshy how do we deal with just that problem

24 GENERAL VERRILLI If there is a genuine

25 innovation in the functioning of the computer shyshy

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1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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A add 714 1023 algorithm 3320 41 automatically

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285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

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write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 52: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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Official shy Subject to Final Review

1 JUSTICE BREYER Yes

2 GENERAL VERRILLI shyshy such that business

3 processes shyshy

4 JUSTICE BREYER Weve got that Yes yes

5 We got the computer But then it doesnt improve the

6 computer but rather it improves through the computer

7 the harvesting of cotton

8 Now youve got it in what you said was your

9 second category which is an improvement through the

10 computer of a technology And I thought in your brief

11 you were distinguishing an improvement through the

12 computer of a human activity that is not a technology

13 and in particular to pick an example of that

14 something in finance or something in business

15 Now am I right about the distinction youre

16 making

17 GENERAL VERRILLI Yeah that shyshy

18 JUSTICE BREYER If Im not right what is

19 the distinction

20 GENERAL VERRILLI That is generally the

21 line were drawing Frankly shyshy

22 JUSTICE BREYER And how is that justified

23 GENERAL VERRILLI I do want shyshy

24 JUSTICE BREYER That shyshy that is Judge Dyk

25 in shyshy in Bilski in the Federal circuit 4 people sort of

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1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

A add 714 1023 algorithm 3320 41 automatically

As 525 3621 387 algorithms apply 72425 111

am 115 32 416 3013 3310 2019 281213 automobile 389

572 added 302 Alice 13 34 2822 3814 available 99

abacus 61213 4923 363 3717 4217 avenues 4124

710 1018 additional 5017 3822 4117 applying 4213 avoids 524

1325 3614 3617

address 4121 4317 4511

Alices 271 2919 3678

approach 226 395 4513 B

ability 1514 addressed 435 allow 94 472 B 121 29 4413

able 1511 167 addressing 181 allows 97 242 appropriate 5122

1919 516 adds 4623 amazing 2514 81516 1514 back 1621

aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512

113 573 adjudication amicus 123 5224 3018 322

absolutely 125 241 210 4414 Archimedes 3991222

1215 159 adjusting 3611 analysis 424 281122 3811 4025

5518 41610 364 406 area 219 5112 ball 526

abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35

48 6682023 418 analyze 1416 arguing 563 banks 95

721 8218 administered 1716 argument 114 bars 43

141920 1522 454 announce 4525 225812 33 baseball 527

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2220 24925 4316 2219 247 18323 226 baseline 522

2621 277 administrative 3919 4221 26715 4413 basic 413 5515

2938 3422 171218 187 456 461416 457 5317 basically 1821

3523 395 242 4123 4721 551315 5515 2319

405 414 424 adopt 203 answering 5119 arguments basics 5610

4418 461823 adopted 31317 answers 3713 1415 basis 132 1512

491221 505 advancement 461821 arms 1625 1516 2719

53368811 351 anyway 1810 arrangements 5411

552 564 advances 3513 apparatus 2916 131 beating 435

accept 102 adversary 547 APPEARAN arrows 315 beginning 163

accomplish advice 1715 116 art 1919 5414

5510 advocated 4916 appears 820 arts 2124 5310 begins 3810

account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719

397 affirmative 402 311 326 369 asked 2314 122 24710

accounts 823 agent 52 3021 548 278 5322 214 38 2616

9356 3611 ago 318 2224 applicant 3220 551224 4414 5318

3611 3615 5111 3921 4023 asking 193 believe 1316

accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421

acknowledges 221 2418 application 3324 5215 255 264 451

1121 4021 421 2623 4117 aspect 517 5424

act 99 2017 agrees 2812 4918 asserted 3113 belong 529

activities 229 ahead 4225 applications 311618 benchmark 522

activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923

3325 4812 airline 5220 applied 434 attaching 124 best 161124

actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819

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59

3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523

Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116

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4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921

74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422

brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024

briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720

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30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207

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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322

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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266

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4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420

1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721

426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539

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122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate

1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513

described 717conducted 297 346 current 4112 disagrees 4213

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213

4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814

4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517

443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718

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domain 453 eligible 301 evolve 3522 557 fiscal 4320 DONALD 121 391 449 exact 236 five 18912

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242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825

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earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534

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economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925

economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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5512 getting 289 grab 618 historically 499 552 5614 friends 272 479 grain 624 711 history 1721 ideas 293 395

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821222324 131720 1719 2157 447 4919 imagine 69 91 1724 239 grounds 2456 holds 262022 4921

functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566

functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510

functions 1323 33217 347 2414 3225 331823 165 181719 141 1918 5011 guy 711 34319 356 252 3914 4425 4924 given 61113 4019 4211 implementation

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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

451416 486 2524 issued 4120 3613 37814 knock 227 improving 206 interpersonal issues 4010 3716 3857 knocked 245

5013 518 296 4323 3820 391112 know 4611 53 5617 interpret 2112 3920 4017 54 109 141

inappropriate 2423 5417 J 425 4329 162212124 5511 551 JA 2715 442101116 17347 1918

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individual 527 204 234 3025 369 4722 4814 2591723 industrial 5310 interpretations JR 121 29 48182224 287 3169 industry 2917 288 4413 5010 511018 3411 35225

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4220 interrelated 4824 5531224 541425 556 ineligible 2418 127 judges 288 429 5625 5513

45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L

4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

397 4424 718 91416 623 736919 156 194 257 4114 4313 47125 5120 122325 1511 723 858919 2521 391120 large 169 3010 5121 5218 2715 311315 9121718 4017 439 Laughter 523 53912 312323 322 104111221 442 121 317

innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312

innovative 517 inventions 1616 138111417 1024 laws 321516 inquiries 5620 3114 3310 1320 14313 keeps 452 5210 372 562122 inquiry 3824 inventive 3421 142124 152 Kennedy 319 lawyer 1612 institute 4315 3423 3520 15623 1614 5715 61 lawyers 2818 instituted 4322 3622 396 1618 17119 1123 1228 leads 471116 instruction inventor 2714 172424 189 12141720 leave 1324

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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

4422 4915 1415 162 million 4319 3824 391 limitations machines 323 174 184 mine 289 4119 443

1418 2323 325 212325 2320 minutes 2712 new 91 3211 limited 3012 magic 3823 242223 2521 2825 5315 nonshyexhaustive line 192 2221 392325 4024 318 381818 model 1622 5113

389 4113 mail 251112 5522 modified 241 nonshysettlement 4821 521011 261 meaning 2210 Monday 111 419

lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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Official shy Subject to Final Review

1 picked it up maybe 5 didnt pick it up Would you say

2 a few words about it

3 GENERAL VERRILLI Sure About shyshy let me go

4 to Bilski there in that I do think while shyshy while

5 certainly the Court held that the term process got a

6 natural construction which could include business

7 methods it seems to me that thats not all the Court

8 said in Bilski The Court also said that it was

9 historically and traditionally quite rare that business

10 methods were patent eligible

11 It also said that shyshy that the shyshy that courts

12 and the PTO examiners should use the abstract ideas

13 exception to 101 to police the appropriate boundary

14 It also said that the

15 machineshyorshytransformation test that the United States

16 advocated remained a useful tool And of course that

17 directs to you seeing whether there is a technology

18 application

19 And of course the holding in Bilski was

20 that the shyshy the method for hedging risk was ineligible

21 because it was an abstract idea and I cant imagine

22 that if in Bilski the shyshy the claim had been exactly the

23 same but had added use a computer to carry out some of

24 these standard random analysis functions that are

25 claimed by the patent that you would have found it to

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1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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54

1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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Official shy Subject to Final ReviewOfficial shy Subject to Final Review

58

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 54: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

50

Official shy Subject to Final Review

1 be patent eligible

2 And I shyshy I would submit for the Court that

3 the key point here I think is that now given where

4 the Court shyshy what the Court has held in Bilski given

5 what its held in Mayo the abstract ideas exception is

6 really the only tool left to deal with what I shyshy what I

7 think I fairly read Bilski as saying is a significant

8 problem the proliferation of patents of business

9 methods

10 JUSTICE KENNEDY Is there an example that

11 you can give us of a shyshy what we can call a business

12 process that is patentable a process that doesnt

13 involve improving the workings of a computer

14 GENERAL VERRILLI I shyshy I think its going

15 to be difficult for me to do that I think for

16 example if you had a business method a process for

17 additional security pointshyofshysale credit card

18 transactions using particular encryption technology

19 that might well be patent eligible Its a technology

20 that it makes conduct of business more efficient or

21 effective

22 But there is a technological link here and

23 we do think thats critical to our shyshy to our point of

24 view with respect to the case And I shyshy and I do think

25 remember that when we say something is not patent

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51

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 55: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 eligible were not saying they cant do it Were

2 saying they cant monopolize it

3 And the concern in a situation like this one

4 is that if this is patent eligible its hard to see

5 why for example the first person who came up with a

6 frequent flier program wouldnt have been able to claim

7 a patent there because after all thats a business

8 method for improving customer loyalty implemented on a

9 computer

10 CHIEF JUSTICE ROBERTS General I shyshy you

11 mentioned a while ago the need for greater clarity and

12 certainty in this area And Im just wondering in your

13 brief youve got a nonshyexhaustive of factors to

14 consider and there are 6 different ones And Im just

15 doubtful that thats going to bring about greater

16 clarity and certainty

17 GENERAL VERRILLI I take shyshy I take the

18 point Mr Chief Justice but I think the key is that

19 they are all directed to answering the question of

20 whether the innovation that is claimed and is an

21 innovation in either A the improvement of a computers

22 functioning or B the use of computer technology to

23 improve the functioning of another technological

24 process and a case like Diehr would be in the latter

25 category

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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A add 714 1023 algorithm 3320 41 automatically

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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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63

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 56: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 And so I do think that thats the key

2 benchmark Thats the baseline Thats the test that

3 we do think can be applied clearly and consistently by

4 the courts or the PTO And it avoids the risk of things

5 like frequent flier programs or the Oakland As money

6 ball methods for evaluating the contributions in

7 individual baseball players make or any one of a host of

8 other things that our intuitions tell us just dont

9 belong in the patent system

10 Thats the shyshy drawing that line keeps them

11 out not drawing that line lets them in And with all

12 due respect I dont think that the novelty and

13 nonobviousness filters that 102 and 103 really deal with

14 that problem effectively because when you get to

15 nonobviousness in 103 for example youll be asking a

16 different question

17 If you take the frequent flier program you

18 would say well is this innovation in building consumer

19 loyalty something that would have been obvious to

20 somebody who runs an airline Its totally divorced

21 from the question of technology at that point and

22 therefore I dont think youre going to get the screen

23 that you need to get in order for the patent system to

24 be confined to its traditional and appropriate scope

25 If there are no further questions thank

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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58

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  • Exhibit A Guidelines Comment
Page 57: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

53

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1 you

2 JUSTICE GINSBURG I have a question about

3 how do you identify an abstract concept The shyshy a

4 natural phenomenon a mathematical formula those are

5 easy to identify but there has been some confusion on

6 what qualifies as an abstract concept

7 GENERAL VERRILLI We would define

8 abstract shyshy an abstract concept as a claim that is not

9 directed to a concrete innovation in technology

10 science or the industrial arts So its the shyshy its

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law

13 Thank you

14 CHIEF JUSTICE ROBERTS Thank you General

15 Mr Phillips you have four minutes

16 remaining

17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS

18 ON BEHALF OF THE PETITIONERS

19 MR PHILLIPS Thank you Mr Chief Justice

20 Id just like to make a few points

21 First of all with respect to the question

22 you asked which is looking at 159 et cetera all I can

23 tell you is that if you look at claim 33 it talks about

24 matched orders the matched orders that are described in

25 286 and 287 and then makes specific reference to 159

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 58: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 and that flow chart thats there And its all designed

2 as a package Its only one element of the shyshy of the

3 invention but it is a central element and its an easy

4 one to understand And it goes well beyond simply the

5 notion of hedge shyshy hedge against settlement risk and do

6 it by a computer

7 JUSTICE SOTOMAYOR Your adversary says that

8 his shyshy the appendix to his brief are the only patents at

9 issue that the flow charts are not at issue in this

10 case

11 MR PHILLIPS Theres no basis for that

12 statement Your Honor There shyshy remember this went off

13 on a very truncated litigation process So theres shyshy

14 you know we shyshy we got cut off at the beginning of it

15 Theres been no construction of the shyshy of the claims

16 and shyshy and obviously these are specifications that go

17 to how you interpret the claim

18 JUSTICE SOTOMAYOR If we were to say that

19 there are no business patents shyshy

20 MR PHILLIPS Yes

21 JUSTICE SOTOMAYOR shyshy would your patent

22 survive at all

23 MR PHILLIPS No I dont shyshy I dont

24 believe so I think theres no question And you

25 know General Verrilli could not have been any plainer

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Official shy Subject to Final Review

1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 59: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 in his statement of how he wants to interpret the

2 abstract idea concept

3 JUSTICE SOTOMAYOR Yes he wants to say no

4 business patents

5 MR PHILLIPS No business shyshy just another

6 way of saying no business methods And you know the

7 Court rejected that And it seems to me extraordinary

8 to say Congress didnt reject no business methods in

9 101 but were going to do shyshy were going to manipulate

10 the judicial exception to accomplish precisely that same

11 thing It seems to me thats wholly inappropriate

12 Justice Ginsburg you asked my shyshy my friend

13 here you know whats his test He didnt answer that

14 question youll notice because he doesnt have an

15 answer His basic argument is whatever you do just

16 kill this patent

17 And if I were in his shoes I suppose Id

18 take that same position I think whats absolutely

19 clear is that the test ought to be one that is

20 structured as a very coarse filter not the kind of

21 filter that hes pushing for where it changes over time

22 I mean I thought his shyshy I thought his response to one

23 of the questions about eshymail and word processing that

24 Justice Sotomayor asked is over time it would change

25 Well thats exactly what 102 and 103 are for That is

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 60: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

56

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1 not the purpose of shyshy of Section 101

2 And then he uses the example of encryption

3 I guarantee you if we were arguing about encryption in

4 this case he would say to me that thats an abstract

5 principle because encryption is a concept thats been

6 around since time immemorial George Washington used

7 it Everybody has used encryption

8 And a question again thats not the

9 solution to these problems The question is how did we

10 go about doing it And we go beyond the basics of

11 simply saying use a computer and thats what we ask

12 this Court to focus on and to evaluate

13 As to the frequent flier program its

14 pretty clear to me that even though it was a novel idea

15 in some sense the concept itself would have been viewed

16 in shyshy in the KSR fashion as quite obvious as a means of

17 improving customer loyalty

18 There are solutions here Giving us 101

19 pass doesnt create a monopoly It just gets us to the

20 102 and 103 inquiries that are at the heart of what the

21 patent laws shyshy and 112 that are at the heart of what the

22 patent laws ought to be dealing with

23 If there are no further questions Your

24 Honor thank you

25 CHIEF JUSTICE ROBERTS Thank you counsel

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 61: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1 The case is submitted

2 (Whereupon at 1105 am the case in the

3 aboveshyentitled matter was submitted)

4

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A add 714 1023 algorithm 3320 41 automatically

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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  • Exhibit A Guidelines Comment
Page 62: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 63: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 64: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 65: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

61

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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293

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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220

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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 66: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

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369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

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2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

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processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

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51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

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422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

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126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248

324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124

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include 2915 interpretation job 238 4562024 1918 209 496 313 1715 Joint 1910 46313 4778 2211 2322

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4220 interrelated 4824 5531224 541425 556 ineligible 2418 127 judges 288 429 5625 5513

45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L

4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403

397 4424 718 91416 623 736919 156 194 257 4114 4313 47125 5120 122325 1511 723 858919 2521 391120 large 169 3010 5121 5218 2715 311315 9121718 4017 439 Laughter 523 53912 312323 322 104111221 442 121 317

innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312

innovative 517 inventions 1616 138111417 1024 laws 321516 inquiries 5620 3114 3310 1320 14313 keeps 452 5210 372 562122 inquiry 3824 inventive 3421 142124 152 Kennedy 319 lawyer 1612 institute 4315 3423 3520 15623 1614 5715 61 lawyers 2818 instituted 4322 3622 396 1618 17119 1123 1228 leads 471116 instruction inventor 2714 172424 189 12141720 leave 1324

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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506

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4025 involving 283 285 29221 kill 5516 2513 2713 intermediated 3115 2924 30324 kind 41224 letter 2919

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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

4422 4915 1415 162 million 4319 3824 391 limitations machines 323 174 184 mine 289 4119 443

1418 2323 325 212325 2320 minutes 2712 new 91 3211 limited 3012 magic 3823 242223 2521 2825 5315 nonshyexhaustive line 192 2221 392325 4024 318 381818 model 1622 5113

389 4113 mail 251112 5522 modified 241 nonshysettlement 4821 521011 261 meaning 2210 Monday 111 419

lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

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litigation 5413 4816 meant 2322 mother 616 notion 151122 litigations 4321 man 612 710 mechanical 71114 545 little 1825 222 101823 3316 move 134 3014 novel 1069

2819 3025 manipulate 559 mechanism 207 movement 3010 3015 5614 323 manipulated 242 multilateral novelty 1059

live 338 338 medium 2419 2725 3115 23141524 long 2013 3021 manner 3616 2423 multilevel 3023 5212

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111013 145 1524 1910 2510 2713

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looks 1122 314 573 374 412 4018 176 1915 lose 2022 213 matters 3912 4920 5016 necessity 4524 255 4512 lot 1122 214 Mayo 231315 518 need 420 159 5416

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low 3924 36524 396 methods 64 5111 5223 offer 2918 loyalty 518 403 411425 1611 179 needed 1121 offering 372

5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

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2415 28715 823 1221 451121 466 141423 155 portion 211 opinions 2412 13192122 466 508 548 158 161317 position 2412 opportunity 1612 2116 5419 554 1711923 5518

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369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

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1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

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40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

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seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

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1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

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422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

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126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

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821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

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write 264 writers 132325 written 617

1716 2925 304 4022

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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

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3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

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  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615

4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363

4422 4915 1415 162 million 4319 3824 391 limitations machines 323 174 184 mine 289 4119 443

1418 2323 325 212325 2320 minutes 2712 new 91 3211 limited 3012 magic 3823 242223 2521 2825 5315 nonshyexhaustive line 192 2221 392325 4024 318 381818 model 1622 5113

389 4113 mail 251112 5522 modified 241 nonshysettlement 4821 521011 261 meaning 2210 Monday 111 419

lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616

link 5022 3610 4422 monitor 96 nonexistent 306 listing 294 majority 448 meaningfully monopolize 512 nonobviousness literally 814 making 824 1113 monopoly 5619 521315

135 3020 1177 1415 means 411 914 Moores 2415 noted 4318 3717 219 4719 5616 morning 34 notice 5514

litigation 5413 4816 meant 2322 mother 616 notion 151122 litigations 4321 man 612 710 mechanical 71114 545 little 1825 222 101823 3316 move 134 3014 novel 1069

2819 3025 manipulate 559 mechanism 207 movement 3010 3015 5614 323 manipulated 242 multilateral novelty 1059

live 338 338 medium 2419 2725 3115 23141524 long 2013 3021 manner 3616 2423 multilevel 3023 5212

387 March 111 meet 4311 multiparty 419 nuanced 4015 look 525 616 marginal 445 mental 2123 myriad 275 number 1619

111013 145 1524 1910 2510 2713

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looked 178 math 1813 method 61 124 necessarily 286 obvious 522 4015 mathematical 175 1912 4617 115 5219

looking 235 534 203 222123 necessary 516 5616 314 3715 matter 113 241824 253 122122 1517 obviously 64 3819 5322 2519 4621 2913 3456 2825 3722 811 1311

looks 1122 314 573 374 412 4018 176 1915 lose 2022 213 matters 3912 4920 5016 necessity 4524 255 4512 lot 1122 214 Mayo 231315 518 need 420 159 5416

2310 2510 262022 271 methodology 1623 302 occasions 923 315 2815 3422 756 433 4520 occurs 4422

low 3924 36524 396 methods 64 5111 5223 offer 2918 loyalty 518 403 411425 1611 179 needed 1121 offering 372

5219 5617 427131519 2311 291415 302 3111 Office 1321 3610 407 neednt 2823 okay 1019

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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

3222 42 284 3718 3218 342 7381622 84 5017 ones 267 446 partly 386 3525 399 879 921720 pointed 3121

5114 parts 127 401 4119 101120 1110 3122 operates 1117 party 154 421722 431 125131518 points 137 operation 3425 pass 408 5619 431020 441 1222 131016 5320 opinion 1624 patent 4924 4436 4528 1320 14312 police 4913

2415 28715 823 1221 451121 466 141423 155 portion 211 opinions 2412 13192122 466 508 548 158 161317 position 2412 opportunity 1612 2116 5419 554 1711923 5518

4315 2217 231616 path 2013 184111320 possible 336 opposed 173 2713 2910 2619 1823 1929 3610 3811

197 206 3019 3115 pay 2722 2023 2112 postshyBilski optic 3012 324101516 payment 2720 2241518 1723 oral 113 2258 321723 341 pencil 102224 2318 241421 practically

37 2615 341 3726 371 25817 263 4224 4413 3913 41125 people 915 2613 2728 preshyBilski 3218

order 1510 41913 4315 1210 214 271224 3019 4119 1914 233 4422 45814 251123 3710 3120 325 precedents 432 251123 261 451618 474 3718 4825 53151719 438 452 338 5223 491025 501 periodically 54112023 precisely 64

orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

5519 5622 5312 5421 Perry 119 26 physical 3011 3617 outer 2816 5516 562122 26141517 3816 4116 prefer 521 outstanding patentshyeligible 29223 303 pick 4813 491 pretty 1015

4319 4419 3112 3225 picked 491 2810 315 overlap 2317 patentability 331823 343 piece 102224 5614

2319 2021 213 34919 356 pipes 3011 price 1610 4614 351115 3713 place 911 2711

P patentable 219 3716 3820 places 3110 primarily 2123 P 31 2312 2519 391119 4019 plainer 5425 principle 2621 package 542 2623 3224 4211 431014 platform 3312 262224 4115 Page 22 311 3513 3914 person 3719 platforms 3010 4117 565

369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

Alderson Reporting Company

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

2524 qualified 47 506 5213 4022 409 4210 program 510 qualifies 4713 realm 3215 reserve 2611 4525

51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

Alderson Reporting Company

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

Scalia 91217 serious 108 skeptical 446 3417 35348 2214 2717 918 10411 16225 sketch 2816 3514 452024 3919 4624 189121521 service 1610 skilled 1919 46313 477 Stevens 1724 1825 2313 services 2917 skills 1814 5471821 stood 2712 329 3912 set 814 264 sky 468 55324 stop 6141921

science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

322 44 65 shoes 5517 458111314 406 5416 struck 2410 413 4323 shop 1211 45162125 speed 3014 structured 4421 561 shows 3819 461614 3722 5520

securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

Alderson Reporting Company

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
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1924 289 4813 5018 20311 2111 Phillips 117 23 412122 4710 old 91616 particularly 2272223 213 367921 50323 5118

3219 4310 2424 271 291015 459 51321 5221 once 2713 parties 31120 291925 321 524 63722 pointshyofshysale

3222 42 284 3718 3218 342 7381622 84 5017 ones 267 446 partly 386 3525 399 879 921720 pointed 3121

5114 parts 127 401 4119 101120 1110 3122 operates 1117 party 154 421722 431 125131518 points 137 operation 3425 pass 408 5619 431020 441 1222 131016 5320 opinion 1624 patent 4924 4436 4528 1320 14312 police 4913

2415 28715 823 1221 451121 466 141423 155 portion 211 opinions 2412 13192122 466 508 548 158 161317 position 2412 opportunity 1612 2116 5419 554 1711923 5518

4315 2217 231616 path 2013 184111320 possible 336 opposed 173 2713 2910 2619 1823 1929 3610 3811

197 206 3019 3115 pay 2722 2023 2112 postshyBilski optic 3012 324101516 payment 2720 2241518 1723 oral 113 2258 321723 341 pencil 102224 2318 241421 practically

37 2615 341 3726 371 25817 263 4224 4413 3913 41125 people 915 2613 2728 preshyBilski 3218

order 1510 41913 4315 1210 214 271224 3019 4119 1914 233 4422 45814 251123 3710 3120 325 precedents 432 251123 261 451618 474 3718 4825 53151719 438 452 338 5223 491025 501 periodically 54112023 precisely 64

orders 532424 501925 514 2720 555 5510 ought 2015 517 52923 permits 65 phone 339 precomputing

5519 5622 5312 5421 Perry 119 26 physical 3011 3617 outer 2816 5516 562122 26141517 3816 4116 prefer 521 outstanding patentshyeligible 29223 303 pick 4813 491 pretty 1015

4319 4419 3112 3225 picked 491 2810 315 overlap 2317 patentability 331823 343 piece 102224 5614

2319 2021 213 34919 356 pipes 3011 price 1610 4614 351115 3713 place 911 2711

P patentable 219 3716 3820 places 3110 primarily 2123 P 31 2312 2519 391119 4019 plainer 5425 principle 2621 package 542 2623 3224 4211 431014 platform 3312 262224 4115 Page 22 311 3513 3914 person 3719 platforms 3010 4117 565

369 4116 5012 515 3411 principles 249 pages 3216 patented 123 pertain 2916 play 2520 printed 326 paid 824 153 2516 311718 321 players 527 probably 3818 paper 102224 3016 461 pertains 3237 playing 1925 problem 417

371 patentee 3921 Petitioners 15 please 310 1119 16222 part 811 1311 patenting 821 118 2414 38 2618 4417 17311 1921

1318 1413 4514 5318 point 723 1923 2025 particular 825 patents 31415 phenomenon 1014 16123 247 321314

2025 3319 322 17559 534 28624 357 3214 332 386 398 411 1710 196 PHILIPS 151 3511 3820 34416 3517

Alderson Reporting Company

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

2524 qualified 47 506 5213 4022 409 4210 program 510 qualifies 4713 realm 3215 reserve 2611 4525

51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

Alderson Reporting Company

Official shy Subject to Final Review

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

Scalia 91217 serious 108 skeptical 446 3417 35348 2214 2717 918 10411 16225 sketch 2816 3514 452024 3919 4624 189121521 service 1610 skilled 1919 46313 477 Stevens 1724 1825 2313 services 2917 skills 1814 5471821 stood 2712 329 3912 set 814 264 sky 468 55324 stop 6141921

science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

322 44 65 shoes 5517 458111314 406 5416 struck 2410 413 4323 shop 1211 45162125 speed 3014 structured 4421 561 shows 3819 461614 3722 5520

securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 70: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

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3720 3813 propositions 5623 red 322 results 4024 402023 423 2624 quite 141 176 reexamination retreat 435 4319 445 prosecuted 2125 499 4316 retreating 435 4723 508 3219 419 5616 reference 5325 return 2513 5214 prosecution quote 2623 referred 2713 revive 821

problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479

proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155

process 31523 3516 R 31 reiterate 476 1617 179 324 62 123 providing 3611 random 4924 reiterated 3623 1810 221518 17121218 province 2325 rare 499 reject 558 2812 291 233 2523 proving 238 ratified 4125 rejected 413 3819 4718 261 322323 PTO 1916 293 raw 337 557 481518 3317171825 4124 455 reach 452021 relationships rise 242022 34513 4123 4912 524 4614 296 risk 41318 168 4317 4656 PTY 13 reached 4718 relevant 2316 4920 524 495 501212 pure 341 reacting 181 2719 545 5016 5124 purpose 561 read 1525 remained 4916 road 3816 5413 purposely 3812 1721 224 remaining 5316 ROBERTS 33

processes 64 pushing 5521 283 3717 remember 1016 2612 3024 2123 448 put 57 191516 507 3125 447 318 37814 483 191819 402 reading 2913 5025 5412 4411 5110

processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016

processor 3517 pyramid 69 realize 114 244 representatio room 3719 production pyramids 133 really 411 1622 routine 3522

1610 1013 118 require 3412 362 products 2511 Q 196 4619 requirement rule 113 1615

2524 qualified 47 506 5213 4022 409 4210 program 510 qualifies 4713 realm 3215 reserve 2611 4525

51218 108 536 4021 5312 reservoir 625 rules 4012 12421 3419 qualify 471 realtime 132 resistant 4213 run 4110 516 5217 quantities 3010 1516 2718 resolved 131 running 2622 5613 question 74 reason 3217 respect 919 3319

programmed 1013 1124 3821 424 4525 5024 runs 5220 305 1923 217 reasons 522 5212 5321

programming 2314 329 rebuttal 212 Respondents S

40820 4512 461216 381 5317 12024 2711 S 21 31 programs 3418 461822 4721 recite 403 2320 2616 sailing 1624

525 5119 521621 recited 282 4415 satisfy 255 265 proliferation 53221 5424 reciting 3517 response 5522 268

508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617

115 3420 4221 reconciling 823 3220 3922 saying 712 825 propose 476 5225 5523 records 2719 4110 1041425

Alderson Reporting Company

Official shy Subject to Final Review

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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

Scalia 91217 serious 108 skeptical 446 3417 35348 2214 2717 918 10411 16225 sketch 2816 3514 452024 3919 4624 189121521 service 1610 skilled 1919 46313 477 Stevens 1724 1825 2313 services 2917 skills 1814 5471821 stood 2712 329 3912 set 814 264 sky 468 55324 stop 6141921

science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

322 44 65 shoes 5517 458111314 406 5416 struck 2410 413 4323 shop 1211 45162125 speed 3014 structured 4421 561 shows 3819 461614 3722 5520

securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

Alderson Reporting Company

Official shy Subject to Final Review

68

146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

Alderson Reporting Company

Official shy Subject to Final Review

69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 71: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

67

147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915

says 61421 2015 5311 single 283 4316 4825 statute 2219 712 111617 5615 3717 Sotomayor 819 statutory 233 1916 231 sequentially sitting 69 1210 1314 237 step 1621 3424 2410 383 423 99 3719 241117 2921 416 547 series 1913 situation 513 2924 303 steps 1914

Scalia 91217 serious 108 skeptical 446 3417 35348 2214 2717 918 10411 16225 sketch 2816 3514 452024 3919 4624 189121521 service 1610 skilled 1919 46313 477 Stevens 1724 1825 2313 services 2917 skills 1814 5471821 stood 2712 329 3912 set 814 264 sky 468 55324 stop 6141921

science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019

scope 5224 settle 1514 3615 special 1317 1025 111 screen 5222 settlement 48 social 3213 2914 1513 1720 scrutiny 2914 536 98 154 software 424 specific 416 54 1912 Scylla 1620 308 4025 97 1219 1118 142 stopping 71111

2619 545 1314182224 1912 4018 stops 710 second 2719 settlements 410 1325 17510 5325 storage 614

286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219

secondshyyear 58 shell 281620 30144 391 2716 282 3923 418 Section 31215 294 422222 431 specifications strip 1417

322 44 65 shoes 5517 458111314 406 5416 struck 2410 413 4323 shop 1211 45162125 speed 3014 structured 4421 561 shows 3819 461614 3722 5520

securely 3414 side 3825 467 Solicitor 121 split 426 stuff 1422 securities 3412 significant 177 525 1223 sputter 3810 3021 security 94 2323 4212 203 22425 squarely 2910 subject 65

3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367

see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive

seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924

Alderson Reporting Company

Official shy Subject to Final Review

68

146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

Alderson Reporting Company

Official shy Subject to Final Review

69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 72: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

68

146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274

sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393

suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544

suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917

4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly

1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169

211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473

3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012

422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199

2225 493 technologyshyne 5424 5518 1811 use 51921 924 survive 5422 4219 third 154 truncated 5413 1034717 susceptible 341 telephone 4717 thought 115 truth 1115 111216 139 suspect 2815 tell 85 258 381 128912 195 truths 249 1311 1469 sweeping 313 528 5323 2311 349 try 418 2310 15317 1718 swoop 2010 term 495 3614 4810 2813 341020 181719 232 system 314 123 terms 312 41 552222 trying 820 925 235 2410

126 1788 55 22624 thousands 136 1111 3917 2525 313 187 24119 275 3916 2010 tugshyofshywar 381215 4124 251214 test 3219 386 three 2224 274 4010 4420 462225 3312 52923 4311 451 threshold 3916 turns 3810 491223 5122

systems 2419 4915 522 tie 4025 Tut 6924 1016 5611 463 551319 time 421 816 1124 useful 714

text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916

T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020

911 1016 theory 2210 tool 4916 506 typewriter V 1648 1816 2320 tools 3617 3518 v 16 1818 254 thing 62425 total 4324 typing 3021 valid 1221 261 2813 71 203 212 totally 5220 Valley 1211 3710 381113 3212 3625 track 613 1018 U varied 1913

Alderson Reporting Company

Official shy Subject to Final Review

69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment
Page 73: St. Onge Steward Johnston Reens LLC2015/10/27  · St. Onge Steward Johnston & Reens LLC 986 Bedford Street +1203324-6155 TEL Stamford, Connecticut +1203327-1096 FAX 06905-5619 ssjr.com

Official shy Subject to Final Review

69

various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225

4120 441213 4416 451023

426 well 33 1611 X

16 3112 1970s 418 1120

462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425

versa 3924 version 253 versus 34

were 82 103 1823 192 469 4821 5111 5599

weve 1925 484 web 227 weekend 510

1212

Y Yeah 1613 385

4510 4722 4817

years 318 259 3615 371019 4321

2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712

vice 3924 video 33458 view 1015

wellshyestablished 276

went 1724

Z zones 421 281

285shy286 1910 286 5325 287 5325

1623 3420 2214 362 0 293 2715 457 4722 5024

viewed 5615 violate 55

W waiting 1334 want 1324 172

221 232 252424 339 3916 476 4823

wanted 2423 wants 2222

4012 5513 Washington

110171922 566

wasnt 2125 2310

watch 3349 water 71 way 416 58

81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254

5412 wholly 5511 willing 377 wondering

5112 word 52021

821 228 2813 3418 35517 363 417 5523

words 713 291 3422 3711 3819 492

work 51719 1124 2110 312 3322 374

workings 5013 world 2018

2510 3011 3816

wouldnt 414 415 2514 3313 516

write 264 writers 132325 written 617

1716 2925 304 4022

1 1004 115 32 100 3615 101 3121522

414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118

102 1717 187 2325 2425 5213 5525 5620

103 1717 187 2325 2435 521315 5525 5620

11 2445 1105 572 112 1921 4020

4021 5621 12 4324 13shy298 15 34

3 3 24 30 259 31 111 33 3118 5323 37 3118

4 4 325 4825 42 1524 1618 44 211

5 5 491 510 3019 411 53 214 57 4322

6 6 5114 65 3019

7

8

9 9 245 9shy0 365

Alderson Reporting Company

  • 2015ig_f_winter_27oct2015
  • Exhibit A Guidelines Comment