[00:00:44] Speaker 03: Next case is Blackbird Tech versus Cloud Fair 2018-16-44. [00:00:54] Speaker 03: Mr. Davis. [00:01:18] Speaker 01: Thank you, Your Honors. [00:01:19] Speaker 01: Good morning. [00:01:20] Speaker 01: May it please the Court. [00:01:22] Speaker 01: Appellants should win this case for three separate reasons. [00:01:26] Speaker 01: First reason, under the Berkheimer and Atricks decision, those decisions establish that where, as here, there is a complaint that has well-grounded factual allegations that the claimed invention is directed to an improvement in the computer technology itself, not to generic components [00:01:47] Speaker 01: performing conventional activities, that those allegations must be accepted as true and construed in the light most favorable to the planet. [00:01:55] Speaker 01: So in such a situation, it's improper to grant a motion to dismiss based on 101. [00:02:03] Speaker 01: Second reason, the Pella should win. [00:02:06] Speaker 01: Under ALICE step one, the claimed inventions here are not abstract. [00:02:10] Speaker 01: Rather, they improve the functionality and utility of internet communications and are thus patent eligible. [00:02:17] Speaker 01: Third reason appellates should win, under ALICE Step 2, even if the claimed inventions are found to be abstract, the claimed inventions reveal an inventive concept in the ordered combination of claimed elements. [00:02:33] Speaker 01: These are not generic components performing conventional activities. [00:02:37] Speaker 01: Rather, what we have here is a special purpose device. [00:02:41] Speaker 01: So those are the three main reasons why I'd like to do right now is get a bit more into the ALICE Steps 1 and 2 in order [00:02:47] Speaker 01: to have a proper context. [00:02:49] Speaker 01: I'd like to discuss the technology of the patent issue here. [00:02:52] Speaker 01: That's a 335 patent. [00:02:54] Speaker 02: Before you go into that, let me just question you a bit about your first argument. [00:03:00] Speaker 02: Yes, Your Honor. [00:03:01] Speaker 02: Are you saying that as long as the complaint plausibly alleges, to a point of getting over Iqbal and Twombly, that there is [00:03:14] Speaker 02: an improvement in computer technology that that is enough to defeat a 101 motion to dismiss. [00:03:23] Speaker 01: Your Honor, I'm not quite certain what you mean by plausibly. [00:03:28] Speaker 02: Well, I'm using it in the sense that Twombly and Iqbal use it for purposes of determining whether a motion to dismiss under 12b6 can be granted. [00:03:40] Speaker 01: My position, Your Honor, is that under the Berkheimer and Atricks decisions, I think that the word I used was well grounded. [00:03:47] Speaker 01: So I don't believe that it could just be any old allegations. [00:03:51] Speaker 01: I believe that there have to be allegations in the complaint, for sure. [00:03:54] Speaker 01: And those allegations need to be backed up, in this instance, by the patent, which is what we have here. [00:04:04] Speaker 04: Can you tell me what the allegations are in the complaint? [00:04:06] Speaker 04: Where would you like to direct me to that you think there are allegations that satisfy the standard? [00:04:11] Speaker 01: Sure. [00:04:11] Speaker 01: If we could go to, I believe the best paragraph in the complaint is going to be paragraph 11 of the amended complaint. [00:04:25] Speaker 04: Where would that be in the record? [00:04:27] Speaker 01: That is appendix 110. [00:04:37] Speaker 01: So I don't know if Your Honor would like to read that or if you would like me to read and discuss. [00:04:47] Speaker 03: Why don't you read it briefly? [00:04:49] Speaker 03: OK. [00:04:49] Speaker 01: So paragraph 11 in the amended complaint indicates, at least in parts, that the inventions claimed in the 335 patent constitute novel and non-obvious ways of providing an internet third-party data channel. [00:05:08] Speaker 01: to address shortcomings in existing communications protocols. [00:05:14] Speaker 01: It goes on to explain how this is done in a technical manner by introducing a distinct processing device located physically and logically between a client and a server. [00:05:24] Speaker 01: And that processing device, what it does is it monitors the client-server communications, having predetermined properties such as HTTP status codes. [00:05:35] Speaker 01: And upon detection of those, [00:05:37] Speaker 01: communications accesses a data source to obtain this third-party data and then modify or replaces the original data communications in response to that data and then provides a result in communication. [00:05:49] Speaker 01: Importantly, this paragraph, paragraph 11 indicates that furthermore, to better utilize networking and computing resources in certain claim inventions, data is only transmitted on the third-party data channel when the data transmission rate of the server [00:06:07] Speaker 01: is below a predetermined threshold. [00:06:10] Speaker 02: But that really is, for the most part, just a recitation of claims 8 and 24, isn't it? [00:06:16] Speaker 01: But that last bit about only transmitted on third-party data shadow, certainly that language comes from. [00:06:22] Speaker 02: That's 8 and 24. [00:06:23] Speaker 02: But I mean, the rest of it incorporates claims, what is it, 1 and 19? [00:06:26] Speaker 02: Are those the two independent claims? [00:06:29] Speaker 01: 1 and 18. [00:06:30] Speaker 02: 1 and 18, yeah. [00:06:32] Speaker 02: I don't see a whole lot more there. [00:06:35] Speaker 02: There's a reference to HTTP. [00:06:37] Speaker 02: which doesn't show up in the claims, but other than that, it looks like just a recitation of the claims. [00:06:44] Speaker 01: The other part, Your Honor, is at the beginning of the same sentence, the last sentence that talks about the limitations of claims 8 and 24, that is, furthermore, to better utilize networking and computer resources. [00:06:57] Speaker 01: That phrase right there is important because it actually can be tied directly to the specification. [00:07:03] Speaker 01: If we look at [00:07:04] Speaker 01: It does all relate to claims 1824, Your Honor, but if you look at any specification by way of example in either column three or column five, let's start with column three of the 335 patent starting at line 63. [00:07:20] Speaker 01: It is further preferred to use a third-party data channel only when the transmission load originated from the server is low. [00:07:28] Speaker 01: Thus, the efficiency of the user's internet connection can be increased. [00:07:33] Speaker 01: So that's an improvement to the technology. [00:07:37] Speaker 01: And the other example is in column five, starting at line 40, let's say 47. [00:07:52] Speaker 01: Generally status codes are well suited as predefined data codes to trigger operations of third party data inclusion mechanisms, step 42. [00:08:00] Speaker 01: The present sample embodiment status codes representing error conditions are used. [00:08:04] Speaker 01: Such status codes signal that no message body could be provided by the server such that the bandwidth of the channel section can be used for transmitting third party data without impeding any data transfer from the server to the client. [00:08:19] Speaker 01: Those two recitations in column three or column five are [00:08:23] Speaker 01: are related. [00:08:23] Speaker 01: They both relate to claims 8 and 24. [00:08:26] Speaker 01: They both increase the efficiency of the user's internet connection. [00:08:31] Speaker 01: How that happens is you have, in the claim invention, the processing device, which is between the client and the server. [00:08:39] Speaker 01: After the client has asked the server for a document, the server, by way of example, is going to recognize, oh, wait, I don't have this document, send back a status code that says not found. [00:08:51] Speaker 01: That's that [00:08:51] Speaker 01: status code 404 that we've probably all seen on our computer screen at some point, don't really know what it means. [00:08:57] Speaker 01: Once that happens, the processing device recognizes, oh, there's a communication that's just this status code. [00:09:08] Speaker 01: There's no other information forthcoming. [00:09:10] Speaker 01: The document is not there. [00:09:11] Speaker 01: There's this available bandwidth. [00:09:14] Speaker 01: The processing device realizes that and only in that situation [00:09:18] Speaker 01: Does it get the third party data, insert it into the communication, push it along to the client? [00:09:25] Speaker 01: So that's the operation. [00:09:29] Speaker 01: And the benefit is to increase the efficiency of the internet communications, Your Honor. [00:09:35] Speaker 01: And my position, our position is that the allegations and claim, or sorry, in paragraph 11 of the amended complaint get us there. [00:09:47] Speaker 03: The district court said the patent is directed to the abstract idea of monitoring a data stream and modifying it when a specific condition is identified. [00:09:59] Speaker 03: Abstract idea. [00:10:02] Speaker 01: That's what the district court said. [00:10:03] Speaker 01: Respectfully, I disagree with the district court and do not believe that there is an abstract idea. [00:10:09] Speaker 01: Rather, what we have is a claimant invention that actually improves the functionality and utility [00:10:17] Speaker 01: of the internet communications, and is thus patent eligible. [00:10:21] Speaker 03: Does it do it only by software, or are there physical aspects to the claims? [00:10:27] Speaker 01: I believe, Your Honor, when you actually get into this patent, I always like to think this patent is an onion, but when you get into the patent, you actually recognize that it could be all software, but it could be hardware or software. [00:10:42] Speaker 02: It isn't your case. [00:10:43] Speaker 01: And software, I mean. [00:10:44] Speaker 02: Isn't it the case, though, it really could be anything that achieves the function that's described in claims? [00:10:52] Speaker 02: I mean, it seems to me that as I read these claims, they are describing something that works in the following way. [00:11:03] Speaker 02: That is to say, it achieves the following objective without identifying with specificity exactly as how you get to accomplish that [00:11:14] Speaker 01: Well, respectfully, Your Honor, I disagree. [00:11:20] Speaker 01: I believe that the claims, let's use the example of claims 8 and 24. [00:11:25] Speaker 01: Again, how one ordinary skill in the art would view claims 8 and 24 is they would read that and they would recognize, of course, that you have to read the claims in the context of the specification. [00:11:38] Speaker 01: And they would go to [00:11:40] Speaker 01: the exact portions of the specification that I just directed you to, and that is in columns three and five, and recognize that what is happening there in those claims, in the claim language, is that the processing device, and this is a how, it's not results-based, it's a how, this is how it's happening. [00:11:54] Speaker 01: The processing device is looking at the status code from the communication from the server, recognizing that status code indicates that there's some available bandwidth in the communication. [00:12:07] Speaker 02: invention is that when there's space available, we will use the space? [00:12:14] Speaker 01: I think that's an oversimplification. [00:12:18] Speaker 02: In what respect is it oversimplified? [00:12:20] Speaker 02: It seems to me that's exactly what the claims 8 and 24 add. [00:12:26] Speaker 01: It's an oversimplification, because I think everything's in the context of the internet communications and the processing device in between the client and server. [00:12:34] Speaker 02: I understand, but the rest of things, 1 and 18, look to me. [00:12:37] Speaker 02: And you went to 8 and 24. [00:12:39] Speaker 02: Yes, Your Honor. [00:12:41] Speaker 02: Because those have arguably more specificity than 1 and 18. [00:12:45] Speaker 02: But if you just look at what 8 and 24 contribute, it doesn't look like it's much more than the way I described it. [00:12:52] Speaker 01: Well, 8 and 24, of course, they're dependent claims. [00:12:55] Speaker 01: They depend on 1 and 18. [00:12:57] Speaker 01: So you have to take the features of 1 and 18 into account as well. [00:13:03] Speaker 01: And 1 and 18 separately and independently also describe how they're not just results-based. [00:13:10] Speaker 01: They indicate that the processing device is going to look at the predetermined properties of any predetermined property. [00:13:17] Speaker 02: Right. [00:13:18] Speaker 02: No, the predetermined property is not defined with any specificity. [00:13:22] Speaker 01: it is correct that the claim language there says predetermined property. [00:13:27] Speaker 01: We believe it's an issue. [00:13:29] Speaker 01: What exactly is predetermined property? [00:13:31] Speaker 01: That was one of the problems with the decision down below. [00:13:34] Speaker 01: Could be anything, couldn't it? [00:13:36] Speaker 01: I don't think it could be anything in the context of the specification. [00:13:42] Speaker 02: How is the specification limited? [00:13:44] Speaker 02: And how limited is it? [00:13:46] Speaker 01: The specification refers to, by way of examples, [00:13:51] Speaker 01: data codes that are associated with the different communications similar to the data codes that we've mentioned. [00:13:56] Speaker 01: They don't necessarily have to be the error codes that tell you that there's available bandwidth, but codes that are associated with every internet communication, you know, very, very specific. [00:14:11] Speaker 03: Counsel, you're into your rebuttal time. [00:14:13] Speaker 03: You can continue or we'll save it for you. [00:14:15] Speaker 01: I will reserve the rest of my time, Your Honor. [00:14:19] Speaker 03: Mr. Garza. [00:14:30] Speaker 00: May it please the court, Anthony Garza for Cloudflare and Encapsula. [00:14:35] Speaker 00: The claims here broadly preempt the idea of monitoring and modifying in transit internet communications. [00:14:43] Speaker 00: And like Judge Bryson said, it allows anything that achieves the function of this claim. [00:14:49] Speaker 00: You don't need any sort of specific device to monitor the data stream. [00:14:54] Speaker 00: There is no limited predetermined properties that would trigger these modifications. [00:14:59] Speaker 00: And there's no narrow set of rules that you have to abide by when determining how to modify these communications. [00:15:05] Speaker 00: This is broad preemption and fails under Alice. [00:15:10] Speaker 00: I'll start by jumping to Alice Step 2 and Blackbird's allegations about its pleadings. [00:15:16] Speaker 00: And I think Judge Bryson was right to jump to Iqbal and Twombly, saying, assuming that these, you know, these statements in the complaint passed Iqbal and Twombly. [00:15:26] Speaker 00: But you can see by looking at paragraph 11, [00:15:29] Speaker 00: It is a mimicking of claims 1 and 18, plus claims 8 and 24, along with conclusory allegations that these are novel and non-obvious. [00:15:39] Speaker 00: Those are the types of statements and complaints that fail Iqbal and Twombly as a matter of law. [00:15:44] Speaker 00: So here, we don't need to go anywhere, because these wouldn't have made it past Iqbal and Twombly had the district court had the opportunity to consider it. [00:15:52] Speaker 00: Again, these paragraphs were not cited to the district court in the briefing, and the district court [00:15:56] Speaker 00: wasn't pointed or asked to look or defer to these statements. [00:16:02] Speaker 00: Even further, however, I think it's telling to note that when it was time to address where in the claims these allegations went to, my colleague went straight to columns three and five of the specification rather than going to the claims. [00:16:17] Speaker 00: And that's because the claims are very broad and do not include the type of [00:16:21] Speaker 00: narrow limitations that tie to the points in the specification that my colleague was pointing to. [00:16:28] Speaker 00: For example, in column five, column five specifies the use of error codes in combination with an idea of limited bandwidth. [00:16:37] Speaker 00: Those two combinations are not tied together in the claims. [00:16:39] Speaker 00: Claim eight does require the idea of limited bandwidth, but claim eight does not require the use of error codes. [00:16:45] Speaker 00: It only requires the use of any sort of predetermined property. [00:16:49] Speaker 00: Again, if you have an inventive concept that's not limited in the claims, if it's not required in the claims, it doesn't help you for Alice. [00:16:56] Speaker 00: Because my colleagues' statements were not reflected in the claims, it doesn't help them beat Alice step two. [00:17:03] Speaker 00: As far as Alice step one, the claims here are abstract. [00:17:08] Speaker 00: As explained in our briefing, the idea of reviewing and modifying in transit communications is not a creature of the information age. [00:17:15] Speaker 00: It's something that the military does and prisons do. [00:17:18] Speaker 00: They edit and redact communications based on properties of those communications. [00:17:24] Speaker 00: The patent limits this to electronic communications and communications using the internet, but that doesn't change the fundamental nature of the claim. [00:17:32] Speaker 00: The claim is still abstract. [00:17:35] Speaker 00: So because these claims are abstract and there's nothing in the ALF step two analysis that transforms the claim into something inventive, [00:17:43] Speaker 00: It fails and the court should affirm the district court's judgment. [00:17:50] Speaker 03: Do you want to address venue at all? [00:17:53] Speaker 00: Because the patents or the claims fail, Alice, we don't think the court needs to address venue. [00:18:00] Speaker 00: And I do want to make sure not to shortchange what the Delaware District Court did. [00:18:04] Speaker 00: They do have a very detailed 20 page opinion based on an extensive record. [00:18:09] Speaker 00: But if I wanted to make it in short, there is extensive evidence in the record that there are many witnesses where this would be much more convenient to proceed in San Francisco rather than Delaware. [00:18:21] Speaker 00: As a result, the court's balancing under Jamara can't be found to be an abuse of discretion on this record. [00:18:28] Speaker 02: You make the argument, I think, that there is a jurisdictional impediment to our deciding the venue issue. [00:18:40] Speaker 00: There is, Your Honor. [00:18:41] Speaker 02: I understand why the Ninth Circuit might think they had a jurisdictional impediment because they would not want to review the position taken by an out-of-circuit district court. [00:18:52] Speaker 02: But there's no such thing as an out-of-circuit district court when it comes to us. [00:18:56] Speaker 00: That's true, Your Honor. [00:18:57] Speaker 02: The district court of Delaware is just as reviewable as the Northern District of California. [00:19:02] Speaker 00: Yes. [00:19:03] Speaker 02: So why don't we have jurisdiction to decide whether the district court in Delaware made an error? [00:19:10] Speaker 00: The policy of the Federal Circuit is to follow regional circuit law. [00:19:13] Speaker 00: And by the way, the Ninth Circuit is not alone in this. [00:19:15] Speaker 00: The Ninth Circuit is not the only circuit to say we won't review out-of-circuit transit decisions. [00:19:19] Speaker 00: That's fairly common. [00:19:21] Speaker 02: So we follow out-of-circuit, the circuit, regional circuit law when it pertains to the same situation. [00:19:28] Speaker 02: But I'm suggesting to you, don't you think that our situation is rather different in that the very reason that the Ninth Circuit doesn't regard itself as having jurisdiction [00:19:39] Speaker 02: over an out-of-circuit district doesn't apply to us. [00:19:43] Speaker 00: So the situation is different, but not in a way where the Federal Circuit should not follow Ninth Circuit law. [00:19:49] Speaker 00: So the Federal Circuit, it's their policy to follow circuit law unless there's a reason of substantive patent law to not apply the Ninth Circuit's rule. [00:20:00] Speaker 00: This has nothing to do with substantive patent law. [00:20:02] Speaker 00: This is about the comparative structures of the Federal Circuit and the Ninth Circuit. [00:20:07] Speaker 00: Because it has nothing to do with substantive patent law, you should defer to the Ninth Circuit's rule. [00:20:13] Speaker 02: It seems to me you have a somewhat easier task to argue waiver pursuant to the Citric. [00:20:21] Speaker 02: I think I have the name of the case, right? [00:20:23] Speaker 00: Citric, yes. [00:20:23] Speaker 02: Citric against Dreamworks case, where there was waiver found on facts not terribly different from this. [00:20:29] Speaker 00: Correct. [00:20:30] Speaker 00: And I think the Ninth Circuit would recognize this as either a jurisdictional issue or a waiver issue. [00:20:34] Speaker 02: Well, they have to decide the jurisdictional issue first. [00:20:37] Speaker 00: Correct. [00:20:38] Speaker 00: Whether or not the court finds jurisdiction, yes, the failure to move for transfer again in the district court in California does waive the issue as well. [00:20:49] Speaker 00: Unless the court has any other questions, I'm happy to defer the rest of my time. [00:20:54] Speaker 03: Thank you, counsel. [00:20:56] Speaker 03: Mr. Davis has a couple of minutes for a bottle if you need it. [00:21:21] Speaker 01: Thank you, Your Honor. [00:21:22] Speaker 01: Just a couple of points. [00:21:25] Speaker 01: First, my colleague indicated that I in no way tied the claims to the so-called improvements in the computer technology. [00:21:38] Speaker 01: Let me clarify that. [00:21:40] Speaker 01: So in claims 8 and 24, I said this before, but perhaps it needs to be more clear. [00:21:47] Speaker 01: The way one of ordinary skill in the art is going to look at that claim and understand it [00:21:53] Speaker 01: is to know that based on the same columns that I directed you to before, columns three and five, that this is the operation that is happening and that is what is going on in the claims. [00:22:08] Speaker 01: Third party data channel, when the data transmission rate of said server to said client is below a predetermined threshold, so there are terms there as you throw around and if you just look at those and evacuate, [00:22:23] Speaker 01: the one thing and and and then we we of course recognize that we need to look at the context of specification and once you do that one of ordinary skill in the art would immediately be drawn to columns three and five and recognize that what is going on in terms of the functionality is an increase in the efficiency of the internet connection. [00:22:43] Speaker 01: The other point I'd like to make your honors is once again I'd like to direct you to the the Burkheimer and and Atrix [00:22:52] Speaker 01: We believe that those apply here. [00:22:59] Speaker 01: Paragraph 11, and also in context, paragraph 10, those paragraphs establish the allegations that the court below should have considered, and they're supported by the specifications. [00:23:15] Speaker 01: There was no way, of course, for us to raise that below, because the same day the Berkheimer decision came out was the day of argument below. [00:23:25] Speaker 01: And then six days later, the HX decision came out. [00:23:28] Speaker 01: In between, the district court made its decision. [00:23:32] Speaker 03: Thank you, Mr. Davis. [00:23:33] Speaker 03: We'll take the case under advisement.