[00:00:10] Speaker 06:
We have three cases on the argument calendar this morning.

[00:00:16] Speaker 06:
Two from the PTO that are being consolidated and argued together, although I see council is still splitting them up.

[00:00:27] Speaker 06:
Even though the briefs are substantially the same, but it's your argument.

[00:00:32] Speaker 06:
And third case from a district court.

[00:00:38] Speaker 06:
So the first two cases I give together are Bozeman Financial versus the Federal Reserve Banks, 2019, 1018, and 1020, Mr. Morrow.

[00:00:57] Speaker 03:
Good morning, Your Honors.

[00:00:58] Speaker 03:
Since you referenced splitting up argument just for clarification, Your Honor, I will, Scott Gant, for Bozeman Financial, I will be arguing the issues concerning the Supreme Court's decision in return mail and its implications for this case and the issues addressed in the supplemental briefing.

[00:01:16] Speaker 03:
My colleague, Mr. Marrow, will be addressing the decision by the PTAB.

[00:01:20] Speaker 06:
So you're Mr. Gant.

[00:01:21] Speaker 06:
Sorry.

[00:01:22] Speaker 03:
I am, Your Honor.

[00:01:23] Speaker 03:
Good.

[00:01:23] Speaker 03:
Thank you.

[00:01:27] Speaker 03:
In return mail, the Supreme Court concluded that Congress did not intend the federal government to be included in its definition of person authorized under the AIA to initiate a proceeding before the PTAP.

[00:01:40] Speaker 03:
The question before this court is whether Congress meant for the Federal Reserve banks to be able to obtain PTAP review when the federal government, including the other components of the Federal Reserve system, may not do so.

[00:01:53] Speaker 03:
The Federal Reserve banks claim that they are persons because they are distinct from the sovereign.

[00:01:59] Speaker 03:
They say that in pages one and two of their supplemental brief, and they also said so in page six of their motion opposing.

[00:02:06] Speaker 07:
You didn't raise this issue before the board.

[00:02:09] Speaker 07:
You didn't raise this issue in the blue brief.

[00:02:13] Speaker 03:
Why isn't it right?

[00:02:14] Speaker 03:
It is not waived, Your Honor.

[00:02:16] Speaker 03:
We addressed that in our briefing, but I want to be directly responsive to your question.

[00:02:20] Speaker 03:
Some of this will reiterate what's in our briefing.

[00:02:23] Speaker 03:
That usually happens.

[00:02:25] Speaker 03:
Yes, indeed.

[00:02:27] Speaker 03:
At least four reasons why it's not waived, Your Honor.

[00:02:31] Speaker 03:
First is, unlike a typical case of waiver,

[00:02:34] Speaker 03:
The very first thing that Bozeman did after filing a notice of appeal in this court was asked to stay briefing pending a resolution by the Supreme Court of return mail.

[00:02:45] Speaker 03:
At that point, the Supreme Court had already granted certiorari.

[00:02:48] Speaker 03:
It was apparent that there was a likelihood that the decision in that case would impact this case, and we asked to stay briefing.

[00:02:55] Speaker 03:
The Federal Reserve Bank's opposed, and that motion was denied.

[00:02:58] Speaker 03:
But unlike a typical case of waiver where there's surprise and prejudice here, there was neither.

[00:03:04] Speaker 03:
Second, we could have your honor.

[00:03:08] Speaker 03:
I have to be candid.

[00:03:09] Speaker 03:
That could have been done.

[00:03:10] Speaker 05:
There was really less excuse to to to relieve you of your forfeiture in this case because it's clear you were aware of the issue before you filed your blue brief.

[00:03:22] Speaker 05:
You asked for the state for this very reason.

[00:03:24] Speaker 05:
So you can't claim, so I put them on notice.

[00:03:27] Speaker 05:
In fact, that inerers to your detriment, as far as I can tell, because you were clearly aware of the issue and then made a litigation choice not to raise it.

[00:03:35] Speaker 03:
I certainly understand that perspective, Your Honor.

[00:03:37] Speaker 03:
Respectfully, we have a different one.

[00:03:39] Speaker 03:
I think there were two reasons, as a practical matter, why that was not done.

[00:03:43] Speaker 03:
The first is just a matter of dollars and cents, to be quite honest.

[00:03:47] Speaker 03:
Bozeman Financial is a single inventor.

[00:03:50] Speaker 03:
He has extremely limited resources.

[00:03:52] Speaker 03:
There were constraints on his ability to pay his counsel to brief the issues in this case.

[00:03:58] Speaker 03:
Briefing an issue like that is not insignificant.

[00:04:01] Speaker 03:
Obviously, we would want to give the court the benefit of the best briefing possible.

[00:04:05] Speaker 05:
No, that's significant.

[00:04:05] Speaker 05:
You could have cut and pasted the briefing that already existed in all these other cases into yours.

[00:04:09] Speaker 05:
That could have cost your client

[00:04:11] Speaker 05:
minutes of your time you could have done at least that simply to preserve the issue or raise the issue or put the other side on notice following the blue brief that this was an issue so I just don't buy that argument because yes you could have charged your client to recreate the wheel but the wheel already existed and was already written out and you could have cut and pasted it

[00:04:32] Speaker 03:
I don't think I'm going to be able to move you from your position on that issue.

[00:04:37] Speaker 03:
But let me, if I may, just answer some of the other reasons why we think there was no waiver here.

[00:04:44] Speaker 03:
The second, return mail also is instructive on this point.

[00:04:48] Speaker 03:
As the court is aware, in return mail in this court, no party ever raised the issue or the definition of person.

[00:04:55] Speaker 03:
That was done by the panel, sua sponte, after full briefing and after oral argument.

[00:05:01] Speaker 03:
Two members of the panel found that there had been a waiver, and Judge Newman found that there had not been a waiver and articulated the reason why the definition of person was important.

[00:05:12] Speaker 03:
When the issue went up to the Supreme Court, the Solicitor General made the Supreme Court aware of the waiver point, that this court had found waiver.

[00:05:20] Speaker 03:
The Supreme Court nonetheless decided to proceed

[00:05:23] Speaker 03:
and address the merits.

[00:05:24] Speaker 03:
We think that that is instructive here, that you should not find a waiver when, unlike, I understand your position, Judge Moore, that we should have raised the issue.

[00:05:34] Speaker 03:
But we think we're in a better position than the parties were in return mail where they never even raised it themselves.

[00:05:39] Speaker 07:
I mean, but that's a situation in which the Supreme Court can excuse the waiver and go ahead and decide it.

[00:05:44] Speaker 07:
But we don't have to excuse your waiver here, right?

[00:05:48] Speaker 07:
It's discretionary with the court.

[00:05:49] Speaker 03:
I think that I'm not willing to concede that, Your Honor, but with respect, I don't want to argue about that if you permit me.

[00:05:58] Speaker 05:
You're not willing to concede that waiver is discretionary?

[00:06:00] Speaker 03:
No, no.

[00:06:01] Speaker 03:
Well, I'm not willing to concede that it would not be an abuse of discretion for the court to find waiver here.

[00:06:07] Speaker 03:
And if I may, I'll refer the court to a decision by the Supreme Court in 1993, which I think is instructive on this point.

[00:06:14] Speaker 03:
It's 508 U.S.

[00:06:17] Speaker 05:
The Supreme Court chose to address the return mail issue at the Supreme Court.

[00:06:22] Speaker 05:
Were there wholesome briefs that fully evaluated that issue when they chose to do so?

[00:06:28] Speaker 03:
There was only the petition stage briefs, not the merits briefing on the issue.

[00:06:32] Speaker 05:
Both sides had briefed the issue.

[00:06:35] Speaker 03:
Obviously, in cert petitions, there is usually a preview of the merits, but I would not say it was full merits briefing.

[00:06:41] Speaker 05:
But that didn't happen here, because you didn't raise this in your blue brief.

[00:06:45] Speaker 03:
Well, we didn't raise it in our opening briefs, but we asked the court for permission to provide supplemental briefing, and that was granted.

[00:06:51] Speaker 03:
So this court has the benefit of full briefing from both sides on what I'll call the return mail issue.

[00:06:57] Speaker 07:
Do you have any other reasons there's no waiver?

[00:07:00] Speaker 03:
Well, the Supreme Court decision that I was referencing, US National Bank of Oregon 508, US 439 from 1993, where the Supreme Court said that the Court of Appeals had properly considered an issue not raised in the briefs or at oral argument and only in post-argument supplemental briefing.

[00:07:19] Speaker 03:
We think that's here.

[00:07:20] Speaker 03:
And then the other reason which is compelling, and we do address this in our brief, Your Honor, was the change in the law doctrine.

[00:07:26] Speaker 03:
We think we fit squarely within this.

[00:07:29] Speaker 03:
The Supreme Court in return mail affected a material change in the law with respect to the definition of person under the AIA.

[00:07:37] Speaker 03:
That's exactly the issue we have in front of us here.

[00:07:40] Speaker 07:
OK, so that exhausts your waiver arguments, right?

[00:07:43] Speaker 07:
It does, Your Honor.

[00:07:44] Speaker ?:
OK.

[00:07:44] Speaker 07:
So on the merits, it seems as though there's some significant differences between the Federal Reserve Banks and the Post Office.

[00:07:55] Speaker 07:
First of all, the stock of the Federal Reserve Banks is owned by commercial banks.

[00:08:01] Speaker 07:
Second of all, those banks are not funded by the government.

[00:08:05] Speaker 07:
Third, the board of directors, the majority of the board of directors, six out of nine are elected by the commercial banks.

[00:08:14] Speaker 07:
None of those things is true in the post office context.

[00:08:18] Speaker 07:
So why isn't the Federal Reserve Bank's situation different from the post office situation?

[00:08:25] Speaker 03:
I think we agree with the Federal Reserve Banks about what the test should be here.

[00:08:31] Speaker 07:
They said in their brief... No, but just address the differences that I identified.

[00:08:36] Speaker 07:
No federal funding, commercial banks elect the majority of the board, commercial banks own the stock.

[00:08:46] Speaker 07:
There may be other differences.

[00:08:47] Speaker 07:
Why are those differences not sufficient?

[00:08:50] Speaker 07:
Distinguish this from the postal.

[00:08:52] Speaker 03:
Sure, let's start with the funding issue, Your Honor.

[00:08:56] Speaker 03:
The mere fact that the Federal Reserve banks get their funding from a source other than appropriations cannot be dispositive.

[00:09:05] Speaker 03:
The Federal Reserve banks, the appellees here, acknowledge in page one of their brief that the Federal Reserve Board is an agency of the federal government.

[00:09:14] Speaker 03:
The Federal Reserve Board also is effectively self-funded.

[00:09:17] Speaker 03:
In fact, it is the source of the funds for the Federal Reserve Board.

[00:09:22] Speaker 07:
not the party here.

[00:09:23] Speaker 03:
They're not but the point your honor is that the mere fact that funding comes from a source other than congressional appropriations is a dispositive nor is it relevant.

[00:09:33] Speaker 03:
But it is and that's why I wanted to get to the test here because what I think we agree on is the test is whether that the Federal Reserve banks are distinct from the sovereign and they're clearly not and I think going to the

[00:09:46] Speaker 03:
The criteria that you raise, Your Honor, I think are relevant and need to be considered.

[00:09:51] Speaker 03:
But when you look at the totality of the circumstances, you look at the statutory structure of the Federal Reserve banks, and you look at the practical realities.

[00:09:59] Speaker 07:
The statutory structure, the authorizing statute doesn't identify them as being an agency of the Federal Government, right?

[00:10:06] Speaker 03:
It doesn't.

[00:10:07] Speaker 03:
One thing that it importantly... It doesn't, but that's not dispositive.

[00:10:11] Speaker 03:
We have a footnote in our brief that says that there are other parts of the U.S.

[00:10:14] Speaker 03:
Code where Congress has said that the Federal Reserve Banks are agencies.

[00:10:19] Speaker 03:
We cited that in our brief, in a footnote.

[00:10:22] Speaker 03:
Also importantly,

[00:10:23] Speaker 03:
The section 12 USC 341 says that the Federal Reserve Bank waives sovereign immunity.

[00:10:29] Speaker 03:
It says that the banks can sue and be sued.

[00:10:32] Speaker 03:
The Supreme Court has repeatedly recognized that language as a waiver of sovereign immunity.

[00:10:37] Speaker 03:
I have never come across a situation in which the government waives sovereign immunity if the entity is not sovereign.

[00:10:44] Speaker 03:
Also, if you look at the way the statute is structured, for example, of course all the money that excess profits go to the Treasury.

[00:10:53] Speaker 03:
If the Federal Reserve Banks were litigating against Bozeman, the money that they would be spending there would go to the people of the United States.

[00:11:00] Speaker 03:
The Federal Reserve Banks are the operating arm of a unified Federal Reserve system.

[00:11:08] Speaker 03:
The board, which is a federal agency,

[00:11:10] Speaker 03:
is it supervises and directs that system.

[00:11:13] Speaker 03:
It decides it must approve the presidents and vice presidents of the Federal Reserve banks, that's 12 USC 341.

[00:11:20] Speaker 03:
It can suspend or remove any Federal Reserve banker officer at 12 USC 248F.

[00:11:26] Speaker 03:
It exercises general supervision over the banks, 12 USC 248J.

[00:11:33] Speaker 03:
And if you look importantly at what happened during the most consequential work that's been done by the banks during their modern history was during the financial crisis.

[00:11:42] Speaker 03:
We discussed this in our briefs.

[00:11:44] Speaker 03:
The Federal Reserve's banks came to this court and filed an amicus brief in the Star case and told this court that there was no private rescue available to bail out AIG.

[00:11:56] Speaker 03:
The only recourse was bailout by the government.

[00:12:00] Speaker 03:
That was done by the Federal Reserve banks.

[00:12:02] Speaker 03:
I see my red light is on.

[00:12:03] Speaker 03:
I'm happy to answer as many questions as you have.

[00:12:06] Speaker 06:
You indeed have consumed your time, but we'll give you a couple of minutes for rebuttal.

[00:12:11] Speaker 06:
Let's hear from Mr. Maurer on the merits.

[00:12:24] Speaker 02:
Good morning.

[00:12:25] Speaker 02:
I plan to address two issues this morning.

[00:12:27] Speaker 02:
First, the board's erroneous step two analysis, and in particular, in light of the Bascom case.

[00:12:35] Speaker 02:
And second, the waiver issue for the 640 patent.

[00:12:40] Speaker 06:
But aren't these claims simply directed to collecting, analyzing, presenting data?

[00:12:45] Speaker 02:
The claims also include another key feature, which is the universal access feature referred to in the briefs.

[00:12:54] Speaker 02:
The universal access feature is a distinguishing feature over the prior art.

[00:12:58] Speaker 02:
And what it is, is it permits all of the relevant players in the financial transaction to access the database at all points along the financial transaction.

[00:13:09] Speaker 02:
And this is the key point here.

[00:13:11] Speaker 02:
The board never addressed whether that portion of the claim is a conventional or non-conventional feature, and there was actually no evidence submitted to the board on that issue.

[00:13:20] Speaker 02:
And so our point would be that under BASCOM, therefore, the case needs to be reversed.

[00:13:26] Speaker 02:
And let me explain, under BASCOM, why I reached that conclusion.

[00:13:32] Speaker 05:
What is the statutory language, or the claim language, I'm sorry, that you think makes this not an abstract idea?

[00:13:41] Speaker 05:
You said the universal access?

[00:13:44] Speaker 02:
Sure.

[00:13:44] Speaker 05:
It's also those words in the claim, so what are you talking about?

[00:13:50] Speaker 02:
So if you look at the 840 patent, claim one,

[00:13:55] Speaker 02:
At column 28, lines 47 through 48, there's the concept that in the database, the database is going to be accessible by each party to the payment clearing process.

[00:14:10] Speaker 02:
at column 28 line 67 through column 29 line 2.

[00:14:16] Speaker 02:
It mentions again that any party of the payment clearing process is capable of verifying the parameters at each point along the financial transaction payment clearing process and the patent

[00:14:29] Speaker 02:
describes how this innovation, in contrast with the prior art, which was a closed system, allows for more accurate fraud detection.

[00:14:36] Speaker 02:
I don't believe the board or any of the parties dispute that the patent at least purports that to be an improvement over the prior art.

[00:14:43] Speaker 02:
And there was no analysis as to whether that purported improvement over the prior art was a conventional or non-conventional feature by the board, and there was no evidence submitted that it was conventional in the industry, in this payment clearing, in the financial industry.

[00:14:57] Speaker 02:
This was a conventional feature.

[00:14:58] Speaker 07:
You used to write the Solytrain case when it was up here before it was decided because this is like Solytrain.

[00:15:07] Speaker 07:
Now in Solytrain we held that it was an abstract idea and it didn't pass step two of the Alice test either.

[00:15:16] Speaker 07:
So what are we to conclude?

[00:15:18] Speaker 07:
If this is just like Solytrain you lose, right?

[00:15:20] Speaker 02:
Well, for purposes of the physical process argument that was being made in the brief, it was similar to the Solutrain claims.

[00:15:28] Speaker 02:
But for this particular feature, the claims in Solutrain didn't include anything like this feature.

[00:15:34] Speaker 02:
In fact, the claims were merely

[00:15:37] Speaker 02:
regurgitation or restatement of the concept that the court found to be the abstract concept.

[00:15:43] Speaker 02:
Here, the board did not find or rule on whether this concept of configuring the database to allow access to multiple parties was part of the abstract concept.

[00:15:53] Speaker 02:
The court's abstract, or rather the board's abstract concept in this case, was narrower and didn't include this feature.

[00:15:59] Speaker 02:
And so therefore, what the board needed to do was to look at whether this additional feature added anything to the claims, whether it was conventional or unconventional.

[00:16:06] Speaker 05:
I'm confused.

[00:16:09] Speaker 05:
You seem to be morphing step one and step two in your answer.

[00:16:13] Speaker 05:
I understand your data accessibility point to be a step two of the ALICE argument, not a step one.

[00:16:18] Speaker 05:
I don't see why having the database acceptable to multiple parties changes whether or not it's an abstract idea of collecting, displaying, and analyzing information to reconcile check information against a ledger.

[00:16:30] Speaker 02:
We certainly are focusing on step two with respect to this point.

[00:16:34] Speaker 02:
This is an improvement over the prior argument.

[00:16:36] Speaker 02:
That's fine.

[00:16:36] Speaker 05:
I just wanted to make sure that I wasn't misunderstanding your argument.

[00:16:38] Speaker 05:
I understood that to be a step two argument.

[00:16:40] Speaker 02:
And I apologize.

[00:16:40] Speaker 02:
But sometimes the court's cases, in my opinion at times, look to whether the claims are directed to an improvement over the prior argument when they do the step one as well.

[00:16:52] Speaker 02:
But for all purposes of this oral argument, I was focusing on step two, certainly.

[00:16:55] Speaker 02:
And I do see my time is up.

[00:16:57] Speaker 02:
But if you have any other questions, I'm good.

[00:16:58] Speaker 05:
I want to ask a question about waiver in general but on page 41 of your blue brief which with regard to the 640 patent you explain that you're asking us to overturn the patent

[00:17:12] Speaker 05:
the PTAB's final decision that claims 1 through 26 of the 640 patent are invalid, or alternatively, you want me to send it back to have claims 1 through 26 reconsidered in light of the eligibility guidelines.

[00:17:25] Speaker 05:
There's a real problem with that request, given that most of those claims were separately invalidated under section 112, which you did not appeal.

[00:17:34] Speaker 05:
And so I feel at a minimum that your, whether it's sloppiness or over-breath or what, but I feel like your request

[00:17:42] Speaker 05:
is not something, not belief that this court would ever be capable of giving you.

[00:17:46] Speaker 05:
Is that right?

[00:17:48] Speaker 02:
The brief could have been stated better in that regard.

[00:17:50] Speaker 02:
The focus should be for the 640 on claims 21 through 24 and whether those are invalid.

[00:17:55] Speaker 05:
So now you are not asking this court to render

[00:18:01] Speaker 05:
or overturn an invalid decision on anything except 21 through 24, correct?

[00:18:06] Speaker 02:
With respect to the, correct, with respect to the section 101 issue.

[00:18:10] Speaker 05:
Well, no, with respect to any issue.

[00:18:12] Speaker 02:
Correct.

[00:18:13] Speaker 02:
Correct.

[00:18:13] Speaker 05:
You didn't appeal the other.

[00:18:15] Speaker 06:
Correct.

[00:18:16] Speaker 06:
All right.

[00:18:16] Speaker 06:
Thank you, counsel.

[00:18:17] Speaker 06:
Mr. Buckles.

[00:18:28] Speaker 00:
Good morning, Your Honors.

[00:18:28] Speaker 00:
May it please the Court, Jeffrey Buchholz for the Federal Reserve Bank.

[00:18:31] Speaker 00:
I'll respond to Mr. Gant's argument on the return mail issue.

[00:18:34] Speaker 00:
And if it please the Court, my colleague Mr. Mitchell will respond to Mr. Maurer's argument.

[00:18:40] Speaker 00:
I'd like to start with preservation, since that's where the Court started on return mail.

[00:18:45] Speaker 00:
There's multiple layers of forfeiture here.

[00:18:47] Speaker 00:
I'll start with the opening brief.

[00:18:48] Speaker 00:
The most basic rule in a Court of Appeals is you can't raise an issue that you don't raise in your opening brief.

[00:18:54] Speaker 00:
And Judge Moore, as you point out here,

[00:18:56] Speaker 00:
There's not the excuse that you sometimes have where maybe you could say you didn't know about the issue, and that's why you didn't raise it in your opening brief.

[00:19:02] Speaker 00:
They obviously knew about it.

[00:19:03] Speaker 00:
They moved for a stay.

[00:19:05] Speaker 00:
Based on return mail, that was denied.

[00:19:07] Speaker 00:
That denial didn't prevent them from raising the issue.

[00:19:09] Speaker 05:
But there was a motion for supplemental briefing in this case.

[00:19:12] Speaker 05:
And what did that motion request?

[00:19:15] Speaker 00:
The motion requested the court to grant supplemental briefing.

[00:19:18] Speaker 05:
On the merits of the return mail issue, correct?

[00:19:21] Speaker 05:
Well, I don't think the motion... Was it limited to on whether or not you waived the issue, for example?

[00:19:27] Speaker 00:
No, certainly their motion was not focused on their waiver.

[00:19:30] Speaker 05:
Or the court's granting of it.

[00:19:31] Speaker 05:
Did the court... I guess, here's the thing, did we grant them permission to supplementally brief an issue that

[00:19:41] Speaker 05:
should have been found waived, and if so, should that be taken into account?

[00:19:45] Speaker 05:
Because waiver is discretionary in deciding whether we ought to have deemed this waived.

[00:19:51] Speaker 00:
So the motions panel order granting leave for supplemental briefing does not address waiver one way or the other.

[00:19:58] Speaker 00:
It does not say we're granting supplemental briefing because we find there's no waiver.

[00:20:02] Speaker 05:
Did you oppose the request for supplemental briefing?

[00:20:05] Speaker 00:
Yes, we did oppose it, including on grounds of waiver.

[00:20:07] Speaker 00:
But my point is simply in answer to your question, the order- And the court didn't

[00:20:11] Speaker 05:
obviously give you that relief.

[00:20:13] Speaker 00:
The order didn't, right, the order granted supplemental briefing limited to 10 pages.

[00:20:18] Speaker 04:
Despite your waiver argument.

[00:20:20] Speaker 00:
Correct.

[00:20:20] Speaker 00:
But that single judge order granting supplemental briefing without explanation, I don't think binds the merits panel.

[00:20:27] Speaker 05:
No, it doesn't bind.

[00:20:28] Speaker 05:
Nothing binds.

[00:20:28] Speaker 05:
This is discretionary.

[00:20:29] Speaker 05:
We have the discretion.

[00:20:30] Speaker 05:
And so the question is, shouldn't that be factored into account in assessing whether or not we ought to deem it waived in this case?

[00:20:38] Speaker 05:
While it may not have been raised in the blue brief, this isn't one of those instances where it came up only in the reply and you didn't have a chance to address it.

[00:20:44] Speaker 05:
You did address it.

[00:20:46] Speaker 05:
You were aware of it.

[00:20:47] Speaker 05:
and the court expressly allowed this briefing, does that lean towards maybe therefore we shouldn't find it waived since the court did choose to allow this briefing?

[00:20:59] Speaker 00:
As Your Honor points out, the waiver is discretionary and the court could reach the issue if it wants.

[00:21:05] Speaker 00:
We don't think that the order simply granting leave for supplemental briefing

[00:21:10] Speaker 00:
Should tie this court's hands at this stage of this court now should exercise.

[00:21:14] Speaker 05:
Nobody suggested it should tie hands.

[00:21:15] Speaker 05:
I don't even suggest it should tie hands.

[00:21:17] Speaker 05:
But what I'm suggesting is it's a relevant factor.

[00:21:20] Speaker 05:
So unlike your typical case where you have something not raised in the opening brief here.

[00:21:26] Speaker 05:
there was a request for supplemental briefing, which was granted, whether I would have granted it or not is not the relevant question, but it was granted.

[00:21:32] Speaker 05:
And then both sides had an opportunity to vet the issue at that point.

[00:21:36] Speaker 05:
And the grant was over your waiver argument.

[00:21:38] Speaker 05:
So it's not whether it's binding on us.

[00:21:41] Speaker 05:
It's whether it doesn't sort of weigh heavily in favor of us finding that this issue ought not to be treated as waived.

[00:21:47] Speaker 00:
That's fine, Your Honor.

[00:21:49] Speaker 00:
I don't want to fight the court about this.

[00:21:50] Speaker 00:
It's fine with me if the court decides in its discretion to overlook the waiver and go ahead and decide the issue.

[00:21:56] Speaker 00:
The last thing I just do want to say in response to Your Honor's question is the order granting supplemental briefing allowed only 10 pages per side.

[00:22:02] Speaker 00:
And so Your Honor asked my friend on the other side, isn't this different from return mail where the Supreme Court had full briefing in front of it?

[00:22:11] Speaker 00:
And 10 pages per side, the court can decide in its discretion whether the issue has been fully vetted

[00:22:16] Speaker 05:
so that the court is prepared to decide and overlook the waiver or whether, because of course, if the issue had been raised in their opening brief, I'm sorry, are you are you suggesting that you didn't feel like you were given adequate opportunity to address the issue?

[00:22:28] Speaker 05:
And if so, did you make any motion to that extent after your honor?

[00:22:32] Speaker 05:
Are you making one orally here?

[00:22:33] Speaker 05:
We weren't given adequate time.

[00:22:35] Speaker 00:
No, Your Honor, I'm not suggesting that at all.

[00:22:36] Speaker 00:
I'm simply saying that as the Court decides how to exercise its discretion about whether to overlook the waiver, if the Court feels like the issue has been adequately briefed, that would tend to counsel in favor of overlooking the waiver.

[00:22:46] Speaker 07:
How many cases are there like this?

[00:22:48] Speaker 07:
How big a problem is this question of whether the Federal Reserve is a person within the meaning of the AIA?

[00:22:55] Speaker 00:
There aren't many cases like this.

[00:22:57] Speaker 00:
How many?

[00:22:58] Speaker 00:
Well, I think these two cases below are the only cases that I know of where a Federal Reserve Bank has petitioned for post issuance review.

[00:23:08] Speaker 00:
There are other cases where the Federal Reserve Banks have been sued in district court for patent infringement.

[00:23:13] Speaker 00:
And one issue, if I could move to the merits,

[00:23:16] Speaker 00:
is in addition to the distinctions, Judge Dyck, that you pointed out between the Postal Service and the Federal Reserve Banks, a very important distinction is the one the Supreme Court emphasized in return mail.

[00:23:27] Speaker 00:
The Supreme Court said it's reasonable for Congress to treat the Postal Service and other federal agencies differently from everyone else for AIA purposes because they already enjoy

[00:23:37] Speaker 00:
the advantage of limited remedies and only claims court patent infringement suits.

[00:23:42] Speaker 00:
The Federal Reserve banks are subject to suit for patent infringement in district court, like everyone else, subject to the full range of remedies and don't have those special protections that the government has.

[00:23:51] Speaker 00:
And so that's an important point in the return mail opinion and an additional clear distinction here.

[00:23:57] Speaker 00:
So what I would say, to get back to your honor's question about how important the issue is, I mean, the Federal Reserve Banks would be happy for the Court to resolve this issue and rule that they are persons entitled to petition for post-issuance review.

[00:24:08] Speaker 00:
That hasn't come up that often, only in this case is the only case I know of where a Reserve Bank has petitioned for post-issuance review.

[00:24:17] Speaker 00:
But since the Reserve Banks do get sued for patent infringement in district court, like any other kind of defendant, it is important to the Reserve Banks to have the option of post-issue and petitioning available to it in a way that's very different from the Postal Service.

[00:24:30] Speaker 00:
The other thing I'd like to say about the merits is that I think my friend said that he thinks that we agree on the test.

[00:24:36] Speaker 00:
The test is whether the reserve banks are distinct from the sovereign.

[00:24:40] Speaker 00:
I'm happy for the court to apply that test.

[00:24:43] Speaker 00:
I think that the first place that the court should look on how to apply that test is the Supreme Court's decision in Banshek, which we cite in our briefs.

[00:24:50] Speaker 00:
the Cuba Central Bank case where the Supreme Court says that sovereigns frequently create, governments frequently create entities that are instrumentalities of the sovereign but are juridically distinct from the sovereign for good reasons and that courts normally should respect the juridical separateness of those instrumentalities from the sovereign.

[00:25:10] Speaker 00:
So here, as a matter of law, the reserve banks have been created, Judge Dyke, as you pointed out, by Congress, by statute, in ways that make them distinct from the sovereign.

[00:25:20] Speaker 00:
The Supreme Court says normally you respect that.

[00:25:23] Speaker 00:
And I can't think of a good reason here why you wouldn't respect that when normally the Supreme Court says you're supposed to.

[00:25:27] Speaker 00:
Again, because why would Congress want the reserve banks to be subject to district court patent suit, the full range of remedies, along with every other private defendant,

[00:25:37] Speaker 07:
unlike the Postal Service and not have the benefit of post issuance petitioning.

[00:25:57] Speaker 00:
Correct, Your Honor.

[00:25:57] Speaker 00:
The Supreme Court emphasizes that and says the government, there was no dispute about the Postal Service being part of the government.

[00:26:02] Speaker 00:
There's a statute that makes it part of the executive branch.

[00:26:05] Speaker 07:
So the Supreme Court emphasizes that the government- It didn't address whether the Postal Service was subject to 1498, right?

[00:26:12] Speaker 00:
No, it did, Your Honor.

[00:26:13] Speaker 00:
The Supreme Court's opinion says that suits against the Postal Service for pat infringement are limited under 1498 to being in the claims court, no injunctions, no punitive damages, et cetera.

[00:26:22] Speaker 00:
The Supreme Court actually emphasizes that as a reason why it was reasonable for Congress

[00:26:27] Speaker 00:
to not allow the Postal Service to petition for post issuance review.

[00:26:30] Speaker 00:
The Postal Service, in a sense, doesn't need the benefit of AIA petitioning because it already has these unique defenses under 1498.

[00:26:38] Speaker 05:
I don't like the Postal Service.

[00:26:39] Speaker 05:
You're not a government corporation.

[00:26:40] Speaker 05:
The US has no stock in you.

[00:26:42] Speaker 05:
You don't receive Congressional Appropriated Funding, right?

[00:26:46] Speaker 00:
Correct.

[00:26:46] Speaker 00:
All that's true.

[00:26:48] Speaker 00:
So we're juridically separate from the sovereign.

[00:26:50] Speaker 05:
Now I understand why you're, quote, fine with us reaching the merits.

[00:26:54] Speaker 05:
Well, it avoids you having to argue this another time, possibly.

[00:26:57] Speaker 00:
Correct, and we do think the answer on the merits is clear, and it would be to the bank's advantage to have the court settle the issue now.

[00:27:04] Speaker 00:
if the court settles in our favor.

[00:27:07] Speaker 04:
Oh, I see.

[00:27:08] Speaker 04:
So you're all for waiver if we're going to go against you, but if we're with you, you're perfectly willing to waiver.

[00:27:14] Speaker 00:
Like any lawyer in my position would be.

[00:27:16] Speaker 00:
I'm guilty as charged of that.

[00:27:18] Speaker 00:
But back to the merits just for one moment before my time runs out.

[00:27:23] Speaker 00:
Excuse me one second.

[00:27:29] Speaker 00:
Yeah, the one thing I wanted to point out is my friend quoted to the court something that the Federal Reserve Bank of New York had said to this court in an amicus brief in Star as if that was some kind of gotcha.

[00:27:40] Speaker 00:
But that brief goes on to say three pages later than the quote that my friend read you is,

[00:27:45] Speaker 00:
The Federal Reserve Bank of New York is not a part of the United States government.

[00:27:49] Speaker 00:
It is a federal instrumentality, a corporation entrusted by statute with important federal functions.

[00:27:54] Speaker 00:
In all actions relevant to Starr, to that case, the bank was closely allied with but legally separate from the United States.

[00:28:01] Speaker 00:
Well, exactly.

[00:28:02] Speaker 00:
Legally allied, excuse me, closely allied with but legally separate from.

[00:28:05] Speaker 00:
And the actions at issue here

[00:28:07] Speaker 00:
This is a dispute about whether the banks are infringing Bozeman patents relating to check clearing, providing financial services, running a payment system.

[00:28:17] Speaker 00:
That conduct, the Federal Reserve banks engage in directly under their own authority provided by Congress.

[00:28:24] Speaker 00:
Yes, they're subject in some areas of the bank's conduct to more direct supervision by the Board of Governors.

[00:28:30] Speaker 00:
In the conduct at issue here, the banks are acting on their own pursuant to direct grants of authority from Congress.

[00:28:35] Speaker 00:
They are legally separate from the sovereign.

[00:28:37] Speaker 00:
The court should hold that they are persons if the court chooses to reach that issue.

[00:28:41] Speaker 00:
If Your Honors have no further questions, I'll turn it over to Mr. Mitchell on the merits.

[00:28:45] Speaker 00:
Thank you very much.

[00:28:46] Speaker 06:
Thank you, counsel.

[00:28:47] Speaker 06:
Mr. Mitchell.

[00:28:51] Speaker 01:
Good morning, may it please the Court.

[00:28:53] Speaker 01:
I'm Josh Mitchell for the Federal Reserve Banks.

[00:28:55] Speaker 01:
I'll just very briefly be addressing the one-on-one merits.

[00:28:58] Speaker 01:
My friend suggested that the universal access feature was not addressed by the Board.

[00:29:03] Speaker 01:
That's actually incorrect on appendix 42 of the 840 appendix.

[00:29:08] Speaker 01:
Patent owner contends that the 840 patent is directed to a unique system that uses disparate databases accessible from multiple data entry points.

[00:29:16] Speaker 01:
And then on the next page, it notes that this court has repeatedly held that such indications of computers and networks that are not even arguably inventive are insufficient to pass the test at step two.

[00:29:27] Speaker 01:
On the 640 waiver point, as you noted, Judge Moore, the only argument for claims, the only claims that survive are claims 21 through 24.

[00:29:39] Speaker 01:
And the only argument they're eligible is that they're eligible for the same reasons as the 840 patent.

[00:29:45] Speaker 01:
And even if you consider the 640 claims, 21 through 24, those claims plainly fail on the merits because they're broad enough to claim a mental process.

[00:29:57] Speaker 01:
Unless the court has any questions, we will rest on our briefs.

[00:30:01] Speaker 06:
Thank you.

[00:30:02] Speaker 06:
Thank you, counsel.

[00:30:03] Speaker 06:
Mr. Debt, two minutes for a button.

[00:30:07] Speaker 03:
Let me direct the court to decisions from the First, Sixth, and Tenth Circuit, which are in opposition to my friend's position.

[00:30:17] Speaker 03:
The Tenth and the Sixth Circuits squarely address the question of whether, under the Sherman Act antitrust statute, the Federal Reserve banks were persons, even though they were corporations.

[00:30:29] Speaker 03:
Both courts said that they are not persons.

[00:30:31] Speaker 03:
They are sufficiently linked to the government that they should not be deemed persons.

[00:30:35] Speaker 03:
That followed on the US Supreme Court decision from 1941, US v. Cooper, which had laid the foundation saying that the government is not a person.

[00:30:42] Speaker 03:
So that's good.

[00:30:44] Speaker 07:
I don't find these decisions that relate to other statutes such as the Tort Claims Act or the antitrust laws to necessarily be that helpful here.

[00:30:54] Speaker 07:
There's a different purpose in the AIA.

[00:30:57] Speaker 07:
It could be that Federal Reserve Banks are not a person under the AIA or a person under the AIA and have a different result under their statute.

[00:31:07] Speaker 03:
I understand.

[00:31:08] Speaker 03:
I think it's instructive, but Your Honor may disagree upon reviewing the cases.

[00:31:13] Speaker 03:
I will refer the Court also to a decision from this Court after we filed our brief, but was cited in my friend's brief.

[00:31:19] Speaker 03:
American Bankers Association versus United States.

[00:31:22] Speaker 03:
That decision did concern the Federal Reserve.

[00:31:25] Speaker 03:
And there were several instructive points there going to your question about the stock.

[00:31:31] Speaker 03:
This court observed in that case that the Federal Reserve stock is part of a regulatory regime and that the Federal Reserve banks are guardians of, quote, public welfare.

[00:31:41] Speaker 03:
I also observe that what my friends are urging is that they should be able to go to the PTAB, even though it is clear that the Federal Reserve Board, which directs and supervises them, cannot.

[00:31:53] Speaker 03:
We think that's not supported by any Supreme Court decision, by what Congress did in the AIA.

[00:31:59] Speaker 03:
It would produce the kind of odd results that the Supreme Court eschews, see Ryder v. Cooper 507 US 258.

[00:32:05] Speaker 05:
Can this Federal Reserve Bank be sued for patent infringement?

[00:32:11] Speaker 05:
We believe so, but this goes- If they can be sued for infringement, why shouldn't they be able to challenge the patent?

[00:32:17] Speaker 03:
Well, the Supreme Court addressed that in return mail.

[00:32:21] Speaker 03:
That goes to a point that my friend brought up where I just want to observe that we disagree with the notion that the Federal Reserve banks can necessarily be sued in district court.

[00:32:30] Speaker 03:
We think the better view actually is under 1498A, that there is at least a colorable, if not a better view, that you need to go to the Court of Federal Claims to do so.

[00:32:40] Speaker 03:
Also, my friend was mistaken in his response to a question about whether there have been any other PTAB review requests by the Federal Reserve Banks.

[00:32:49] Speaker 03:
There have been, we found, at least one.

[00:32:51] Speaker 03:
Federal Reserve Bank, the Stambler, IPR 2013, there were several numbers, but 00341 and several other related matters.

[00:33:01] Speaker 03:
So we know that it has happened before.

[00:33:03] Speaker 03:
And to the point about how big a problem this is, if you accept my friend's view, what would happen is

[00:33:07] Speaker 03:
There are all kinds of entities throughout that are created by Congress, which have attributes of- What was the result in the 2013 case?

[00:33:16] Speaker 03:
That settled, Your Honor.

[00:33:18] Speaker 03:
So it was dismissed voluntarily by the parties through consent.

[00:33:21] Speaker 06:
Can you finish up, please?

[00:33:22] Speaker 03:
Yes.

[00:33:22] Speaker 03:
One final point, and I appreciate your generosity with the time.

[00:33:25] Speaker 03:
Going to Judge Dyke's question about how big a problem this is, I think it's more than just the Federal Reserve Banks.

[00:33:32] Speaker 03:
There are all kinds of entities created by Congress that have different attributes, some of which look like private and some of which look like government.

[00:33:39] Speaker 03:
And if you decide here that the Federal Reserve Banks are a person under the AIA, you're going to have to do the same exact thing with respect to all other kinds of entities that are subject to patent infringement suits.

[00:33:53] Speaker 06:
Thank you, Your Honor.

[00:33:54] Speaker 06:
Thank you, Counsel.

[00:33:54] Speaker 06:
The case is both submitted.