[00:00:00] Speaker 03:
OK, fantastic.

[00:00:01] Speaker 03:
All right, we're going to start with the oral arguments for the morning.

[00:00:04] Speaker 03:
We have four, and then we have one submitted case.

[00:00:08] Speaker 03:
The first case to be argued is appeal number 21-2173, Sanderling Management Limited versus SNAP, Incorporated.

[00:00:18] Speaker 03:
We'll first hear from the appellant counsel, Ms.

[00:00:22] Speaker 03:
Witzma.

[00:00:23] Speaker 03:
Whitesma?

[00:00:24] Speaker 02:
Correct.

[00:00:26] Speaker 03:
All right.

[00:00:26] Speaker 03:
Miss Whitesma, you've reserved five minutes of time, right?

[00:00:29] Speaker 03:
Yes, Your Honor.

[00:00:30] Speaker 03:
OK.

[00:00:30] Speaker 03:
Please begin one of them.

[00:00:32] Speaker 02:
Good morning.

[00:00:33] Speaker 02:
May it please the court.

[00:00:35] Speaker 02:
I want to start today by describing our client's invention.

[00:00:38] Speaker 02:
And then I want to focus on three specific errors that the district court made in finding that invention invalid as a matter of law.

[00:00:46] Speaker 02:
A decade ago, Sanderling found a technical way for mobile devices to be effectively used as a marketing tool

[00:00:51] Speaker 02:
by branding and sharing images taken on those devices.

[00:00:55] Speaker 02:
At the time, conventional technology analyzed a selected picture already taken on the device for data specific to that image and then matched and returned a relevant image processing function to the device.

[00:01:07] Speaker 02:
This process was slow and efficient

[00:01:10] Speaker 02:
static, and could not be scaled.

[00:01:13] Speaker 02:
Sanderling found a technical solution to these problems by delinking the delivery of the editing processing functions to the mobile devices from the data analysis of those images already captured on the devices.

[00:01:26] Speaker 02:
Its invention did so by using the actual GPS location of devices rather than the location where those pictures were taken.

[00:01:34] Speaker 02:
As Sanderling emphasized during prosecution of the patent,

[00:01:37] Speaker 02:
and after amending the claims to add its limitation, the invention required the quote, actual use of GPS location data.

[00:01:46] Speaker 02:
By delinking the delivery of editing functions from image content and instead tying it to the device's actual location, Sanderling's invention was able to what we call preload the editing functions on devices even before any pictures were taken.

[00:02:01] Speaker 02:
And by delinking, it improved both the operability

[00:02:04] Speaker 02:
and the functionality of the mobile devices themselves.

[00:02:08] Speaker 03:
I should ask you a question.

[00:02:10] Speaker 03:
What if the claimed invention was a computerized method of distributing restaurant coupons?

[00:02:21] Speaker 03:
And it was based on using GPS to track different people by their phones.

[00:02:30] Speaker 03:
And then when they saw that

[00:02:33] Speaker 03:
someone was nearby a restaurant, they would transmit to that person a coupon because there was an Applebee's right around the corner.

[00:02:44] Speaker 03:
And so now, hey, $10 off at Applebee's right around the corner.

[00:02:51] Speaker 03:
Do you think that would be patent eligible?

[00:02:54] Speaker 02:
Your Honor, I'm unable to answer that with a yes or no, and I'll explain why.

[00:02:57] Speaker 02:
As your opinion, your concurrent opinion noted in American Axel,

[00:03:03] Speaker 02:
The eligibility analysis is very difficult.

[00:03:06] Speaker 02:
And it is case by case driven.

[00:03:08] Speaker 02:
And it is a contextual context analysis.

[00:03:12] Speaker 02:
And as Bilski made clear, there is no one simple way to analyze what is eligible or not.

[00:03:19] Speaker 02:
There's no one specific test.

[00:03:21] Speaker 02:
And therefore, this court has used a decisional mechanism of applying

[00:03:27] Speaker 02:
the court's prior precedents, and comparing with a particular invention and the claims of those inventions are more comparable to cases in which an invention provided a specific solution to a specific technical problem in its specific technological environment, as in, for example, the Core Wireless, Enfish, Cardionet,

[00:03:51] Speaker 03:
But would you say there's something technical about the invention I just described, because there's some great efficiency at being able to, in real time, transmit these coupons to people that are located nearby the Applebee's restaurant?

[00:04:13] Speaker 03:
And so therefore, it's a great marketing tool, and we're using

[00:04:19] Speaker 03:
computer technology, and there's something efficient and maybe even scalable, assuming we have the same understanding of what scalable means.

[00:04:31] Speaker 03:
So is that patent-eligible?

[00:04:33] Speaker 02:
Yeah, I would submit that if it improved functionality and operability of a user device to be able to find that Applebee's and use that coupon, then yes, it would be patent-eligible under this court's precedence.

[00:04:46] Speaker 03:
But at the same time, a claim like that looks like you're transmitting content, data, information just based on a particular condition being satisfied.

[00:05:01] Speaker 03:
And I feel like we do have case law out there that has found claims like that ineligible.

[00:05:09] Speaker 02:
Your Honor, the cases that find

[00:05:12] Speaker 02:
Inventions involving the mere collection, transmission, analysis, or storage of data do find those type of claims ineligible.

[00:05:19] Speaker 02:
But here, where you have a specific way of achieving the invention that's necessarily rooted in a technological environment, this is an invention that necessarily arises in the realm of computer networks.

[00:05:34] Speaker 02:
You are providing image processing functions.

[00:05:37] Speaker 02:
You're not just providing data.

[00:05:38] Speaker 02:
In fact, the entire point of this invention was to get away from any data analysis, data transmission.

[00:05:44] Speaker 02:
Those were the very reasons that the conventional way of doing it was inefficient and didn't provide the inventive steps of being able to simultaneously, almost instantaneously, reach large audiences, large groups of individuals with tailored content that was relevant at the particular time

[00:06:03] Speaker 02:
in a way that was both efficient and scalable.

[00:06:07] Speaker 02:
And so the court's decisions always turn on how the particular information is being used and the way it's being implemented.

[00:06:15] Speaker 01:
What in your claims would be the specific improvement to computer technology?

[00:06:19] Speaker 01:
What would you say that would be?

[00:06:23] Speaker 02:
Thank you, Your Honor.

[00:06:24] Speaker 02:
It improved the technology in two ways.

[00:06:26] Speaker 02:
It improved the device operability because it minimized the number of steps.

[00:06:31] Speaker 02:
Actually, it eliminated the number of steps to use the editing tools and made them available for immediate use by the end user.

[00:06:40] Speaker 02:
And the elimination of steps is something that the court is focused on in finding patents eligible, for example, in cardio, I'm sorry, core wireless in particular.

[00:06:53] Speaker 02:
The court found that displaying information, the way that the information was displayed, limited the steps necessary to reach the desired functionality.

[00:07:02] Speaker 02:
So to here, this invention eliminated the steps needed for a user to actually use the editing functions, the desired functionality.

[00:07:13] Speaker 02:
No longer did the user have to generate an image

[00:07:16] Speaker 02:
capture it, designate it, send it to a remote server, have that remote server analyze the data, and then return a relevant processing function.

[00:07:24] Speaker 02:
This made it immediately available.

[00:07:26] Speaker 02:
And so that improved device operability.

[00:07:29] Speaker 02:
But there's a separate aspect to that.

[00:07:32] Speaker 02:
And it improved the functionality.

[00:07:34] Speaker 02:
Because that entire process of capturing, analyzing, sending, transmitting, is a very inefficient process.

[00:07:42] Speaker 02:
And it's one that requires one-to-one analysis.

[00:07:45] Speaker 02:
you have to match a processing function to each and every single image under the conventional method.

[00:07:52] Speaker 02:
This allowed the device to operate without having to engage in that inefficient process of analyzing the specific information in the image itself.

[00:08:04] Speaker 02:
And that way it allowed it to target it to entire groups, because no longer did it have to wait for each particular individual at a cultural event or sporting event to designate and send

[00:08:14] Speaker 02:
and analyze the image the way that the conventional technology did at the time.

[00:08:20] Speaker 01:
If you're making something available for immediate use, though, isn't that simply using a computer to do something faster?

[00:08:27] Speaker 02:
It's a little bit different.

[00:08:29] Speaker 02:
I know that the claim uses the term automatically.

[00:08:32] Speaker 02:
But I would contend that the use of the word automatically in the context of this patent does not mean mere automation.

[00:08:40] Speaker 02:
Almost every invention

[00:08:42] Speaker 02:
that we see is going to use some form of computer functionality that the court is looking at in these abstract cases.

[00:08:49] Speaker 02:
What this claim means is that it is doing it automatically without any user intervention, without any user initiation, like the conventional method where a user had to actually designate the photo

[00:09:04] Speaker 02:
and send it, no longer did that have to happen.

[00:09:07] Speaker 02:
It was automatically supplied to them.

[00:09:10] Speaker 02:
It was preloaded on their device, so it was immediately available for use.

[00:09:15] Speaker 04:
Did you argue that the district court needed to construe certain claim terms before it could resolve the motion?

[00:09:21] Speaker 02:
We argued that there were certain claim terms that needed to be construed, but we further emphasized that the claim construction process should be a robust one based on

[00:09:30] Speaker 02:
consideration intrinsic and extrinsic evidence, including expert testimony.

[00:09:35] Speaker 04:
Did you ever provide proposed constructions or explain to the district court how it would make a difference if, for instance, your proposed constructions were adopted?

[00:09:46] Speaker 02:
Two separate questions.

[00:09:47] Speaker 02:
Let me answer the first one.

[00:09:48] Speaker 02:
We did not provide explicit definitions of individual discrete claim terms.

[00:09:53] Speaker 02:
What we did is we identified two terms that we believed

[00:09:57] Speaker 02:
might require construction.

[00:09:59] Speaker 02:
But in the motion to dismiss, there was no suggestion that SNAP was disputing the dynamic nature of the invention, the instantaneous nature of the invention, in fact, limitations that are explicitly required by the claims.

[00:10:12] Speaker 02:
And so it was not until the reply brief that they said, oh, these are all phantom limitations.

[00:10:16] Speaker 02:
The court can't look at this at step one or step two.

[00:10:19] Speaker 02:
And so at the hearing, we implore the district court.

[00:10:21] Speaker 02:
Please engage in claim construction.

[00:10:23] Speaker 02:
You can't determine the character of an invention or the scope of the invention without going through this process.

[00:10:29] Speaker 04:
And that's... In that imploring or in your motion for reconsideration, did you tell the district court how the term should be construed and what difference it would make?

[00:10:38] Speaker 02:
We told the court specifically why dynamically

[00:10:41] Speaker 02:
was a function of the explicit claim terms and how that was provided a benefit over the conventional methods of providing the image functions.

[00:10:52] Speaker 03:
Which term are you construing for this dynamic feature?

[00:10:57] Speaker 02:
The dynamic is a function of the fact there are explicit, the instantaneous is explicit.

[00:11:04] Speaker 03:
Is that through the word automatically?

[00:11:10] Speaker 02:
No, the instantaneously is a function of the fact that claim 11 requires this to be used within a few seconds or less, which the patent defines as real time.

[00:11:20] Speaker 03:
If you could just point me to some words in the claim.

[00:11:23] Speaker 02:
Sure.

[00:11:24] Speaker 02:
Dynamically, first of all, it appears in the title, in the abstract, in the description of the invention.

[00:11:30] Speaker 02:
And we believe that it should have been considered, at least as to the character of the invention at step one.

[00:11:35] Speaker 03:
Right now, we're just talking about claim construction.

[00:11:37] Speaker 03:
So I'm trying to figure out which word or phrase in one of the claims were you saying, right here, let's get this construed.

[00:11:50] Speaker 02:
Did we say this is what you need to consider?

[00:11:53] Speaker 02:
We said that there were limitations such as automatic and instantaneous that needed to be considered.

[00:11:59] Speaker 03:
And so I see the word automatic.

[00:12:01] Speaker 03:
It's in automatically forwarding.

[00:12:02] Speaker 03:
I mean, I'm not sure how much work the word automatically is doing.

[00:12:07] Speaker 03:
Fording seems to say it anyway.

[00:12:10] Speaker 03:
But what you're saying instantaneously, you're saying dynamically, and I'm just trying to find out which word or words in any of your claims are those thoughts rooted.

[00:12:22] Speaker 02:
instantaneously is reflected in the language of claim 11, column 24 of the 412 patent, which requires that the invention be made available in a few seconds or less.

[00:12:34] Speaker 03:
And the patent itself.

[00:12:35] Speaker 03:
Help me.

[00:12:36] Speaker 03:
Which I'm looking at.

[00:12:39] Speaker 02:
Appendix 75, Your Honor.

[00:12:41] Speaker 02:
Column 24.

[00:12:42] Speaker 04:
Is it not in any of the claim ones that you have at the front of your blue brief?

[00:12:48] Speaker 02:
We believe that it is a.

[00:12:51] Speaker 02:
It is not explicitly claimed in claim one, but because it is being delivered based on the location of the device rather than the process of sending and matching image data content.

[00:13:04] Speaker 03:
I'm sorry.

[00:13:04] Speaker 03:
You said A75?

[00:13:05] Speaker 02:
A75.

[00:13:07] Speaker 02:
Appendix 75, Your Honor.

[00:13:09] Speaker 03:
Which claim?

[00:13:10] Speaker 02:
Claim 11, column 24.

[00:13:14] Speaker 03:
All right.

[00:13:15] Speaker 02:
It requires that the processing function be delivered in a few seconds or less, which is defined.

[00:13:20] Speaker 03:
This is a defendant claim 11.

[00:13:21] Speaker 02:
Correct.

[00:13:24] Speaker 03:
OK.

[00:13:25] Speaker 02:
Your Honor, I see I'm well into my rebuttal time.

[00:13:27] Speaker 03:
We'll save the remainder of your rebuttal time and see how much more, if any, we'll give you.

[00:13:33] Speaker 02:
Thank you, Your Honor.

[00:13:34] Speaker 03:
I appreciate it.

[00:13:42] Speaker 03:
Is that how we pronounce your name?

[00:13:43] Speaker 03:
Yes, Your Honor.

[00:13:44] Speaker 03:
Thank you.

[00:13:44] Speaker 03:
You did very well, actually.

[00:13:46] Speaker 05:
Sorry, the deputy instructed us to wait for the present counsel to clear the podium before we approach.

[00:13:53] Speaker 05:
May it please the court, good morning, Your Honors.

[00:13:56] Speaker 05:
Steve Shorchin on behalf of SNAP, Inc.

[00:13:59] Speaker 05:
Judge Tinn, if I may, I would like to take up your hypothetical view, began the argument with.

[00:14:05] Speaker 05:
The invention, as you have described it, hypothetically, is patent ineligible under step one.

[00:14:10] Speaker 05:
And that is exactly the problem that Sanderling has with the independent claims in this case.

[00:14:16] Speaker 05:
The first mistake in analysis from a claim construction point of view that is made by Sanderling, respectfully, was articulated in the very opening comments that the images are already captured on the devices.

[00:14:32] Speaker 05:
And from this misreading, with all due respect, of the claims, which have no discussion about when an image is taken, or frankly, even if an image is taken,

[00:14:43] Speaker 05:
Sanderling then piles on alleged improvements to speed, efficiency, and other items in the hope of clinging to some eligibility under Section 101.

[00:14:56] Speaker 05:
If we may, let's start with the exact claims, the independent claims.

[00:14:59] Speaker 05:
And you will note that the lower court treated the independent claims as representative of all the claims asserted, and that Sanderling only had generalized nonspecific objections to that treatment.

[00:15:13] Speaker 05:
In none of the independent claims of the three assertive patents, is there any discussion or limitation about when the image must be taken?

[00:15:24] Speaker 05:
There's no discussion about if the image must be present before the distribution rule is matched or forwarded.

[00:15:32] Speaker 05:
And in fact, there's no discussion in the claims whatsoever that an image must even be taken.

[00:15:38] Speaker 05:
The final limitation of each of the independent claims, too, are

[00:15:41] Speaker 05:
identical one is slightly different, say wherein at least one image processing function is set to be used by an application.

[00:15:53] Speaker 05:
That's with respect to claim one of the 412 and claim one of the 886.

[00:15:58] Speaker 05:
The 986 patent is similar but uses a slightly different language with the same import wherein the at least one digital media content processing function is configured to be used by an application.

[00:16:12] Speaker 05:
As we emphasize in our responsive brief on behalf of the APHELIA, at no point do any of these claims recite when the image must be taken, whether it is delinked in some way from the distribution rules, such that these so-called enhancements to speed or efficiency may be seen for purposes of analyzing step one of ALIS or step two of 101 eligibility.

[00:16:37] Speaker 04:
Can I ask, your friend on the other side took us to a dependent claim, I think, claim 11 of the 412 patent.

[00:16:45] Speaker 04:
Could there be a material difference with some of the dependent claims?

[00:16:48] Speaker 04:
And would you argue that that's not an issue we can reach because it wasn't argued below, given the representative claim analysis?

[00:16:57] Speaker 05:
Judge Stark, thank you for the question.

[00:16:58] Speaker 05:
I do believe it was waived as not argued below.

[00:17:01] Speaker 05:
As I believe it was Judge Chen asked the question, and Judge Stark, you followed up.

[00:17:06] Speaker 05:
pressing counsel specifically for the claims that were requested by the lower court to be construed, but more importantly, the precise constructions that were offered.

[00:17:15] Speaker 05:
The record is unambiguous on this point.

[00:17:18] Speaker 05:
The appellant, Sanderling, on four separate occasions, now five, technically, have declined to offer any court a claim construction for a claim term that actually appears in an issued claim.

[00:17:33] Speaker 05:
They declined to do it in response to the motion to dismiss.

[00:17:37] Speaker 05:
They declined to do it at oral argument before Judge Wu.

[00:17:42] Speaker 05:
They declined to offer a construction of any term on the motion for reconsideration.

[00:17:47] Speaker 05:
For the fourth attempt, they declined to offer any construction of this court, Judge Stark, I believe, having waived those arguments below.

[00:17:53] Speaker 05:
And now today, at oral argument, with all due respect, counsel has not provided any constructions except to say,

[00:18:00] Speaker 05:
that there is a belief that instantaneous or automatically should be construed.

[00:18:06] Speaker 05:
But Judge Stark, to your question, that's never been requested by any court, and therefore it is waived.

[00:18:11] Speaker 05:
More importantly, the district court, properly following this court's guidance, when it asked Sanderling at the argument below if it could point to constructions, it would alter its analysis.

[00:18:21] Speaker 05:
And under Alice in 101 and hearing none, the court in its written opinion said,

[00:18:27] Speaker 05:
As I'm instructed by the Federal Circuit, there's no claim construction here for me to resolve, nor has Sanderling pointed to any construction that would alter my analysis.

[00:18:35] Speaker 05:
And as a result, he conducted the step one and step two analysis as the Federal Circuit has instructed in the absence of those constructions.

[00:18:44] Speaker 05:
So Judge Stark, specifically to your question and my final comment to it is,

[00:18:48] Speaker 05:
Dependent claim 11, as I think Judge Chen probably observed in the way the question was responded to, does not even include the term that counsel and Sanderling today seeks for construction.

[00:19:03] Speaker 05:
So where we are on the construction issue is having briefed it entirely and argued it below, including on reconsideration, no claim term appearing in an issued claim has been requested

[00:19:18] Speaker 05:
by any court for a specific construction to impact the 101 eligibility analysis.

[00:19:23] Speaker 01:
With respect to Alice Step 2, are there any factual disputes that would need to be resolved?

[00:19:30] Speaker 05:
No, Judge Cunningham, there are not.

[00:19:32] Speaker 05:
And the reason is twofold.

[00:19:35] Speaker 05:
First, the court correctly concluded, the court below, I should clarify, correctly concluded that under Alice Step 1, and Your Honor, I will come to Alice Step 2, that under Alice Step 1,

[00:19:48] Speaker 05:
The abstract idea was providing information, in this case, processing function based on the meeting of a condition, for example, matching a GPS location with a geographical location.

[00:20:01] Speaker 05:
That was Judge Wu's understanding of the abstract concept.

[00:20:04] Speaker 05:
Now, Judge, cutting into your direct question.

[00:20:06] Speaker 05:
In order to conduct a step two alice invalidity, I'm sorry, 101 analysis, the court looks to see whether any inventive concept beyond the abstract idea itself

[00:20:18] Speaker 05:
is present.

[00:20:19] Speaker 05:
The record below, and as indicated in both the primary order on the motion dismissed and the motion on reconsideration, noted that there was no dispute from Sanderling that the primary components that are all recited in the claim language are all being used in their conventional and generic way under step two.

[00:20:39] Speaker 05:
And so for example, Judge Cunningham, we have in the limitations servers and processors.

[00:20:45] Speaker 05:
There's no dispute in the appendix site here, it's in our brief at page 46, but the appendix sites are 49 through 52, but more importantly, appendix 64, which is the specification at column one, that the purported technologies of servers and processors are being used in their routine and conventional manner.

[00:21:04] Speaker 05:
For location indication, GPS module or mobile device,

[00:21:09] Speaker 05:
The specification itself states that those are known in the art.

[00:21:13] Speaker 05:
Your honor may find that at appendix 71, column 15, beginning at line 35.

[00:21:18] Speaker 05:
The court noted correctly that implementing GPS technology with mobile devices has been known for decades, citing several decisions of this court.

[00:21:26] Speaker 05:
With respect to distributing or forwarding the processing function, that is based upon the location or sensor data matching a generic condition.

[00:21:34] Speaker 05:
And that type of a generic data-related function cannot save the claim from ineligibility, because this court has said repeatedly, including in the electric power group case, the OIP technology case, and the buy-safe decision, that simply transmitting a rule, for example, Judge Shannon, your hypothetical, does not save a claim under step two of 101 determination.

[00:21:58] Speaker 05:
Finally, Judge Cunningham, there's two more arguments that could affect your answer, I suppose.

[00:22:02] Speaker 05:
The limitations that we discussed earlier, the set to be configured or set to be used limitation, which is the final limitation.

[00:22:10] Speaker 05:
The specification itself notices and acknowledges, and Your Honor will find this at Appendix 64, column one, beginning of line 38, that client terminals with integrated cameras and image sensors had already been widely used, I'm quoting,

[00:22:26] Speaker 05:
And I'll quote again, inexpensive image sensors and image processing software was readily available to mobile device manufacturers.

[00:22:35] Speaker 05:
Finally, Your Honor, there is an inherent argument in the briefing of the appellant that there somehow is an ordered combination here, and that even if the individual components recited in the claims are being used in their commonly accepted generic component expected manner, that there is some ordered combination.

[00:22:54] Speaker 05:
Respectfully, we believe that argument is incorrect for several reasons.

[00:22:58] Speaker 05:
First, the district court frowned, we believe correctly, in his opinion that's at appendix page 14, that the asserted claims recite an ordered combination that do not amount to more than a conventional use of the computers.

[00:23:11] Speaker 05:
He concluded that the inventive concept that Sanderling identified, the so-called ordered combination of steps, is in fact the abstract idea itself.

[00:23:20] Speaker 05:
And that cannot supply the inventive concept, as this court has long held.

[00:23:25] Speaker 05:
More importantly, the claims, when you read them, they do not recite any limitation of a claim element required to be performed in any specific order.

[00:23:37] Speaker 05:
None of the features that Sanderling claims require some ordering, delinking the instantaneous, dynamically enabled,

[00:23:45] Speaker 05:
None of those limitations, none of the claim terms that they rely upon for that argument actually appear in the limitations.

[00:23:51] Speaker 05:
They're phantom limitations.

[00:23:52] Speaker 04:
Mr. Shulkin, your friend on the other side says that this invention is a technical improvement or a technical solution to a technical problem or improvement in computer functionality.

[00:24:05] Speaker 04:
Why doesn't that raise a fact question?

[00:24:10] Speaker 05:
Your Honor, for the same reason it did not in the two-way media case.

[00:24:14] Speaker 05:
The two-way media case, I think, is instructive on this point, Your Honor.

[00:24:18] Speaker 05:
In that case, the appellant argued that the specification set out a scalable architecture and that the court should deem the claims eligible under step two of Alice because they enhance or enable a scalable architecture.

[00:24:34] Speaker 05:
The problem this court found, and I'm going to quote from the court's opinion, nothing in the claims or their constructions

[00:24:40] Speaker 05:
required anything other than conventional computer and network operating components according to their ordinary functions.

[00:24:47] Speaker 05:
And then when the court reached its holding, it said this.

[00:24:49] Speaker 05:
Nor do we see any inventive concept in the ordered combination of these steps.

[00:24:53] Speaker 05:
The steps are organized in a completely conventional way.

[00:24:56] Speaker 05:
Data is processed, sent, and once sent, specific information about the transmission is recorded.

[00:25:02] Speaker 04:
OK, so that may all have been, I guess, was true there.

[00:25:05] Speaker 04:
But that doesn't mean that that's all true here.

[00:25:08] Speaker 05:
Well, Your Honor, I believe it is true here, because there's nothing in the specification that sets forth or describes the scalability or the efficiencies for the components that are recited in the claims that Sanderling points to.

[00:25:22] Speaker 05:
So setting aside the Federal Circuit's long history of decisions that scalability and efficiency by itself does not satisfy ALICE Step 2, for example, in the custom media case,

[00:25:33] Speaker 05:
One then looks to see whether the components themselves are being improved upon in some way, or are they being used in merely their conventional manner.

[00:25:41] Speaker 05:
And with respect, Judge Stark, the reason I answered Judge Cunningham's question that way and went through each of the components in the claim, starting with server and entering with the ordered combination, is that none of the components or structures recited in those limitations provide any inventive concept.

[00:25:55] Speaker 05:
And so we're left with, at the root of their argument, scalability and efficiency.

[00:26:00] Speaker 05:
which this court has said is insufficient.

[00:26:02] Speaker 05:
Again, in many cases, it's custom media of simply being a leading example.

[00:26:08] Speaker 03:
There's this one passage in the patent specification I'm just curious about.

[00:26:15] Speaker 05:
Is it A69?

[00:26:16] Speaker 05:
Judge, I apologize.

[00:26:17] Speaker 05:
I'm a little hard of hearing, which Judge Laurie discovered on Tuesday.

[00:26:20] Speaker 03:
A69?

[00:26:20] Speaker 03:
It had A69.

[00:26:22] Speaker 05:
Thank you, sir.

[00:26:23] Speaker 03:
If you go to A69, column 11, starting at line 51,

[00:26:29] Speaker 03:
Are you there?

[00:26:29] Speaker 05:
I am, sir.

[00:26:31] Speaker 03:
So it says, for instance, system 100 is integrated with an image filtering service offered by Instagram such that the Instagram service allows an end user to select a branding function offered by system 100.

[00:26:44] Speaker 03:
The end user selects the branding function in the same manner that the end user selects a filter provided by the Instagram image filtering service.

[00:26:53] Speaker 03:
And I'm just trying to understand here

[00:26:57] Speaker 03:
Is this passage saying that Instagram image filtering service is already something in the prior art, and that this invention is supplementing that?

[00:27:11] Speaker 05:
Your Honor, I believe it may be.

[00:27:15] Speaker 05:
And I'll tell Your Honor why by referring to another specification section.

[00:27:19] Speaker 05:
If your honor would refer to appendix page 64 and column 1 beginning at line 63 through column 2, line 2, here's what the specification acknowledged.

[00:27:32] Speaker 05:
And I will paraphrase some, but the court apparently has found my reference.

[00:27:36] Speaker 05:
The asserted patent specification acknowledged the concept of targeting promotional content and advertising, for example, a sponsored link, a banner, or an embedded coupon, Judge Tan, in your hypothetical, for example, to a particular user group on a social media network using a geolocalized client terminal, and that it was well known at the time of the claim convention.

[00:27:59] Speaker 05:
And so, for example, Your Honor, I think, frankly, that portion of the specification is the patentee's admission that the hypothetical you provided at the beginning of the argument would not only be ineligible, but would be known to the art before the invention date.

[00:28:11] Speaker 05:
So as the patent claims, that technology was well known.

[00:28:16] Speaker 05:
And so that cannot be the improvement over the state of the art or cannot be the inventive concept under step two of Alice to save these claims once they are deemed to be abstract.

[00:28:29] Speaker 04:
A question about the amendment.

[00:28:31] Speaker 04:
You point out that in the originating court, I think the Northern District of Illinois, the judge had a standing order by which the plaintiff had an opportunity to either amend or defend on the merits against your motion to dismiss.

[00:28:46] Speaker 04:
And evidently they did not seek to amend at that time.

[00:28:50] Speaker 04:
I've got that right.

[00:28:51] Speaker 05:
Yes, Your Honor.

[00:28:52] Speaker 05:
I'm seeing I'm out of time, but can I answer your question, Your Honor?

[00:28:54] Speaker 04:
Yes, once I get to it, if I may.

[00:28:57] Speaker 04:
Apologies.

[00:28:57] Speaker 04:
So the question is, ultimately Judge Wu did not deny the motion for reconsideration on those grounds.

[00:29:07] Speaker 04:
I think he did it on futility.

[00:29:09] Speaker 04:
Is this additional argument that you've made about why amendments should not be permitted, is that one we can consider on our standard of review, since the district court did not reach that argument?

[00:29:21] Speaker 05:
Your Honor, it would be an alternative grounds for affirmance.

[00:29:24] Speaker 05:
And the reason is,

[00:29:25] Speaker 05:
Futility is one basis that a court may deny an amendment, which Judge Wu expressly found twice in the original order and then the motion for reconsideration, the futility of the amendments.

[00:29:36] Speaker 05:
But so is untimeliness.

[00:29:38] Speaker 05:
And as Your Honor has pointed out, the Northern District of Illinois Standing Order, and I'll just briefly read the order to the record, and then unless there are further questions, I'll take my seat.

[00:29:48] Speaker 05:
It states this, if the parties litigate the motion to dismiss,

[00:29:52] Speaker 05:
and the moving party prevails, then the non-moving party is advised that this court may dismiss the case with prejudice under the appropriate legal standards.

[00:30:02] Speaker 05:
So the Northern Illinois Local Rule, or Standing Rule, essentially puts the- But was Judge Wu operating under that rule?

[00:30:11] Speaker 05:
Judge Chen, so the motion to dismiss was filed in Illinois.

[00:30:14] Speaker 05:
It was fully briefed, and while it was briefed,

[00:30:17] Speaker 05:
Blakely, in Illinois, granted a 14.04a motion to Judge Wu.

[00:30:22] Speaker 05:
Judge Wu did not, to be clear, Judge Stein, Judge Wu did not expressly use that provision as a basis for denying amendment.

[00:30:29] Speaker 05:
He ruled on the futility of the amendment when they finally, after the motion to dismiss, was granted in the motion for reconsidering.

[00:30:36] Speaker 03:
I'm just trying to figure out whether it's a legitimate alternative basis to deny the motion to amend based on this rule that's in a different court.

[00:30:46] Speaker 05:
Well, because the rule was pending when the papers were filed, the procedural step of making the decision, am I going to go ahead and file a new complaint and amend it under the Northern District Rules of Illinois, or am I going to stand on my complaint because I feel confident also?

[00:30:59] Speaker 03:
So when the case got transferred to California, the operation of that rule already kicked in and carried over with the case?

[00:31:06] Speaker 03:
We believe so, Your Honor.

[00:31:07] Speaker 03:
OK.

[00:31:08] Speaker 00:
Was there any comparable rule in CBCAL?

[00:31:11] Speaker 05:
Not that I'm aware of, Judge Cunningham.

[00:31:13] Speaker 03:
Okay, thanks very much.

[00:31:15] Speaker 05:
Thank you, Your Honor.

[00:31:19] Speaker 03:
Ms.

[00:31:19] Speaker 03:
Weitzman will have four minutes.

[00:31:22] Speaker 02:
Thank you for the additional time, Your Honor.

[00:31:25] Speaker 02:
Let me start with the last point.

[00:31:26] Speaker 02:
I think it's the easiest one to address.

[00:31:28] Speaker 02:
with respect to the timeliness of the proposed amendment.

[00:31:33] Speaker 02:
The district court did not rule on that basis.

[00:31:34] Speaker 02:
It did not find that the proposed amendment was untimely.

[00:31:38] Speaker 02:
And the court should not find a waiver where the court did not find one.

[00:31:41] Speaker 02:
With respect to whether the court's standing orders were transferred, no, they were not.

[00:31:45] Speaker 02:
The court was very specific about what procedural rules would follow the case from Illinois to California.

[00:31:53] Speaker 02:
And this is in Appendix 40.

[00:31:55] Speaker 02:
In Docket Entry 91, it said that the

[00:31:58] Speaker 02:
courts, local rules in the northern district of Illinois would continue to apply through claim construction.

[00:32:05] Speaker 02:
Said nothing about adopting a standing order of a particular judge who said only that if I grant a motion to dismiss, I will only allow leave under the appropriate legal standards.

[00:32:18] Speaker 02:
What are those legal standards in the Ninth Circuit?

[00:32:20] Speaker 02:
extreme liberality, there is a presumption in favor of amendment, absent prejudice.

[00:32:27] Speaker 02:
SNAP never showed any prejudice.

[00:32:28] Speaker 03:
So when it says in the document that the court will continue to use the local rules for the Northern District of Illinois until the claim construction slash markman hearing?

[00:32:37] Speaker 02:
Correct.

[00:32:39] Speaker 03:
Wouldn't this period of time dealing with this motion to dismiss be encompassed within that statement?

[00:32:49] Speaker 02:
SNAP is not relying on any local rule of the Northern District of Illinois.

[00:32:52] Speaker 02:
It's relying on an individual judge's standing order that says, I'm going to decide whether to grant leave under the appropriate legal standards.

[00:33:01] Speaker 02:
The appropriate legal standards are, in the Ninth Circuit, that absent a showing of prejudice, there is a presumption that amendments should be granted.

[00:33:11] Speaker 02:
It's an extreme liberality standard in the Ninth Circuit.

[00:33:14] Speaker 02:
SNAP never even asked for dismissal with prejudice.

[00:33:19] Speaker 02:
until the hearing.

[00:33:20] Speaker 02:
It never put us on notice that it was seeking dismissal with prejudice.

[00:33:24] Speaker 02:
And courts routinely, for example, in ATRIX, they were allowed to amend before they proposed a second amended complaint, which was then considered.

[00:33:34] Speaker 04:
If you were to prevail on your 101 appeal and we were to send the case back to the district court, shouldn't it be up to that judge first to decide the impact of the Northern District of Illinois

[00:33:47] Speaker 04:
rules and the standing order of the judge.

[00:33:50] Speaker 04:
Wouldn't SNAP be free to make this argument that you lose anyway?

[00:33:54] Speaker 02:
Well, I don't think it made the argument in connection with the motion to dismiss.

[00:33:56] Speaker 02:
I believe that the court should find that the claim limitation satisfies step one.

[00:34:02] Speaker 02:
But I want to get to the point of step two before my time runs out.

[00:34:06] Speaker 02:
We have to remember the context of this.

[00:34:07] Speaker 02:
This is a motion to dismiss at the pleading stage.

[00:34:10] Speaker 02:
And all presumptions, there's a presumption of validity.

[00:34:14] Speaker 02:
And there's also a presumption that all the allegations in the complaint as pled are true.

[00:34:18] Speaker 02:
And the burden was on SNAP to show that the intrinsic record contained a clear statement that the invention

[00:34:30] Speaker 02:
was well understood, routine, or conventional.

[00:34:32] Speaker 02:
That was SNAP's burden, double burden, as the moving party and as the party bearing the burden of proof under a clear and convincing evidence.

[00:34:40] Speaker 02:
There is no clear statement anywhere in this record that the claim steps, as opposed to computer parts,

[00:34:47] Speaker 02:
were well-known, routine, and conventional at the time of the invention.

[00:34:50] Speaker 02:
And if I could point the court to two pieces of the appendix to review before reaching its decision, that would be the statements that SNAP made to the PTO itself at Appendix 961, and the prior art, which Mr. Salem submitted with his declaration,

[00:35:08] Speaker 02:
to show what was conventional at the time, or what was prior art at the time.

[00:35:12] Speaker 02:
And that would be Appendix 216, Figure 5.

[00:35:15] Speaker 02:
The one prior art patent that it provided to show what was conventional actually shows the flaws in the conventional technology that Sanderling's invention tried to improve on.

[00:35:26] Speaker 02:
I see a lot of time.

[00:35:28] Speaker 03:
OK.

[00:35:28] Speaker 03:
Thanks very much.

[00:35:28] Speaker 03:
The case is submitted.

[00:35:30] Speaker 02:
Thank you, Your Honor.

[00:35:31] Speaker 03:
Thank you, Your Honor.