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By Blake Brittain
Jan. 28 — A “system for providing a collaborative workspace” through a computer network is actually just a “method of organizing human activity,” a patent ineligible abstract idea, the U.S. District Court for the Northern District of California ruled Jan. 20.
In a separate order related to different patents in the same case, the court excluded expert damages testimony on Jan. 23 because the expert admitted to basing part of her analysis on “noncomparable” patent licensing agreements, and there was no evidence of the methodology she used to calculate her proposed royalty rate (Open Text S.A. v. Box, Inc., 2015 BL 17940, N.D. Cal., No. 3:13-cv-04910-JD, 1/23/15).
Open Text S.A. sued Box, Inc. for infringing five of its “Groupware” patents related to facilitating “workplace collaboration through the Internet or an intranet without specialized software or calling on a system administrator or IT person for help”—or, as the court described it, “the unremarkable concept of people working together on a project” (U.S. Patent Nos. 6,223,177; 6,917,962; 7,287,055; 7,299,258; and 7,320,018).
Box moved for a judgment on the pleadings of invalidity of the common claim shared by the five patents under 35 U.S.C. §101.
Using the U.S. Supreme Court's two-part framework from Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347, 2014 BL 170103 (2014), the court determined that the claim was patent ineligible under Section 101.
The court first ruled that the claim was directed at an abstract idea. Open Text argued that the idea was a novel “system for providing a collaborative workspace on a network server.” The court was not convinced that the claim was directed to anything more than a way for groups to work together.
“Shorn of its implementation-specific fleece, the claim is directed at providing a method for people to collaborate and share information without the need for specialized software or expertise,” the court said.
“It may be, as Open Text insists, that this idea was new at the time of invention, but it is still an abstract idea, and therefore meets the first part of the Mayo/Alice test.”
“A system for groups of people to collaborate and share information without specialized software or expertise is clearly a ‘method of organizing human activity,' and thus an unpatentable abstract idea,” the court said.
The court then ruled that the claim was not saved by an inventive concept that would “ ‘transform the nature of the claim' into a patent-eligible application.”
“Open Text points to four claim limitations as inventive: (1) the use of a server-based system (as opposed to a peer-to-peer system); (2) the workgroup creator; (3) the use of a web browser for accessing the site; and (4) security controls,” the court said. “But it is apparent from the patent itself that these implementation-specific elements were known prior to the invention of the Groupware patents.”
The court was also unconvinced by Open Text's argument that the limitations “circumscribe the claims to avoid total preemption of the idea and leave room for future innovations.”
“While preemption concerns may be the root of the Supreme Court’s section 101 test, it does not follow that the Court determines patentability by guessing at the probability of preemption,” the court said. “There is no non-speculative way for a court to determine whether and to what extent future innovation might be curtailed.”
Three days later, the court excluded testimony from Open Text's damages expert, Krista Holt, using the admissibility test from Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579, 27 U.S.P.Q.2d 1200, (1993).
The testimony included a determination of a reasonable royalty rate from a hypothetical negotiation. Holt analyzed four licensing agreements and used them to suggest a range for a reasonable royalty between 3 and 45 percent. However, Holt also said that the agreements did not “provide evidence of an established royalty,” were “not comparable licenses for the [patents],” and that “she did not rely on them.”
The court determined that the reliance on “inappropriate” licenses in her calculations made them inadmissible.
“Both Open Text and Holt agree that she affirmatively rejected the licenses as non-comparable,” the court said. “Because of this and the fact that the 3% to 45% ‘bargaining range' is unquestionably based on inappropriate licenses, the range cannot be admitted into evidence or used in any way to determine a royalty rate.”
The court also excluded Holt's final proposed royalty rate of 15 percent. The court said that her analysis consisted of “one to three paragraphs per factor, followed by a line indicating whether she thinks the impact of the factor on the royalty rate is ‘Upward,' ‘Downward,' or ‘Neutral.' Upward or downward from what starting point is never stated, and at the hearing, Holt testified that she had no numerical starting point.”
“What mandates exclusion here, rather than simply subjecting the opinions to cross examination, is not that the qualitative factors Holt discusses are improper considerations in determining a royalty, or that the reams of evidence that she claims she considered are beyond the pale,” the court said. “Exclusion is required because the link, if any, between those inputs and Holt’s final royalty is written in invisible ink.”
The court also excluded the testimony because it was “impossible to verify” whether Holt had apportioned away the portions of the allegedly infringing products that were not at issue.
Judge James Donato wrote both opinions.
Open Text was represented by Brian Jeffrey Eutermoser of Cooley LLP, Broomfield, Colo. Box was represented by Mark Wayne Wasserman of Reed Smith LLP, Falls Church, Va.
To contact the reporter on this story: Blake Brittain in Washington at email@example.com
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Full text of the judgment on the pleadings at http://www.bloomberglaw.com/public/document/Open_Text_SA_v_Box_Inc_et_al_Docket_No_313cv04910_ND_Cal_Oct_24_2.
Full text of the expert testimony exclusion order at http://www.bloomberglaw.com/public/document/Open_Text_SA_v_Box_Inc_et_al_Docket_No_313cv04910_ND_Cal_Oct_24_2/1.
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