DDR Holdings, LLC v. Hotels.com, L.P. (Fed. Cir. 2014)

By Kent Sieffert

On December 5, 2014, the U.S. Court of Appeals for the Federal Circuit once again applied the Supreme Court’s recent decision in Alice Corp. v. CLS Bank Int'l,[1] this time in an appeal from the U.S. District Court for the Eastern District of Texas where the District Court denied the defendant’s motion for judgment as a matter of law (JMOL) on non-infringement and invalidity of the asserted patents.[2]   In its decision, DDR Holdings, LLC v. Hotels.com, L.P. (Fed. Cir. 2014), the U.S. Court of Appeals, for the first time, applied Alice and found that at least one of the asserted patents (U.S. Patent No. 7,818,399 (filed Jan. 30, 2006), hereinafter, the “‘399 patent”) for a computer-implemented method was directed to patentable subject matter.[3]  That is, for the first time at the U.S. Court of Appeals for the Federal Circuit, a software-related patent survived a challenge under Alice.

Initially, DDR Holdings ("DDR") sued Hotels.com and several other defendants in the United States District Court for the Eastern District of Texas, alleging infringement of U.S. Patent Nos. 6,993,572 (filed Jan. 30, 2006) and 7,818,399.[4]  After trial, the jury found that the asserted claims of the '572 and '399 patents were valid and infringed.[5]  The Defendants appealed and argued, inter alia, that the software-related '399 patent was directed to patent-ineligible subject matter.[6]

In general, the ‘399 patent describes and claims techniques for “expanding commercial opportunities for Internet websites through coordinated offsite marketing.”[7]  According to the ‘399 patent, an affiliate e-commerce system provides its hosts with added value and incremental revenue of traditional affiliate programs, but also allows the hosts to control customer experience throughout a purchase transaction and allows the affiliated merchants with incremental sales without loss of visitor traffic.[8]  The ‘399 patent states that the “look and feel” of each host is “captured and stored” by the system such that web pages served by the affiliate e-commerce system give the impression that the user is viewing pages served by the host.[9]

The Federal Circuit's analysis focused on claim 19 of the '399 patent,[10] which recites:

A system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising:

    (a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements, which visually perceptible elements correspond to the plurality of first web pages;

        (i) wherein each of the first web pages belongs to one of a plurality of web page owners;

        (ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and

        (iii) wherein the selected merchant, the outsource provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other;

    (b) a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to:

        (i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages;

        (ii) automatically identify as the source page the one of the first web pages on which the link has been activated;

        (iii) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and

        (iv) using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page.

In analyzing the claim, the Federal Circuit applied the framework set forth by the Supreme Court in Alice Corp. to determine: (1) whether the claims at issue are directed to a patent-ineligible abstract idea and, if so, (2) whether the claims contain additional elements that transform the nature of the claim into a patent-eligible application of that abstract idea.[11]  The Federal Circuit characterized this second step as the “search for an ‘inventive concept’” sufficient to ensure the claim amounts to “significantly more” than a patent on an ineligible concept.[12]

During its analysis, the Federal Circuit focused on at least one technical problem purportedly solved by the ‘399 patent:

As an initial matter, it is true that the claims here are similar to the claims in the cases discussed above in the sense that the claims involve both a computer and the Internet. But these claims stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks. [13]

Similarly:

In particular, the ’399 patent’s claims address the problem of retaining website visitors that, if adhering to the routine, conventional functioning of Internet hyperlink protocol, would be instantly transported away from a host’s website after “clicking” on an advertisement and activating a hyperlink.[14]

Moreover:

In more plain language, upon the click of an advertisement for a third-party product displayed on a host’s website, the visitor is no longer transported to the third party’s website. Instead, the patent claims call for an “outsource provider” having a web server which directs the visitor to an automatically-generated hybrid web page that combines visual “look and feel” elements from the host website and product information from the third-party merchant’s website related to the clicked advertisement.  In this way, rather than instantly losing visitors to the third-party’s website, the host website can instead send its visitors to a web page on the outsource provider’s server that 1) incorporates “look and feel” elements from the host website, and 2) provides visitors with the opportunity to purchase products from the third-party merchant without actually entering that merchant’s website.[15]

Upon observing that the claims in the ‘399 patent were directed to solving a specific technical problem, the Federal Circuit concluded that the claims at issue “do not attempt to preempt every application of the idea of increasing sales by making two web pages look the same.”[16]  The Federal Circuit reasoned that, instead, the claims recited a “specific way to automate the creation of a composite web page by an ‘outsource provider’ that incorporates elements from multiple sources in order to solve a problem faced by websites on the Internet.”[17]  The Federal Circuit noted, in particular, that the claims of the ‘399 patent specify how interactions with the Internet are manipulated in a certain way to yield a desired result that “overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink.”[18]  Based on this analysis, the Federal Circuit concluded that the ‘399 patent claims include “additional features” that ensure the claims do not monopolize the abstract idea and, therefore, are directed to patent-eligible subject matter.[19]

In this way, in DDR Holdings, the Federal Circuit provided some initial guidance to aid the patent practitioner in ensuring that patents for software-related inventions are crafted to describe and claim technical solutions to specific problems so as to be squarely directed to patent-eligible subject matter.

 

 

[1] 134 S. Ct. 2347 (2014).

[2] DDR Holdings, LLC. V. Hotels.com, L.P., No. 2013-1505 (Fed. Cir. Dec. 5, 2014).

[3] Id., slip op. at 16.

[4] Id., slip op. at 7.

[5] Id., slip op. at 8.

[6] Id., slip op. at 8–9.

[7] ‘399 Patent, Title at [54].

[8] ‘399 Patent, col. 2, ll. 59-67.

[9] ‘399 Patent, col. 3, ll. 9-16.

[10] See, e.g., DDR Holdings, slip op. at 20–23.

[11] Id., slip op. at 16 (citing Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014)).

[12] Id. (citing Alice Corp., 134 S. Ct. at 2355).

[13] Id., slip op. at 20 (emphasis added).

[14] Id.

[15] Id., slip op. at 20–21 (footnote omitted).

[16] Id., slip op. at 23.

[17] Id. (emphasis added).

[18] Id., slip op. at 22.

[19] Id., slip op. at 23.