Alice Rocks the Boat Once Again

1.12.16

Price optimization method isn’t patent-eligible

In 2014, the U.S. Supreme Court’s ruling in Alice Corp. Pty. Ltd. v. CLS Bank Int’l established a two-part test for determining patent eligibility. In its wake, the decision left many of those seeking patent protection for financial-related methods involving computers feeling a bit queasy. Now their boat has been rocked once again by another Alice-related decision: OIP Technologies, Inc. v. Amazon.com, Inc.

Better pricing decisions

OIP Technologies owns a patent on a computer-implemented method for “pricing a product for sale.” The patent covers a price-optimization method that “helps vendors automatically reach better pricing decisions through automatic estimation and measurement of actual demand to select prices.”

The patent explains that, traditionally, merchandisers have manually determined prices based on their qualitative knowledge of the items, pricing experience and other business policies. This approach slows the merchandiser’s reaction time to changing market conditions and often keeps businesses from charging an optimal price that maximizes profitability.

OIP sued Amazon for infringement of its patent. The trial court dismissed the case, finding the methods patent-ineligible. OIP appealed.

Background on Alice

Under the federal Patent Act, a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” The U.S. Supreme Court has long held that laws of nature, natural phenomena and abstract ideas aren’t patent-eligible.

As mentioned, in Alice, the high court established a two-part test for determining patent eligibility. First, a court must determine whether the patent claim covers a patent-ineligible concept, such as an abstract idea. If so, it must then consider the elements of the claim and determine whether these additional elements, individually or taken together as an ordered combination, transform the claim into a patent-eligible application.

Routine, conventional activities

In this case, the U.S. Court of Appeals for the Federal Circuit found that OIP’s patent claims covered the concept of “offer-based price optimization.” This concept, the court said, is similar to other “fundamental economic concepts” — such as using advertising as an exchange or currency, intermediated settlement, risk hedging and data collection — that have been found to be abstract ideas by the Supreme Court and the Federal Circuit. The fact that OIP’s patent claims didn’t preempt all price optimization, or could be limited to price optimization in the e-commerce setting, didn’t make the claims any less abstract.

Beyond the abstract idea of offer-based price optimization, the patent claims recited well-understood routine conventional activities, either by requiring conventional computer activities or routine data-gathering steps. For example, one claim described:

• “Sending a first set of electronic messages over a network to devices … programmed to communicate,”
• Storing test results in a “machine-readable medium,” and
• “Using a computerized system … to automatically determine an estimated outcome and setting a price.”

The court found these computer functions were well understood, routine, conventional activities previously known to the industry.

At best, said the court, the patent described the automation of the fundamental economic concept of offer-based price optimization through the use of generic computer functions. The key distinguishing feature of the patent claims was the ability to automate or otherwise make more efficient traditional price-optimization methods. But, the court observed, relying on a computer to perform routine tasks more quickly or more accurately is insufficient to transform an abstract idea into a patent-eligible application.

Anchored decision

OIP requested reconsideration of the appeals court’s decision, asserting that Alice was being wielded like a “buzz saw.” But the court was unmoved. This doesn’t bode well for other parties arguing for the patent-eligibility of similar economic concepts.