CAFC Partially Reverses Noninfringement Judgment But Scraps IBM Web Advertising Claims as Ineligible

The U.S. Court of Appeals for the Federal Circuit (CAFC) in a precedential decision today mostly upheld a district court ruling that found Chewy, Inc. did not infringe several claims of one IBM web advertising patent and that granted summary judgment of patent ineligibility on certain claims of another. However, the decision, authored by Chief Judge Kimberly Moore, reversed the district court’s finding of noninfringement on one of the five asserted claims of one patent, remanding the case for further proceedings on that issue.

IBM owns U.S. Patent Nos. 7,072,849 and 7,076,443, both relating to improvements in web-based advertising. Chewy sued IBM, seeking declaratory judgment of non-infringement, and IBM filed counterclaims alleging infringement of the patents via Chewy’s website and mobile app. The district court ultimately granted Chewy’s motion for summary judgment of noninfringement of claims 1, 2, 12, 14, and 18 of the ’849 patent and its motion for summary judgment that claims 13, 15, 16, and 17 of the ’443 patent were patent ineligible under Section 101.

Noninfringement

The district court granted summary judgment of noninfringement because it found that “no reasonable factfinder could find Chewy’s website or mobile applications perform the selectively storing limitation recited in the claims.” That limitation forms step c. of representative claim 1 and requires “selectively storing advertising objects at a store established at the reception system.” IBM disagreed with the district court’s construction of the limitation but said that even accepting the court’s construction there were factual disputes precluding summary judgment. However, the CAFC agreed with the district court with respect to claims 1, 2, 14 and 18 of the ‘849 patent, holding that the evidence showed Chewy’s website and mobile apps retrieve advertising objects in response to a user requesting the relevant page, whereas the construed limitation requires an object to be “retrieved and stored at the user’s terminal ‘before being requested by the user.’”

Genuine Dispute of Fact

With respect to claim 12 of the ‘849 patent, however, the CAFC agreed with IBM that there is a genuine dispute of material fact as to whether Chewy meets the relevant limitation of step b of claim 8, from which claim 12 depends, which reads “b. establishing characterizations for respective users based on the compiled data.” This requires “delivering advertisements to a user based on user-specific targeting criteria, such as the user’s interaction history or demographics.”

The district court said there was no dispute that Chewy delivers ads based on the page the user is viewing regardless of interaction history or demographics, but IBM pointed first to Chewy’s privacy policy as evidence that there is a dispute. The privacy policy says that Chewy uses “what ads you see, what ads you interact with, and other actions you take on our Services” to “provide you” with “personalized or targeted ads . . . based on information from activities such as browsing or purchasing” (emphases added by the CAFC). The Federal Circuit’s opinion said the district court’s reasoning “fails to draw all reasonable inferences in the nonmoving party’s (IBM’s) favor” and that “[w]hen viewed through the proper lens, the privacy policy supports a finding that Chewy delivers advertisements based on the individual user’s interaction history.”

Although that alone was enough to preclude summary judgment, said the CAFC, IBM also pointed to an internal document from Chewy that indicated it has existing strategies for individualized targeting criteria. The document says one such strategy is that Chewy “recommends products from a Pet Parent[’]s order history based on the likelihood it is the right time to re-purchase,” which “becomes more focused on the specific Pet Parent as they repurchase at their own intervals.” The court rejected Chewy’s arguments on appeal as being unpersuasive, especially at the summary judgment stage, and reversed and remanded the decision on this claim.

Eligibility Fail

As to patent eligibility, the district court held at step one of the Alice v. CLS Bank inquiry that the challenged claims of the ‘443 patent are directed to “the abstract idea of identifying advertisements based on search results.” IBM argued the claims are directed to a patent-eligible improvement in online advertising, namely, “obtaining search results from a user’s search query and using those search results to identify targeted advertisements,” but the CAFC agreed with the district court. “The claims broadly recite correlating advertisements with search results using a generic process,” said the CAFC. The court cited Customedia Techs., LLC v. Dish Network Corp as precedent for holding claims to targeted advertising abstract at Alice step one and rejected IBM’s attempts to argue the claims improve “the specificity and relevancy of online advertisements.”

At Alice step two, IBM argued that the claims contain three distinct inventive concepts:

1) “claims 13 and 15 recite an inventive repository configured to associate search results with advertisements”;
2) “claim 13 recites using offline batch processing in an unconventional way”; and
3) “claim 16 recites refining the targeting criteria by assigning session identifiers when the user enters a search query.”

The CAFC was not persuaded by any of these arguments, or the argument that the claim elements as an ordered combination provide an inventive concept, and thus affirmed the district court’s eligibility holding.