113-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 1of 29 Page ID #:459 RICHARD B. NEWMAN, Cal. Bar No. 195191 |New Ye ‘Telephone: By 9 1368777 Facsimile: (866) 449-4897 DARREN M. FRANKLIN, Cal. Bar No. 210939 /dfranklin @ she ‘A Limited Liability Partnership Including Professional Corporations 333 South Hope Street, 43rd Floor Los Angeles, California 90071-1422 Telephone: (213) 620-1780 Facsimile: (213) 620-1398 Attorneys for Defendant and Counter-Claimant ‘CLICKBOOTH.COM, LLC UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION ESSOCIATE, INC., a Delaware Case No. SACV 13-01886 JVS (DFMx) corporation, REPLY IN SUPPORT OF Plaintiff, DEFENDANT DEFENDANT. CLICKBOOTH.COM, LLC’S v. MOTION FOR JUD DGMENT TON CLICKBOOTH.COM, LLC, PATENT INEMIGIBILITY UNDER 35 US.C. § 101 Defendant. | Date: February 9, 2015 AND RELATED COUNTERCLAIMS. | Time: 1:30 PM Courtroom: 10C Judge: Hon. James V. Selna SRERRTATRT TERY OF DEFENDANT CLICRHOOTH N SURORTOVUDGMENTONTHE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. $101BR 26 27 28 113-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 2 of 29 Page ID #:460, TABLE OF CONTENTS I. INTRODUCTIO! Il. | THE COURT SHOULD GRANT JUDGMENT ON THE PLEADING: A. Alice Step 1; The Claims Are Directed To an Abstract Idea Applied To an Existing Technological Environment. 3 1. Essociate misapplies Alice by failing to address the “directed to a patent-ineligible concept” test. 3 2. Essociate misapplies Alice by arguing the “novelty” of its patent.....6 3. Essociate misapplies Alice by arguing that Internet affiliate marketing is a “narrow” 4. Essociate misapplies Alice by relying upon an overly narrow interpretation of “abstract idea 5. Essociate cannot mask its use of an abstract idea by arguing about the patentability of prior-art “standalone” and “ iat hub” systems. B. Alice Step 2: The Claims Fail To Add “Significantly More” to the ‘Abstract ldea—No “Inventive Concept” a 1. Essociate fails to explain how anything its claims transforms them into something that is patent eligible. 2. Essociate again misapplies Alice by focusing onthe alleged novelty of its abstract idea, as applied to affiliate systems. .....13 3. Essociat's allegation that it solved a “technological problem’ does not make the abstract idea patent-eligibl wl 4, Essociate fails to explain how its claim steps, in combination, recite anything more than basic Internet record-keeping.......--17 5. Essociate’s claims recite merely conventional techniques C. The Claims Do Not Pass the Machine-or-Transformation Test . Ill. CONCLUSION .. i SRT aTSDAT REPLY OF DEFENDANT CLICKBOGTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT INELIGIBILITY UNDER 35 U'S.C § 101Case ey aAunarwne 113-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 3 of 29 Page ID #:461 TABLE OF AUTHORITIES Cases |Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347 (2014) Bascom Research, LLC v. LinkedIn, Inc., --- F.Supp.3d ---, 2015 WL 149480 (N.D. Cal. Jan. 5, 2015) Bilski v. Kappos, 561 US. 593 (2010)... Califormia Inst. of Tech. v. Hughes Comme’ns Inc., ---F. Supp. 3d ---, No. 2:13-CV-07245-MRP, 2014 WL 5661290 (C.D. Cal. Nov. u 3, 2014), Cloud Satchel, LLC, v. Amazon.com, Inc., --- F. Supp. 3d ---, 2014 WL 7227942 (D. Del. Dec. 18, 2014) CLS Bank Int'l v. Alice Corp. Pty, 717 F.3d 1269 (Fed. Cir. 2013). Cogent Med., Inc. v. Elsevier Inc., 2014 WL 4966326 (N.D. Cal. Sept. 30, 2014). Content Extraction & Transmission LLC, v. Wells Fargo Bank, F.3d ---, 2014 WL 7272219 (Fed. Cir. Dec. 23, 2014)... DDR Holdings v. Hotels.com, L. 773 F.3d 1245 (Fed. Cir. 2014) 2, 15, 23 Diamond v. Diehr, 450 U.S. 175 (1981). IpLearn, LLC v. K12 Inc., ~-- F. Supp. 3d --, No. 11-1026-RGA, 2014 WL 7206380 (D. Del. Dec. 17, 2014). wld Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012)... ...passim |McRO, Inc. v. Namco Bandai Games Am., Inc., No. CV 12-10327 GW (FFMx), 2014 WL 4749601 (C.D. Cal. Sept. 22, 2014)....7 ii SRT REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT.INELIGIBILITY UNDER 35 U.S 10]Case eyaAnerwone © /13-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 4 of 29 Page ID ¥:462 Mortgage Grader, Inc. v. Costco Wholesale Corp., No. SACV-00043 AG (ANx) (C.D. Cal. Jan. 12, 2015). Parker v. Flook, 437 U.S. 584 (1978)... State St. Bank & Trust Co. v. Signature Fin. Grp., Inc, 149 F.3d 1368 (Fed. Cir. 1998).... LO Synopsys, Inc. v. Mentor Graphics Corp., No. C 12-6467 MMC, 2015 U.S. Dist. LEXIS 6333 (N.D. Cal. Jan. 20, 2015)...14 Ultramercial, Inc. v. Hulu, LLC, 712 F.3d 709 (Fed. Cir. 2014). passim -iti- SRERATAT EFL OF DEFENDANT CLICRSOOTH IN SUPPORT OFTUDOMENTONTHE PLEADINGS BASED ON PATENT INELIGIBILITY ENDER 8 USC 6Hcase }13-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 5 of 29 Page ID #:463 I. INTRODUCTION In its motion for judgment on the pleadings, Defendant Clickbooth showed that Essociate’s claimed invention is patent ineligible under the two-part test set out in Alice Corp. Pty. Lid. v. CLS Bank Int'l, 134 S.Ct. 2347 (2014), and Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 $.Ct. 1289 (2012). As to the first step, the patent claims are directed to the abstract idea of receiving and tracking referrals, applied to the preexisting technical environment of affiliate systems. The ing affiliate system to receive referrals from a referring Webmaster in an affiliate pool of Webmasters.” Ex. 1, col. 24, lines 21-23.' claims on their face suggest the abstract idea of “configuring an exii As to the second step, Essociate implemented this abstract idea using computers and the Internet for their conventional record-keeping purposes, using the draftsman’s art to break down the recordkeeping into its constituent steps of “assigning” webmaster unique identifiers, “receiving a user request,” “correlating” the webmaster ID to one used by the merchant’s system, and “generating a URL” that includes the correlated ID for the merchant’s system. This conventional use of computers and the Internet for their basic “electronic recordkeeping” functions is not an “inventive concept.” Alice, 134 S.Ct, at 2359. It is not “significantly more” than the abstract idea as applied to a preexisting technological system. As a result, it does not transform the nature of the claim such that Essociate can monopolize the idea of receiving and tracking referrals from a system outside the existing affiliate system. Essociate’s claims are simply not patent eligible. As explained below, Essociate’s opposition is largely non-responsive and relies upon a pre-Alice standard to argue that the Essociate Patent does not “claim an abstract idea.” Opp. at 6:11, 6:13, 8:20 (emphasis added). Essociate is wrong about the standard. Under Alice step 1, the patent claims merely need to be directed to an ' Essociate’s E a patent is Ex. 1 to the Declaration of Darren M. Franklin in support of this motion. .eferences to “Ex.” are to exhibits authenticated by this declaration. -l- SRST "REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT:INELIGIBILITY UNDER 35 USC 101Case }13-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 6 of 29 Page ID #:464 abstract idea. 134 S.Ct. at 2355. That is plainly the case here, as shown by Essociate’s admissions that “affiliate tracking is one concept underlying the ‘660 Patent” and that its claims are directed to “[t]he idea that an affiliate who isn’t a ‘member of a merchant's affiliate network can still participate in it—through the virtual affiliate pool.” Opp. at 9:22-23, 12: 5-6. For similar reasons, as to Alice step 2, Essociate did not add significantly more to the abstract idea by adding an inventive concept. Clickbooth explained in its motion, and Essociate did not rebut, that the use of URL redirects, the correlation of webmaster IDs, and the like were conventional techniques that have long been used for electronic record-keeping or bookkeeping purposes on the Internet—no different in principle than the use of computers to create shadow accounts in Alice. Mot. at 18, Essociate has offered nothing to support the notion that it invented the techniques for directing traffic from one Internet website to another or for keeping track of the source of the traffic, or that its patent claims apply these techniques in anything other than a normal and expected manner. Indeed, Essociate does not argue that its techniques were in any way unconventional or prevented the Internet from working as expected, as was the case with the hyperlink in DDR Holdings v. Hotels.com, L.P., 773 F.3d 1245, 1258-59 (Fed. Cir. 2014). In the chart on pages 12-15 of its opposition brief, Essociate merely asserts that each claim element contains an inventive concept because the claimed invention implements the supposedly novel idea of “virtual affiliates.” But a “virtual affiliate” is itself a reference to the abstract idea of receiving and tracking referrals from outside an existing affiliate system. Essociate admits this, stating that virtual affiliates are affiliates of one affiliate system that can send traffic to an existing merchant affiliate system without actually joining that system. Opp. at 3:11-13. In other words, virtual affiliates are outside referral sources, applied to how people do business on the Internet using relationship marketing. In sum, Essociate patented an abstract idea as applied to the field of Internet 2. SRASTATSEAT "REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. 101Case /13-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 7 of 29 Page ID #:465 affiliate marketing, configuring existing merchant affiliate systems to receive and track referrals from outside sources using standard Internet programming techniques. Under Alice, it is time to recognize Essociate’s patent claims for what they are—an improper attempt to monopolize an abstract idea in a particular field without contributing “significantly more” than the conventional use of computers for standard electronic recordkeeping purposes. The Court should grant Clickbooth’s motion for judgment on the pleadings. Il. THE COURT SHOULD GRANT JUDGMENT ON THE PLEADINGS Alice instructs courts to answer two questions: First, are the claims “directed to a patent-ineligible concept,” such as an abstract idea? Alice, 134 S.Ct. at 2355. Second, do the patent claims contain “an ‘inventive concept’—i.e., an element or ‘combination of elements that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself"? Id. Essociate struggles to escape the inevitable conclusion that the answer to the first question above is “yes” and that the answer to the second question above is “no.” At the outset, Essociate tries to reduce the holding in Alice to a “narrow rule” 0. To the contrary, Alice has dramatically changed the way courts evaluate patents like that “provides no special guidance to the court’s inquiry here.” Opp. at the one that Essociate asserts against Clickbooth. Patents can no longer be used to monopolize abstract ideas by applying them to preexisting technological systems using conventional techniques and writing claims on how that was done. That is precisely what Essociate has done here with its patent. A. — Alice Step 1: The Claims Are Directed To an Abstract Idea Applied To an Existing Technological Environment 1. _ Essociate misapplies Alice by failing to address the “directed to a patent-ineligible concept” test. Under Alice, Essociate’s patent claims are directed to the abstract idea of receiving and tracking referrals from referral sources in an existing technological 3. SRST 'REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON TE ‘PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. $ 101Case wearuaAnrwn '13-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 8 of 29 Page ID #:466 environment, Essociate applies a pre-Alice standard to claim that this isn't so because “while affiliate tracking is one concept underlying the '660 Patent, it is not the claimed invention.” Opp. at 9:22-23 (emphasis added). Of course, referral tracking does not have to be “the claimed invention” for the first step in Alice to be met. Under Alice step 1, the claims merely need to be directed to an abstract idea. 134 S.Ct. at 2355, The claimed invention in Alice was not “the concept of, intermediated settlement,” but the Court determined that the patent claims were directed to this concept. Id. at 2356-57. As explained in Clickbooth’s opening brief, Essociate’s patent claims are directed to an abstract idea—receiving and tracking referrals from referral sources. It is difficult for even Essociate to describe its patent claims without admitting that they are directed to—even if they do not merely claim—this abstract idea, Essociate asserts that its patent claims are “an improvement on the prior art by affording ‘virtual affiliates’ access to an existing affiliate system.” Opp. at 8:22-23. But the improvement is nothing more than “configuring” these existing systems to receive and track referrals using conventional Internet technology. As Clickbooth noted in its opening brief, the Supreme Court and Federal Circuit are as interested in the purpose of the claimed invention as in the individual elements of the claims, when considering step 1 of Alice. For example, in Alice, the Supreme Court concluded that the patent claims were directed to mitigating settlement risk using a third party, even though the claims recited more. The patent claims outlined an entire process, including creating shadow records, obtaining a start-of-the-day balance from an exchange institution, and so on. See Alice, 134 S.Ct. at 2359, But these steps were meant to achieve the purpose of mitigating settlement risk. Here, Essociate asserts that its claims are not abstract because the patent gives ‘virtual affiliates’ access to an existing affiliate system.” Opp. at 8:23. But this is precisely why the claims are directed to an abstract idea. Essociate’s formulation is “4. SpuRITARRTaTSEAT REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT: INELIOIBILITY UNDER 35 USC $101Case 8 {13-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 9 of 29 Page ID #:467 similar to Clickbooth’s statement; it just uses Internet terminology because Essociate applied the idea to the “particular technological environment” of the Internet (including existing affiliate networks), which is insufficient to confer patent eligibility. Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 716 (Fed. Cir, 2014). In particular, “virtual affiliates” are “a subset of the Webmasters of the affiliate pool” who “remain[] independent from the Merchant's affiliate system.” Ex. 1, col. 7, lines 41-51. They are a type of independent referral source on the Internet. As also explained in the opening brief, an affiliate system is itself a type of Internet-based referral network for receiving and tracking referrals. Essociate’s argument that “affiliate system” has a more specific meaning (Opp. at 1 1:26-28) is irrelevant to this point. Essociate’s patent claims simply suggest that these preexisting referral networks should themselves be configured to receive and track outside referrals. That merely limits the application of the idea of receiving and tracking referrals to a preexisting technological environment, which, again, does not change the nature of the claim. Bilski v. Kappos, 561 U.S. 593, 660 (2010) (“[T]he prohibition against patenting abstract ideas ‘cannot be circumvented by attempting to limit the use of [the patent ineligible concept] to a particular technological environment.””) (quoting Diamond v. Diehr, 450 U.S. 175, 191-92 (1981)). Essociate also asserts that its claims allow a merchant affiliate network to “broaden its reach to affiliates of other networks [the “virtual affiliates”] without having to sign up each individual affiliate.” Opp. at 9:7-9. Again, this just confirms that the claims are directed to applying the abstract idea of receiving outside referrals and tracking them to existing affiliate networks. Essociate suggested to existing referral networks that they should open up their networks to receive referrals from people they had not signed up and screened themselves. And it did so for the same reason that people have been receiving and tracking referrals for years, to increase leads and reward referral sources. This is an old technique for ordering private obligations or relations and not the type of concept the Patent Act was 5 SaRTEET ‘REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF UDGMENT ON THE PLEADINGS BASED ON PATENT INELIGIBILITY UNDER 35 USC § 101Case 8| ey Ane won '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 10 of 29 Page ID #:468 designed to protect. See Content Extraction & Transmission LLC, v. Wells Fargo Bank, -- F.3d ---, 2014 WL 7272219, at *3 (Fed. Cir. Dec. 23, 2014) (“[Allthough there is no categorical business-method exception, claims directed to the mere formation and manipulation of economic relations may involve an abstract idea.”). Ultimately, it is undeniable that Essociate’s patent claims are directed to an abstract idea of allowing the receipt and tracking of referrals, as applied to a preexis a “concept,” as a “Virtual Affiliate” (Opp. at 8) but that doesn’t change the fact that ‘ing technological environment. Essociate refers to this idea or, as it calls it, its claims are directed to an abstract idea. The court should thus find that the Essociate Patent fails step 1 of the Alice test. 2. Essociate misapplies Alice by arguing the “novelty” of its patent. Essociate’s opposition relies on arguments that are inconsistent with Alice. For example, it takes pains to argue that “Alice did not change the time-honored rules for novelty, and the '660 Patent passes them.” Opp. at 1:9-10. But, as Clickbooth explained in its opening brief, a claimed invention can be novel and still be ineligible for patenting under 35 U.S.C. § 101. (Mot. at 9:1-12.) In particular, Clickbooth cited Ultramercial’s express rejection of the argument that “abstract ideas remain patent eligible under § 101 as long as they are new ideas, not previously well-known, and not routine activity.” 772 F.3d at 714. The Honorable Andrew J. Guilford similarly recognized in a recent Section 101 decision that the purported novelty of an idea does not save it from being abstract: “In the case of a new abstract idea (or newly discovered law of nature or physical phenomenon) the exceptions to § 101 ... are tools uniquely capable of preventing or invalidating a patent that otherwise passes §§ 102 and 103 [by being novel and not obvious]."” Mortgage Grader, Inc. v. Costco Wholesale Corp., No. SACV-00043 AG (ANx), slip. op. at 5 (C.D. Cal. Jan. 12, 2015). Essociate thus misapplies Alice by arguing the “novelty” of its patent. Step 1 of the Alice test (whether the patent claims are directed to an abstract idea) does not -6- SeRATATSET TREPLY OF DEFENDANT CLICKHOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. 10Case 8} ea Auer wD 10 il 12 13 14 15 16 17 18 19 20 21 22 2 26 27 2 8B 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 11 of 29 Page ID #:469 consider the alleged novelty of the claimed invention—the fact that the claimed invention might have achieved a new technological result. The Federal Circuit has clearly held that “any novelty in implementation of the idea is a factor to be considered only in the second step of the Alice analysis.” Ultramercial, 772 F.3d at 715 (Fed. Cir. 2014) (disagreeing with the patent owner’s claim that adding “novel of non-routine components to the claimed idea necessarily turns an abstraction into something concrete”); accord Cloud Satchel, LLC, v. Amazon.com, Inc., --- F. Supp. 3d -—, 2014 WL 7227942, at *6 (D. Del. Dec. 18, 2014). As the Honorable George H, Wu recognized in a recent opinion, “The invention here may have been novel, but the claims are directed to an abstract idea.” McRO, Inc. v. Namco Bandai Games Am., Inc., No. CV 12-10327 GW (FFMx), 2014 WL 4749601, at *11 (C.D. Cal. Sept. 22, 2014). Rather than considering the purpose of the claimed invention, as the case law requires, Essociate focuses on whether the '660 patent “claims a specific process for achieving a novel technological result.” Opp. at 8:20-21.? This is the standard for an anticipation defense under 35 U.S.C. § 102, not the standard for a subject-matter eligibility defense under under 35 U.S.C. § 101. Likewise, Essociate focuses on whether “Virtual Affiliates’ is a novel concept in the online affiliate-marketing industry.” Opp. at 9:1-2. This focus is a distraction because the test under step 1 of, Alice is not novelty, it is whether the claims are directed to an abstract idea. 7 Bssociate misrepresents the holding of OpenTV, Inc. v. Netflix Inc., 2014 WL 7185921 (N.D. Cal. Dec. 16, 2014). First, Essociate omits that OpenTV addressed three patents, two of which the court invalidated as directed to abstract ideas. Id, at ipa fa 28 forthe remaining patent, Essociate wrongly states tha the court found that patent not to claim an abstract idea, Opp. at 7-21-8:2. The court never said that, Rather, the patentee argued that “the scope of the claim is much narrower than {might appear “on its face,” and thus was not directed fo an abstract idea, 2014 WL 7185081, at°4. ‘The court thus deferred the invalidity analysis until after claim construction and declined to make any findings on whether the claims were directed to an abstract idea. Id. at *5. Moreover, the case is plainly distinguishable from the t action. Essociate does not argue that its claims are narrow in scope, and at most raises an irrelevant quibble about the meaning of “affiliate system,” Opp. at 11:19-26, which the Essociate patent admits was conventional technology. Ie SRTRRTRAT TREFLY OF DEFENDANT CLICKBOOTHTIN SUPPORT OF ODGRENT ON TE NGS BASED ON PATENTINGLIGIBILITY UNDER 3S USC #1Case 8| 8B y 8 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 12 of 29 Page ID #:470 Moreover, as Clickbooth established in its opening brief, and Essociate concedes by not responding to the point, the idea of receiving and tracking referrals isn't even new. For example, lawyers have for years been receiving and tracking referrals from other lawyers outside their formal referral networks, including to give other lawyers referral fees when permitted, Mot. at 12:13-15. Essociate’s only response is that “Virtual Affiliates” is a novel concept in the online affiliate- marketing industry.” Opp. at 9:1-2 (emphasis added). Maybe so. But that just ‘means Essociate applied this abstract idea (receiving and tracking referrals) to an existing technological environment—as its patent claims expressly say, to an “existing affiliate system.” As Clickbooth noted in its opening brief, again without response from Essociate, telling a programmer to configure an existing affiliate system to receive referrals from a new source is nothing more than a suggestion that the programmer should apply the abstract idea to a particular technological environment, which is insufficient under the case law. Mot. at 16:18-20 (citing Mayo, 133 S.Ct. at 1297). 3. Essociate misapplies Alice by arguing that Internet affiliate marketing is a “narrow” field. Not only does Essociate misapply Alice by arguing the “novelty” of its patent, it invites legal error by arguing that its claimed invention applies only “in the narrow world of Internet affiliate marketing.” Opp. at 8:21-22. The case law does not permit Essociate to preempt an abstract idea, no matter how broad or narrow the technological field. After the Supreme Court decisions in Bilski, Mayo, and Alice, this is established law, and the Supreme Court has squarely rejected Essociate’s rationale for patent eligibility. See Alice, 134 S.Ct. at 2358 (““[T]he prohibition against patenting abstract ideas cannot be circumvented by attempting to limit the use of [the idea] to a particular technological environment.””) (quoting Bilski v. Kappos, 561 U.S. 593, 610-11 (2010)); Mayo, 132 S.Ct. at 1305 (““Flook established that limiting an abstract idea to one field of use ... did not make the 8 SeRrERaTATSRIT [REPLY OF DEFENDANT CLICKHOOTIIN SUPPORT OFTUDOMENT ON THE PLEADINGS BASED ON PATENT:INELIGIBILITY UNDER 35 USC 4 101Case 8| 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 13 of 29 Page ID #:471 concept patentable.’”) (quoting Bilski); Parker v. Flook, 437 U.S. 584, 589-90. (1978) (holding that claims were patent ineligible even though they did not “wholly preempt” use of a formula outside the petrochemical and oil-refining industries). Thus, as Clickbooth pointed out in its opening brief, applying an abstract idea to an existing system is not “significantly more than a patent on the [ineligible concept] itself.” Mot. at 16:16-22 (quoting Alice, 134 S.Ct. at 2355). 4. Essociate misapplies Alice by relying upon an overly narrow interpretation of “abstract idea.” Essociate also asserts that it has not applied an abstract idea because such ideas must generally be a “building block” or a “‘fundamental practice’ of a particular field.” Opp. at 6:21-22 (emphasis added) (citing Alice 134 S.Ct. at 2356- 57). Alice did not hold that an idea must have been prevalent “in a particular field” to be abstract, or even that it must have been a building block or fundamental practice. Essociate distorts the holding in Alice so it can argue that receiving outside referrals is not an abstract idea for the affiliate marketing industry because this practice was not prevalent when Essociate came along—that is, because companies like Amazon.com and Linkshare insisted on signing up and screening their own affiliate webmasters to control the quality of traffic they were sent. As Clickbooth has explained, however, applying an abstract idea to a preexisting technological environment does not transform the nature of the claims. See Alice, 134 S.Ct. at 2358; Mayo, 132 S.Ct. at 1297. And, as explained above, the concept of “novelty” is irrelevant to the question of whether a patent claim is directed to an abstract idea. Moreover, contrary to Essociate’s argument, abstract ideas are not limited to “fundamental truths,” “fundamental economic practices,” or “basic tools of scientific and technological work.” See Alice, 134 S.Ct. at 2356 (rejecting the argument that abstract ideas are confined to “preexisting, fundamental truths”); Bascom Research, LLC v. LinkedIn, Inc., --- F. Supp.3d ---, 2015 WL 149480, at *7 (N.D. Cal. Jan. 5, 2015) (citing Alice). The recent Ultramercial decision is -9- SuRTaTSaT "REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC § 101,Case 8} eyraunrone © PR a 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 14 of 29 Page ID #:472 instructive. In Ultramercial, the Federal Circuit affirmed the invalidity of a patent describing a method of distributing copyrighted media paid for by advertisers over the Internet. 772 F.3d at 712. Applying Alice, the Federal Circuit held that “the concept embodied by the majority of the limitations describes only the abstract idea of showing an advertisement before delivering free content.” Id. at 715. The idea of “showing an advertisement before delivering free content” is hardly a “fundamental economic practice,” yet the Federal Circuit had no problem finding the patent invalid as directed to an abstract idea. 5. _ Essociate cannot mask its use of an abstract idea by arguing about the patentability of prior-art “standalone” and “affiliate hub” systems. Essociate asserts, without support, that Clickbooth “impale[d]” itself by arguing that the prior-art “standalone” and “affiliate hub” systems are patentable. Opp. at 9:26-10:20. This assertion is not supported by any citation in Essociate’s brief because Clickbooth never made this argument. It is certainly possible, however, that these systems are not patent eligible because, as Clickbooth explained in its motion, the Patent Office was applying the wrong standard for patent eligibility at the time they were issued. See State St. Bank & Trust Co. v. Signature Fin. Grp., Inc, 149 F.3d 1368, 1370 (Fed. Cir. 1998) abrogated by In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (affirming patent-cligibility of a “data processing system . . - for implementing an investment structure” because it provided a “useful” result), In any event, the patent eligibility of these earlier referral networks is not before the Court. What is before the Court is Essociate’s attempt to monopolize the abstract idea of receiving and tracking referrals as applied to the preexisting technological field of Internet affiliate systems. Essociate did not invent these preexisting systems. It suggested only that they be configured to implement the abstract idea of receiving and tracking referrals between affiliate systems using the conventional tools of the Internet. -10- SMRETATSRET REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-NELIGIBILITY UNDER 35 USC § 101,Case 8| 8 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 15 of 29 Page ID #:473 Essociate also misapplies a district court decision regarding preemption to suggest that its claims are patent eligible as long as Clickbooth can find a way to avoid infringement. Opp. at 10:9-12. That was not the holding in Califormia Inst. of Tech. v. Hughes Comme’ns Inc., ~~ F. Supp. 3d ~--, No. 2:13-CV-07245-MRP, 2014 WL 5661290, at *15 (C.D. Cal. Nov. 3, 2014). To the contrary, the court found in applying the second step of the Alice analysis—the “inventive concept” step—that although the claims at issue were directed to abstract ideas (encoding and decoding data for error correction), they contained meaningful limitations that were not “necessary or obvious tools for achieving error correction.” Id. Here, as explained in Clickbooth’s motion, Essociate applied the idea of receiving and tracking referrals to existing affiliate networks by using the obvious tools these networks always used to track their existing referrals, such as URL redirects and webmaster IDs. See Mot. at 16-17 & n.14 (describing URL referral links and webmaster IDs of Amazon network). Essociate used these existing tools, including when it correlated webmaster IDs of the two systems for routine book-keeping purposes. Recognizing this, Essociate argues that Clickbooth could avoid infringement by giving up the use of URL referral links and “using cookies and pixels only.” Opp. at 10. Essociate’s argument that it did not preempt the entire field was the precise argument made by the dissenting Federal Circuit judges in Alice who would have sustained the patent-eligibility of the claims that the Supreme Court struck down. They argued that Alice Corp. did not claim an abstract idea because “someone can use an escrow arrangement in many other applications, without computer systems, and even with computers but in other ways without infringing the claims.” CLS Bank Int'l v, Alice Corp. Pty,717 F.3d 1269, 1309 (Fed. Cir. 2013). But the Supreme Court was not persuaded by such arguments. It recognized that the claims recited the creation of so-called “shadow records” along with a specific combination, and timing of sequence of operations (“obtaining,” “ll SREB REPLY OF DEFENDANT CLICKBOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC § 101,Case g| '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 16 of 29 Page ID #:474 “adjusting,” and “issuing” steps). Alice, 134 S.Ct. at 2359. It did not matter to the Court that different steps could have been taken to avoid infringement and achieve the same results. The combination of steps that Alice Corp. had appended to the abstract idea amounted to electronic recordkeeping. /d. Similarly, it does not matter here whether Clickbooth could avoid using the basic electronic recordkeeping functions of URL redirects, webmaster IDs, and lookup tables to engage in referral business on the Internet. Clickbooth is just as free as Essociate (or any other Internet user) to apply the idea of receiving and tracking referrals between existing affiliate networks, and to do so using conventional techniques that were used by Essociate to carry out this abstract idea. B. Alice Step 2: The Claims Fail To Add “Significantly More” to the Abstract Idea—No “Inventive Concept” 1. _ Essociate fails to explain how anything its claims transforms them into something that is patent eligible. Once a court finds that a patent claim is directed to an abstract idea, it must “consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of, the claim into a patent-eligible application.” Alice, 134 8.Ct. at 2355 (quotation and citation omitted). “A claim that recites an abstract idea must include ‘additional features’ to ensure ‘that the [claim] is more than a drafting effort designed to monopolize the [abstract ideal.” Id. at 2357 (quoting Mayo, 132 S.Ct. at 1294, 1298) (alterations in original). The added element or combination of elements must be such that “the patent in practice amounts to significantly more than a patent upon the [abstract idea] itself.”” Id, at 2355 (quoting Mayo, 132 S.Ct. at 1294). Here, Essociate fails to explain how anything in its patent claims transforms the claims into something that is patent eligible. Essociate asserts that its claimed invention “allow(s] virtual affiliates to access an existing merchant affiliate system without having to join the merchant's affiliate system.” Opp. at 12:3-4. This -12- SMR ATSE REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 US.C. 10]Case 8} x '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 17 of 29 Page ID #:475 assertion, however, is nothing more than a restatement of the abstract idea of allowing referral sources to send referrals to an independent referral network. The notion of “virtual affiliates” does not transform the nature of the claims. Virtual affiliates are outside referral sources, “‘a subset of the Webmasters of the affiliate pool,” as the Essociate patent explains. Ex. 1, col. 7, lines 41-42. The remainder of Essociate’s explanation—that the invention involves “altering the merchant’s sytem, usually by configuring a type of URL, and then generating a URL that matches the configuration when a user clicks a banner ad”— adds nothing beyond conventional Internet components and techniques. Conventional Internet advertising already let a merchant “chart a transaction from ‘inception to end, beginning with the initial movement from advertisement to Merchant URL, and ending with the user’s completed transaction.” Ex. 1, col. 1, lines 64-67. Essociate has not and cannot deny that the concepts of configuring and generating a URL when a user clicks a banner ad were conventional on the Internet. 2. — Essociate again misapplies Alice by focusing on the alleged novelty of its abstract idea, as applied to affiliate systems. Perhaps because it cannot identify anything transformative in its patent claims, Essociate once again becomes preoccupied with the alleged novelty of “virtual affiliates”—that is, the receiving and tracking referrals across different referral networks as applied to existing affiliate systems, Essociate applies a pre- |Alice standard by claiming that the idea itself, “(t]he concept of Virtual Affiliates[,] is novel in the affiliate network industry.” Opp. at 12:15-16. Essociate also uses circular logic to argue that it added a sufficiently “inventive concept” to the abstract idea because “[t]he idea that an affiliate who isn’t a member of a merchant’s affiliate network can still participate in it—through the virtual affiliate pool—is novel.” Opp. at 12:5-6. Essociate calls this an “idea” because that’s just what it is—the abstract idea of receiving and tracking referrals across referral networks, applied to Internet affiliate systems. -13- SHRMTRTSET REPLY OF DEPENDANT CLICRROOTH IN SUPPORT OFTUDGMENT ON THE ‘PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 U.S § 101,Case 8| 8 p a 26 27 28 '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 18 of 29 Page ID #:476 Essociate thus misapplies Alice again in step 2 of the Alice test. An abstract idea does not become patent eligibile just because it is a new idea. See Ultramercial, 772 F.3d at 714-15 (“We do not agree with Ultramercial that the addition of merely novel or non-routine components to the claimed idea necessarily IpLearn, LLC y. K12 Inc., --- F. Supp. 3d -~, No. 11-1026-RGA, 2014 WL 7206380, at *6 (D. Del. Dec. 17, 2014) (“A new idea, ie., one that is non-anticipated and non-obvious, does not, however, make an abstract idea patent eligible.”); Cogent Med., Inc. v. Elsevier Inc., 2014 WL 4966326, at *4 n.3 (N.D. Cal. Sept. 30, 2014) (distinguishing § 101 inquiry from § 102 inquiry and finding method patent-ineligible, stating that “iJt is important to turns an abstraction into something concrete.” distinguish novelty and obviousness from the ‘inventive feature’ inquiry required by the Supreme Court in Alice”); Synopsys, Inc. v. Mentor Graphics Corp., No. C 12- 6467 MMC, 2015 U.S. Dist. LEXIS 6333, at *14 (N.D. Cal. Jan. 20, 2015) (quoting Cogent Med.). At step two of the Alice framework, the court must consider the elements of each claim and ask, “what else is there in the claims” beyond a conventional application of the abstract idea, 134 S.Ct. at 2355. Here, the “what else” there is in the claims is insufficient to tie up the abstract idea of an affiliate, who is not a member of a merchant network, being able to refer traffic to the network. Essociate fails to show how it used anything other than conventional computer technology used on the Intemet to carry out this abstract idea. Under Alice, being the first to apply the abstract idea is no longer the type of “inventive concept” that suffices to tie up the idea in a patent. If it were, the Court would have held that the inventors in Alice had properly been issued a patent, because they were the first to have created a sophisticated computer escrow system. 3. Essociate’s allegation that it solved a “technological problem” does not make the abstract idea patent-eligible. Essociate pairs its irrelevant argument about novelty with an unsupported and “4- SHRRRTTSET "REPLY OF DEFENDANT CLICKHOGTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT INELIGIBILITY UNDER 35 USC. $ 101,Case 8| 16 17 18 19 20 21 22 23 24 25 26 27 28 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 19 of 29 Page ID #:477 equally irrelevant argument that its invention, like the invention in DDR Holdings,L LC v, Hotels.com, LP, “solves a particular technological problem on the Internet.” Opp. at 8:27-28. The problem, Essociate alleges, was that “every Internet merchant that wanted a website owner ... to offer its advertisement had to either sign up that affiliate to the merchant's own system, or use an intermediary ‘affiliate hub.”” Opp. at 1:12-15. Essociate, however, fails to link this alleged problem to any technical shortcoming that had to be solved. To the contrary, as Clickbooth explained in its opening brief, established affiliate networks (like Amazon.com) were soliciting referrals only from affiliates they had signed up themselves so that they could screen out undesirable or risky referral sources. See Mot. at 4:9-11 & n.4; Franklin Decl., Ex. 2, col. 2, lines 19-38 (Amazon’s patent explaining how affiliates were screened for “vulgarities” or other “flags” that might make them inappropriate “associates”). Thus, there was no “technological” hurdle to receiving traffic from outside sources. Prior merchant affiliate networks, like Amazon.com, were soliciting traffic from webmasters they had screened themselves for quality-control purposes, All Essociate did was to suggest to these networks that they should also receive outside referrals—like all but the most exclusive of merchants and professionals in the real world have always done. In so doing, Essociate did not invent a new type of computer technology for the Internet. Rather, it suggested the “performance of [a] business practice known from the pre-Internet world along with the requirement to perform it on the Internet.” DDR Holdings, 773 F.3d at 1257. Once a merchant decides to trust a third-party network to send it traffic, all that remains is how to keep track of the traffic so webmasters posting banner ads ican be paid. The Essociate patent suggests doing this using the mundane electronic recordkeeping tools of the Internet: webmaster IDs, URLs, and correlation tables to [cross-reference IDs from different sytems. See Mot. at 16-20; Opp. at 2:17-18 (“Merchants use systems based on URL’s which allow them to track traffic and to compensate webmasters for referrals of traffic and/or transactions.”) (footnote -15- SRST ‘REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OFTODGNENT ON THE ‘PLEADINGS BASED ON PATENT.INELIGIBILITY UNDER 38 US.C-§ 101Case | eyaunarvne 10 8 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 20 0f29 Page ID #:478 omitted). This in no way changes the nature of Essociate’s claims from one that is directed to an abstract idea to one that is patent eligible. Essociate nevertheless claims that it invented groundbreaking technology because it correlated the webmaster IDs so that the URL generated for the consumer would have an ID that is “functional” in the merchant’s affiliate system. Opp. at 3:21-23. But, as Clickbooth explained in its opening brief without any rebuttal by Essociate, correlating IDs is a basic electronic recordkeeping function. Mot. at 18:15-19:15. A recent case invalidating claims as patent-ineligible reached the same conclusion for claims that are similar to the claims at issue here. See Bascom Research, 2015 WL 149480, at *2 & n.3, *10, 2015 U.S. Dist. LEXIS 4606, at *5- ¥6 & n.3, *29-*30 (N.D. Cal. Jan. 2, 2015) (finding that the abstract idea of establishing relationships between documents and making them public was not transformed by reciting the use of “link directories” and “unique identifiers’ to identify the link relationships” because these are common attributes of “conventional tables or relational databases.”). The Court should reject Essociate’s reliance on basic electronic recordkeeping functions of the Internet as somehow transformative of the abstract idea of receiving and tracking referrals from referral sources. As Clickbooth pointed out in its opening brief, Essociate’s use of URLs and correlated IDs is far more routine and mundane than the impressive system built by Alice’s inventors to carry out simultaneous multi-million-dollar financial transactions using shadow accounts. Mot. at 19:5-11. Using URLs with a correlated webmaster ID is also more routine than the system built by Ultramercial’s inventors for letting a consumer “pay” for copyrighted content through a sponsor message, recorded query response, activity log, and message sponsor payment. Mot. at 9:4-9, Essociate’s arguments again echo the ones made by the dissenting Federal Circuit judges in Alice whose views the Supreme Court rejected. See CLS Bank Int'l v. Alice Corp.,717 F.3d 1269, 1307 (Fed. Cir. 2013) (dissenting views relying on claimed features “specifically -16- SHRI REPLY OF DEFENDANT CLICKHOOTHIN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC § 10Case 8} ewaunerone '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 21 of 29 Page ID #:479 programmed to solve a complex problem” using, inter alia, “a structural configuration that ‘receive[s],’ ‘electronically adjust{s],’ and ‘generate[s}’ according to the specific requirements of the system”). 4, Essociate fails to explain how its claim steps, in combination, recite anything more than basic Internet record-keeping. Essociate asserts that Clickbooth evaluated each element only “standing alone,” but this is incorrect. Opp. at 11:5-6. Clickbooth looked at the steps in the patent claims both individually and as an ordered combination, and explained why, when viewed as a whole, the claims simply instruct a person to apply the abstract idea to the Internet and computers using basic record-keeping functions. (Mot. at 21:1-11. As explained in Clickbooth’s opening brief, the claims instruct a person to apply the abstract idea by “‘configuring’ an existing affiliate system to receive referrals, ‘assigning’ webmaster identifiers, ‘receiving’ a user request that included the identifier, ‘correlating’ it with the identifier used by the merchant affiliate system, and ‘generating’ a URL for the merchant system that included the identifier for tracking purposes.” Mot, at 21:5-9. Essociate’s opposition tellingly does not explain why this s anything other than the use of the Intemet and computers for their basic electronic record-keeping functions. 5. Essociate’s claims recite merely conventional techniques. In the chart on pages 12-15 of its opposition, Essociate asserts an “inventive concept” in the steps of its claims only because conventional techniques are used to apply the idea of “virtual affiliates” —the idea of receiving and tracking outside referrals applied to existing affiliate systems. In step 2 of Alice, the Court must consider “what else” there is in the claims besides the abstract idea. 134 S.Ct. at 2355. Essociate is unable to make this showing because it used conventional techniques to apply the method. ‘As shown in Essociate’s own chart for claim 1, there is no substance to |Essociate’s claim to have contributed “significantly more” to the technological -17- Sanna "REPLY OF DEFENDANT CLICKEOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT:INBLIGIBILITY UNDER 35 USC § 101Case 8| ey Ane LN YE 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 22 of 29 Page ID #:480 environment of existing affiliate systems than the abstract idea of receiving outside referrals and tracking them. a. 1. A method for providing Virtual Affiliates to an existing target affiliate system, the method comprising the operations of: Essociate’s Argument Clickbooth’s Response The concept of Virtual This is another way of saying Essociate was the first Affiliates is novel in the | to apply the abstract idea of receiving and tracking affiliate networking referrals to existing affiliate systems. Using the industry. word “virtual” does not transform the nature of the claim. b. configuring an existing target affiliate system to receive referrals from Essociate’s Argument Clickbooth’s Response “Configuring” means more than just making random changes to the existing target system. In the context of the "660 Patent, this step contains the inventive concept that an existing merchant’s system can be effectively configured to accept traffic from affiliates in another affiliate system—the affiliate pooling system. This is a restatement of the suggestion to apply the abstract idea of receiving and tracking referrals across existing affiliate systems. Essociate adds nothing to this analysis by saying the claim requires a system to be “effectively” configured. Merely applying an abstract idea in a way that is “functional” is not the test for patent eligibility. The method and system claims in Alice described methods that were functional as well. See Alice, 134 S. Ct. at 2352 n.2. ©. afirst plurality of Webmasters in an affiliate pool of source Webmasters Essociate’s Argument Clickbooth’s Response The plurality of webmasters The “inventive concept” is simply a -18- SiRERRTARAT TEAL OF DERNDART CLICRHOOHTN SURORTOF TUDGMENTON THE PLEADINGS BASED ON PATENT INELIGIBILITY UNDER 35 USC. 101Case 8| wCwrnraAunrwone 10 12 13 14 15 16 7 18 19 20 21 23 24 25 26 27 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 23 of 29 Page ID #:481 referred to in this element are affiliates in the source affiliate system (in this case, Clickbooth). The inventive concept is that those webmasters can send traffic to another affiliate system without having to join that other system as affiliates. restatement of the fact that Essociate merely applied the abstract idea of receiving and tracking referrals from outside sources to an existing affiliate system. The notion of allowing webmasters to send traffic to independent affiliate systems does not transform the nature of the claim; it is the abstract idea itself, applied to the Internet. originating from a source Webmaster in an affiliate pooling system, including the step of: assigning a source Webmaster unique identifier for each of said {first plurality of Webmasters each operating at least one web site; such that the target Merchant affiliate system recognizes a transaction as Essociate’s Argument Clickbooth’s Response ‘This step contains the inventive concept that the target merchant affiliate system can recognize a transaction as originating from a webmaster/affiliate in another affiliate system—specifically, the source affiliate system— without needing to have that webmaster separately join the merchant's affiliate system as an affiliate. This is again a restatement of the fact that Essociate applied the abstract idea of receiving and tracking referrals across existing affiliate systems. The Essociate patent admits that merchant systems like Amazon.com were already receiving and tracking referrals from webmasters they signed up themselves. Exh. 1, col. 2, lines 29-53. Essociate merely suggested the abstract idea that they receive and track referrals from outside their own networks as well. e. receiving a user request for a target Merchant affiliate system URL from a web site operated by a particular referring Webmaster of the first plurality of Webmasters, SHRTaTET -19- TEPLY OF DERNDANT CLICRDOOTN SUPPORT OF TUDGRENTON THE TPLEADINGS BASED ON PATENT INELIGILTY UNDER 'S USC #11Case 8) ey aur ene i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 24 of 29 Page ID #:482 Essociate’s Argument Clickbooth’s Response The °660 Patent contains the inventive concept that this user request can be for a target merchant affiliate system— even though the user makes the request from a website of an affiliate who is not an affiliate in the requested merchant's affiliate system. This is also a restatement of the fact that the abstract idea has been applied to an existing affiliate system. The notion of allowing the user to be referred to a merchant by someone outside the merchants referral network does not transform the nature of the claim; it is the abstract idea itself, applied to the Internet. £. correlating the received source Webmaster unique identifier to a target Webmaster unique identifier corresponding to the unique identification system of the requested Merchant affiliate system; and Essociate’s Argument Clickbooth’s Response Clickbooth claims that there is no inventive concept here because correlating data is a recognized process. But the step doesn’t involve correlating data in the abstract; the inventive concept is correlating an identifier that is technologically functional in one affiliate system (the source affiliate system) to an identifier functional in a different affiliate system (the merchant’s affiliate system) for the purpose of forming a specific, functional URL that will allow the transaction to be recognized Essociate’s addition of the word “functional” adds nothing transformative. One would expect an ID to be functional in the system in which is used. Moreover, using a computer to correlate one ID to another is a basic record-keeping function of computers. Essociate did not invent lookup tables for correlating IDs, and using such a table to form a URL that “functional” in the merchant's system is no inventive concept under Alice. It is no different in principle than creating functional “shadow accounts” in Alice or a functional “activity log,” “interactive SaRTRRTRaT -20- REPLY OF DEFENDANT CLICRBOOTH IN SUPPORT OFTUDGMENT ONE PLEADINGS BASED ON PATENT:INELIGIBILITY UNDER 35 USC. § 101,Case 8} [3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 25 of 29 Page ID #:483 by the target merchant’s system and for the source webmaster to be credited for the transaction, despite not message,” or the like in Ultramercial. The remainder of Essociate’s explanation reflects merely the expected result of according to the novel system and method and must meet the parameters established in previous steps. Both the URL and this step are inventive concepts because they allow the traffic to be recognized by the target merchant’s system and for the source webmaster to be credited for a transaction, despite not being a participant in the merchant's affiliate being a participant in the applying the abstract idea of referral merchant’s affiliate system. tracking to the Internet (i.e, the outside referral source will be credited). generating a URL for the requested Merchant affiliate system, Essociate’s Argument Clickbooth’s Response The generated URL is configured | The Essociate patent admits that generating URLs predates Essociate. Ex. 1, col. 1, lines 38-42. Here, Essociate is simply restating the fact that it merely applied an abstract idea to existing affiliate systems. The notion of allowing the merchant system to recognize and credit outside webmasters does not transform the nature of the claim; itis the abstract idea itself, applied to the Internet, It is merely the expected result of applying the abstract idea of referral the inventive concept that | abstract system. tracking to the Internet (i.e., the outside referral source will be credited). h. wherein the URL includes the correlated target Webmaster Merchant unique identifier, Essociate’s Argument Clickbooth’s Response This URL is the result of __ | Essociate merely restates the application of the idea of receiving and tracking referrals SHRATATSAT -21- TREPLY OF DEFENDANT CLICRBOOTHTIN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. 8 101,Case 8| '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 26 of 29 Page ID #:484 allows a single click on a banner ad to generate a URL that contains an identifier for the target system, even though neither the web user nor the source webmaster has previously interacted with the target system. between existing affiliate systems. As discussed above, URLs using unique IDs were basic record- keeping mechanisms on the Internet. Correlating those IDs so they would be recognizable to the network business being referred to is a basic electronic recordkeeping function. Moreover, Essociate fails to explain where the claim language implies a “single click,” or how a single click on a banner ad (as opposed to a double click on a banner ad) could possibly transform the claim into something that is patent eligible. i, whereby the URL can be system, and utilized to access the requested Merchant affiliate Essociate’s Argument Clickbooth’s Response The URL allows access to the target merchant’s system even though it was not itself generated by either the target system or an affiliate of the system. Without the inventive concepts found in the "660 Patent, this would be impossible. Essociate fails to identify the supposed “inventive concepts found in the “660 Patent [without which] this would be impossible.” That’s because Essociate did not invent URL redirects. It did not invent webmaster IDs. It did not invent correlating an ID in one system to an ID in another system. These are conventional electronic record-keeping activities that computers and the Internet were invented to perform. They do not transform the claim into something that is patent eligible. i. SHRMTTST further provide identification of the source Webmaster for requisite tracking. -22- REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 US.C.§ 10,Case 8| '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 27 of 29 Page ID #:485 Essociate’s Argument Clickbooth’s Response Without the ‘660 Patent’s system and method, there could be no “source” webmaster from an affiliate system different than the requested merchant affiliate system. The inventive concept here is that the URL permits the “source” webmaster, who is an affiliate in the source affiliate system, to be identified in connection with traffic sent to the merchant affiliate system, without being an affiliate in the merchant affiliate system. Essociate is again calling the application of the abstract idea to an existing system the “inventive concept” itself. Essociate suggested the abstract idea that existing systems receive referrals from another source—outside their own networks. Doing that using a URL that identifies the source of the traffic was conventional on the Internet. Essociate did not use URLs to do something unexpected or contrary to expected performance, as in DDR Holdings. Mot. at 9:20-10:15 In short, once the abstract idea is extracted from the claims, what “else” remains is a conventional application of that idea to existing affiliate systems. It may be “novel” in the sense that it was not done before. But it is not an “inventive concept” under Alice because it would be unfair for someone to tie up the patent- ineligible concept by using conventional techniques, long used on the Internet for record-keeping purposes. Alice, 134 S.Ct at 2353 (citing Mayo, 132 S.Ct. at 1289). Cc The Claims Do Not Pass the Machine-or-Transformation Test Essociate asserts that its patent claims pass the “machine-or-transformation”” test because they recite “configuring” an affiliate system that “consists of servers, IP addresses, lines of software code, and other devices.” Opp. at 17:12-17. Asa preliminary matter, “satisfying the machine-or-transformation test, by itself, is not sufficient to render a claim patent-eligible, as not all transformations or machine implementations infuse an otherwise ineligible claim with an ‘inventive concept.”” DDR Holdings, 773 F.3d at 1256 (citing Mayo, 132 S.Ct. at 1301). And after Alice, SRTETTSDIT -23- 'REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OF JUDGMENT ON THE 'PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. $ 10Case 8) ey anuavne 11 12 13 14 15 16 17 18 19 20 21 22 23 25, 26 27 28 3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 28 of 29. Page ID #:486 there can remain no doubt: Conventional computer limitations do not make an otherwise ineligible claim patent-eligible. See 134 S.Ct. at 2358. By calling out “servers, IP addresses, [and] lines of software code,” Essociate merely highlights that an affiliate system is not a “novel machine or apparatus,” but rather a preexisting network making conventional use of the Internet so that people ‘can refer business to each other. As the Essociate Patent itself establishes, affiliate networks were a staple of the Internet used by customers of Amazon.com and others long before Essociate came along with its suggestion that they ease their restrictions on outside referrals. The ‘660 patent admits that “[m]ost Merchants currently utilize some form of affiliate system.” Ex. 1, col. 2, lines 8-9. An affiliate system is a common part of the Internet, and the Federal Circuit has held that “the Internet is not sufficient to save the patent under the machine prong of the machine-or- transformation test.” Ultramercial, 772 F.3d at 716-17 (citing CyberSource, 654 F.3d at 1370).’ The Internet “is a ubiquitous information-transmitting medium, not anovel machine.” Id. Essociate’s logic that computer servers operating on the Intemet are a patent- eligible “machine” would have resulted in the claims in Alice being found patent- eligible. That claimed invention was also implemented on a computer. Similarly here, using computer servers and unspecified software code to keep track of referrals from outside affiliates is not creating a new machine. It is using the Internet for its basic electronic recordkeeping (traffic tracking) functions. Essociate also argues that it “transformed” affiliate systems by “configuring” them to accept outside referrals. Opp. at 16. This argument also lacks merit and boils down to the assertion that a merchant system be “configured” to implement the abstract idea of accepting and tracking referrals from outside referral sources. The } Essociate relies on dicta from the district court opinion in CyberSource pondering whether transforming an IP address could potentially confer patent eligibility. Opp. at 17:5-8. That dicta is not only questionable but also entirely irrefevant because Essociate does not claim that it transforms any IP addresses. 24 STAT TERY OF DEFENDANT CLICRGOOTT WN SUPORT OFTUDGRIENTON THE TLEADINGS BASED ON PATENT INELIGILITY UNDER MUS FLCase 8} eCamrdsHrRYWDN '3-cv-01886-JVS-DFM Document 44 Filed 01/23/15 Page 29 of 29. Page ID #:487 “configuring” step thus is insufficient to confer patent eligibility on the claims here. As the Alice Court noted, “Mayo made clear that transformation into a patent- eligible application requires ‘more than simply stat{ing] the [abstract idea] while Alice, 134 S. Ct, at 2357 (citing Mayo) adding the words ‘apply it. Essociate additionally suggests that the machine-or-transformation test is met because Essociate “improved” how affiliate networks work. Opp. at 17:2-4 (asserting that improving the functioning of the computer in Alice would have been a patent-eligible invention). But Essociate did not “improve” the Internet or its well-established affiliate networks by inventing a new kind of computer technology. ‘The alleged improvement was to use the age-old idea of receiving and tracking referrals from outside sources, and it implemented this abstract idea by saying the merchant system should be so “configured.” The inventors in Ultramercial actually did improve the Internet by building a new Internet system that had never been tried before, allowing consumers to “pay” for copyrighted content through a combination of queries, activity logs, and messages. But being the first to use the Internet to carry out an abstract idea did not entitle the Ultramercial inventors to a patent. Likewise, “configuring” existing affiliate systems to receive and track referrals from outside sources does not entitle Essociate to a patent. Ill. CONCLUSION For the foregoing reasons, the asserted claims of the '660 patent are directed to a patent-ineligible subject matter under 35 U.S.C. § 101. Accordingly, the ‘Court should find all asserted claims of the '660 patent invalid and grant judgment ‘on the pleadings in Clickbooth’s favor. Dated: January 23, 2015 ‘HINCH NEWMAN LLP By: Js/Richard B.Newman Richard B. Newman, Cal Bar No. 195191 Attorneys for Defendant and Counter-Claimant CLICKBOOTH.COM, LLC -25- SRE TaTSAT ‘REPLY OF DEFENDANT CLICKBOOTH IN SUPPORT OFTUBGMENTON THE PLEADINGS BASED ON PATENT-INELIGIBILITY UNDER 35 USC. 101