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Personal Audio is one of our favorite, uhmm…, …”non-practicing entities” (remember that we promised to try and not use the term “patent troll“….). In 2014, Personal Audio was in the news quite a lot because it seemed to be suing anyone who was someone in podcasting (mostly over U.S. Patent 8,112,504), including CBS, CNN and the companies behind The Adam Corolla Show.

Will Personal Audio's dream to license podcasters near and far end with the PTAB's decision on the '504 patent?

Will Personal Audio’s dream to license podcasters near and far end with the PTAB’s decision on the ‘504 patent?

A little over a month ago (on December 17, 2014), the Patent Trial and Appeal Board (“PTAB”) held oral hearing on Electronic Frontier Foundation’s (“EFF”) petition for inter partes review of the ‘504 patent. At this point, there’s no way to know when the PTAB will issue its decision on the case. So far, no recent documents have been posted in the case, other than the parties’ respective pre-hearing papers regarding the demonstrative exhibits.

Personal Audio had already won some big cases, e.g., against CBS for instance. As Gigacom explained, after the jury verdict in the CBS case, CBS may need to “pay the troll“. Even Adam Corolla, who at great cost pushed back against Personal Audio, eventually settled with the NPE. The PTAB’s decision, though, is likely to affect how aggressively (or not) Personal Audio will assert the ‘504 patent in the future.

As for Personal Audio’s case against CBS in the U.S. District Court in Eastern Texas, it isn’t officially closed yet, even though the jury found that CBS was liable for infringement of Personal Audio’s ‘504 patent.

That’s because CBS recently filed a motion for judgment as a matter of law (under Fed. Rule of Civ. Procedure 50(b)) that the ‘504 patent is invalid under Section 101 of the Patent Act (35 U.S.C. 101). Under Section 101, any new and useful process, machine, manufacture, composition or improvement constitutes subject matter eligible for patent protection. But laws of nature and abstract ideas themselves are not eligible subject matter.

CBS claims that the Supreme Court’s 2014 decision in Alice Corp v. CLS Bank Int’l supports that the ‘504 patent claims cover unpatentable subject matter under Section 101. Where a claim centers on a law of nature or abstract idea, under Alice, a court would need to determine whether the claim also includes an inventive concept. In other words, the claim must have additional features that distinguish it from an “attempt to monopolize an abstract idea.”

flowchartUS08112504-20120207-D00002

Flow chart (Figure 2) from the ‘504 patent

In CBS’s view, the subject matter of the ‘504 patent– distributing episodic media content– is analogous to an attempt to cover playing bingo or creating a contractual relationship. CBS also claims that there aren’t any disputed facts relevant to the 101 question and that both parties agree that the issue is a legal question that the Court can decide.

On the other hand, though, Personal Audio recently filed a document with the Court claiming that DDR Holdings Llc v. Hotels.com supports its position that the Court should deny CBS’ motion (although the document that Personal Audio filed did not appear to elaborate on exactly why that is). The Federal Circuit issued its decision in DDR Holdings on December 15, 2014.

DDR Holdings also addressed a defendant’s Rule 50(b) motion as to whether the patent-in-suit covered patentable subject matter under Section 101. In DDR Holdings, the patent at issue covered a sort of “composite” webpage that allowed a host site to maintain the look and feel of the host web site on a new page when a customer clicked on a third-party vendor link.

In assessing the Section 101 question in DDR Holdings (the Court did find that certain claims of the patent-in-suit were anticipated and granted the JMOL on that issue), the Court noted that:

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.

 However, the Court went on to discuss its 2014 Ultramerical case, noting:

We caution, however, that not all claims purporting to address Internet-centric challenges are eligible for patent… …The [patent-in-suit’s] claims are different enough in substance from those in Ultramerical because they do not broadly and generically claim use of the Internet to perform an abstract business practice (with insignificant added activity)…

So, in our view, the DR Holdings case provides as much support for CBS’s position. For example, in DR, the Federal Circuit also noted (emphasis ours):

It is also clear that the claims at issue do not attempt to preempt every application of the idea by increasing sales by making two web pages look the same, or of any other variant suggested by [the defendant]. Rather, they recite 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.”

So, will the Court give CBS another chance to show that Pro Audio’s ‘504 patent attempts to “preempt every application of the idea” at issue? Or, as Pro Audio argues, will the Court find that the jury verdict is supported and that the ‘504 patent recites “a specific way” to provide access to archived podcasting episodes? What do you think?

Stay tuned for more on the ‘Pod Wars!’

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