- Source: DDR Holdings v. Hotels.com
DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), was the first United States Court of Appeals for the Federal Circuit decision to uphold the validity of computer-implemented patent claims after the Supreme Court's decision in Alice Corp. v. CLS Bank International. Both Alice and DDR Holdings are legal decisions relevant to the debate about whether software and business methods are patentable subject matter under Title 35 of the United States Code §101. The Federal Circuit applied the framework articulated in Alice to uphold the validity of the patents on webpage display technology at issue in DDR Holdings.
In Alice, the Supreme Court held that a computer implementation of an abstract idea, which is not itself eligible for a patent, does not by itself transform that idea into something that is patent eligible. According to the Supreme Court, in order to be patent eligible, what is claimed must be more than the abstract idea. The implementation of the idea must be something beyond the "routine," "conventional" or "generic." In DDR Holdings, the Federal Circuit, applying the Alice analytical framework, upheld the validity of DDR's patent on its webpage display technology.
Background
DDR Holdings, LLC ("DDR") was formed by inventors Daniel D. Ross and D. Delano Ross, Jr. following the asset sale of their dot-com company, Nexchange (which was formed to utilize their invention). DDR filed a lawsuit against twelve entities including Hotels.com, National Leisure Group, World Travel Holdings, Digital River, Expedia, Travelocity.com, and Orbitz Worldwide for patent infringement. DDR settled with all but three of these defendants prior to an October 2012 jury trial in the United States District Court for the Eastern District of Texas. The jury found that neither of the patents at issue were invalid, that National Leisure Group, Inc. and World Travel Holdings, Inc. (collectively "NLG") directly infringed both these patents, that Digital River directly infringed one of the patents, and that DDR should be awarded $750,000 in damages.
Following the verdict, the district court denied defendants’ motions for Judgment as a matter of law (JMOL) and entered final judgment in favor of DDR, consistent with the jury's findings. Defendants appealed, however, by the time of oral argument, DDR settled with Digital River, and Digital River's appeal was subsequently terminated. NLG continued its appeal.
= Patents-in-suit
=DDR is the assignee of U.S. Patent Nos. 7,818,399 ("the '399 patent") and 6,993,572 ("the '572 patent"), both of which are continuations of an earlier patent—U.S. Patent No. 6,629,135 ("the '135 patent"). The court's § 101 analysis focused on the '399 patent, entitled "Methods of expanding commercial opportunities for internet websites through coordinated offsite marketing."
= The Invention
=The '399 patent addresses a particular problem in the field of e-commerce when vendors advertise their products and services through a hosting page of an affiliate:
[Vendors] are able to lure visitor traffic away from the affiliate. Once a visitor clicks on an affiliate ad and enters an online store, that visitor has left the affiliate's site and is gone. [This presents] a fundamental drawback of the affiliate programs--the loss of the visitor to the vendor.
The '399 patent also identifies some other attempts at solving this problem:
Affiliates are able to use "frames" to keep a shell of their own website around the vendor's site, but this is only a marginally effective solution.
Some Internet affiliate sales vendors have begun placing "return to referring website" links on their order confirmation screens, an approach that is largely ineffective. This limitation of an affiliate program restricts participation to less trafficked websites that are unconcerned about losing visitors.
Search engines and directories continue to increase in their usefulness and popularity, while banner ads and old-style links continue their rapid loss of effectiveness and popular usage.
The '399 patent claims a process involving stored data concerning the visual elements responsible for the "look and feel" of the host website, where, upon clicking an ad for a third-party merchant's product, the customer is directed to a hybrid page generated by the host website that is a composite of the third-party merchant's product information and the look and feel elements of the host website. "For example, the generated composite web page may combine the logo, background color, and fonts of the host website with product information from the merchant."
The Federal Circuit described the '399 patent as follows:
The patents-in-suit disclose a system that provides a solution to this problem (for the host) by creating a new web page that permits a website visitor, in a sense, to be in two places at the same time… [T]he host website can display a third-party merchant’s products, but retain its visitor traffic by displaying this product information from within a generated web page that ‘gives the viewer of the page the impression that she is viewing pages served by the host’ website."
[The system] instructs an Internet web server of an “outsource provider” to construct and serve to the visitor a new, hybrid web page that merges content associated with the products of the third-party merchant with the stored “visually perceptible elements” from the identified host website.
A case note states that one way to accomplish the function would be with an