Hinch Newman Wins eCommerce Traffic Patent Fight for Top Affiliate Network

As reported in Law360 (February 11, 2015), the United States District Court, Central District of California granted Clickbooth.com’s Motion for Judgment on the Pleadings, ruling that the claims asserted by Essociate, Inc.’s Internet based affiliate pooling patent are patent ineligible under 35 U.S.C. § 101 and are therefore invalid.  A copy of the motion can be seen, here.

Title 35 of the U.S. Code Section 101 is a section of federal patent law pertaining to what is eligible for patent protection.  The decision comes following the 2014 United States Supreme Court decision issued in Alice v. CLS Bank and the subsequent line of software patent infringement cases.

Essociate sued Clickbooth on December 3, 2013, accusing Clickbooth of infringing its eCommerce patent that allowed online merchants to track user traffic from websites that were not part of the seller’s affiliate system.  The lawsuit was another in a slew of patent infringement actions filed by Essociate against numerous affiliate networks dating back to 2009.

Hinch Newman filed counterclaims on behalf of Clickbooth contending that it did not infringe the patent and that the patent is otherwise invalid.  In addition, Clickbooth filed a petition for inter partes review in the U.S. Patent and Trademark Office challenging all of the patent claims asserted by Essociate.

According to the court’s order, the Essociate patent generally describes steps for how a merchant can gain access to customers from a referring entity without having to compete with other merchants for those same customers.  This process allows a merchant to avoid, or at least reduce, competition while also allowing it to still track which and how many customers the referring entity directs to the merchant.

In granting the motion, U.S. District Court Judge James V. Selna noted that “mathematical algorithms, including those executed on a generic computer, are abstract ideas.”  Judge Selna rejected Essociate’s contentions and agreed with Clickbooth’s argument that the steps simply embody the fundamental economic practice of receiving and tracking referrals from referral sources, and providing incentives to those referral sources, both concepts that involve the mere formation of economic relations.

The court next considered Clickbooth’s argument that Essociate’s patent claims do nothing more than seek to limit the use of the abstract idea of receiving and tracking referrals from referral sources to the technological environment of an existing affiliate system.  Hinch Newman asserted in the motion that aspects of the patent “do no more than require a generic computer to perform generic computer functions.”

Implementing an abstract idea on a generic computer is not patentable.  Hinch Newman argued that the patent claims add no inventive concept to the most routine functions of a computer and are directed to the abstract idea of “receiving and tracking referrals from referral sources.”

The court agreed, stating that “the claims list steps to configure an existing affiliate system to receive referrals from a new source, assign unique identification codes to webmasters in this new source, receive requests for access to merchant URLs, correlate the identification codes of the affiliate system and the webmaster using a tool like a lookup table, and then generate a URL for the merchant.  These claimed steps do not improve the functioning of the computer or the Internet, but only ‘amount to electronic bookkeeping.’”

Hinch Newman sought more than a ruling of non-infringement, which would have allowed Essociate to continue pursuing other affiliate networks.  Rather, the firm was able to quickly obtain a  complete victory on behalf of the entire affiliate marketing industry by having the asserted claims of the Essociate patent invalidated.

Essociate has appealed the ruling to the U.S. Court of Appeals for the Federal Circuit.

The case is Essociate, Inc. v. Clickbooth.com, LLC, SACV 13-1886 JVS (DFMx), in the U.S. District Court for the Central District of California.

A copy of the decision can be seen, here.

Contact an experienced advertising and marketing litigation attorney to discuss developing and executing an effective intellectual property litigation strategy.

Information conveyed in this article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.