Bid for Position v. AOL and Google (CAFC 2009-1068) precedential

Google AdWords is the system that lets advertisers jockey for position in the ads that appear on Google search page results.

The claimed method allows a bidder to select a position of priority in the auction and automatically adjusts the bidder's bid so as to maintain that chosen priority status. The accused system is Google's internet advertising system, AdWords, which runs continuous auctions to determine the placement of advertisements on Google's search results pages.

In the accused AdWords system, advertisers choose keywords to trigger the display of their advertisements. When a keyword is used in a search performed on Google.com, AdWords runs an auction to determine the order in which the advertisements will be placed next to the search results. Each advertiser submits a bid in the form of a Maximum Cost-Per-Click ("CPC"), i.e., the maximum price the advertiser is willing to pay each time its advertisement is "clicked" by a user of the search engine. AdWords then multiplies each bid by a "Quality Score," also known as the estimated Click Through Rate ("eCTR"), which predicts the likelihood that a user searching for the designated keyword will click on the subject advertisement, based on a confidential algorithm that considers various historical factors.

The product of the bid (Maximum CPC) and the Quality Score (eCTR) yields an "Ad Rank" for each advertisement. The Ad Ranks are then used to sort and place advertisements in descending order on the corresponding results page. Once the advertisements have been sorted, the actual cost paid by an advertiser per click is discounted to the lowest price the advertiser could have bid to achieve the same position, using a formula known as generalized second-price auction. Those computations are repeated each time a new search is conducted.

AdWords also offers a "Position Preference" feature that allows advertisers to specify a preferred position or range of positions for the placement of their advertisements. The Position Preference feature enables advertisers to select a position or range of positions for AdWords to target, such as position 4, positions 1 through 5, or positions 5 through 10. If the advertiser activates the Position Preference feature, AdWords ensures that the advertisement will never appear below the lowest preferred position, although it may appear above the highest preferred position. AdWords monitors the advertisement's average position over a period of time, as auctions are triggered by relevant keyword searches, and it submits an adjusted proxy bid every 24 hours as needed to keep the advertisement at or above the target position. Other than the periodic substitution of a new proxy bid, the auctions are conducted in the same manner whether or not the Position Preference feature is activated.

Claim construction was fairly clear-cut. Three clauses were left to appeal: 1) who "chooses the desired position of priority in the auction"; 2) what "the value" of a bid means; and 3) the temporal quality of "continuing priority." The district court found: 1) the bidder chooses the desired priority position; 2) the value of a bid is "simply the monetary amount set forth in the bid;" and 3) "'continuing priority' requires the bidder to maintain the position of priority for some period of time."

Following a Markman hearing, the district court issued a claim construction order on July 11, 2008. Only three clauses in the claims are relevant to this appeal: (1) "information for selecting one of the two or more positions of priority that the first bidder wishes to maintain in the auction" (claim 1) and "selected one of the two or more positions of priority that the first bidder wishes to maintain in the auction" (claim 11); (2) "wherein the relative position of priority for providing the service for the first bidder is dependent upon whether the value of the first bid exceeds the value of the second bid"; and (3) "the auction for determining continuing priority for providing an ongoing service."

The district court interpreted the first clause to mean that the bidder, not the system, chooses the desired position of priority in the auction. The court found support for that conclusion in the claim language, which stated that the bid management data is "received" from the bidder and that it is the bidder who selects the position of priority to maintain in the auction. The court also pointed to the specification and the prosecution history as indicating that it is the bidder who enters the bid management data.

The dispute over the second clause turned entirely on the construction of the term "value." Plaintiff Bid for Position requested that the court construe that term to mean "relative worth, utility, or importance." The district court, however, observed that "value" is used in reference to "bid," and that "bid" was agreed to mean "an offer of a price." The court therefore defined the "value" of a bid to mean simply the monetary amount set forth in the bid.

The district court's construction of the third clause focused on the term "continuing priority" and whether that term includes a temporal aspect, i.e., whether the priority status must be maintained for a meaningful period of time. The court observed that the main purpose of the patent is to maintain the bidder's desired position of priority for a period of time until it is no longer possible to maintain that position without exceeding the maximum bid amount. Accordingly, the court concluded that "continuing priority" requires the bidder to maintain the position of priority for some period of time.

The rest was easy. The district court "found non-infringement as to each of the three contested limitations."

First, the court found that whereas the '151 patent requires bidders to select the position of priority, the AdWords system controls the assignment of positions based on Ad Rank. Because AdWords determines what Quality Score to assign to each advertisement, the court concluded that "[t]he multiplying of the bid with the Quality Score means the advertiser loses control to determine the placement of the advertisement, and a higher bid does not mean a higher placement."

Second, the district court held that the '151 patent compares bids and ranks them by bid amount, while AdWords multiplies each bid by a subjective Quality Score to rank ads by relevance rather than by bid amount. Accordingly, a higher bidding advertisement might be placed below a lower bidding advertisement because the latter is deemed more relevant and is given a higher Quality Score.

Third, the district court found that the '151 patent requires priority to be maintained for some period of time, while AdWords calculates a new Quality Score and Ad Rank each time a search is conducted, without consideration of positions assigned in prior auctions.

On appeal affirmation:

Bid for Position's argument to the contrary is barred by the claim language, particularly when read in light of the prosecution history.

The claims recite that the bidder must submit information for selecting a priority position that the bidder wishes to maintain in the auction. That language suggests that the bidder must select a particular position, not simply accept whatever position its bid will support. The prosecution history confirms that the patent does not cover a system in which the bidder simply bids for the "best available" position. During prosecution, the patent examiner issued a rejection stating that the prior art already taught "selecting a bidding position, specifically the highest ranking bid position," and then "automatically reducing the first bid to a minimum which allows the bidder to keep the selected position of priority."

In response to the examiner's rejection, and to avoid the prior art cited by the examiner, the inventor amended the claims to require the entry of information regarding the specific position of priority that the bidder wishes to maintain. Accordingly, it is clear that the inventor disclaimed the subject matter of selecting, through inaction, the highest available priority position. See Seachange Int'l, Inc. v. C-COR, Inc., 413 F.3d 1361, 1372-73 (Fed. Cir. 2005). Because that is how AdWords functions without the Position Preference feature activated, that configuration does not satisfy every limitation of claims 1 and 11, and it therefore does not infringe the '151 patent.

We reach the same conclusion with respect to AdWords with the Position Preference feature activated, but for a different reason. While AdWords with Position Preference allows a bidder to select a specific position of priority, it does not satisfy the limitation of the '151 patent that states: "the relative position of priority for providing the service for the first bidder is dependent on whether the value of the first bid exceeds the value of the second bid."

The district court interpreted the "value" of a bid, as used in the patent, to mean the monetary "amount" of the bid, i.e., the price offered by the bidder. Bid for Position contends that the term "value" includes equivalents of the monetary amount of the bid.

Among other worthless arguments -

Bid for Position is also incorrect in arguing for a construction of "value" that is distinct from the amount or price of the bid. The claim language uses the terms "bid" and "value of the bid" interchangeably, such that the two cannot be read to have separate meanings.

The wrap-up on the major differences between the asserted patent and Google AdWords -

We agree that the method recited in the '151 patent, in which the amount of the bidder's bid determines the placement of the advertisement, is substantially different from AdWords, with or without Position Preference. In the method of the '151 patent, the ultimate placement of an advertisement is purely a function of the relative amounts of the competing advertisers' bids, whereas in AdWords the ultimate placement of an advertisement is dictated by the product of the bid amount and the Quality Score that AdWords assigns. Thus, AdWords is not a pure bidding system, such as the system recited in the '151 patent, but instead operates in a quite different manner that enables the bid recipient, i.e., Google, to exercise substantial control over the outcome of the auction. That difference is sufficiently fundamental that we conclude, as did the district court, that a trier of fact could not properly find the AdWords system to be equivalent to the system recited in the '151 patent.

Affirmed.