Search Results for: Alice v. CLS Bank

Federal Circuit Cases to Watch on Software Patentability – Planet Blue

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 Guest Commentary by Robert Stoll

In the wake of the Supreme Court’s decision in Alice Corp v. CLS Bank (2014), there have been dozens of decisions in federal district courts and at the Federal Circuit that have applied Alice and Section 101 to a wide variety of business method and software related patents. And in the vast majority of these cases, the courts have invalidated the patents.

This trend line has led to rampant speculation about the end of software patents. But a review of the patents in those cases indicates that the claims at issue in most of the district court cases (and arguably all the Federal Circuit decisions) were directed to business methods that would have likely been held invalid under Bilski and other pre-Alice decisions. What we have seen far less is how courts will apply Alice to patent claims directed to software technology (as opposed to business methods).

Arguably the first of those cases is on its way through the Federal Circuit. The McRO (Planet Blue) v. Activision Blizzard, et al. (C.D. Cal. 2014) (“Planet Blue”) appeal pending at the Federal Circuit may be an important indicator of how software patents will be evaluated by the courts going forward.

Unlike many of the other Section 101 cases that have largely involved simple financial/business practices or similar non-technical “inventions,” the patents in Planet Blue are directed to what appear to be actual technological challenges. The patents utilize complex and seemingly specific computer-implemented techniques.

And yet the Planet Blue patents were found invalid under Section 101 in the district court. In deciding the case, Judge Wu did a thorough analysis of the patent claims, starting with the observation that “[f]acially, these claims do not seem directed to an abstract idea” and appear to be directed to a “specific technological process.”  However, interpreting Mayo to require him to disregard any aspect of the claims found in the prior art, he conducted a further analysis to determine what feature of the claims were novel. Wu found that the only aspect of the claims that added to the prior art was an abstract idea:  “the use of rules, rather than artists, to set the morph weights and transitions between phonemes.”

Planet Blue has now appealed to the Federal Circuit, and opening merits briefs were recently filed. These and the subsequent briefs, arguments and decision in this case will be important for practitioners and patent holders for several reasons:

The Federal Circuit will evaluate a patent claim that is technology-based.

An initial read of the claims in the Planet Blue patents seem to be a far cry from basic method claims. The Planet Blue patents are used in animation; the technology helps automate the process of adapting an animated image to mouth words without having to draw or manually program the animated character’s movements. Its’ claims are drawn to the use of three-dimensional synchronization for certain applications in animation.

The district court initially acknowledged that the claims, in isolation, appeared tangible and specific and did not seem directed to an abstract idea: “considered standing alone, the asserted claims do not seem to cover any and all use of rules for three-dimensional synchronization.” In deciding this case, the Federal Circuit will be making an important decision on how to evaluate technology and software claims in a post-Alice environment.

The decision should provide additional guidance on how to apply the ‘significantly more’ test.

In the Alice decision, the Court recognized that patents – even those that are directed to an abstract idea or other ineligible concept – can be made patent eligible if the patent ‘transforms’ the abstract idea, or  does ‘something’ or ‘significantly more’ than a patent on the concept itself. This is the second step of the Alice/Mayo test, which the Court refers to as the search for an inventive concept.  Unfortunately, both the Supreme Court and Federal Circuit have provided scant guidance on what is necessary to satisfy this “significantly more” test.

In this case, the district court found that the claims covered a well-known concept of lip synchronization and weren’t sufficient to meet the ‘significantly more’ test. The Federal Circuit will review the claims, and assess whether the district court’s analysis and conclusion were correct.  The Federal Circuit’s decision should provide some insight as to how ‘significantly more’ test should be performed and how claims should be read moving forward.

Lower courts will be paying close attention to the Federal Circuit’s ruling in this case in their 101 assessments.

Just six weeks after the Planet Blue decision, another Section 101 decision came out from the Central District of California, this one authored by Judge Pfaelzer, in California Institute of Technology v. Hughes Communications, Inc. (C.D. Cal. 2014).  In that case, the court denied Hughes’ motion for summary judgment on Section 101 ineligibility. Judge Pfaelzer also undertook a lengthy analysis of Section 101 case law.  In applying the Mayo/Alice framework, the court found that the Caltech claims were directed to abstract ideas, but that the claims were patentable since they contain inventive concepts.

Interestingly, Judge Pfaelzer also made a point of discussing the Planet Blue decision.  While respectfully acknowledging that Planet Blue offers valuable contributions to the Section 101 discussion, Judge Pfaelzer noted that Planet Blue ultimately reached the wrong conclusion since courts should not, in her view, apply the point-of-novelty approach in the Section 101 inquiry, citing the Supreme Court’s Diamond v. Diehr decision.

This is the first step in the journey, not the destination. Planet Blue may turn out to be a bellwether case on software patentability, as these patents seem quite similar to so many of the software patents held by companies across the IT industry and beyond.  But the outcome is likely to be highly panel dependent, and it would not be surprising to see a request for en banc consideration at some point down the line. The case is sure to be closely watched, and it will be fascinating to see whether the Federal Circuit follows the lead of Ultramercial (and upholds the lower court decision on patent ineligibility), or whether the reasoning of DDR Holdings will prevail (and the Section 101 decision reversed).

Bob Stoll is a partner at Drinker Biddle and Reath and Co-Chair of the IP Group and a previous Commissioner for Patents at the USPTO.  The views expressed above are his own and do not necessarily represent the views of his firm or its clients.

 

Judge Bryson: Computerized Loyalty-Point Conversion System Not Patent Eligible

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Loyalty Conversion Systems v. American Airlines (E.D. Texas 2014) LoyaltyConversion101Decision

Data processing and business method patents continue to fall like dominoes. In this case, Federal Circuit Judge Bryson – sitting by designation in the Eastern District of Texas – has determined on the pleadings that Loyalty’s reward-program patent is ineligible based upon the recent Supreme Court cases of Alice Corporation Pty. Ltd. v. CLS Bank International, 134 S.Ct. 2347 (2014) and Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012).

Loyalty’s two patents are recently issued but claim priority back to a 2006 filing. U.S. Patent Nos. 8,313,023 (“the ′023 patent”) and 8,511,550 (“the ′550 patent”).  The inventors appear to be corporate lawyer Sean McGhie and patent attorney Brian Buchheit. The litigation is apparently being controlled by ITUS Corp (Robert Berman) although no assignments are listed for the patents in the US Patent Office website.

The basic goal behind the invention is to open-up the buying power of customer reward points. This goal is accomplished by allowing customers to transfer reward-points (and their typical limited buying power) for a more negotiable instrument.  The claims include a number of computers sending, displaying and storing messages back and forth in order to accomplish the aforementioned goal.  However, the patent proposes no advance in computer technology per se, other than perhaps being the first to propose the sending and storing of messages in the particular sequence identified.

Judge Bryson writes:

Notwithstanding the prolixity of the claims, they recite a very simple invention: a computer-driven method and computer program for converting one vendor’s loyalty award credits into loyalty award credits of another vendor. In principle, the invention is thus the equivalent of a currency exchange as applied to loyalty award credits such as airline frequent flyer miles or hotel loyalty award points. The Court concludes that the invention claimed in the ′023 and ′550 patents is not fundamentally different from the kinds of commonplace financial transactions that were the subjects of the Supreme Court’s recent decisions in Bilski v. Kappos, 130 S. Ct. 3218 (2010), and Alice Corporation Pty. Ltd. v. CLS Bank International, 134 S.Ct. 2347 (2014), in which the Court held patent claims invalid for failing to recite patentable subject matter. This case falls squarely within the principles announced in those cases. Accordingly, the Court holds that the asserted claims of the ′023 and ′550 patents are invalid. . . .

In light of Bilski and CLS Bank, the resolution of the section 101 issue in this case is straightforward. At their core, the asserted claims of the two patents in suit are directed to the conversion of loyalty award points of one vendor into loyalty award points of another. That core idea plainly would not be patentable without more, as it is indistinguishable in principle from the simple and familiar financial or business operations that were at issue in Bilski and CLS Bank, as well as similar financial operations at issue in various Federal Circuit decisions in which the claims were held to be invalid under section 101. See Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013) (“system for generating tasks to be performed in an insurance organization”); Bancorp Servs., L.L.C. v. Sun Life Assurance Co., 687 F.3d 1266 (Fed. Cir. 2012) (method for managing a life insurance policy, including generating the policy, calculating fees, and determining the surrender value and investment value of the policy); Dealertrack, Inc. v. Huber, 674 F.3d 1315 (Fed. Cir. 2012) (method for processing credit applications); Fort Props., Inc. v. Am. Master Lease LLC, 671 F.3d 1317 (Fed. Cir. 2012) (method for creating a real estate investment instrument adapted for performing tax-deferred exchanges); CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011) (method for verifying the validity of credit card transactions). If anything, the conversion process at the core of the claims in this case is simpler and more commonplace than some of the methods held unpatentable in the cases cited above.

Regarding the computer technology elements of the claim, Judge Bryson dismissed those as “largely functional in nature” and that the resulting claims “do little more than set forth the general concept of currency exchange, as applied to loyalty awards, and then announce the use of ‘one or more’ computers to obtain various efficiencies in the process of converting one type of loyalty award credits into another.”  In the decision, Judge Bryson stepped through each of the technological limitations of the asserted claims and concluded that none offered the ‘something more’ required by the Supreme Court.

= = = =

Procedurally, this case is important as a dismissal-on-the-pleadings — i.e., quite early in the case.  For defendants – this means a major cost savings.

The standard for this type of dismissal are defined by Rule 12(c) of the Federal Rules of Civil Procedure and  is “designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.” Great Plains Trust Co v. Morgan Stanley, 313 F.3d 305 (5th Cir. 2002). The approach is akin to summary judgment and considers: “whether, viewed in the light most favorable to the plaintiff, the complaint states a valid claim for relief.”

The dismissal on the pleadings is somewhat workable here because subject matter eligibility is a question of law that is largely based upon an introspective look at the patent document.  Of course some outside reference points are: is it an inventive concept? Further, a case potentially turn on claim construction.  In his opinion, Judge Bryson recognized these complications but noted that the parties “have not pointed to any factual issues that could affect” the eligibility analysis.  Further, Judge Bryson waited to make his decision until after a claim construction hearing to likewise ensure that claim construction would not affect the outcome of the 101 analysis.

= = = =

Claim 1 of the 550 patent is as follows:

  1. A method comprising:

a computer serving a set of one or more Web pages for a loyalty program of an entity to one or more remotely located client machines, wherein the Web pages are able to be rendered within a client-side browser as a graphical user interface on the one or more client machines, wherein upon being rendered within the client-side browser said graphical user interface shows a quantity of nonnegotiable credits, wherein said non-negotiable credits are loyalty points of the loyalty program possessed by a member, wherein upon being rendered within the client-side browser the graphical user interface comprises a conversion option to convert at least a subset of the shown non-negotiable credits into a quantity [of] entity independent funds, wherein said entity independent funds are different loyalty points of a different loyalty program of a commerce partner, wherein said entity independent funds are possessed by the member, wherein an agreement exists between the entity and the commerce partner, wherein the agreement permits members to convert the non-negotiable credits to the entity independent funds in accordance with a fixed credits-to-funds conversion ratio, wherein the agreement specifies that the entity is to compensate the commerce partner in an agreed upon amount of cash or credit for conversions of non-negotiable credits to entity independent funds, wherein said agreed upon amount is a multiple of a quantity of converted non-negotiable credits, wherein the entity independent funds are redeemable per the different loyalty program for commerce partner goods or for commerce partner services, wherein the commerce partner is not said entity, wherein in [the] absence of being converted the non-negotiable credits are not accepted as payment for commerce partner goods or for commerce partner services;

the computer responsive to receiving a message indicating a selection of the conversion option, processing the selection to effectuate changes in the served set of Web pages; and

responsive to the processing, the computer serving one or more Web pages or Web page updates that include the effectuated changes to the one or more remotely located client machines, wherein upon being rendered within the client-side browser the graphical user interface is updated with the effectuated changes, wherein the updated graphical user interface shows a reduced quantity of non-negotiable credits possessed by the member in the loyalty program, said reduced quantity resulting at least in part from the subset of non-negotiable credits being converted into the quantity of entity independent funds in accordance with the fixed credits-to-funds conversion ratio.

Ongoing Debate: Is Software Patentable?

Patent

by Dennis Crouch

A pair of recent Federal Circuit decisions continue to highlight ongoing ambiguities and difficulties regarding the scope of patent subject matter eligibility for software related patents.

  • Bancorp Services, L.L.C. v. Sun Life Assur. Co. of Canada (U.S.), — F.3d —-, 2012 WL 3037176 (Fed. Cir. 2012) (computer related financial claims are not patent eligible).
  • CLS Bank Intern. v. Alice Corp. Pty. Ltd., 103 U.S.P.Q.2d 1297 (Fed. Cir. 2012) (computerized stock trading platform claims are patent eligible).

Both decisions agree on several main points: that the mere inclusion of a computer limitation does not make a claim patent eligible and that the claim form (method, system, etc.) does not change the subject matter eligibility analysis. Although perhaps a revisionist history, Bancorp explains that the differing outcomes are based upon factual distinctions in the two cases:

In CLS, we reversed the district court and held that method, system, and medium claims directed to a specific application of exchanging obligations between parties using a computer were patent eligible under § 101. In faulting the district court for “ignoring claim limitations in order to abstract a process down to a fundamental truth,” we explained that the asserted claims in CLS were patent eligible because “it [wa]s difficult to conclude that the computer limitations … d[id] not play a significant part in the performance of the invention or that the claims [we]re not limited to a very specific application of the [inventive] concept.” Here, in contrast, the district court evaluated the limitations of the claims as a whole before concluding that they were invalid under § 101. As we explained above, the computer limitations do not play a “significant part” in the performance of the claimed invention. And unlike in CLS, the claims here are not directed to a “very specific application” of the inventive concept; as noted, Bancorp seeks to broadly claim the unpatentable abstract concept of managing a stable value protected life insurance policy.

Despite this attempted reconciliation, it is clear that the CLS majority has a different approach to subject matter eligibility questions. Perhaps the key difference is the question of how we think of “the invention.” In CLS, the invention is defined by the claim. In Bancorp and the CLS dissent, the court looks for the core inventive concept as the starting-point for its subject matter eligibility analysis.

It is simply ridiculous that after 40 years of debate, we still do not have an answer to the simple question of whether (or when) software is patentable.

En Banc Petition: Counting to Two Alice Style

Patent

by Dennis Crouch

Apple Inc. v. Universal Secure Registry LLC, Docket No. 20-01223 (Fed. Cir. 2021)

In August, the Federal Circuit sided with Apple and affirmed the district court determination that USR’s asserted claims were all directed to abstract ideas — and thus ineligible under 35 U.S.C. § 101. When I first wrote about the original decision, I noted the high correlation between the two steps of Alice: “if a claim fails step one, it usually fails step two as well.”  However, this particular decision stood-out because of the extent that the step-one analysis “borrow heavily from typical step two analysis.”  Crouch, When Two become One, Patently-O (Aug 29, 2021).

USR has now petitioned for en banc rehearing, and focused-in on the panel’s overlapping analysis regarding step one and step two. Questions presented:

  1. Whether step one of the Alice test for patentable subject matter requires a showing of “specificity,” “unexpected results” or unconventional claim elements.
  2. Whether the two steps of the Alice test are distinct requirements that must both
    be separately met to invalidate a patent claim.

USR Apple Petition.

Alice Corp v. CLS Bank: When Two Become One

The patents at issue are related to securing electronic payments without giving a merchant your actual credit card number. The merchant is given a time-varying code instead of a credit card number.  That code is then sent to the credit card company servers for authorization, including any restrictions on transactions with the merchant.  The company then either approves or denies the transaction.  This approach allows for purchases without actually providing the merchant with the “secure information” such as the credit card or account number.

In rejecting the claims, the court noted that cases “often turn[] on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself.” Universal Secure Registry LLC v. Apple Inc., 10 F.4th 1342 (Fed. Cir. 2021). I read this as requiring: (1) that the claims be drafted with specificity; and (2) that the element claimed by an “improvement to computer functionality.”  Generic claims are not enough; neither are specific claim limitations directed toward elements already well known in the art. The court found that the claims were directed toward “conventional actions in a generic way.”  That conventional-generic combination was enough to fully answer both steps of the Alice analysis.

USR’s petition argues that the decision improperly conflates the two steps of Alice:

At step one, the panel imposes a heightened “specificity” requirement for patents on authentication technology; requires “unexpected results” and “unconventionality”; and imports into Section 101 the definiteness requirement of Section 112—none of which has any basis in the statute or Supreme Court precedent. At step two, the panel opinion collapses Alice/Mayo’s two distinct steps into one by applying the same analysis as at step one.

Petition.

The petition here was filed prior to the Federal Circuit’s recent decision in CosmoKey Sols. GmbH & Co. KG v. Duo Sec. LLC, 2020-2043, 2021 WL 4515279 (Fed. Cir. Oct. 4, 2021).  In that case, the majority skipped Alice Step One, but then relied upon seeming step-one analysis to make a determination regarding Alice Step Two.  Both decisions were authored by Judge Stoll.

= = = = =

Claim 22 of U.S. Patent Nos. 8,856,539:

A method for providing information to a provider to enable transactions between the provider and entities who have secure data stored in a secure registry in which each entity is identified by a time-varying multi character code, the method comprising:

receiving a transaction request including at least the time-varying multicharacter code for an entity on whose behalf a transaction is to take place and an indication of the provider requesting the transaction;

mapping the time-varying multicharacter code to an identity of the entity using the time-varying multicharacter code;

determining compliance with any access restrictions for the provider to secure data of the entity for completing the transaction based at least in part on the indication of the provider and the time-varying multicharacter code of the transaction request;

accessing information of the entity required to perform the transaction based on the determined compliance with any access restrictions for the provider, the information including account identifying information;

providing the account identifying information to a third party without providing the account identifying information to the provider to enable or deny the transaction;

and enabling or denying the provider to perform the transaction without the provider’s knowledge of the account identifying information.

DRAFTING PATENT ELIGIBLE CLAIMS; A SIMPLE EXAMPLE – CONTINUED

Patent

Guest post by Howard Skaist, founder of Berkeley Law & Technology Group, LLC.

In 2014, two months after Alice was decided by the Supreme Court, a post that I wrote appeared on Patently-O proposing an approach to claim drafting in light of the Alice decision using a “thought experiment” as an illustration.  A hypothetical in that post suggested trying to claim the original computer spreadsheet VisiCalc before the Alice decision and then after the Alice decision.  The conclusion of the post as to Section 101 was summarized at the time, as follows:

“…from a formal perspective, it is necessary that innovative aspects of the invention, as implemented or intended to be implemented, be on the face of the claim …” (emphasis supplied)

One problem, however, as illustrated starkly by the hypothetical is that claims drafted in light of the Alice decision are generally narrower than they would have been otherwise. Today, perhaps, one could write better (e.g., broader) claims to pass muster under the Mayo–Alice Framework than the example claims provided in that 2014 post.  However, the point of this post is not to attempt to do that, but rather to consider the pre-Alice claim provided as an illustration and ask the following two questions.

First, how would the pre-Alice claim from that original post fare under the subject matter eligibility guidance recently published in January 2019? Second, how might that claim (or claims) be re-drafted to hopefully significantly improve the chances that the claim (or claims) will pass muster under that same new guidance?

To refresh, the ‘before’ claim of the post was:

  1. A method comprising:  implementing a spreadsheet on a computer.

The primary change under the new subject matter guidance is to so-called step 2A (using the terminology of the US Patent Office) — whether the claim is directed toward a judicial exception such as an abstract idea.  The new subject matter guidance adds a first prong and a second prong to Step 2A.  Following the first prong, an examiner is to determine whether the claim recites a judicial exception, in this case an abstract idea, by referring to subject matter groupings. The subject matter groupings are specified as: mathematical concepts, certain methods of organizing human behavior, and mental processes.

I note that the guidance is quite specific in saying that the claim must “recite” matter that falls within the enumerated groupings.  Thus, here, I would say it does not.   Nonetheless, I have to question if an examiner would take that view.  While the claim clearly does not recite a mathematical concept, I could imagine an examiner asserting that the claim recites a mental process.  While I would not agree with this latter conclusion, I could imagine that an examiner might say, for example, that a spreadsheet can be a mental process and that the language “implementing … on a computer” is nothing more than clever patent drafting.

How, then, might the claim be re-drafted to overcome such a rejection, but still retain some measure of breadth?  To challenge ourselves, and perhaps, recite slightly more than necessary, how about this claim?

  1. A method comprising:  implementing a spreadsheet via a computer, including determining contents of one or more cells thereof, based at least in part on one or more user-specified operations to be applied to signals and/or states to be provided as operands for the one or more user-specified operations.

This re-drafted claim at least arguably does not recite a mental process.  Rather, the claim language is pretty specific to make it clear that physical processes are taking place.  Thus, at least two out of three groupings have been drafted around.

Still, an examiner might say that a spreadsheet is a long-standing, fundamental economic practice or one that is a method of organizing human activities, demonstrating one danger with this particular grouping. It is, by its very nature, a bit vague.  Without making any admissions, thus, it would not be not entirely unreasonable for an examiner to suggest that a spreadsheet might fall into this grouping.

Fortunately, all is not lost.  Even if one fails to pass muster under the first prong, an opportunity to satisfy section 101 under the second prong remains.  Here, the new guidance says that if the recited exception is integrated into a practical application, then the claim is still patent-eligible.

Specifically, the guidance says that to meet the second prong the claim is to integrate the judicial exception into a practical application that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort to monopolize the judicial exception.  Being an advocate, my position would be that we have met this already with the claim above.

However, again, to be especially hard on ourselves, perhaps we need to make it clear that some sort of result is generated, so that, as a whole, the claim comprises an improvement over a spreadsheet generated by hand, perhaps, as follows:

  1. A method comprising:  implementing a spreadsheet via a computer, including: determining contents of one or more cells thereof, based at least in part on one or more user-specified operations to be applied to signals and/or states to be provided as operands for the one or more user-specified operations; and generating output signals and/or states based at least in part on the determining, wherein the generating includes generating a report that comprises at least a table portion or a sub-portion of the spreadsheet.

Now, it seems that it would be challenging to assert that a practical application with meaningful limits has not been claimed.  Furthermore, if needed, more dependent claims could be used to flush out more application specific features.  Thus, it would seem, we have successfully written or could successfully write a claim that is patent-eligible under the new guidance.

Given the length limitations of a post such as this, it is important that I now quickly move to the point of my prior musings.  So, I have three general observations to make in light of my “thought experiment” above.

First, that my re-drafted claim would pass the Mayo–Alice Framework under the close scrutiny of a court at best is unclear.  Thus, as one conclusion, even if you are able to draft a claim to pass the new subject matter guidance, it seems prudent to include, as dependent claims, features that you believe more clearly pass the patent eligibility test being applied by courts. 

As a second conclusion, in an attempt to provide greater certainty, it appears that the new guidance permits one to present broader patent-eligible claims to the US Patent Office than previously.  To rephrase this latter point, the Patent Office has provided guidance intended to ferret out the more egregious cases of patent-ineligibility, thereby leaving it to courts to sort out closer question situations, as this example might illustrate.

As a third conclusion, with respect to the new guidance, the “money,” so to speak, resides in meeting the second prong. More specifically, while a patent drafter should certainly attempt to draft claims to comply with the first prong and the second prong; still, given the vagueness at the edges of the first prong groupings, efforts by a patent claim drafter to comply with the second prong appear to me to be more likely to succeed.

Tabbed Spreadsheet — Patent Eligible

Patenting a Spreadsheet

Alice Corp. and Patent Claiming: A Simple Example

Does the Patent Statute Cabin-in the Abstract Idea Exception? (Yes)

Patent, , ,

by Dennis Crouch

In a new Supreme Court petition, Trading Technologies (TT) has again challenged USPTO and Federal Circuit eligibility determinations.

TT v. Lee asks the following question:

Given that 35 U.S.C. § 100(b) sets forth that a patent eligible “process” includes a “new use of a known process, machine, manufacture, composition of matter, or material,” did the Federal Circuit err by holding that an indisputably new and non-obvious use (i.e., game steps) of an existing manufacture (i.e., playing cards) was patent ineligible under Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014)?

The underlying appellate decision In re Smith involves a patent application claiming a new method of playing Blackjack. The new approach offered by offers ability to bet on the occurrence of “natural 0” hands as well as other potential side bets.  Claim 1 in particular requires a deck of ‘physical playing cards” that are shuffled and then dealt according to a defined pattern.  Bets are then taken with the potential of more dealing and eventually all wagers are resolved.  The Federal Circuit affirmed the PTAB/Examiner determinations that the claimed method of playing cards constitutes an unpatentable abstract idea. As I previously wrote:

The court held that a wagering game is roughly identical to fundamental economic practices that the Supreme Court held to be abstract ideas in Alice and Bilski. . . . Following the Board’s lead, the appellate court then found that the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept.”

Important for this case, the court noted that some card games are patent eligible, but that universe appears to be limited only to patents claiming “a new or original deck of cards.”  Of course, the patent statute expressly states that processes are patent eligible – and that set of eligible processes “includes a new use of a known process, machine, manufacture, composition of matter, or material.”  35 U.S.C. 100(b).

Above the Statute?: An important fundamental question is whether the eligibility exceptions of Alice and Mayo supersede the statute.  Some argue that their origins are Constitutional – embedded in the “discoveries” limitation and thus control the law regardless of the statutory text.  But the Supreme Court has repeatedly indicated that the abstract idea and law of nature exceptions are grounded in the 35 U. S. C. §101 (despite the absence of express language).  Under a plain language interpretation, these atextual exceptions should not be extended so far as to conflict with the statute — especially the express definitions of §100(b). Thus, TT writes:

Under the statute, new processes that use conventional equipment or materials are clearly patent eligible subject matter. 35 U.S.C. § 100(b) (patent eligible processes include “a new use of a known process, machine, manufacture, composition of matter, or material.”). This Court has never abrogated § 100(b). And Alice did nothing to change this. Indeed, to fail the first step of the Alice test, a claim needs to tie up an “abstract idea,” which for purposes of this test was defined to be a preexisting practice that serves as a fundamental “building block of human ingenuity,” such as a “longstanding” and “prevalent” economic practice. . . . The Federal Circuit has improperly extended Alice step one to claims that indisputably recite a new set of game steps that was not preexisting, let alone “fundamental.”

My own take is that the Constitutional intellectual property clause probably does have some teeth and – as an extreme example – would not empower Congress to authorize patents covering abstract ideas as such.  That said, Congressional power certainly extends to authorizing the grant of patents covering the types of inventions being identified as abstract ideas under Alice Corp such as the blackjack game at issue here.

[In re TT – Petition]

DISCLOSURES – The petition was filed by my friends and former colleagues Leif Sigmund and Jennifer Kurcz at the MBHB firm and the firm is a paid sponsor of Patently-O.  I also represented TT in other matters up until 2007.  That said, I have not discussed this particular case or my here with TT/MBHB other than to request a copy of the petition after I noted its filing.

Alice v. CLS Bank: Claims Invalid Under Section 101

Patent, ,

By Jason Rantanen

Alice Corporation Pty. Ltd. v. CLS Bank International (2014)

Download opinion here: Alice v CLS

This morning the Supreme Court issued its opinion in Alice, unanimously affirming the Federal Circuit and finding all claims drawn to patent ineligible subject matter under Section 101.  Justice Thomas wrote for the opinion for the Court.  It begins:

The question presented is whether these claims are patent eligible under 35 U. S. C. §101, or are instead drawn to a patent-ineligible abstract idea. We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.

The opinion includes both the actual language of representative claims (in a footnote) and the court’s interpretation of them (in the body of the opinion).  The latter is primarily what the court focuses on:

In sum, the patents in suit claim (1) the foregoing method for exchanging obligations (the method claims), (2) a computer system configured to carry out the method for exchanging obligations (the system claims), and (3) a computer-readable medium containing program code for performing the method of exchanging obligations (the media claims). All of the claims are implemented using a computer; the system and media claims expressly recite a computer, and the parties have stipulated that the method claims require a computer as well.

The Court next summarizes the long-standing nature of the law of nature, natural phenomena, and abstract ideas exception to patent eligibility, and reiterates that these exceptions are driven by a concern about pre-emption, balanced against caution in allowing the exceptions to swallow all of patent law:

Accordingly, in applying the §101 exception, we must distinguish between patents that claim the “‘buildin[g] block[s]’” of human ingenuity and those that integrate the building blocks into something more, Mayo, 566 U. S., at ___ (slip op., at 20), thereby “transform[ing]” them into a patent-eligible invention, id., at ___ (slip op., at 3).

Next comes the first key part: the Court reiterates the framework described in Mayo v. Prometheus, including the inventive concept language:

In Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012), we set forth a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts. First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. Id., at ___ (slip op., at 8). If so, we then ask, “[w]hat else is there in the claims before us?” Id., at ___ (slip op., at 9). To answer that question, we 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. Id., at ___ (slip op., at 10, 9). We have described step two of this analysis as a search for 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., at ___ (slip op., at 3).3

Applying this framework, the Court first found the claims directed to an abstract idea.:

On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “ ‘a fundamental economic practice long prevalent in our system of commerce.’”

It then concluded that the claims also failed the second step: “the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent eligible invention.”

Here’s the second piece of key language, which relates to the computer-implemented nature of the claims:

These cases [Mayo, Flook, Benson, and Diehr] demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it’” is not enough for patent eligibility. Mayo, supra, at ___ (slip op., at 3). Nor is limiting the use of an abstract idea “‘to a particular technological environment.’” Bilski, supra, at 610–611. Stating an abstract idea while adding the words“apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to“implemen[t]” an abstract idea “on . . . a computer,” Mayo, supra, at ___ (slip op., at 16), that addition cannot impart patent eligibility.

It is irrelevant that a computer is a physical object:

There is no dispute that a computer is a tangible system (in §101 terms, a “machine”), or that many computer-implemented claims are formally addressed to patent-eligible subject matter. But if that were the end of the §101 inquiry, an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept. Such a result would make the determination of patent eligibility “depend simply on the draftsman’s art,” Flook, supra, at 593, thereby eviscerating the rule that “‘[l]aws of nature, natural phenomena, and abstract ideas are not patentable,’” Myriad, 569 U. S., at ___ (slip op., at 11).

Applying this standard, the Court concluded that the claims at issue here did nothing “more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.”  Slip Op. at 14.

Note that the Court’s ruling applies to the method claims, the computer system claims, and the computer-readable medium claims.  Here’s the third bit of key language; I predict it’s going to tie folks in knots:

As to its system claims, petitioner emphasizes that those claims recite “specific hardware” configured to perform“specific computerized functions.” Brief for Petitioner 53.But what petitioner characterizes as specific hardware—a“data processing system” with a “communications controller” and “data storage unit,” for example, see App. 954,958, 1257—is purely functional and generic. Nearly every computer will include a “communications controller” and “data storage unit” capable of performing the basic calculation, storage, and transmission functions required by the method claims. See 717 F. 3d, at 1290 (Lourie, J., concurring). As a result, none of the hardware recited by the system claims “offers a meaningful limitation beyond generally linking ‘the use of the [method] to a particular technological environment,’ that is, implementation via computers.”

Put another way, the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer;the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long “warn[ed] . . . against” interpreting §101“in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”

Justice Sotomayor, joined by Justice Ginsburg and Breyer, agreed that the method claims here were drawn to an abstract idea, but concurred to express agreement with Justice Stevens’ view in Bilski that a “claim that merely describes a method of doing business does not qualify as a‘process’ under §101.”

 

 

New Patently-O Law Journal Essay: Parsing the Impact of Alice and the PEG

Patent

New Patently-O Law Journal Essay by Colleen V. Chien, Nicholas Halkowski, Maria He, and Rodney Swartz.

Abstract:

Almost two years have passed since the USPTO issued its January 2019 Patent Eligibility Guidance (PEG), itself a response to the Supreme Court’s Alice decision, and what many perceived as its destabilizing impact on the certainty of patent prosecutions. Leveraging new  data releases, we report on trends in prosecution following the USPTO’s PEG and the Guidance on 112, finding 1) a decline in subject matter rejections and stabilization of subject matter appeals, 2) no discernable increase in 112 rejections, 3) no evidence that small entities were being left behind in Alice-impacted art units by forum shopping by large entities, 4) no noticeable decline in “medical diagnostic” or “software” applications following Alice or Mayo, and 5) more unique words in issued patent claims post Alice. The scripts and techniques we developed to navigate data discontinuities and a lack of labels and complete our analysis are included in this essay.

Read the Essay at: Colleen V. Chien, Nicholas Halkowski, Maria He, and Rodney Swartz, Parsing the Impact of Alice and the PEG, 2020 Patently-O Law Journal 20.

Prior Patently-O Patent L.J. Articles:

  • Paul R. Michel and John T. Battaglia, eBay, the Right to Exclude, and the Two Classes of Patent Owners, 2020 Patently-O Law Journal 11 (2020). (Michel.2020.RightToExclude)
  • Thomas F. Cotter, Two Errors in the Ninth Circuit’s Qualcomm Opinion, 2020 Patently-O Patent Law Journal 1 (2020). (Cotter.2020.TwoErrors.pdf)
  • Jasper L. Tran & J. Sean Benevento, Alice at Five, 2019 PatentlyO L.J. 25 (2019) (Tran.2019.AliceatFive.pdf)
  • Bernard Chao, Implementing Apportionment, 2019 PatentlyO L.J. 20 (Chao.2019.ImplementingApportionment)
  • Jeremy C. Doerre, Is There Any Need to Resort to a § 101 Exception for Prior Art Ideas?, 2019 PatentlyO L.J. 10. (2019.Doerre.AnyNeed)
  • Colleen V. Chien, Piloting Applicant-Initiated 101 Deferral Through A Randomized Controlled Trial, 2019 Patently-O Patent Law Journal 1. (2019.Chien.DeferringPSM)
  • David A. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20. (Boundy.2018.BadGuidance)
  • Colleen Chien and Jiun-Ying Wu, Decoding Patentable Subject Matter, 2018 PatentlyO Patent Law Journal 1.
  • Paul M. Janicke, Patent Venue: Half Christmas Pie, And Half Crow, 2017 Patently-O Patent Law Journal 13. (Janicke.2017.ChristmasPie.pdf)
  • Paul M. Janicke, The Imminent Outpouring from the Eastern District of Texas, 2017 Patently-O Patent Law Journal 1 (2017) (Janicke.2017.Venue)
  • Mark A. Lemley, Erik Oliver, Kent Richardson, James Yoon, & Michael Costa, Patent Purchases and Litigation Outcomes, 2016 Patently-O Patent Law Journal 15 (Lemley.2016.PatentMarket)
  • Bernard Chao and Amy Mapes, An Early Look at Mayo’s Impact on Personalized Medicine, 2016 Patently-O Patent Law Journal 10 (Chao.2016.PersonalizedMedicine)
  • James E. Daily, An Empirical Analysis of Some Proponents and Opponents of Patent Reform, 2016 Patently-O Patent Law Journal 1. (Daily.2016.Professors)
  • Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1. (GrayLeCozDuan)
  • Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the America Invents Act: A Call for Legislative Restraint, 2012 Patently-O Patent Law Journal 1 (Stoll.2012.estoppel.pdf)
  • Paul Morgan, The Ambiguity in Section 102(a)(1) of the Leahy-Smith America Invents Act, 2011 Patently-O Patent Law Journal 29.  (Morgan.2011.AIAAmbiguities)
  • Joshua D. Sarnoff, Derivation and Prior Art Problems with the New Patent Act, 2011 Patently-O Patent Law Journal 12 (sarnoff.2011.derivation.pdf)
  • Bernard Chao, Not So Confidential: A Call for Restraint in Sealing Court Records, 2011 Patently-O Patent Patent Law Journal 6 (chao.sealedrecords.pdf)
  • Benjamin Levi and Rodney R. Sweetland, The Federal Trade Commission’s (FTC) Recommendations to the International Trade Commission (ITC):  Unsound, Unmeasured, and Unauthoritative, 2011 Patently-O Patent Law Journal 1 (levi.ftcunsound.pdf)
  • Kevin Emerson Collins, An Initial Comment on King Pharmaceuticals: The Printed Matter Doctrine as a Structural Doctrine and Its Implications for Prometheus Laboratories, 2010 Patently-O Patent Law Journal 111 (Collins.KingPharma.pdf)
  • Robert A. Matthews, Jr., When Multiple Plaintiffs/Relators Sue for the Same Act of Patent False Marking, 2010 Patently-O Patent Law Journal 95 (matthews.falsemarking.pdf)
  • Kristen Osenga, The Patent Office’s Fast Track Will Not Take Us in the Right Direction, 2010 Patently-O Patent L.J. 89 (Osenga.pdf)
  • Peter S. Menell,  The International Trade Commission’s Section 337 Authority, 2010 Patently-O Patent L.J. 79
  • Donald S. Chisum, Written Description of the Invention: Ariad (2010) and the Overlooked Invention Priority Principle, 2010 Patently‐O Patent L.J. 72
  • Kevin Collins, An Initial Comment on Ariad: Written Description and the Baseline of Patent Protection for After-Arising Technology, 2010 Patently-O Patent L.J. 24
  • Etan Chatlynne, Investigating Patent Law’s Presumption of Validity—An Empirical Analysis, 2010 Patently-O Patent L.J. 37
  • Michael Kasdan and Joseph Casino, Federal Courts Closely Scrutinizing and Slashing Patent Damage Awards, 2010 Patently-O Patent L.J. 24 (Kasdan.Casino.Damages)
  • Dennis Crouch, Broadening Federal Circuit Jurisprudence: Moving Beyond Federal Circuit Patent Cases, 2010 Patently-O Patent L.J. 19 (2010)
  • Edward Reines and Nathan Greenblatt, Interlocutory Appeals of Claim Construction in the Patent Reform Act of 2009, Part II, 2010 Patently‐O Patent L.J. 7  (2010) (Reines.2010)
  • Gregory P. Landis & Loria B. Yeadon, Selecting the Next Nominee for the Federal Circuit: Patently Obvious to Consider Diversity, 2010 Patently-O Patent L.J. 1 (2010) (Nominee Diversity)
  • Paul Cole, Patentability of Computer Software As Such, 2008 Patently-O Patent L.J. 1. (Cole.pdf)
  • John F. Duffy, The Death of Google’s Patents, 2008 Patently O-Pat. L.J. ___ (googlepatents101.pdf)
  • Mark R. Patterson, Reestablishing the Doctrine of Patent Exhaustion, 2007 Patently-O Patent L.J. 38
  • Arti K. Rai, The GSK Case: An Administrative Perspective, 2007 Patently-O Patent L.J. 36
  • Joshua D. Sarnoff, BIO v. DC and the New Need to Eliminate Federal Patent Law Preemption of State and Local Price and Product Regulation, 2007 Patently-O Patent L.J. 30 (Download Sarnoff.BIO.pdf)
  • John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 2007 Patently-O Patent L.J. 21. (Duffy.BPAI.pdf)
  • Joseph Casino and Michael Kasdan, In re Seagate Technology: Willfulness and Waiver, a Summary and a Proposal, 2007 Patently-O Patent L.J. 1 (Casino-Seagate)

 

BASCOM v. AT&T: Section 101 Jurisprudence Continues to Develop

Patent, ,

By Jason Rantanen

BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC (Fed. Cir. June 27, 2016) Download Bascom
Panel: Newman (concurring in the result), O’Malley, Chen (author)

Since Alice v. CLS Bank, the Federal Circuit has issued four opinions rejecting a lack of patent eligible subject matter challenge: DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014); Enfish LLC v. Microsoft Corp., 2016 WL 2756255 (Fed. Cir. May 12, 2016); Rapid Litigation Management Ltd. v. Cellzdirect, Inc., 2016 WL 3606624 (Fed. Cir. 2016), and BASCOM v. AT&T, with the latter three coming the last few months.  (Many more decisions affirm invalidity on § 101 grounds.)  Each of these opinions is important for understanding the contours of the post-Mayo/Alice patentable subject matter doctrine.   In this post, I’ll summarize BASCOM and examine its treatment of the relationship between steps one and two of the Mayo/Alice framework.

Background: The claimed invention involved in this case is a “system for filtering Internet content.”  Slip Op. at 6.  The patent’s first claim reads:

1. A content filtering system for filtering content retrieved from an Internet computer network by individual controlled access network accounts, said filtering system comprising:

a local client computer generating network access requests for said individual controlled access network accounts;

at least one filtering scheme;

a plurality of sets of logical filtering elements; and

a remote ISP server coupled to said client computer and said Internet computer
network, said ISP server associating each said network account to at least one filtering scheme and at least one set of filtering elements, said ISP server further receiving said network access requests from said client computer and executing said associated filtering scheme utilizing said associated set of logical filtering elements.

At the district court, AT&T moved to dismiss BASCOM’s complaint on the ground that the asserted claims were invalid under 35 US.C. § 101.  “AT&T argued that the claims were directed to the abstract idea of ‘filtering content,’ ‘filtering internet content,’ or ‘determining who gets to see what,” and that none of the limitations “transforms the abstract idea of filtering  content into patent-eligible subject matter because they do no more than recite routine and conventional activities performed by generic computer components.”  Id. at 8.  The district court agreed with AT&T, finding that “the claims were directed to the abstract idea of ‘filtering content’ because ‘content provided on the Internet is not fundamentally different from content observed, read, and interacted with through other mediums like books, magazines, television, or movies,”  Id. at 9, and that “no individual limitation was inventive because each limitation, in isolation, was a ‘well known, generic computer component[]’ or a standard filtering mechanism.”  Id.  Nor were the limitations in combination inventive because “[f]iltering software, apparently composed of filtering schemes and filtering elements, was well-known in the prior art” and “using ISP servers to filter content was well-known to practitioners.”  Id., quoting district court.

“Ordered combination of limitations” can provide the “inventive concept”: On appeal, the Federal Circuit reversed based on the second step of the Mayo/Alice framework.   Critical to its conclusion that the claims were directed to patent eligible subject matter was the court’s focus on the particular arrangement of generic and conventional components in the claims.

“An inventive concept that transforms the abstract idea into a patent-eligible invention must be significantly more than the abstract idea itself, and cannot be simply an instruction to implement or apply the abstract idea on a computer.”  Slip Op. at 14.  Under the court’s step two analysis, the specific limitations were sufficient to establish eligibility on the limited record before the court–not because the limitations themselves provided that “inventive concept,” but because the arrangement of those elements did.  “The inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.  As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.”  Slip Op. at 15.  On the limited record before the court, the specific method of filtering content claimed in the patent “cannot be said, as a matter of law, to have been conventional or generic.”  Id. at 16.

The relationship between Mayo/Alice Step One and Step Two:  The court’s step one analysis is, unfortunately, somewhat muddled.  The court first states that the claims are directed to an abstract idea, that of filtering content on the Internet, id. at 12, then shifts to the conclusion that the claims present a “close call,” requiring progression to step two.  Id. at 13 (“This case, unlike Enfish, presents a “close call[] about how to characterize what the claims are directed to….Here, in contrast, the claims and their specific limitations do not readily lend themselves to a step-one finding that they are directed to a nonabstract idea.  We therefore defer our consideration of the specific claim limitations’ narrowing effect for step two.”)

Ultimately, the choice between claims that are clearly directed to an abstract idea and those that are “close calls” may not matter.  If a claim is either unambiguously directed to an abstract idea or is a “close call,” the result is that the claim fails Mayo/Alice step one and the analysis proceeds to step two, the search for an inventive concept.  Viewed in this light, resolving disputes over the articulation of the abstract idea isn’t necessary as long as it fits in the “close call” category.

On the other hand, the articulation of the abstract idea in step does matter because it provides an important ingredient for step two.  Here, the court drew upon the articulation of the “abstract idea” as “filtering content on the Internet” to conduct its step two analysis.  “The claims do not merely recite the abstract idea of filtering content along with the requirement to perform it on the Internet, or to perform it on a set of generic computer components.  Such claims would not contain an inventive concept.”  Id. at 16.  With that articulation of the abstract idea in hand, it is relatively easy to see the method of filtering claimed in claim 1 as providing the necessary “inventive concept.”  The articulation of the abstract idea as “filtering content on the Internet” also provides the foundation for the court’s analysis of the invention here as compared with its previous decisions on patent eligible subject matter.

But if one were to articulate the abstract idea as being “controlling access to content by using centrally-held accounts with different permissions,” it might be significantly more difficult for the claims to pass the step two analysis because that idea is much closer to the inventive concept described by the court.  “The inventive concept described and claimed in the ‘606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.”   Id. at 15.  To be sure, it would be harder for such an articulation to fail the Mayo/Alice step 1 analysis, but it’s not immediately clear to me that it would.

Judge Newman’s Concurrence: Concurring in the result, Judge Newman wrote separately “to urge a more flexible approach to the determination of patent eligibility, for the two-step protocol for ascertaining whether a patent is for an “abstract idea” is not always necessary to resolve patent disputes.”  Newman concurrence at 2.  Judge Newman’s concurrence, while raising the academic question of whether there is actually an “abstract ideas” limit on the § 101 categories or instead whether questions of abstractness are fully resolved by application of §§ 102, 103 and 112, does not really offer much in the way of a path forward under current patent law.    To the extent Judge Newman is suggesting that district courts should be able to deny 12(b)(6) motions when there are evidentiary disputes, then I would agree.  But if she is suggesting something else, it is not clear to me how  proposal would fit into the procedural constraints of Rule 12(b)(6) or current § 101 jurisprudence.

EFF: Limit Software Patents

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Guest Post by Julie Samuels.  Samuels holds an endowed chair at EFF aptly named the Mark Cuban Chair to Elimiate Stupid Patents.  EFF's brief in the CLS Bank case is available here: /media/docs/2012/12/eff–iso-cls.pdf. 

Since the Supreme Court’s 2010 Bilski ruling, the Federal Circuit has been consistent on only one point in its § 101 jurisprudence—and that’s on being inconsistent. In the face of the Federal Circuit’s failure to provide a workable § 101 standard, the Supreme Court issued its unanimous ruling in Mayo v. Prometheus, essentially telling the Federal Circuit to take the patentable subject matter inquiry seriously. Yet the Federal Circuit paid no heed when it issued ruled in CLS Bank v. Alice, all but ignoring the Supreme Court (for many of us court watchers, the Federal Circuit’s failure to address Mayo was shocking; even Judge Prost, in her dissent, admonished the majority for “fail[ing] to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach.”).

So it really was no surprise when the Federal Circuit agreed to take CLS en banc. We, along with many others, hope that this case would provide the Court an opportunity to head the Bilski Court’s warning that:

The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change. (130 S. Ct. at 3229).

As currently interpreted, § 101 leaves parties unable to discern a patent’s metes and bounds or assess its validity, making inadvertent infringement an unfortunate cost of doing business. This has led to a dangerous and dramatic increase in patent litigation, particularly surrounding business method patents or those covering software. For better or worse (and I think worse), the major uptick in these cases involved non-practicing entities. Some data that we included in our amicus brief filed in CLS Bank:

  • From 200-2002, NPE litigation accounting for only about five percent of patent litigation;[1] in 2007 that figure was 22 percent and in 2011 it was 40 percent.[2]
  • Litigation surrounding software patents has also greatly increased:

6a00d8341c588553ef017c34cf3367970b-pi[1][3]

  • For the first time in 2011, spending by both Apple and Google on patents exceeded the firms’ spending on new product research and development.[4]
  • NPEs now disproportionately target small companies; at least 55% of unique defendants sued by NPEs make under $10 million a year.[5]

These statistics are a direct result of the legal instability surrounding § 101. One way to stem this problem is to create incentives for those facing litigation (or litigation threats) to pursue their meritorious defenses of noninfringement and invalidity. Section 101 could play that role, in fact, the Mayo Court seemed to state as much: “to shift the patent-eligibility inquiry entirely to these late sections [§§102, 103, 112] risks creating significantly greater legal uncertainty, while assuming that those sections can do work that they are not equipped to do.” 132 S. Ct. at 1304.

 Yet no version of recent § 101 jurisprudence offers much hope of settling the law. Instead, we recommended in our brief (filed along with Public Knowledge) that the Federal Circuit take another route and adopt a stricter construction of § 112(f), as recently proposed by Prof. Mark Lemley. Specifically, instead of attempting to figure out whether a broad, functional claim is abstract or not, a court may first use § 112(f) to narrow the claim to the structures and their equivalents recited in the patent and then, if questions remain, make a § 101 inquiry.  

 While § 112(f) has traditionally been applied to apparatus claims, it’s clear that Congress intended it to apply to method claims as well. Despite this, software patents often do not detail actual algorithms or explain how to actually carry out the methods they attempt to claim; as such they should be indefinite under cases like Aristocrat Techs. v. Int’l Game Tech. If the claims do specify the algorithms, then the § 101 inquiry will be limited to those algorithms and their equivalents. These questions—of whether §112(f) applies; if it does, how the claims should be limited; and then if § 101 permits that narrowed claim—could all be accomplished at early stages of litigation, before expensive discovery and motion practice.

[1] James Bessen, Jennifer Ford and Michael Meurer, The Private and Social Costs of Patent Trolls, Boston Univ. School of Law, Working Paper No. 11-45, 2011 (“Bessen 2011”), at 6.

[2] Sara Jeruss, Robin Feldman & Joshua Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation (2012) at 5, 25.

[3] James Bessen, A Generation of Software Patents, Boston Univ. School of Law, Working Paper No. 11-31 (June 21, 2011), at 19

[4] Zak Islam, Smartphone Industry Spent $20 Billion on Patents in 2011, tom’s hardware (October 9, 2012), http://www.tomshardware.com/news/Patents-Smartphone-Apple-Google-Motorola,18231.html

[5] Colleen Chien, Startups and Patent Trolls, Santa Clara Univ. School of Law, Accepted Paper No. 09-12 (September 28, 2012)

DDR Holdings – Federal Circuit Forges a Sensible Path on Software Patents

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Guest post by Bart Eppenauer. 

Amidst all the angst and uncertainty following the Supreme Court’s decision in Alice Corp. v. CLS Bank (2014), patent owners and inventors in the Information Technology world should be celebrating the decision last week in DDR Holdings v. Hotels.com from the Federal Circuit.  While the Alice decision fell short of ushering in a bright line test with absolute clarity, a vocal minority has grabbed the opportunity to generate headlines suggesting that software patents are all but dead in the water.  This kind of hysteria is not only unfounded, but it sends the wrong message to our policymakers, and to startups and innovative companies of all sizes across all industries.  Perhaps its wishful thinking to expect that DDR Holdings will quell opponents of software patents in any respect, but the decision should send a strong signal that software patents are far from dead.  As I’ve recently urged, the proper course of action at this point is to take a calm, measured and rational approach as we work through the current state of affairs.

As noted by Professor Crouch in his earlier post on DDR Holdings, the DDR ‘399 patent at issue under Section 101 involved an e-commerce syndication system for generating a composite web page that combines selected visual elements of a host website with content of a third-party merchant.  While I can acknowledge the view that the analysis in DDR Holdings could be in tension with the Federal Circuit’s Ultramercial decision, I firmly believe that the DDR patent falls within the contours of patent eligible subject matter.  And I respectfully take issue with the characterization of the DDR patent as a “business method” patent.  In my view, the DDR patent, both in the disclosure and in the claims, sets forth and defines a technical solution to a technical problem through the implementation of computer software in the context of e-commerce.  A cursory review of the specifications and claims of the DDR patent, the representative Alice patent and the Ultramercial patent reveals the stark differences in the level (or absence thereof) of technology-based, software-based disclosure in these patents.

The Alice patents were drawn to an abstract business method for intermediated settlement – i.e., escrow – hardly a new business concept.  The patents contained token references to performing the purported invention on a generic computer.  The patent in Ultramercial involved a business method for allowing consumers to access copyrighted content over the internet in exchange for viewing an advertisement.  In that patent, there is absolutely no disclosure whatsoever of software or computer technology, or of any other technological advancement in the form of computer software or hardware, or anything else.  The Ultramercial patent was simply a business method and nothing more.  In both cases, the now-defunct patents mentioned computers, but did not provide a technological connection between their described method and any kind of actual software innovation.

That connection is exactly what real software enables.  The Supreme Court explicitly stated that the Alice patent claims did not purport to improve the functioning of a computer itself, nor did they advance an improvement in any other technology or technical field.  And contrary to the assertions that the decision threatens all software patents, the Supreme Court specifically acknowledged, as if there was any question to begin with, that many computer-implemented claims (i.e., software) are indeed within the domain of patent-eligible subject matter.  In Ultramercial, the Federal Circuit followed suit in its recognition that at some level all inventions embody or otherwise use abstract ideas or laws of nature, but that they “do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea.” Ultramercial at p. 10 (emphasis added).

Turning to the DDR patent, the Federal Circuit justifiably recognized that “the claimed solution is necessarily rooted in computer technology to overcome a problem specifically arising in the realm of computer networks” (DDR at p. 20), whereas the patents from earlier cited decisions claimed nothing more than the performance of abstract business practices on the Internet or using a generic computer.  Just a brief snippet of technical disclosure from the DDR patent illustrates that this is so:

  • The Link Generator allows host to create and maintain the shopping opportunities that they can then place on their site. Each Link is assigned a unique Link ID. The Link ID identifies who the host is, who the merchant is, and what commerce object (catalog, category, product or dynamic selection) is linked to.
  • The first time a host builds a Link to a merchant’s product, category or catalog, an approval of that host for that merchant may be made. Until the host is approved, they cannot see the Link ID that has been assigned to the newly created Link.
  • The code the host embeds on their web site is as follows:
    < !—BEGIN NEXCHANGE LINK—>
    < !—For more information go to http://www.nexchange.com—>
    < !—The following 2 lines MUST NOT BE CHANGED to ensure proper crediting—>
    < IMG BORDER=‘0’ SRC=‘http://www.nexchange.net/img.asp?LinkID=xxxx’>
    < a href=‘http://www.nexchange.net/route.asp?LinkID=xxxx’>
    < !—Substitute your own text or image below—>
    **YOUR TEXT OR IMAGE HERE**</a>
    < !—END NEXCHANGE LINK—>
  • There are several points to note here:
    • The image src (img.asp) is actually an ASP program that returns a single transparent pixel. This is used to track impressions (how many times the link was displayed on the host site).
    • The route.asp page is a page that routes the customer to the shopping page. As additional servers are added, this will become very important for load balancing.
    • The ‘xxxx’ for the LinkID=‘xxxx’ is the Link ID assigned to the Link in the Link Generator.

This, along with many other examples of software-based technical disclosure in the patent specification, supports the Federal Circuit’s conclusion that the DDR patent claims “specify how interactions with the Internet are manipulated to yield a desired result” and “recite an invention that is not merely the routine or conventional use of the Internet.” (DDR at pp. 22-23).  In other words, the DDR patent claims, while relating to a business challenge, are simply not directed to an abstract idea under the Alice test.

So why all the purported confusion surrounding software patents, business method patents, and the differences there between?  After more than two decades in the IP field, I believe it comes down to a fundamental misunderstanding (and sometimes willful disregard to advance an ideology) of the true nature of “software.”

By way of the briefest of explanations, the execution of a typical software program illustrates that software implemented processes perform rapid activation and deactivation of transistors.  Software defined instructions operate on the information stored within transistor elements.  A software program in a modern computer can perform at least hundreds of millions of such operations per second.  In essence, software instructions literally, but temporarily, reconfigure electronic pathways and transform computing hardware to perform real, useful, and physical activity.

When an algorithm is implemented “purely in software,” it necessarily controls hardware components to carry out computerized actions.  I was struck by Professor Crouch’s Halloween report on his 9 year old daughter’s amazingly insightful viewpoint on how software actually transforms computers into different machines and provides very different experiences.  In discussing the differences between using Microsoft Word and playing her WarriorCat game, she explained – “Sure, the box is the same in both situations.  But, Microsoft Word obeys me and the game thwarts my moves. I see them as very different.  Its brain changes.”

Reducing software code to “just math” or sweeping it away as an abstraction is an inaccurate reading of patent case law that could jeopardize the future of innovation in this country.  The vast majority of companies that obtain software patents are manufacturing companies that integrate software into products they manufacture to deliver valuable new advancements.  These inno­va­tions power technologies ranging from modern smartphones to advanced robotic manufacturing, fly-by-wire aircraft systems, artificial retinas, driverless cars, GPS, medical and diagnostic tools, just to scratch the surface.

The past few years have been a time of unprecedented change to patent law.  Clearly there will be many more Section 101 cases to come that land on both sides of the abstract idea line (whatever and wherever that line may be).  While we’re just at the early stages of a post-Alice world, in my view the DDR decision forges a sensible path on software patentability.  With so much at stake in terms of America’s role as an innovation leader and the incredible economic impact that the IT industry fuels, let’s hope that more decisions follow the path of DDR.

Bart Eppenauer is the Managing Partner of the Seattle office of Shook Hardy & Bacon.

Patent Invalid for Unduly Preempting the Field of “Automatic Lip Synchronization For Computer-Generated 3D Animation Using a Rules-Based Morph Target Approach”

Patent, ,

by Dennis Crouch

McRO (Planet Blue) v. Activision Blizzard, et al. (C.D. Cal. 2014) Decision PDF

In his second major Section 101 decision in as many weeks, Judge Wu (C.D. Cal) has relied upon Alice Corp. (2014) to invalidate all of McRO’s asserted patent claims.  The case is quite important because it is one of the first major applications of Alice Corp. to invalidate non-business-method claims.  Here, the invention is directed toward a specific technological problem that had troubled the field of animation – automatically animating lip synchronization and facial expression of animated characters. See U.S. Patent Nos. 6,307,576 (“‘576 Patent”) and 6,611,278 (“‘278 Patent”).  The appeal will be interesting and may serve as one of the Federal Circuit’s first opportunities to draw a new line in the sand.

The problem addressed by the invention is that it has been historically quite difficult to match-up animation audio and video — so that the character’s mouth and face are moving to match the sound overlay.  Historically, this has been very expensive and time consuming to do well. What you might call the ‘gist’ of the invention is simply a data transformation — from an audio signal to a visual animation output.  The details are a bit more technical. According to claim 1 of the ‘278 patent, the invention operates by first creating a set of phoneme sequences keyed to a pre-recorded audio sequence. Then, those phenome sequences are used to create a set of morph-weight-set streams (based upon a set of factors provided by the animators).  Those morph-streams are then used as input sequences for the animated characters to provide both timing and movement of facial expressions, including emotion.   The inventions claim priority back to 1997.

1. A method for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:

obtaining a first set of rules that defines a morph weight set stream as a function of phoneme sequence and times associated with said phoneme sequence;

obtaining a plurality of sub-sequences of timed phonemes corresponding to a desired audio sequence for said three-dimensional characters;

generating an output morph weight set stream by applying said first set of rules to each sub-sequence of said plurality of sub-sequences of timed phonemes; and

applying said output morph weight set stream to an input sequence of animated characters to generate an output sequence of animated characters with lip and facial expression synchronized to said audio sequence.

In writing about this patent claim, Judge Wu noted that – in isolation – it appears tangible and specific rather than abstract.

They are tangible, each covering an approach to automated three-dimensional computer animation, which is a specific technological process. They do not claim a monopoly, as Defendants argue, on “the idea that the human mouth looks a certain way while speaking particular sounds,” “applied to the field of animation.” Further, the patents do not cover the prior art methods of computer assisted, but non-automated, lip synchronization for three-dimensional computer animation.

Further, the defendants raised a defense of non-infringement – explaining that their particular method of automated lip synchronization is not even covered by the patents. Thus, Judge Wu writes: “At first blush, it is therefore difficult to see how the claims might implicate the ‘basic underlying concern that these patents tie up too much future use of’ any abstract idea they apply.”

However, Judge Wu recognized that the Supreme Court’s analysis of Alice Corp was not done in a vacuum but rather made reference to what was already known in the the art and asked whether the claimed invention extended that knowledge with an inventive concept that goes beyond a mere abstract idea.  In Judge Wu’s words the Section 101 eligibility of “the claims must be evaluated in the context of the prior art.”

Judge Wu’s approach was to identify the point-of-novelty for the claimed invention and then consider whether that point-of-novelty was itself an abstract idea.  That approach was made easy because the patents admitted that many elements of the invention were already part of thee prior art.  However, the patents claimed the new elements as the use of rules that define morph sets as a function of the phonemes which the court sees an an abstract idea that cannot be patented because it would allow the patentee to “preempt the field of automatic lip synchronization for computer-generated 3D animation … using a rules-based morph target approach.” Thus, the claims are invalid.

Judge Wu does show some sympathy to the patentee here — indicating that it appears to be a nice and important invention – just one that is not patent eligible.

But a § 101 defect does not mean that the invention was in the prior art. The invention here may have been novel, but the claims are directed to an abstract idea. And the patent’s casual – and honest – description of the prior art was made at a time when, under the then-prevalent interpretation of the law, such admissions were unlikely to be harmful. One
unintended consequence of Alice, and perhaps of this and other decisions to come, is an incentive for patent applicants to say as little as possible about the prior art in their applications.

Although he does not cite the Supreme Court’s 1946 decision in Halliburton v. Walker, Judge Wu does offer closing remarks that hearken back to the principle that patent claims must be specific at the point-of-novelty.  He writes: “This case illustrates the danger that exists when the novel portions of an invention are claimed too broadly.”

There are many interesting aspects to the decision, but I wanted to post these initial thoughts before moving forward.

Finding the limits of ineligibility

Patent,

by Dennis Crouch

It is safe to say that hundreds of thousands of U.S. patents rely upon the manipulation of information or laws of nature as fundamental aspects of their respective inventions. Many of these patents rest on shaky ground following the Supreme Court’s recent decision in Alice Corp. v. CLS Bank (2014).  Alice Corp.  has the potential of being broadly interpreted, but a major problem with the opinion is that it offers few limiting principles for the definitions of ‘abstract idea’ and ‘law of nature.’  Federal District Court Judge Wu most recently pessimistically described the new test as “I know it when I see it.”  As such, patent attorneys working in the software and biotechnology fields wonder if the sky is falling.  Although storm-clouds have gathered for some, the sky is not falling for the patent system. And, the new scope of eligibility is more well defined than many think.

The critical step for understanding Alice Corp. is to recognize that the case was not decided in a vacuum. Rather, the Supreme Court has a long and multi-generational history of wrestling with concepts of patent eligibility.  Alice Corp. fits within that precedent as an incremental addition, but without rejecting or even modifying the Supreme Court’s own prior precedent.  Rather, what Alice Corp. has rejected is the prior analysis of the Federal Circuit and US Patent Office that seemingly allowed for the patenting of systems and processes whose inventors relied upon only an iota of hardware to separate the patented invention from an underlying abstract idea or law of nature. The new cohort of Alice Corp. (2014),  Myriad (2013), Mayo (2012) and Bilski (2010) collectively wipe-away thirty years of Federal Circuit precedent on eligibility, but at the same time, revive 150-years of Supreme Court doctrine on the topic. Although somewhat cyclic, throughout this time inventors have continually been able to obtain new patents to cover their inventions and enforce those patents against would-be free-riders.  This has been the situation for decade upon decade and will continue.  As Chisum writes, the patent laws “have been interpreted so as to cover most of the new technologies that evolved during the last 200 years.” Chisum on Patents Section 1-1 (2014).

Moving forward a key approach is to look again for the limiting principles of the last cohort of eligibility cases — Diamond v. Diehr, 450 U.S. 175 (1981); Diamond v. Chakrabarty, 447 U.S. 303 (1980), Parker v. Flook, 437 U.S. 584 (1978); and Gottschalk v. Benson, 409 U.S. 63 (1972).  Of course, these cases were decided in a different technological age – before even the birth of many contemporary inventors and need to be understood and given credence in a way that fits with the direction of technological innovation. However, care should be taken not to simply whitewash their holdings.  And, although these pre-CAFC decisions by the court appear historical, they are relatively new when compared with the Supreme Court’s body of eligibility decisions.  The principles laid down by the Supreme Court’s Pre-CAFC decisions were already known and discussed in dozens of prior cases.  As you read these old cases, the language and patterns become repetitive and more predictable, if also nuanced.  See, e.g., Le Roy v. Tatham, 55 U.S. (14 How.) 156 (1852); Burr v. Duryee, 68 U.S. (1 Wall.) 531, 570 (1863); O’Reilly v. Morse, 56 U.S. (15 How.) 62, 112-20 0853); Cochrane v. Deener, 94 U.S. 780 (1876); Munson v. Mayor of New York City; Kewanee Oil v. Bicron Corp., 416 U.S. 470, 483 (1974);  Jacobs v. Baker, 74 U.S. (7 Wall.) 295, 19 L. Ed. 200 (1869); Corning v. Burden, 56 U.S. 252, 267 (1853); Risdon Iron & Locomotive Works v. Medart, 158 U.S. 68, 72-73 (1895); Am. Wood-Paper Co. v. Fibre Disintegrating Co., 90 U.S. 566, 593-96 (1874); Cochrane v. Badische Anilin & Soda Fabrik, 111 U.S. 293, 311-12 (1884); Smith v. Snow, 294 U.S. 1, 5-6 (1935); Waxham v. Smith, 294 U.S. 20, 22 (1935); J.E.M. AG Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124, 130 (2001); Mackay Radio & Tel. Co. v. Radio Corp., 306 U.S. 86, 94 (1939); Rubber-Tip Pencil v. Howard, 87 U.S. 498, 507 (1874); Great Atlantic & Pac. Tea Co. v. Supermarket Equipment Corp., 340 U.S. 147 (1950); etc.

As Bilski suggests, the historic cases offer clues to understanding our revived approach to patent eligibility.  For some, the answers uncovered from will be frustrating because we are far from the pithy expanse of “anything under the sun made by man” that has – at times – been supported by the Federal Circuit.  And certainly, a number of patents will be invalidated. However, this policy shift does not foretell the death of our system and likewise, it does not offer a free-for-all to invalidate any patent on a whim.  Of course, in order to avoid those results, the next steps need to be re-identifying and categorizing our years of precedent with an eye to applying them today and tomorrow.

Federal Circuit Falls in Line: Supporting Strong Limits on Patent Eligibility

Patent, ,

By Dennis Crouch

In buySAFE v. Google (Fed. Cir. 2014), the Federal Circuit has found the patentee’s computer-based-transaction patent to be invalid as an abstract idea lacking subject matter eligibility. The decision by Judge Taranto and Joined by Judge Hughes is somewhat unremarkable and the holding falls easily within the framework created by Alice Corp and Mayo.  At the same time, the Federal Circuit offers several nuggets that may provide broader fodder for future eligibility challenges.

In its recent software patent decision of Alice Corp., the Supreme Court identified its underlying policy motivation for denying patent rights to abstract ideas, laws of nature, and natural phenomenon. The high court’s concern is “that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014), quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012).

Bright Line Test as a Proxy for the Policy Goals: In Mayo, the Supreme Court explained that the exceptions to patentability (law of nature, abstract idea, product of nature) serve as proxies “for the underlying building-block concern.”  Although admittedly an inexact substitute for the particular policy concern, the named exceptions are “somewhat more easily administered” and also have the benefit of substantial tradition. By using a proxy for its underlying concern, the Supreme Court seems ready to admit that some excluded inventions will not have raised substantial building-block concerns, however, the court concludes that judges simply “are not institutionally well suited to making the kinds of judgments needed to distinguish between” them. Mayo.  Thus, the result is a “bright line” exclusion against abstract ideas, laws of nature, mathematical formulae, and natural phenomenon.

Narrowness of Idea Cannot be Judged: Of particular importance here, although the breadth of an abstract idea is relevant to its impact on future innovation, the court here is clear that the breadth or narrowness is not relevant to the application of the exclusionary rule itself.  Rather, the exclusionary rule applies “even if the particular . . . abstract idea at issue is narrow.”

The Process of Determining Eligibility: The process then for determining subject matter eligibility is: (1) determine whether the patent claim is “directed to subject matter in one of the three excluded categories;” and (2) if so, determine whether “the additional elements” of the claim supply an “inventive concept” that is “significantly more than” the ineligible matter itself.  In explaining this second step, the Federal Circuit expounded that the inventive concept must be “in the physical realm of things and acts – a ‘new and useful application’ of the ineligible matter in the physical realm.” Further, merely requiring a generic computer implementation of an ineligible idea does not move the invention “into section 101 eligibility territory.”

Physicality requirement?: You might query how the Federal Circuit’s physicality requirement comports with Bilski v. Kappos, 561 U.S. 593 (2010) (rejecting the machine-or-transformation test as determinative).  The Federal Circuit actually takes an odd interpretation of Bilski.  The court here suggests that the Supreme Court rule on business method patents is that they are certainly directed to abstract ideas (step 1 above), and that they are only patentable with additional inventive concepts tied to the physical realm.

What is an Abstract Idea?:  Up to now, the courts have avoided providing any solid definition for the abstract idea test.  And here, the Federal Circuit was also able to duck that issue because the particular claims at issue are somewhat parallel to those seen in Bilski and Alice. Namely, the claims focus on arrangement involving contractual relations between parties and involving “a fundamental economic practice long prevalent in our system of commerce.”

In the present case, the patented “transaction performance guarantee” is, according to the court here “beyond question of ancient lineage.” And, the patentee’s addition of the computer and computer program in generic terms were insufficient to meet the eligibility test outlined above.

Invalidity affirmed.

I should note that the court did not discuss the presumption of validity or the standard of evidence applied to the underlying elements of the Alice Corp eligibility test.

= = = =

Claim 1 of US Patent No. 7,644,019:

A method, comprising:

receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;

processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party,

wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

= = = = =

An interesting element of this particular decision is that Judge Rader was originally a member of the panel but lost his vote when he retired in June 2014.  Most certainly Judge Rader’s presence on the panel would have impacted the language used to reach these results.

A Typical Eligibility Case in 2023

Patent, , , , , , , ,

by Dennis Crouch

The U.S. Constitution authorizes Congress to legislatively create a patent system. And, Congress has so since the beginning, with George Washington signing the the First Patent Act into law in 1790.  As Congress continued to legislatively develop the statute, courts also added common law nuance, including the law of patent eligibility.  In Bilski, the Supreme Court recognized that the traditional exclusions of “abstract ideas” and “laws of nature” were not textually derived, but were of such antiquity that their precedent could be maintained and justified. Bilski v. Kappos, 561 U.S. 593 (2010). Later, in Mayo and Alice, the Supreme Court fleshed-out its two step test for determining eligibility for these categorical exclusions.

  1. Ask whether the claimed invention is directed toward a categorical exclusion.
  2. If yes, ask whether the claimed invention includes something more, such as an inventive concept that transforms the abstract idea into a patent eligible invention.

Mayo v. Prometheus, 566 U.S. 66 (2012); Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014).  Since 2012, almost 2,000 court decisions have referenced these cases along with 8,000+ PTAB decisions.  These were clearly watershed cases that dramatically changed the landscape of patent law and patent litigation.

Prior to Alice/Mayo, most courts focusing on eligibility  issues contended with major policy goals associated with preemption of ideas and fundamental principles.  That analysis reeks of policymaking and helps explain why courts shied away.  The Alice/Mayo revolution systemized eligibility doctrine into a framework more familiar to judges. Although the purpose is still to avoid improper preemption of fundamental ideas, courts no longer have to grapple with the question of preemption, but rather only the jurisprudential proxies created by the Court.

The recent decision in Hawk Tech Sys. v. Castle Retail, — F.4th — (Fed. Cir. 2023), highlights the current state of the law.  Hawk’s patent relates to video surveillance systems, and claims a method of receiving and/or converting stored video images and then displaying them simultaneously on a remote viewing device.  The district court quickly dismissed the case under R.12(b)(6), finding the claim ineligible on its face.  On appeal  the Federal Circuit affirmed.

At some level, all inventions rely upon abstract ideas and laws of nature for their operation.  At Step 1, Alice asks a more pointed question — is the claim “directed to” one of those excluded forms.  The primary focus then is on what the patent itself “asserts to be the focus of the claimed advance,” looking to both the claim language and the associated specification. Solutran, Inc. v. Elavon, Inc., 931 F.3d 1161 (Fed. Cir. 2019).   Hawk’s claims are directed to a method of viewing images, and includes a series of steps: “receiving, displaying, converting, storing, and transmitting digital video” that are all claimed “using results-based functional language.”  This combination of a data-manipulation process claimed at a high level of abstraction has been regularly tagged as being directed to an abstract idea.  In other cases, details in the specification showing a technological solution has saved claims at step 1.  Here, however, the court concluded that the abstract idea analysis focuses on the claim language itself.  Here, the court (in my view) mis-cited ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759 (Fed. Cir. 2019).  In that case, the court noted that technical details in the specification shouldn’t be imported into the claims for Alice step-on analysis.  Hawk’s argument was somewhat different — it suggested that the specification provided an explanation as to how the claimed approach solved a particular problem.  Even still, the patentee’s arguments are likely lacking because of the dearth of details in both the claims and the specification.  The court concluded that the claims simply “fail to recite a specific solution to make the alleged improvement … and at most recite abstract data manipulation.”

At step 2 the appellate panel agreed with the district court that the claims failed to show any technological improvement sufficient to be considered an inventive concept.  Here, the court concluded that achieving a novel technological benefit was insufficient because the claims were written in “generical functional language” relying upon “conventional computer and network components operating according to their ordinary function.”

One quirk of the district court decision was that it held a hearing and considered some evidence prior to deciding the R.12(b)(6) motion.  But, those motions are designed to be based simply on the pleadings. The rules further provide that, if a court considers matters outside the pleadings then “the motion must be treated as one for summary judgment.”  FRCP 12(d).  And, once it becomes summary judgment, then the court needs to allow more time for the parties to develop the factual evidence.   On appeal, the Federal Circuit agreed that the district court erred, but concluded that the error was harmless since the district court’s decision did not hinge on any of the additional material presented.

Affirmed.

Note: The patent here claims a 2002 priority date, but the particular application was filed in 2017 and issued in 2019.  I.e., the case was considered and passed muster under the USPTO’s eligibility examination guidelines.

Justin Hasford of Finnegan handled the the case below and the appeal for the defendant, Castle Retail.  Chris Austin of Weide & Miller represented the patentee .

Eolas Seeks Supreme Court Review of Federal Circuit’s Patent Eligibility Decision

Patent, , , , ,

Eolas is seeking a writ of certiorari from the Supreme Court — hoping that the court will overturn the Federal Circuit’s decision invalidating its distributed computing (WWW) claims as ineligible under Alice Corp. and Mayo and ostensibly under 35 U.S.C. § 101. The petition presents three key questions: (more…)

Abstract Ideas: The Turnstile Keeps Spinning

Patent,

by Dennis Crouch

Smart Sys. Innovations v. Chicago Transit Authority (Fed. Cir. 2017)

In a split opinion, the Federal Circuit has affirmed the district court’s judgment on the pleadings – R. 12(c) – that the asserted claims of SSI’s four patents are invalid under Section 101 for claiming an abstract idea.  U.S. Patent Nos. 7,566,003, 7,568,617, 8,505,816, and 8,662,390. (Claim 14 of the ‘003 patent – covering a method for validating entry to a city bus or train – is reproduced below).

The baseline for eligibility analysis is the two-step Alice test:

A patent claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2) if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”

Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (quoting Alice).

The patents here are are directed to a method for collecting fares – without dedicated fare-cards, paper tickets, or tokens.  Instead, the system uses credit/debit cards.   After “stripping” the patent claims from their technical jargon and obtuse syntax, the District Court ruled that the patents “really only cover an abstract concept [of] paying for a subway or bus ride with a credit card.”

On appeal, the Federal Circuit affirmed – holding that these steps were – as a whole – directed toward an abstract idea:

The Asserted Claims are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes. Rather, the claims are directed to the collection, storage, and recognition of data. We have determined that claims directed to the collection, storage, and recognition of data are not [sic] directed to an abstract idea.

Note here the suggestion from the court that “a new type of bankcard, turnstile, or database” could be patent eligible.  Here, the limitation to the field of mass-transit did not help the patentee: “merely limiting the field of use . . . does not render the claims any less abstract.” Quoting Affinity Labs.  In thinking through the step one, the majority looked toward the Alice focus on whether the claims are “directed to” an abstract idea.  According to the court – that question is separate and distinct from the “thrust,” “heart,” or “focus” of the invention.

According to the majority, Alice Step 2 is also easily met – because the tech-focused aspects of the claims are simply directed to the use of a general purpose computer and thus “offer no inventive concept that transforms them into patent-eligible subject matter.”  In the process of reaching this result, the court distinguished both Diehr and DDR Holdings:

  • Diehr does not apply when, as here, the claims at issue use generic computer components “in which to carry out the abstract idea.”
  • DDR Holdings does not apply when, as here, the asserted claims do not “attempt to solve a challenge particular to the Internet.”

Finally, the majority considered several ‘other arguments’ regarding eligibility:

  • No preemption: Although one purpose of the abstract-idea exception is to limit preemption, the test itself does not actually consider preemption.  Thus, once the abstract idea analysis is completed “preemption concerns are … moot” Ariosa.
  • Transformation:  Although the machine-or-transformation test “can provide a useful clue to the second step of the Alice framework” it does not overwhelm the primary search for an ‘inventive concept.’ Quoting Ultramercial.

Thus, the claims were all affirmed to be invalid and thus not enforceable.

The majority opinion was penned by Judge Wallach and joined by Judge Reyna.  Judge Linn filed an opinion dissenting in part. Judge Linn argues that the “gist” analysis by the Federal Circuit is improper:

The majority commits the same error as the district court in engaging in a reductionist exercise of ignoring the limitations of the claims in question and, at least with respect to the ’003 and ’617 patents, in failing to appreciate that the abstract idea exception—if it is to be applied at all—must be applied narrowly, consistent with its genesis. . . . All three nonstatutory exceptions are intended to foreclose only those claims that preempt and thereby preclude or inhibit human ingenuity with regard to basic building blocks of scientific or technological activity. They are intended to be read narrowly.

As the Supreme Court has done in its 101 analysis, Judge Linn linked his work back to cases such as Le Roy, Mackay, and Funk Bros. The language of those cases focus on “fundamental truths” and “hitherto unknown phenomenon of nature.”  In Benson and Alice, the court also explained “Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.”

For Judge Linn, a method of charging a bank-card at a bus-turnstile does not fit into those expansive definitions.

Judge Linn’s opinion recognizes that his concern directly stems from the Supreme Court’s approach in Alice and Mayo.  He writes: “The problem with this test, however, is that it is indeterminate and often leads to arbitrary results.”  His solution is that the two part test should not be “applied in a legal vacuum divorced from its genesis” and the three exceptions should be treated consistently. Patents should not be struck down simply because they “seemingly fail the Supreme Court’s test.” Rather, the focus should be on whether the patents “attempt to appropriate a basic building block of scientific or technological work.”

The solution for Judge Linn: Focus on the language of the claims and each limitation when determining whether a claim is directed to an abstract idea – “a basic building block of scientific or technological activity” or instead to a “tangible application” that serves a “new and useful end.”

= = = = =

Here is Claim 14 of the ‘003 patent:

A method for validating entry into a first transit system using a bankcard terminal, the method comprising:

downloading, from a processing system associated with a set of transit systems including the first transit system, a set of bankcard records comprising, for each bankcard record in the set, an identifier of a bankcard previously registered with the processing system, and wherein the set of bankcard records identifies bankcards from a plurality of issuers;

receiving, from a bankcard reader, bankcard data comprising data from a bankcard currently presented by a holder of the bankcard, wherein the bankcard comprises one of a credit card and a debit card;

determining an identifier based on at least part of the bankcard data from the currently presented bankcard;

determining whether the currently presented bankcard is contained in the set of bankcard records;

verifying the currently presented bankcard with a bankcard verification system, if the bankcard was not contained in the set of bankcard records; and

denying access, if the act of verifying the currently presented bankcard with the bankcard verification system results in a determination of an invalid bankcard.

Ladders of Abstractions: How Many Rungs Till the Threshold?

Patent

by Dennis Crouch

Maxell, Ltd., v. Fandango Media, LLC (Supreme Court 2020)

Maxell was originally a battery company (MAXimum capacity dry cELL).  The $80b company has expanded into all sorts of digital media. 

Its patents at issue in this case all relate to managing access to content sent over networks, such as videos provided through online rental and streaming services.  U.S. Patents 8,311,389; 9,088,942, and 9,733,522 (all with 2000 priority date). [Update – These are the three patents listed in the petition, but that appears to be an error.  I believe that Maxell intended to list 9,083,942 and 9,773,522 but switched a couple of digits.]

Maxell sued Fandango for infringement — alleging that the “FandangoNow” service infringed.  The lawsuit was cut-short by the district court’s dismissal on the pleadings – finding the asserted claims ineligible as directed to the abstract idea of “restricting access to data” using “rules based upon time.”  On appeal, the Federal Circuit affirmed without opinion following its internal R.36 procedure.  Now, Maxell has petitioned the Supreme Court with a simple question:

Whether the claims at issue in Maxell’s patents are patent-eligible under 35 U.S.C. 101, as interpreted in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014).

[Petition].  This petition is part of the pile of eligibility petitions, including Athena, Hikma, Berkheimer, and Trading Technologies.

The argument in Maxell focuses primarily on Alice Step 1 — whether the claim is directed to a patent ineligible concept.  Maxell explains its position that the lower court went too-far in generalizing the concepts of the invention:

The court fundamentally erred at step one by describing the claims at too high a level of generality and failing to consider the digital context.

Id. The Supreme Court particularly warned against undue generalization in Alice — writing that at some level of generalization, all inventions involve an abstract concept. Alice.

Although Maxell’s innovations could be generally classified as a way of “restricting access to data” using “rules based upon time,” the company argues that this abstraction is not what was actually claimed:

[T]he patents do not claim the general concept of restricting access to data using rules; they claim particular solutions for restricting access
to digital audio/visual content using control information and rules sent to the user with the audio/visual file. Those solutions use two time controls to restrict access to copyright-protected content – a retention period and a playback permission period – according to specific rules set out in the claims. They protect copyright owners’ rights by restricting access to the audio/visual file to a limited period. And they optimize the user experience by allowing the user to choose when to use the audio/visual file, including when the user is offline.

Regarding Alice Step 2, Maxell suggests that the innovative concept is easier to identify once you recognize that the patent applications were filed back in the year 2000.  However, the district court refused to consider evidence of inventiveness in its eligibility analysis.

In some ways, this case is simply asking the Supreme Court to recognize the USPTO’s eligibility examination guidelines as the law — a claim is only directed at an abstract idea if it recites an abstract idea.

= = = = =

The district court used the following claim as representative in its analysis:

13. A method, comprising:

transmitting audio/video information;

receiving the audio/video information;

storing the audio/video information on a storage medium; and

reproducing the audio/video information from the storage medium according to control information related to the audio/video information,

wherein the control information includes:

  • a first period for retaining the audio/video information on the storage medium, and
  • a second period, that begins at the start of an initial reproduction of the audio/video information, for enabling a start of a reproduction of the audio/video information stored on the storage medium, and

wherein,

  • in a case where an elapsed time from a retaining of the audio/video information is within the first period and an elapsed time from an initial reproduction of the audio/video information is within the second period, enabling a reproduction of the audio/video information, and,
  • in a case where a reproduction is started before the end of the first period and the reproduction is continuing at the end of the first period, enabling the reproduction to an end of the audio/video information beyond the end of the first period, and thereafter disabling a start of another reproduction of the audio/video information even if an elapsed time from the initial reproduction of the audio/video information is within the second period.

Note that the claim has interesting parallels to the claims invalidated in Mayo v. Prometheus.

Supreme Court: Challenging Quick-Look Eligibility Denials

Patent, , , , ,

by Dennis Crouch

Broadband ITV v. Hawaiian Telecom (Supreme Court 2017)

A newly filed petition for writ of certiorari offers a substantial challenge to the quick-look eligibility decisions that have been so popular among district courts.  The challenge here is especially focused on no-evidence eligibility decisions that serve as a substitute for an obviousness determination.

In the case, the claims of BBiTV’s U.S. Patent No. 7,631,336 have been repeatedly upheld as non-obvious before a Hawaii district court ruled them ineligible on summary judgment.  In its 103 analysis, the Hawaii court also denied summary judgment of obviousness – finding questions of material fact regarding whether (1) elements of the claims were found in the prior art or (2) PHOSITA would have been motivated to combine those elements.  In its simultaneous 101 decision, however, the court determined as a matter of law that those same elements were “well-understood, routine, conventional activities previously known to the industry” that lack the “inventive concept” required by Alice.  The decision was (as is now common) affirmed without opinion by the Federal Circuit.

The petition challenges the decision and the newly-popular approach of using eligibility as a shortcut to more difficult and fact-intensive obviousness analysis. The three three questions:

1. Evidence for Underlying Factual Findings: Whether the statutory presumption of validity set forth in 35 U.S.C. § 282 applies to claims challenged under 35 U.S.C. § 101, as set forth by this Court in Microsoft Corp. v. i4i L.P., 564 U.S. 91 (2011), when the ultimate legal conclusion relies upon underlying findings of fact, such as whether the additional novel and non-obvious elements of the claims are merely well-understood, routine, and conventional or whether they add an inventive concept.

2. Standard for Summary Judgment: Whether, unlike every other area of law involving motions for summary judgment, as set forth by Fed. R. Civ. P. 56 and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and its progeny, a district court may resolve material underlying fact disputes against the non-movant party on a summary judgment motion for lack of patent-eligibility under § 101.

3. Not All Abstraction Are Abstract: Whether the judicially-created exception for “abstract ideas” broadly includes any abstraction of a claim (including novel business practices or methods of organizing human activities) or only “fundamental” and “long-standing” (i.e., pre-existing) practices and methods, as recognized by this Court in Bilski v. Kappos, 561 U.S. 593, 611 (2010) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356- 57 (2014).

The questions begin with the implicit understanding that, although a question of law, eligibility decisions are based upon a set of factual determinations that should be treated like any other factual determination by the court.  This approach is directly contrary to the approach often taken these days that follows Judge Mayer’s concurring opinion in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014).

An important legal question here is how close the link should be between obviousness and eligibility.  Post-KSR and Alice, there does appear to be substantial connection between the obviousness analysis associated with combining-old-elements and the eligibility analysis of elements that are “well-understood, routine, and conventional.”  The two should often correlate, the court here may have the opportunity to explain the differences both in doctrine and procedure.

Read the petition here: [LINK]

Amicus Briefs in support of the Petition are due by May 17, 2017.

 

Section 101 Invalidates Another Financial Services Patent

Patent,

In what is beginning to look like a deluge, another district court has invalidated a set of asserted patents as lacking eligible subject matter under 35 U.S.C. 101 as interpreted by the Supreme Court in Alice Corp. (2014).

Every Penny Counts (EPC) v. Wells Fargo Bank (M.D. Fla. September 2014) EveryPennyCounts101

EPC’s invention is a computerized method for rounding-up credit and debit transactions to the nearest dollar and then putting the extra money to a special use. See U.S. Patent Nos. 8,025,217 and 7,571,849.

Claim 1 of the ‘217 patent is listed as follows:

1. A system for accumulating credits from a customer account belonging to the customer and managed by an institution and placing the credits into a provider account, comprising:

an information processor; said information processor including a data store with data identifying the customer, the rounding determinant, the managed institution, and the account;

said data store including machine readable instructions authorizing the processor to access and read the customer account;

said data store including machine readable instructions to calculate rounders after receiving a plurality of payment transactions from the read customer account and to calculate an excess based on the rounders;

said data store including machine readable instructions to withdraw the excess from the customer account;

said data store including machine readable instructions to transfer the withdrawn excess to the provider account.

In a previous decision (pre-Nautilus), District Court Judge Merryday had found the claim to “lack definiteness” but yet not fall to the standard set by the Federal Circuit for a finding of invalid-as-indefinite.  Under the Supreme Court’s Nautilus decision the claim may in-fact be legally indefinite.  However, Judge Merryday shorted the invalidity decision by finding all of the claims of both asserted patents invalid as indefinite.

In judging this claim under the two-step Alice Corp approach, Judge Merryday first identified the abstract idea that the claims are “drawn to” as “the concept of routinely modifying transaction amounts and depositing the designated incremental differences into a recipient account.”  The court explained that this concept is an abstract idea because as in Alice and Bilski, it is a “basic concept” and a “fundamental economic practice long prevalent in our system of commerce.”  Judge Merryday took steps to provide a variety of examples of how the concept has been historically known and used. Since an abstract idea was identified within the claim, the court then moved to the second step of the Alice Corp analysis — determining whether the claim contains an ‘inventive concept’ sufficient to transform the claimed abstract idea into a patent eligible application.  On that point, the court found that each step in the method included “purely conventional” uses of a computer to do the type of tasks that you would expect a computer to be used for such as receiving data, rounding, adding, etc. As such, those steps were insufficient to overcome the step-two hurdle.

In sum, the ’849 patent, a method patent, is invalid under Section 101 because the patent claims an abstract idea that is implemented by “well-understood, routine, conventional activities previously known to the industry.” Alice (2014).  Similarly, the ’217 patent, a system patent, is invalid under Section 101 because the patent merely implements – on a generic, unspecified computer – the ’849 patent’s (unpatentable) method.

What we’re still looking for is a post-Alice court decision that upholds a computer-method patent under Section 101.