Search Results for: Alice v. CLS Bank

Federal Circuit’s Internal Debate of Eligibility Continues

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Amdocs v. Openet (Fed. Cir. 2016)

In the end, I don’t know how important Amdocs will be, but it offers an interesting split decision on the eligibility of software patent claims.  Senior Judge Plager and Judge Newman were in the majority — finding the claims eligible — with Judge Reyna in dissent.  One takeaway is that the Federal Circuit continues to be divided on the issues.  By luck-of-the-panel in this case, the minority on the court as a whole were the majority on the panel (pushing against Alice & Mayo).  Going forward, the split can be reconciled by another Supreme Court opinion, a forceful Federal Circuit en banc decision, or perhaps by future judicial appointments by President Trump.  I expect 2-3 vacancies on the court during Trump’s first term.

In a 2014 post I described the Amdocs district court decision invalidating the claims.  The four patents at issue all stem from the same original application relating to a software and network structure for computing the bill for network communications usage.   One benefit imparted by the invention is associated with its physically distributed architecture that “minimizes the impact on network and system resources” by allowing “data to reside close to the information sources.” According to the majority opinion, “each patent explains that this is an advantage over prior art systems that stored information in one location, which made it difficult to keep up with massive record flows from the network devices and which required huge databases.”  The nexus with the tated benefit is difficult to find in many of the claims themselve.  See Claim 1 below, which was taken as representative of the asserted claims of Amdocs ‘065 patent:

1. A computer program product embodied on a computer readable storage medium for processing network accounting information comprising:

computer code for receiving from a first source a first network accounting record;

computer code for correlating the first network accounting record with accounting information available from a second source; and

computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.

You’ll note that the claim is an almost pure software claim — requiring “computer code” “embodied on a computer readable storage medium.”  The code has three functions: (1) receiving a network accounting record; (2) correlating the record with additional accounting information; and (3) using the accounting information to “enhance” the original network accounting record.  The claim term “enhance” is construed narrowly than you might imagine as the addition of one or more fields to the record.  An example of an added field would be a user’s name that might be added to the accounting record that previously used a numeric identifier.   The court also found that the term “enhance” should be interpreted as requiring that – and doing so in a “a distributed fashion … close to their sources” rather than at a centralized location.  This narrow interpretation of the term “enhance” do not flow naturally from the claim language, but do turn out to be crucial to the outcome.

In reviewing the claim, the court noted that “somewhat facially-similar claims” have been alternatively invalidated as abstract ideas and found eligible.  Compare, for example, Digitech with Enfish and DDR.   Here, the court wrote that the claims are “much closer” to the ones found eligible.  I might rewrite their opinion to say that the judges in the majority prefer the decisions finding eligibility over those invalidating software patent claims.

The two recent Supreme Court cases of Alice and Mayo spell out the court’s two-step framework for determining whether a patent is improperly directed to one of the excluded categories of abstract ideas, natural phenomena, and laws of nature.  Briefly, the court first determines whether “the claims at issue are directed to one of those patent-ineligible concepts.”  If so, the decision-maker must then determine whether any particular elements in the claim “transform the nature of the claim into a patent-eligible application.”  This second step requires consideration of additional elements both individually and in combination in search for an “inventive concept . . . sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” [Quoting Mayo and Alice throughout].

In making its eligibility conclusion in Amdocs, the appellate majority focused on the claim requirement (as construed) that processing be done in a distributed fashion.  According to the court, “enhancing data in a distributed fashion” is “an unconventional technological solution . . . to a technological problem (massive record flows which previously required massive databases).”  Remember here though that we are not talking about patenting a distributed system, but rather patenting a “computer program product embodied on a computer readable storage medium” used to implement the features.

Rather than taking Alice/Mayo steps in turn, the majority accepted “for argument’s sake” that the claims were directed to abstract ideas. However, the claim adds “something more” beyond an abstract idea.  Here, the court notes that the claims require “distributed architecture—an architecture providing a technological solution to a technological problem. This provides the requisite ‘something more’ than the performance of “well-understood, routine, [and] conventional activities previously known to the industry.”

Despite being the stated “unconventional” idea of using a distributed architecture, the court noted that the patent may still fail on anticipation or obviousnesss grounds.

Writing in dissent, Judge Reyna offered several different arguments. First, Reyna argue that the court’s skipping of Alice/Mayo Step 1 helped lead to an incorrect result. If you do not define the abstract idea at issue, how do you know whether the claim includes something more?  Reyna also argued that the “distribution architecture … is insufficient to satisfy Alice step two” because the limitation is not actually found in the claims and, even as interpreted provide only a functional result.  Reyna does note that the specification provides sufficient description of a distributed architecture, but that the claims themselves lack the requisite detail.

The specifications disclose a distributed system architecture comprising special-purpose components configured to cooperate with one another according to defined protocols in a user-configurable manner for the purpose of deriving useful accounting records in a more scalable and efficient manner than previously possible. The disclosed system improves upon prior art systems by creating a specific “distributed filtering and aggregation system . . . [that] eliminates capacity bottlenecks” through distributed processing. ’ The disclosed system is patent eligible. But the inquiry is not whether the specifications disclose a patent-eligible system, but whether the claims are directed to a patent ineligible concept.

[Read the opinion here]

Citing to Supreme Court’s Eligibility Cases

Patent

The chart below shows Shepard’s citation results for recent Supreme Court eligibility cases.  I chart the number of federal court decisions citing to each of these seven major Supreme Court decisions.  2016 numbers do not include November-December 2016.

Citing101DecisionChart

* I apologize that the chart won’t be easy to read for those who are colorblind. Truthfully, it is hard for anyone to tease out information regarding any particular decision.

Guest Post: Why the (Previously) Improving Economy Likely (Also) Reduced Patent Litigation Rates

Patent, , , ,

Guest Post by Ted Sichelman, Professor of Law and Director of the Technology Entrepreneurship and Intellectual Property Clinic and Center for Intellectual Property Law & Markets at the University of San Diego School of Law, and Shawn Miller, Lecturer in Law and Teaching Fellow in Law, Science & Technology at Stanford Law School

As Patently-O has described in detail (e.g., here and here), patent litigation rates have been in flux over the last several years. First, in 2010, rates nominally went up because of false marking suits. Then, in 2011, following passage of the America Invents Act (AIA), patent litigation rates appeared to increase (and the media made much ado over this). Yet, the only thing that changed immediately after the AIA was how we counted patent litigation numbers because of new joinder rules. Indeed, the AIA’s joinder rules actually lowered total defendant counts a bit. Next came inter partes review (IPR) and covered business method (CBM) review, which appear to have substantially decreased litigation rates in 2013 and 2014. Then came Alice Corp. v. CLS Bank and its progeny, which some have claimed decreased litigation rates throughout 2014. And now rates seem to be back up in 2015—why, nobody is sure.

To further understand the drivers of patent litigation, Alan Marco (Chief Economist at the USPTO) and the two of us recently conducted the first rigorous study of the effects of the economy as a whole (the “macroeconomy”) on patent litigation rates over the period 1970-2009 (we stopped at 2009 to avoid the counting mess I just described). The study will be published this month in the Journal of Empirical Legal Studies (a draft is available here).

As background, we examined changes in the rates of total litigation, litigation per issued patent, and litigation per in-force patent. To do so, we used a new USPTO dataset that provides the most accurate numbers on total in-force patents by year gathered to date. Figure 1 below shows the number of in-force patents between 1971 and 2009 (the vertical bars represent periods of recession).

Figure 1

Figure 1. U.S. In-Force Patents (1971-2009) [from USPTO data].

Indeed, although many have noted that the litigation rates per issued patent have been fairly stable, Figure 2 below shows that the litigation rates per in-force patent have risen quite dramatically since the early- to mid-1990s (at least from 1970s rates—Ron Katznelson has argued that rates per in-force patent in the 1920s to the mid-1930s are fairly comparable to the recent rates, at least through the 2000s).

Figure 2

Figure 2. U.S. Patent Litigation Per In-Force Patent (1971-2009)

(Total Patent Litigation in Gold (with annual filings on left y-axis) and Litigation Per In-Force Patent in Blue (with annual values on right y-axis)).

We then performed numerous time-series regressions against important macroeconomic variables like GDP, R & D spending, interest rates, and related factors, controlling for in-force patents and other key variables. Our major findings (over the last 20-25 years) are as follows:

  • In economic upswings (i.e., increasing productivity, low interest rates, low economy-wide financial risk), patent litigation rates generally fall.
  • In recessions, whether rates rise or fall depends on the availability of credit.
    • When credit is freely available in a downturn, overall patent litigation rates generally rise.
    • However, when credit is scarce (like in the most recent recession), overall patent litigation rates generally fall.

We explain the first finding on a “substitution” theory—namely, when selling products and services is highly profitable, companies and investors are less concerned about earning revenue from patent litigation. We speculate that our second finding is driven by the increasing reliance by plaintiffs on external funding. Indeed, the availability of credit has only played a significant role in patent litigation rates since roughly the mid-1990s, when licensing-driven litigation began to rise—first by practicing entities such as IBM and Texas Instruments and, later, by non-practicing entities (NPEs).

Over the last five years, the mean U.S. real GDP growth rate has been about 2-3% per year. Ignoring other factors, and assuming our model applies on a going forward basis since 2009, this increase in productivity has very roughly amounted to a 6-9% decrease in annual patent litigation counts over the same period. In general, it is likely that a sizeable portion of the decrease in patent litigation rates over the last several years has been not merely due to the rise of IPRs and CBMs, and the issuance of Alice Corp. v. CLS Bank, but also to the economy as a whole. So the next time the economy worsens, if credit remains relatively available, all other factors equal, it is likely that patent litigation rates will rise significantly—not by a huge amount, but enough to notice. Whether the current increase in patent litigation is somehow related to a declining macroeconomy, only time will tell.

Please note that the views expressed herein solely express our personal views and do not express the views of the U.S. Patent & Trademark Office.

 

My Rant on Versata: Non-existent Statutory Analysis Continues

Ethics, Patent, , , , , ,

by David Hricik

Over on the main page, Dennis has done a good job laying out the court’s “analysis” in Versata v. SAP of whether section 101 is a defense to invalidity.  The court recognized that, by the text of the statute, it is not.

But, it reasoned that because, today, section 101 challenges are a cottage industry, that that interpretation must be wrong.  It cites to dicta from old Supreme Court cases.  And, it says basically, “well, people are doing it so it must be right.”

Um, wrong:   See Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177 & 191 (1994) (overruling six decades of case law implying a cause of action), superseded on other grounds by 15 U.S.C. § 78(t)(e). Whatever a court says a statute says, the Constitution makes paramount what the enacted text actually says.  Courts can get something wrong for a long time; a judge’s Constitutionally required job is not to continue the nonsense; it is to stop it.

The fact is that no court has ever actually analyzed whether 101 is a defense, particularly after 1952, when (I believe) Congress meant to get rid of this “inventive concept” and other nonsense that courts had, previously, read into the word “invention” in what was then 101.  Congress put all of those odd requirements into the objective section 103.  But… the point is:  no court has analyzed the text — about whether “eligibility” is a defense to any infringement suit (and obviously not in CBM proceedings), and when this court did, it recognized the text did not support Section 101 as an invalidity defense.

That should have been the end of the inquiry, absent (a) an absurd result; (b) ambiguity; or (c) some other narrow exception to ignoring the plain text.  But the panel went further, and suggested that some sort of history precluded giving the statutory text its plain meaning.  (I wrote a book on statutory interpretation; I won’t bore you with the details.)

Let’s go past the text and look for some strong reason to ignore its plain meaning.  What is this evidence?

Courts sometimes use the purpose of a statute to interpret it.  Likewise, they look at legislative history to discern meaning or to find purpose.  What if there was some huge committee report droning on about 101 and so on?  We should likely take that into account.

But it’s not there.

The legislative history shows that the purpose CBM was adopted to address shortcomings with the PTO’s ability in the late 1990’s to find prior art, and that was Congress’s intent.  The House report makes clear that the purpose was to deal with the perception that in the late 1990’s, the PTO had not found the best prior art to apply under sections 102 and 103:

A number of patent observers believe the issuance of poor business-method patents during the late 1990’s through the early 2000’s led to the patent ‘‘troll’’ lawsuits that compelled the Committee to launch the patent reform project 6 years ago. At the time, the USPTO lacked a sufficient number of examiners with expertise in the relevant art area. Compounding this problem, there was a dearth of available prior art to assist examiners as they reviewed business method applications. Critics also note that most countries do not grant patents for business methods.

The Act responds to the problem by creating a transitional program 1 year after enactment of the bill to implement a provisional post-grant proceeding for review of the validity of any business method patent. In contrast to the era of the late 1990’s-early 2000’s, examiners will review the best prior art available….

H. Rep. 112-98, at p. 54 (June 1, 2011) (emphases added).  Thus, the committee report shows that the purpose of the amendments adding CBM is consistent with the statute’s plain text:  to allow people to bring CBM to show that the invention was not new or would have been obvious in light of “the best prior art available.”  The report emphasized the lack of “a sufficient number of examiners with expertise in the relevant art area.” 

Conversely, nothing in the House report mentions the failure to recognize “abstract ideas” or the failure to properly apply Section 101.  Further, it is absurd to suggest that in the late 1990s lack of access to prior art or lack of sufficient examiners with familiarity with prior art had any impact on the ability to determine what is a “law of nature,” or “abstract idea,” or the like.  Indeed, courts are doing this now on 12(b)(6) motions based on their own “evidence”(?) of what is known, etc.

So, so far:  purpose and history, based on the “good” legislative history (committee reports and such usually get more weight than other stuff), 101 is  not a defense.

What about random statements of legislators?  Once you get into random statements, the legislative history of the AIA on this transitional program is, like almost all legislative histories in this granular level, murky.  I have reviewed the remarks made on the Floor of the Senate, and there is no doubt that a few members of Congress mentioned business method patents.  A fair reading is that at least some members of Congress thought the source of the problem to be addressed was with “abstract” patents, while others believed the failure to consider the most pertinent prior art was the source of the problem.

I have also considered other aspects of the legislative history that this panel didn’t cite.  For example, then-Director Kappos observed:  “a key House Committee Report states that ‘the post-grant review proceeding permits a challenge on any ground related to invalidity under section 282.’ H.R. Rep. No.112-98, at 47 (2011).” Yet, it is undeniable – and the Versata court held — that the text of the adopted statute points to only two subsections of Section 282, and so this sentence from that report flatly contradicts the enacted statute.  (It accurately reflects the text at the time Kappos spoke; but Congress didn’t adopt it.)  A sentence in a committee report that directly contradicts the enacted language does not control.  As with most bills, the legislative history of the AIA contains many statements that are not the law, and a few that contradict the enacted statute.

Others have pointed to this statement from a senator from Arizona, Senator Kyl:  “section 101 invention issues” were among those “that can be raised in post-grant review.”  157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011).  Relying on this statement for the proposition that eligible subject matter is covered by the text is doubly problematic.  Foremost, “section 101 invention issues” is not in the enacted text, as the Versata court correctly held. Further, the Supreme Court has long and repeatedly rejected relying upon one legislator’s statement as having been enacted into federal law.  Doing so jeopardizes the Constitutional requirements of enactment and presentment.  This is especially true where, as here, that statement contradicts the plain text as well as other more weighty evidence of legislative intent.  Those sources – which, if entitled to any weight — are entitled to more weight than one Senator’s floor statement – contradict Senator Kyl’s subjective interpretation of the statute.  Again, however, I believe none of this matters here.

So, at best, there is some slight indication that a few members of Congress thought that “abstract” patents (whatever that might mean”) is the problem.

But it is long-settled there has to be some reason, much stronger than a few random statements, to ignore the plain text of an enacted statute.  What controls is the language Congress enacted, not our speculation about the intent of a handful of elected representatives.

Let’s go further.

Sometimes courts interpret statutes in light of existing case law, and that’s what the Versata court relied upon.  Well, what about case law, and the notion this court adopted that there’s some sort of “long-standing” understanding that 101 is a defense.  This is weird:  despite the plain language, and despite Congress knowing that 101 should be a defense, it did not list it.  Think about judicial activism for a moment.

And let’s be real here.

First, post-1952 it was not until Myriad that there was a challenge in the Supreme Court to an issued patent based on 101.  All the others were fights with the PTO.  No one in Myriad litigated whether 101 was a defense in terms of section 282. It’s not, as even this panel recognized.

So, saying there’s some long-standing line of cases from the Supreme Court is simply wrong:  there’s now two cases, one just decided (Alice).  Further, we all know that 101 defenses were about as rare as a blue zebra until a few years ago.

But maybe there is some long-standing interpretation, even in dicta?

Wrong.  If you read the authority relied upon by the court, they don’t support the this “history” at all — instead they undermine it.

Foremost, the Supreme Court case relied upon is Graham v. John Deere Co., 383 U.S. 1 (1966).  That famous case about Section 103 had nothing to do with whether “eligible subject matter” was a condition for patentability, and did not decide that issue. Instead, in dicta analyzing the “condition for patentability” in Section 103, the court noted:

The Act sets out the conditions of patentability in three sections. An analysis of the structure of these three sections indicates that patentability is dependent upon three explicit conditions: novelty and utility as articulated and defined in § 101 and § 102, and nonobviousness, the new statutory formulation, as set out in § 103.  The first two sections, which trace closely the 1874 codification, express the ‘new and useful’ tests which have always existed in the statutory scheme and, for our purposes here, need no clarification. The pivotal section around which the present controversy centers is § 103 . . . .

383 U.S. at 12-13.

That statement actually undermines the argument that “eligible subject matter” is a condition for patentability.

Here’s why:

Graham explains that the Patent Act of 1793 had only two conditions for patentability:  utility and novelty (both of which were once in the same statute, a precursor to sections 101 and 102).  Id. at 10 (“Although the Patent Act was amended, revised or codified some 50 times between 1790 and 1950, Congress steered clear of a statutory set of requirements other than the bare novelty and utility tests reformulated in Jefferson’s draft of the 1793 Patent Act”).  The Graham Court recognized that in 1952 Congress had added a third condition, non-obviousness.  See id. at 14 (“Patentability is to depend, in addition to novelty and utility, upon the ‘non-obvious’ nature of the ‘subject matter sought to be patented’ to a person having ordinary skill in the art.’”) (quoting Section 103).

So… the Graham case suggests — if anything, as it is dicta — that “eligible subject matter” is not a condition for patentability.  If Graham stated that utility, novelty, and non-obviousness were the three conditions for patentability, then the Court’s statement that there are “three conditions” means “eligible subject matter” is not one:  if “eligible subject matter” were also a condition for patentability, then there would be four, not three, conditions.

The panel also cites dicta in a footnote in Aristrocrat Techs., Austl. PTY LTd. v. Int’l Game Tech., 543 F.3d 657, 661 (Fed. Cir. 2008).  Although the merits of a Section 101 issue was decided in Dealertrack, the patentee did not contend that Section 101 was not a statutory defense, and the court did not decide that issue.  Further, dicta in that case traces directly back to the dicta from Graham.  So, there is no long line of cases that, somehow, Congress knew about and intended to adopt.

Worse, there is loose language in other cases saying exactly the opposite, that only 102 and 103 are conditions of patentability (i.e., are consistent with the plain text.).  For example, the Federal Circuit has stated: “The two sections of part II that Congress has denominated ‘conditions of patentability’ are § 102 . . . and § 103 . . . .”  Myspace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1260-61 (Fed. Cir. 2012).   The Supreme Court made essentially the same observation in Diamond v. Diehr, 450 U.S. 175, 190-91 (1981).

So… in fact there is no case law supporting this history, and instead the “case history” is, at best, split and unclear.

The important fact to me is that none of these cases parse the statutory text, or examine the purpose and legislative history of the AIA discussed here.  Ignoring the actual text in favor of what courts have said a statute says is obviously incorrect.  In that regard, the Supreme Court has overridden judicial interpretations of statutes that failed to adhere to the text, and has done so even after decades of having lower courts adhere to those incorrect constructions.  See Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177 & 191 (1994) (overruling six decades of case law implying a cause of action), superseded on other grounds by 15 U.S.C. § 78(t)(e). Whatever a court says a statute says, the Constitution makes paramount what the enacted text actually says.

To sum up, absent some good reason to ignore the plain text, in my opinion random statements from one or two legislators and dicta in cases does not control.  Dicta in cases that do not analyze the statutory text do not control.  A committee report that flatly contradicts the enacted text does not control.  And one Senator’s opinion is not enacted statutory text.

I understand why the panel did what it did.  But the Constitution is more important than judicial politics.

Finally, let’s be real again:  if you look at what Congress did in 1952, it was to get rid of this subjective nonsense.  I strongly believe that then Chief-Judge Rader’s opinion, and “additional views” in CLS Bank v. Alice (which, textually, this panel confirmed in holding 101 is not even a listed defense) need to be raised and litigated.  Statutes should matter.

(You can find the original version of this, with citations and footnotes at:

My exhaustive (and last, really I promise!) post about why 101 is not a defense, nor properly raised in CBM proceedings

Judge Mayer: Subject Matter Eligibility Must be Decided First Even if Not Raised by Either Party on Appeal

Patent, , , ,

By Dennis Crouch

Alexsam, Inc. v. IDT Corp. (Fed. Cir. 2013)

I recently posted on Alexsam’s pending litigation in the Eastern District of Texas. In that case, the jury sided with the patentee Alexsam and rejected the defendants’ arguments that the patent was invalid. The appeal here involves the same patents directed to a system for activating gift cards at the time that they are purchased. See U.S. Patent No. 6,000,608. The most interesting aspect of the decision comes from Judge Mayer’s dissent where he argued that asserted patent claims “disclose nothing more than an abstract idea for making a business run more efficiently, thereby failing to meet the subject matter eligibility requirements set forth in 35 U.S.C. § 101.”

The claim issue (Claim 57) reads as follows:

A multifunction card system comprising:

a. at least one card having a unique identification number encoded on it, said identification number comprising a bank identification number approved by the American Banking Association for use in a banking network;

b. a transaction processor receiving card activation data from an unmodified existing standard retail point-of-sale device, said card activation data including said unique identification number;

c. a processing hub receiving directly or indirectly said activation data from said transaction processor; and

d. said processing hub activating an account corresponding to the unique identification number, thereby permitting later access to said account.

To reach his conclusion that the claim fails to disclose eligible subject matter, Judge Mayer first began by identifying the core inventive concept of the claim. Here, the idea behind the patent is that it allows a card to be activated by swiping it through the terminal used for processing credit card transactions rather than having a dedicated activation terminal. The benefit of that approach is that no special equipment is needed for activating gift cards and the patent application states that no new technology is required in order to allow standard point-of-sale devices to activate gift cards.

The way Judge Mayer describes this setup immediately raises novelty and obviousness concerns in my mind. Indeed, Judge Mayer writes that the case “presents the anomalous situation in which a patentee attempts to preserve the validity of his claims by arguing that they contain nothing new.” Ordinarily, when patent claims “contain nothing new,” they are found invalid for lacking novelty or nonobviousness. Indeed, millions of patent claims are rejected each year by the USPTO for this very reason. And, the primary thrust of the US patent examination system is to ensure that patents are only issued for inventions that are sufficiently new. In this case, the defendants argued that claims were obvious and anticipated as a matter of law. However, instead of addressing that issue that was actually appealed, Judge Mayer focused on the Subject Matter Eligibility that was not raised on appeal – seeing subject matter eligibility as a threshold issue that must be decided first:

Whether claims are directed to statutory subject matter is a “threshold” question, Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010), which must be addressed before this court can consider subordinate issues related to obviousness and infringement. See Parker v. Flook, 437 U.S. 584, 593 (1978) (“Flook”) (emphasizing that “[t]he obligation to determine what type of discovery is sought to be patented” so as to determine whether it falls within the ambit of section 101 “must precede the determination of whether that discovery is, in fact, new or obvious” (emphasis added)); In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009) (“Only if the requirements of § 101 are satisfied is the inventor allowed to pass through to the other requirements for patentability, such as novelty under § 102 and . . . non-obviousness under § 103.” (citations and internal quotation marks omitted)).

In our 2010 article, Professor Robert Merges and I argued that the law does not require the “threshold” question be decided in any particular order. See Dennis Crouch & Robert P. Merges, Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berkeley Tech. L.J. 1673 (2010). Indeed, thresholds are crossed all throughout a journey. Judge Mayer is in the minority on this point of doctrinal ordering. Although rejecting some of our arguments, the CLS Bank plurality opinion agreed with Merges and myself that “district courts may exercise their discretion to begin elsewhere when they perceive that another section of the Patent Act might provide a clearer and more expeditious path to resolving a dispute.” (Citing Merges & Crouch).

The second major problem with Judge Mayer’s dissent is the implicit ruling that Subject Matter Eligibility is not waivable and instead should be raised sua sponte by an appellate court. Here, the §101 eligibility question was not raised by the defendant-appellants in the appeal, nor were they discussed in oral arguments. In the past, both Judges Mayer and Dyk have raised §101 issues sua sponte on appeal — essentially finding that subject matter eligibility questions are on par with the issue of a court’s subject matter jurisdiction.

Finally, Judge Mayer’s decision highlights the failure the CLS Bank decision – because there was no majority opinion in that case, Judge Mayer did not feel the need to even cite that recent pronouncement by the court that directly relates to the case at hand.

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Sanctions: The district court awarded sanctions to the patentee for the defendants’ litigation misconduct in failing to provide to satisfy the appropriate discovery requests regarding the accused systems. The sanction was quite harsh. In particular, the district court deemed several accused systems were infringing as a sanction for ITD’s failure to disclose the fact that its cards contain BINs in their card numbers. On appeal, the Federal Circuit affirmed the sanction. I suspect that the “Patent Abuse Reduction Act” would further embolden accused infringers to play discovery games by avoiding disclosing key information or admitting key facts that would greatly simplify the litigation.

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Unpaid License Still a License: Some of IDTs systems use the MasterCard computer network. That is important because MasterCard has obtained a license from Alexsam to practice the invention. The agreement specifically states that other parties (such as IDT) that are using the MasterCard computer network will be “deemed sublicensed under an implied sublicense.” As part of the agreement, MasterCard is also required to report the total number of licensed transactions to Alexsam at the end of each month, and to pay a fee for each transaction. In this case, however, MasterCard never reported IDT as a sublicensee or paid the required royalties. On appeal, the Federal Circuit agreed with IDT that the MasterCard related sales were licensed and that IDT is therefore not liable for those. In reaching its conclusions, the court noted that the MasterCard agreement did not condition the sublicense on payment of the royalties. Further, the court the cited to its decision in Tessera, Inc. v. Int’l Trade Comm’n, No. 2010-1176, 2011 WL 1944067 (Fed. Cir. 2011) where it held that failure to pay royalties “did not convert authorized sales into unauthorized sales.”

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Money to feed the goats: Attorney Fees at the Federal Circuit

Patent

by Dennis Crouch

I previously wrote about the case of Bank v. Al Johnson’s Swedish Rest., Docket No. 19-01880 (Fed. Cir. 2019).  The dispute is over whether the USPTO should cancel Al Johnson’s registered trademark for goats on a green roof. To be clear – the mark is not the image of goats on a roof, but instead is an actual building with live goats walking around on the roof. [Goat Cam]

Bank challenged the registration on several grounds, including improper functionality and disparaging (toward the goats and their human friends).  The problem in the case for Bank is that he is not a competitor or customer. Banks is not injured by the mark in any concrete way other than being offended by its existence.

The TTAB dismissed the opposition for lack of standing. That decision was then affirmed on appeal since Bank provided neither a real interest nor a reasonable basis for his belief of damage.  The court noted that the “offense” injury was substantially undermined by Tam.

In its original decision, the Federal Circuit also awarded attorney fees to Swedish Restaurant under Fed. R. App. P. 38:

If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.

Id. The court found that the Banks appeal was frivolous. Banks is an attorney and represented himself in the appeal. Usually pro se parties are given more leeway because of their lack of training and experience in the system. However, an attorney representing himself is not given such leeway:

Even though Mr. Bank appears pro se before us, he is an attorney and bears the commensurate obligations. Accordingly, we grant Swedish Restaurant’s motion for costs and attorney fees, including the costs and fees incurred in relation to the parties’ sanctions motions, and
deny Mr. Bank’s motion for sanctions.

Costs and attorney fees to Swedish Restaurant.

Federal Circuit Original Opinion.

Following the court’s decision, there was some debate on attorney fees. In particular, Swedish Restaurant requested that the court clerk enter the attorney fee award. Banks protested — arguing that attorney fee awards must be calculated and awarded by the court, not the clerk.  The Federal Circuit agreed on that point and today awarded all of Swedish Restaurant’s requested fees of $28,523.00.  (The Clerk separately taxed the costs at $241.54.)

 

 

 

 

Goats on the Roof at the Supreme Court

Patent

Todd Bank’s effort to save the dignity of goats has reached the U.S. Supreme Court.  The respondent in the case is Al Johnson’s Swedish Restaurant — a Door County Wisconsin mainstay. “Al Johnson’s is an authentic Swedish family owned restaurant where you can find goats grazing the sod roof.” [Goat Cam].

Al Johnson’s registered trade dress “consists of goats on a roof of grass.” When Bank petitioned the USPTO to cancel the mark, the TTAB refused — holding that Bank did not have standing to file the petition.  On appeal, the Federal Circuit affirmed.  Unlike the no-injury-required approach an AIA-review petitioner on the patent-side, the trademark law requires that a cancellation petitioner “believe[] that he is or will be damaged” by the mark’s registration. Here, Bank was not particularly injured, although he does claim to be disparaged by the mark:

The petition asks two questions – one on the merits and the other associated with sanctions from the court:

1. Whether Tam precludes disparagement as the basis of one’s standing under Section 14 of the Lanham Act, 15 U.S.C. § 1064, to challenge the validity of a trademark where the basis of the merits of the challenge, i.e., the challenger’s assertion as to why the mark is invalid, is unrelated to disparagement.

2. Whether a federal appeals court abuses its authority by sanctioning a party for arguing in favor of his position, even though: (i) the arguments and the position are meritorious; and (ii) the court claimed that the party had conceded that his position had been foreclosed by a decision of this Court, whereas the party, rather than having made such a concession, had argued that his position was not foreclosed by that decision.

In its decision, the Federal Circuit sided with the mark holder and then found the appeal frivolous. The court thus awarded cost and attorney fees to Swedish Restaurant.

Even though Mr. Bank appears pro se before us, he is an attorney and bears the commensurate obligations. Accordingly, we grant Swedish Restaurant’s motion for costs and attorney fees, including the costs and fees incurred in relation to the parties’ sanctions motions, and deny Mr. Bank’s motion for sanctions.

Id.

Goats Remain on the Roof

 

Eligibility: Dice Game Patent Craps Out

Patent

by Dennis Crouch

In re Marco Guldenaar Holdings B.V. (Fed. Cir. 2018)

Guldenaar is is seeking to patent his method of playing a dice game using specially marked dice.  U.S. App. No.  13/078,196.  The PTAB denied his patent on eligibility grounds and the Federal Circuit has now affirmed — holding that the method of game play is an abstract idea and the special markings on the dice represent unpatentable printed matter.  The decision here falls in line with In re Smith, 815 F.3d 816 (Fed. Cir. 2016) where the court held that the claimed method of playing and wagering-on a card game was an abstract idea. The patented method in Smith used a standard deck of cards, and the Federal Circuit noted that “shuffling and dealing a standard deck of cards are “purely conventional” activities. Citing Alice.

Guldenaar’s claim 1 is directed to a “method of playing a dice game” that begins with the provision of a set of three dice — each die having either one, two, or three identical marks. (See the figures above).  Someone then bets on whether or not the marks will appear face-up on the next role, and, after the roll, the bet is settled.  Pretty simple game. (Claim text below).

In applying Alice Step 1, the court found that the claims here are directed to the “rules for playing a dice game,” which is an abstract idea.  In the process, the court warned the PTO that its generalized approach to labeling “methods of organizing human activities” as abstract ideas, but found that this particular method fit the bill.

Under Alice Step 2, claims directed to an abstract idea can be patentable if the claims also include an “inventive concept” sufficient to transform the claimed abstract idea into a patent-eligible application.”  Here, one particular inventive concept appears to be the claimed set of dice that is arguably inventive, and at least not purely conventional.  On appeal, however, the Federal Circuit ruled that the die markings “constitute printed matter [that] fall outside the scope of § 101.”

In Smith, the claims were directed to a standard deck of cards and the court indicated that claims using an original deck of cards could survive Alice. “We could envisage, for example, claims directed to conducting a game using a new or original deck of cards potentially surviving step two of Alice.”   The panel here appears to reject that notion — holding instead that the the original set of dice cannot be seen as transformative since the original aspects

Judge Chen authored the majority opinion that was joined by Judge Bryson.  Judge Mayer filed a concurring opinion channeling Justice Stevens concurring opinion in Bilski.  In Bilski, Justice Stevens (joined by Justices Ginsburg, Breyer, and Sotomayor) argued for a categorical exclusion of business method patents. Here, Judge Mayer argues for a categorical exclusion to the patenting of games — “claims directed to dice, card, and board games can never meet the section 101 threshold because they endeavor to influence human behavior rather than effect technological change.”

= = = =

Claim 1:

1. A method of playing a dice game comprising:

placing at least one wager on at least one of the following: that the first die marking on the first die will appear face up, that the second die marking on the second die will appear face up, that the third die marking on the third die will appear face up, or any combination thereof;

rolling the set of dice; and

paying a payout amount if the at least one wager occurs.

En Banc Petition: What Evidence and Facts are Useful to the Eligibility Analysis

Patent

In their petition for en banc review, Nader and Kamran Asghari-Kamrani ask the Federal Circuit to come together to explain the facts (and the law) of patent eligibility under 35 U.S.C. § 101.  In particular, the new petition filed by Antigone Peyton raises two questions:

1. Is the threshold inquiry for patent eligibility under 35 U.S.C. § 101 a pure question of law without underlying factual issues relating to the question of whether the claims transform an abstract idea into a patent eligible application, including whether they are directed to improvements in computer technology or merely describe well-understood, routine, and conventional activities known in the industry (the Alice Step Two inquiry)?

2. Can a district court conclude, when considering a Rule 12(b)(6) motion, that a computer-based invention’s claims directed towards authenticating a user during an electronic transaction with an external entity by way of a central entity—using a digital identity and dynamic code—fail to recite an improvement in authentication technologies implemented on a computer network and merely recite well-understood, routine, and conventional activities without construing the claims or applying the patentee’s proposed construction, considering the patent’s teachings, or considering relevant fact evidence such as expert testimony on the nature of the invention and state of the art, prior art teachings, or industry practices?

[Read the petition: 2018-10-11 0069 Petition for en banc rehearing filed by Appellants Kamran Asghari-Kamrani and Nader Asghari-Kamrani]

The case at issue here stems from the CAFC’s affirmance of the lower court’s Rule 12(b)(6) dismissal — finding that the claims of U.S. Patent No. 8,266,432 are invalid as directed an abstract ideas.  The claims here are directed to a user authentication system that uses using a central computer to send a temporary dynamic code to a user and then validate the code when submitted by a third party (who is conducting a transaction with the user).

The patentee argues that the facts would show that its approach is an innovative implementation — but the district court dismissed the case without considering any submitted evidence. The district court issued its decision prior to Berkheimer and Aatrix.  However, on appeal, the Federal Circuit affirmed the dismissal without considering the impact of those decisions (R. 36 Judgment without Opinion).

Although the claims expressly and repeatedly require computer intervention, the district court noted that invention would still work for its purpose even without the computer technology.  That setup led the court to find the claims directed toward an abstract idea:

The claims are directed to the abstract idea of using a third party and a random, time-sensitive code to confirm the identity of a participant to a transaction. This formulation is admittedly verbose. It is verbose because the patent claims combine two abstract ideas: the use of a third party intermediary to confirm the identity of a participant to a transaction and the use of a temporary code to confirm the identity of a participant to a transaction. It is an obvious combination, and nothing about the combination removes the patent claims from the realm of the abstract.

Intra-Circuit Split: In its brief, the patentee highlights the current intra-circuit split among the Federal Circuit judges on the issue of when facts are relevant and important to the eligibility inquiry.

[The Berkheimer analysis] has been alternatively characterized by some members of the Court as an “unremarkable proposition” that
is consistent with the Court’s precedent, Aatrix, 890 F.3d at 1355 (Moore, J., concurring), and by others as “contrary to that well-established precedent” with “staggering” consequences, id. at 1362, 1365 (Reyna, J., dissenting). Other members of this Court have explicitly suggested that it should wait for help or guidance from Congress or the Supreme Court. Berkheimer (Lourie, J., concurring).

. . . This Court should join the USPTO’s current effort to roll up its sleeves and bring more certainty, predictability, and clarity to the Section 101 analysis.

It is unlikely that the court will take the bait with this case, but we shall see.

 

Claim 1 below:

1. A method for authenticating a user during an electronic transaction between the user and an external-entity, the method comprising:

receiving electronically a request for a dynamic code for the user by a computer associated with a central-entity during the transaction between the user and the external-entity;

generating by the central-entity during the transaction a dynamic code for the user in response to the request, wherein the dynamic code is valid for a predefined time and becomes invalid after being used;

providing by the computer associated with the central-entity said generated dynamic code to the user during the transaction;

receiving electronically by the central-entity a request for authenticating the user from a computer associated with the external-entity based on a user-specific information and the dynamic code as a digital identity included in the request which said dynamic code was received by the user during the transaction and was provided to the external-entity by the user during the transaction; and

authenticating by the central-entity the user and providing a result of the authenticating to the external-entity during the transaction if the digital identity is valid.

 

 

From the USPTO: PTAB Standard Operating Procedures

Patent

The PTAB has substantially revised its Standard Operating Procedures (“SOPs”) regarding paneling of matters before the PTAB (SOP1) and precedential and informative decisions (SOP2). The revisions focus upon increasing transparency, predictability, and reliability across the USPTO. They update the procedures based upon feedback received from stakeholders, courts, legislators, and our 6 years of experience with AIA trial proceedings.

Revised SOP1 explains the procedures for panel assignment and for informing parties regarding panel changes. It also explains the process for designating panels with more than three judges, and notes that such panels should be rare and will only occur with the approval of the Director.

Revised SOP2 creates a Precedential Opinion Panel (POP), typically comprising the Director, the Commissioner for Patents, and the Chief Judge of the PTAB. The POP will serve two primary functions: 1) it may be convened to rehear matters in pending trials and appeals, for example on issues of exceptional importance; and 2) it may assist the Director in determining whether a decision previously issued by the PTAB should be designated as precedential or informative. It is expected that the POP and the procedures described in revised SOP2 will, in most cases, replace the prior practice of expanded paneling under SOP1, with a process that is more transparent and predictable. It is also expected that revised SOP2 will result in more decisions being designated as precedential.

Revised SOP2 includes, among other things:

  • Creation of the POP, typically comprising the Director, the Commissioner for Patents, and the Chief Judge of the PTAB;
  • Identification of the circumstances when POP members may delegate their authority, and to whom;
  • Provision of notice to the parties when POP review takes place, as well as the identification of the POP members in a particular case;
  • Explanation of the standards, procedures, and timing for requesting POP review in a pending case on rehearing; and
  • Revised procedures for designating a decision previously issued by the PTAB as precedential or informative.

For more details about revised SOP1 and SOP2, please see the full text available on the USPTO website.

Patent Eligibility and Failing to State a Claim for Patent Infringement

Patent

by Dennis Crouch

TS Patents v. Yahoo! Inc. (Fed. Cir. 2018)

In this case, TS patents (inventor Sheng Tai Tsao) has asserted four patents against Yahoo!: U.S. Patent Nos. 9,280,547 (“the ’547 patent”); 8,799,473 (“the ’473 patent”); 8,713,442 (“the ’442 patent”); and 8,396,891 (“the ʼ891 patent”).  All four patents are related to remote hosting.  When a user logs-in, the system creates a per-user-session hierarchical folder list that is sent to the user’s local device.  When a user logs-out, the hierarchical list is deleted from memory.  (2002 priority dates).

The district court found all the asserted claims invalid under 35 U.S.C. § 101 following the Alice/Mayo test as applied to abstract ideas.  In Alice Step-Two, the district court concluded that the claimed elements and arrangements were all “conventional” and “generic.”  In particular, the district court dismissed the case on the pleadings — ruling that the patent is so clearly invalid that the complaint failed to state a plausible claim (Fed.R.Civ.Pro. 12(b)(6)).  At that stage, the district court did not consider any evidence or expressly draw factual conclusions.  On appeal, the Federal Circuit affirmed without opinion (R.36).

In its new en banc petition, TS Patent has asked the Federal Circuit to reconsider in light of its recent decisions in Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018) and Aatrix Software, Inc. v. Green Shades Software, Inc., 890 F.3d 1354 (Fed. Cir
2018).  Leading attorney Matthew Dowd writes:

When a U.S. patent—in particular, a patent issued after Alice Corp. Pty Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014)—states that the claimed computer-based invention yields technical improvements over existing systems, can a district court make factual findings contrary to the patent’s specification at the pleading stage and dismiss a complaint for patent infringement under Rule 12(b)(6)?

TSPatentEnBanc.  The Federal Circuit is struggling internally with this issue, but I do not expect TS to get a majority of the judges — especially since Judges Newman and Linn were on the original R.36 panel.

What is the right answer here: Our system needs a relatively quick and cheap way to cancel patents that are clearly invalid and should not have issued.  Without a better solution, the Supreme Court functionally blessed this approach — although effective it has some major defects.  Barring major revisions of eligibility analysis, the better approach here is to open the window for post-grant review proceedings.

Section 101’s Absurdities

Ethics

Rant warning.

Over on the main page, Dennis has pointed out that a cert petition including citations to my posts here about why Section 101 is not a “defense” to infringement, and to the recent CAFC cases about why 101 includes factual inquiries.  This rant is about those issues.

Let me start there.  That 101 contains factual inquiries is the exact point Judges Rader and O’Malley made years ago, relying on Judge Lourie’s opinion from Alice five times:

[A]s is shown more fully below, the analysis under § 101, while ultimately a legal determination, is rife with underlying factual issues. For example, while members of this court have used varying formulations for the precise test, there is no doubt the § 101 inquiry requires a search for limitations in the claims that narrow or tie the claims to specific applications of an otherwise abstract concept. CLS Bank, __ F.3d at __, 2013 WL 1920941,  at *27-30 (meaningful limitations); Id. at *10 (opinion of Lourie, J.). Further, factual issues may underlie determining whether the patent embraces a scientific principle or abstract idea. Id. (opinion of Lourie, J.) (“The underlying notion is that a scientific principle . . . reveals a relationship that has always existed.”) (quoting Parker v. Flook, 437 U.S. 584, 593 n.15 (1978)). If the question is whether “genuine human contribution” is required, and that requires “more than a trivial appendix to the underlying abstract idea,” and were not at the time of filing “routine, well-understood, or conventional,” factual inquiries likely abound. Id. at *11-12. Almost by definition, analyzing whether something was “conventional” or “routine” involves analyzing facts. Id. at *12. Ultramercial II, 2013 U.S. App LEXIS 12715, at *6-7(emphasis added).

Ultramercial III.

In other words, every judge in Alice agreed that 101 requires factual analysis.

Yet, at the USPTO, people are getting rejections from examiners who just say asserting a claim is “conventional” without any citation to facts (aka evidence).  And despite binding panel precedent that seems in conflict, the CAFC seems now to disagree on whether 101 has factual components, and won’t address en banc that question. Maybe that is because  the questions asked in the 101 “analysis” are precisely the same questions asked in any section 103 rejection and which are plainly factual.  Maybe it is because 101 is 103 (and 112) “light.”

Which leads me to the second point. We’re spending thousands of hours arguing about what is an “invention.”  Regulations are written with flow charts to figure this out.  (And despite this, the Federal Circuit has said Alice did not change 101 law — even though the USPTO has had to write multiple new regulations because of it, and thousands of patents issued properly (presumptively) before it are “invalid” after it.  But, conversely, some courts hold in legal malpractice cases that lawyers did not need to “predict” Alice, and so can’t be liable for failing to raise it, or getting a patent that was worthless after it.)

Folks, those who forget the past are doomed to repeat it.  Patent law and America’s capacity for innovation were saved from this nonsense in 1946.  I have read and written about what Congress did in 1946 to rid of “inventiveness” and “invention” as requirements for patentability, and my blog posts above are about how Congress did exactly this in 1946.  The answers are in the statutory text.  Congress did not want us to argue about “invention” and instead put the conditions for patentability in 102 and 103 (and 112).

Where the judicial activism of the Supreme Court has put our country is is in a dire place.  We are in a time when innovation is king.  China has more patents pending than the U.S.  Around the country, I have heard executives from all types of industry state that our system has made patenting of dubious value.  The data shows that the Supreme Court’s rampant activist approach — undertaken perhaps in a noble effort to get rid of some (too many) stupid patents (and combined with IPRs) — has made our patent system weak, eliminated key incentives to innovate, and, most fundamentally, ignored the changes Congress made back in 1946 to stop this nonsense.

Rant over.

 

RecogniCorp: Can Data Processing be Patented?

Patent

In RecogniCorp, LLC v. Nintendo Co., Ltd., petitioner-patentee RecogniCorp has asked the Supreme Court to take a fresh look at its eligibility doctrines with the following two questions presented:

  1. Whether computer-implemented inventions that provide specific improvements to existing technological processes for encoding or decoding data are patent-eligible under the first step of the Alice test, even if those inventions involve or make use of abstract ideas.
  2. Whether the use of new mathematical algorithms to improve existing technological processes by reducing bandwidth and memory usage can constitute “inventive concepts” under the second step of the Alice test.

Although I previously panned the petition as unlikely to be granted, a set of amicus briefs supporting certiorari substantially raise the odds.

The court battle here began when RecogniCorp sued Nintendo for infringing its U.S. Patent No. 8,005,303.  Without any claim construction or considering any evidence, the district court dismissed the case on the pleadings (R.12(c))– finding that the claims lacked subject matter eligiblity. On appeal, the Federal Circuit affirmed (applying Alice):

  • Step 1: The claims are directed to the abstract idea of encoding and decoding image data long utilized to transmit information (“one if by land, two if by sea”).
  • Step 2: No further inventive concept.

 

Representative claim 1 is listed here:

1. A method for creating a composite image, comprising:

displaying facial feature images on a first area of a first display via a first device associated with the first display, wherein the facial feature images are associated with facial feature element codes;

selecting a facial feature image from the first area of the first display via a user interface associated with the first device, wherein the first device incorporates the selected facial feature image into a composite image on a second area of the first display, wherein the composite image is associated with a composite facial image code having at least a facial feature element code; and

reproducing the composite image on a second display based on the composite facial image code.

Challenging Alice at the Supreme Court?

 

Federal Circuit: Testing Vehicle Operators for Impairment is an Unpatentable Abstract Idea

Patent, , ,

Vehicle Intelligence v. Mercedes-Benz (Fed. Cir. 2015) (Non-precedential opinion)

Vehicle Intelligence and Safety LLC is the owner of United States Patent Number 7,394,392 vehicle safety improvements. In particular, the patent claims systems and methods for testing vehicle operators and then taking control of the vehicle if the operator is deemed impaired. Senior Judge Hart of the Northern District of Illinois ruled on the pleadings (12(c)) that the asserted claims were invalid as being drawn to patent-ineligible subject matter under Section 101 of the Patent Act. On appeal, the Federal Circuit here affirms – holding that “the disputed claims cover only abstract ideas coupled with routine data-gathering steps and conventional computer activity.” An early potential strike against the patent that the inventor, Kevin Roe, is also the patent attorney who prosecuted the case and the litigator who filed the appellate briefs.

Claim 16 reads as follows:

A system to screen an equipment operator, comprising:

a screening module to screen and selectively test an equipment operator when said screening indicates potential impairment of said equipment operator, wherein said screening module utilizes one or more expert system modules in screening said equipment operator; and

a control module to control operation of said equipment if said selective testing of said equipment operator indicates said impairment of said equipment operator, wherein said screening module includes one or more expert system modules that utilize at least a portion of one or more equipment modules selected from the group of equipment modules consisting of: an operations module, an audio module, a navigation module, an anti-theft module, and a climate control module.

In applying Alice Corp., Federal Circuit began with step one – is the claim drawn to ineligible subject matter? Answer: Yes. Here, the court found the claims directed toward “the abstract idea of testing operators of any kind of moving equipment for any kind of physical or mental impairment.”

Although the court did not explain particularly how the testing of operators for impairment fits within the definition of an abstract idea, the court made clear that one element of its decision was based upon the fact that the claims were broadly written and not limited to particular impairments, particular screening or testing methods, the method of programming the claimed “expert system,” or the “nature” of the control.

[C]ritically absent from the entire patent is how the existing vehicle equipment can be used to measure these characteristics; assuming these measurements can be made, how the decision module determines if an operator is impaired based on these measurements; assuming this determination can be made, how the decision module decides which control response to make; and assuming the control response decision can be made, how the “expert system” effectuates the chosen control response. At best, the ‘392 patent answers the question of how to provide faster, more accurate and reliable impairment testing by simply stating “use an expert system.” Thus, in the absence of any details about how the “expert system” works, the claims at issue are drawn to a patent ineligible abstract idea, satisfying Mayo/Alice step one.

An important take-away from this analysis is that the concept of an abstract-idea is closely tied-in with the novelty of the claims themselves – even at step-one of Alice. Thus, contrary to what many patent attorneys continue to believe, whether a concept is an “abstract idea” will depend upon the invention’s priority dates. However, on that same point, the Court rejected Vehicle Intelligence’s argument that its claim did not embody that broad concept of “testing-operators and taking control” since prior patents held by other companies already disclosed and claimed other methods of achieving those same results. The court rejected that notion since full-preemption is not a requirement of the Alice test.

Readers will also notice the linkage between the court’s analysis for eligibility and the doctrines of written description and indefiniteness. The suggestion in this case appears to be that the same claim could have been eligible if the patentee had provided (in the specification) a full explanation of how to implement its system.

On step two of Alice, the court found that “nothing” in the claims disclosed “any inventive concept sufficient to transform the abstract idea of testing operators of any kind of moving equipment for any kind of physical or mental impairment into a patent-eligible application of that idea.” On this point, the patentee argued that its claims were tied to particular device (one of “an operations module, an audio module, a navigation module, an anti-theft module, and a climate control module.”). However, the court found that the patent did not include enough of an explanation of “how the methods at issue can be embedded into these existing modules.”

The court also notes that being “tied to particular machines” is not “sufficient to confer eligibility.”

Although non-precedential, the case will certainly reverberate – especially the court’s refusal to limit the definition of ‘abstract idea’ and its continued acceptance of judgment-on-the-pleadings as the proper method for dismissing cases on Section 101.

Joe Herndon at Patent Docs has more.

Guest Post: The Blurring Of §§ 101 and 103—A Double-Edged Sword that Cuts the Other Way

Patent, ,

Guest post by Ben Roxborough.  Mr. Roxborough is one of a few dual citizens who have completed federal court clerkships in both the United States and Australia. He has clerked in the U.S. for three years and practiced in Australia for five years, writing articles on how Australian courts developed a workable doctrine for patentable subject matter. He earned an LL.M. degree at Stanford Law School, specializing in intellectual property. This is not legal advice, and he welcomes any comments or criticisms: ben.roxborough@gmail.com

To say that the sands have been shifting with respect to Section 101 jurisprudence would severely understate the seismic change that it has experienced in recent years; ever more so in recent months. The consequence is that the lines between sections 101, 102 and 103 have been blurred. This consequence appears to stem from statements in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289, 1304 (2012), where Justice Breyer suggested that the inquiries “overlap.” Indeed, three years later, the Federal Circuit panel in Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1347 (2015), went as far as saying that a “pragmatic analysis of § 101 is facilitated by considerations analogous to those of §§ 102 and 103.”

Because the lines have blurred, defendants have been able to rely on 102/103 arguments to invalidate patents on 101 grounds. These arguments, which defendants tend to advance at the second step of the Mayo/Alice framework, generally state that the additional steps—beyond the putative ineligible subject matter—are conventional because they can be found in the specification or are so ubiquitous that the court can treat them as routine and well understood by those in the scientific community. In Mayo, 132 S. Ct. at 1298, for example, Justice Breyer cited admissions in the specification that the processes for determining the level of metabolites in a patient’s blood were “well known in the art.” The patent lacked inventive concept because of this. Relying on Mayo, among other cases, defendants now make a simple argument. The argument may be summed up as: “Your Honor, if you combine what’s described in the specification and prior art with the ineligible subject matter, you’ll find that the patent claims are routine and conventional and do not meet the 101 threshold.”

In effect, the 101 ineligibility defense has become a de facto 103 defense, targeting primarily combination patents. But putting aside the fact that this de facto argument reflects a conclusion (rather than any real analysis), the argument is extraordinary because prior art in the specification is used against the patentee. No evidence other than the specification is being proffered to support the defendant’s position (which may mean that the prior art in the specification is an admission, but no patentee would say that the combination of the prior art elements were well known in the art at the time of the invention). And although some district courts have acknowledged this paradox, the argument tends to be successful as it was in McRO, Inc. v. Namco Bandai Games Am., Inc., No. CV 12-10327-GW, 2014 WL 4749601, at *11 (C.D. Cal. Sept. 22, 2014).

But it doesn’t end there: the patentee’s perilous position is only compounded further when the defendant seeks dismissal of the claim pursuant to Federal Rule of Civil Procedure 12(b)(6) because the patentee generally cannot proffer evidence outside the four corners of the complaint (and patent) that could undercut the defendant’s position. This seems unfair from not only a procedural perspective, but also a substantive one. When looking at a combination patent, what courts most want to know (or should want to know) is: “Who would have thought to combine the elements of the invention in the first place, and why?”

These basic concerns are central in the 103 context. But they should be equally relevant in the 101 context. Defendants have had a field day eviscerating patent after patent since Alice using ‘obviousness-like’ arguments to show that the patent lacks inventive concept. What is required in response to these developments is judicial recognition of ‘obviousness-like’ arguments that cut the other way. The article I am writing seeks to develop these themes, so to place plaintiffs and defendants on equal footing under Section 101. They are summarized here (and, admittedly, are far from fully developed):

  1. THE SKILLED ARTISAN: To provide the 101 analysis with an objective baseline, courts need to define who the skilled artisan is—and what she knew at the time of the invention. Sometimes a plaintiff is precluded from presenting such evidence because courts now decide a significant number of 101 cases at the Rule 12(b)(6) stage. To guard against early Rule 12(b)(6) motions, the skilled artisan’s background should be described in the complaint (or even the patent itself). Or, the Defendant should be required to show ineligibility within the confines of Rule 12(b)(6). This is less of a problem at the Rule 56(a) stage because the patentee has a chance to present skilled artisan’s common general knowledge. Critically, however, in those cases now on appeal—where the district court has not properly articulated the skilled artisan’s background—the Federal Circuit should be remanding such decisions for further factual development of the record. Placing greater emphasis on the skilled artisan can only make the 101 analysis a more balanced one.
  1. SOLVE THE PROBLEM: Defendants are using the specification against the patentee. But what is referenced in the specification can actually help the patentee demonstrate that the additional steps beyond the ineligible subject matter constitute inventive concept. Specifically, plaintiffs should turn the tables and point to the specification to demonstrate the problems faced by those in the field—and why the invention provides a “new and useful” solution. 35 U.S.C. § 101. Taking a problem-solution approach to define what is “new and useful” is precisely the type of analysis that Judge Chen applied in DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), though it has its roots in Diamond v. Diehr, 450 U.S. 175, 188 (1981) and the Supreme Court’s more recent holding in Alice also reflects this approach.
  1. TEACHING AWAY: This analysis typically applies in the 103 context. But what stops it from being relevant in the 101 context? To this point, the recent BRCA1 decision has opened the door for its application. In re BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig., 774 F.3d 755, 764 (Fed. Cir. 2014). Just as Justice Breyer tethered the notion of what was “well known in the art” by referring to the specification for 101 purposes, the Federal Circuit in BRCA1 has tethered that same notion to “techniques that a scientist would have thought” to use when deciding to engage in experiments that were directed to the invention. But if inventors engage in activities that run counter to scientific thought, those activities can hardly be considered routine and conventional in a 101 sense, correct? While some may say that teaching away analysis should be reserved for § 103 (and to do so would otherwise conflate § 101 with §103), several reasons militate against this position. First, as stated above, the Supreme Court and Federal Circuit have said that § 101 is facilitated by considerations analogous to those of § 103. Second, teaching away analysis should not be monopolized by § 103. In fact, evidence that teaches away is already relevant to enablement (§ 112) to show that “a significant amount of experimentation would have been necessary to practice the claimed invention.” Liebel-Flarsheim Co. v. Medrad, Inc., 481 F.3d 1371, 1379-79 (Fed. Cir. 2007). Because teaching away analysis is transferable between different sections in the statute, there would seem no reason why it could not be extended to § 101 to determine whether a combination of steps is routine and conventional.
  1. HINDSIGHT: Given that Alice requires that courts look at patented elements as a whole, the concern of hindsight bias should have as much relevance to a § 101 challenge as it does a § 103 challenge. For when each of the elements of a claimed invention do not exist in the prior art, or even the ordered combination, how can a defendant rationally argue that the combination is routine and conventional without some degree of hindsight bias kicking in? Princeton Biochemicals, Inc. v. Beckman Coulter, Inc., 411 F.3d 1332, 1337 (2005). Indeed, in Mayo, 132 S. Ct. at 1298-99, Justice Breyer explained that the invention in Diehr was patentable because the “ordered combination” of the steps of the claimed invention as a whole were “nowhere suggested” to be “in context obvious, already in use, or purely conventional.” And while the Supreme Court made no express mention of hindsight in its 101 holdings, it was, at the very least, an underlying rationale in Diehr. Footnote 12 of that opinion is exemplary. Alice, too, reinforces this point when it spoke of looking at combination patents as “whole.”
  1. PREEMPTION & PIONEER PATENTS: Plaintiffs do appear to be pressing preemption arguments more heavily in recent months. The Sequenom case illustrates this: Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371 (2015) But, sadly, the Federal Circuit panel got it wrong when it was not prepared to consider evidence that demonstrated that the invention did not foreclose the use of the discovery. The saying what’s good for the goose is good for the gander seems apt. Because of this, it will be left to the Federal Circuit en banc, or other panels to address how preemption should factor into the 101 calculus. In any case, those decisions should take a liberal approach to Mayo’s dicta and allow preemption to play a tie-breaking fact role in close cases—e., a role similar to that of secondary indicia in the 103 calculus as evidence providing a tipping point in favor of a non-obviousness determination. To this end, and in the preemption context, the patentee should be entitled to show that there are different ways of achieving the goal to which the patent is directed—not just one (preemptive) way.

In addition, the Mayo decision also spoke of “how much future innovation is foreclosed relative to the contribution of the inventor.” Mayo, 132 S. Ct. at 1303. Does this mean that a pioneer patent should be given more latitude in a 101 context than a patent that provides a mere incremental improvement? I think it does. But a workable doctrine must emerge—much like one emerged with respect to the doctrine of equivalents in the infringement context. The article will address this.

  1. DRAFT JURY 101 INSTRUCTION: Given that some 101 cases are predicated on underlying factual findings, much like 103, the article will conclude with an appendix that includes a draft jury instruction. That will be addressed in more detail later.

Intellectual Ventures Software Patents Too Generic (i.e., Abstract)

Patent,

by Dennis Crouch

On appeal, the Federal Circuit has affirmed that Intellectual Ventures’ asserted patent claims are invalid for lacking eligible subject matter. Intellectual Ventures v. Capital One (Fed. Cir. 2015) (Patent Nos. 8,083,137, 7,603,382, and 7,260,587).

The basic idea behind the patent ‘137 patent is to help users budget and then stick to their budget. Incredibly important task that many of us find quite challenging.  The court identified Claim 5 as representative.  That claim includes two steps: (1) storing a user profile with a set of categories – each with a pre-set budget limit; an (2) transmitting a summary of transactions for a category along with the pre-set budget limit.  Claim text:

5. A method comprising:

storing, in a database, a [user] profile … containing one or more user-selected categories to track transactions associated with said user identity, wherein individual user-selected categories include a user pre-set limit; and

causing communication, over a communication medium and to a receiving device, of transaction summary data in the database for at least one of the one or more user-selected categories, said transaction summary data containing said at least one user-selected category’s user pre-set limit.

In reading this claim in the context of Alice Corp., the Federal Circuit first found it directed to the abstract idea of “tracking financial transactions to determine whether they exceed a pre-set spending limit (i.e., budgeting).”  In Alice Corp. step two, the court found no inventive concept: “it is clear that the claims contain no inventive concept. . . . Instructing one to ‘apply’ an abstract idea and reciting no more than generic computer elements performing generic computer tasks does not make an abstract idea patent eligible.”

The court similarly agreed that the claims of the ‘382 patent are also ineligible. Claim 1 provides:

A system for providing web pages accessed from a web site in a manner which presents the web pages tailored to an individual user, comprising:

an interactive interface configured to provide dynamic web site navigation data to the user, the interactive interface comprising:

a display depicting portions of the web site visited by the user as a function of the web site navigation data; and

a display depicting portions of the web site visited by the user as a function of the user’s personal characteristics.

Thus, the claim relates generally to a system for customizing information based upon information known about a user and also web-site navigation data (such a the time-of-day a site is being visited). With Alice Corp. step 1, the court agreed that the aforementioned gist is in fact an abstract idea because such information tailoring is “a fundamental . . . practice long prevalent in our system . . . .” Quoting Alice Corp. Regarding Alice Corp step 2, the court found no inventive concept.  Intellectual ventures had argued that its approach provided a dynamic and real-time application of the concepts — however, the court rejected that argument on its facts — finding that “the claims are not so limited.”

Of special concern for the patentees here is the claimed “interactive interface” configured to implement the method.  Intellectual Ventures argued that device provided an inventive application of the broader idea.  The Federal Circuit disagreed – finding that “nowhere does Intellectual Ventures assert that it invented an interactive interface …. Rather, the interactive interface limitation is a generic computer element.”

Intellectual Ventures third patent included claims with more substance, including a process of sorting, scanning, and organizing images obtained from hard copy prints.  However, those asserted claims were found not-infringed.

Next Step: Substantive Harmonization of Patent Eligibility?

Patent

Broad subject matter eligibility had a strong run from 1980-2014. Although eligibility in the U.S. was broad, Europe was somewhat more narrow on various fronts.  With Alice Corp v. CLS Bank and Mayo v. Prometheus, that framework is now historic. Although some amount of shaking-out is still ongoing, in many ways European subject matter eligibility is now broader than U.S. eligibility.

Now that those of us favoring broad eligibility have been taken-down several pegs, we may now have ripe timing for substantive harmonization on eligibility grounds both with Europe and through the Trans-Pacific-Partnership (TPP).

Status of USPTO’s Withdrawn Abstract Idea Patents

Patent,

by Dennis Crouch

In the Summer of 2014, the U.S. Supreme Court decided the seminal case of Alice Corp v. CLS Bank that pushed further against the patenting of abstract ideas or their non-inventive applications. As part of its implementation procedures, the USPTO quickly began examining applications under the new standards and – as an immediate response – withdrew the allowance of a number of applications that had been determined to be patentable prior to the Alice decision.  Through a FOIA request, Charles Duan and Tristan Gray-Le Coz of Public Knowledge were able to obtain a list of those several hundred withdrawn applications and reported their results on Patently-O in November 2014.

I wanted to follow up on those applications to how they have fared in the seven months since the USPTO’s July 2014 action. These cases are interesting because they were ready for issuance and the only extra issue is eligibility under Section 101.  Thus, this setup offers a nice natural experiment to consider cases where Section 101 is of direct importance.

Using PAIR, I pulled up pendency information for each of these applications and the chart below shows the results:

PendingAliceAppsBasically, 93% of the applications are still pending. Most of these have been initially rejected under Section 101 and now are on to a second-round final. 7% though are either patented or have received a notice of allowance. Only 1% of the applications have been abandoned.  Because these applicants had – at one point – a genuine expectation of issuance that may be hard eliminate.

Of these issued patents, I think that the response filed in Application No. 13/076,216 is interesting. In that case, the applicant essentially argued that the USPTO had failed to provide evidence that the idea of data collection and analysis was an abstract idea and failed to provide evidence that the computer-implemented limitations failed to provide sufficient practical grounding in order to avoid the eligibility ax. The ‘216 application has matured into U.S. Patent No. 8,965,784.

Over the next year, we should begin to get a good picture of how the USPTO will be working with the framework laid out by the courts.

Data Structure Patent Ineligible

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By Dennis Crouch

Digitech Image v. Electronics for Imaging (Fed. Cir. 2014)

Digitech sued dozens of companies for infringing its U.S. Patent No. 6,128,415. As I wrote back in April 2014, basic idea behind the invention is to tag digital images with particular information about the camera and its color/spatial image qualities in a form that is device-independent. The patent includes claims directed to both a “device profile” and a “method of generating a device profile.” The profile is simply a set of data elements regarding the camera qualities discussed above and the method simply involves generating and combining those data elements. This sort of tagging of digital images has become ubiquitous and so the patent could be quite valuable – except that the Federal Circuit has held the patent invalid as lacking subject matter eligibility under 35 U.S.C. §101.

Claim 1 is drafted as follows:

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:

first data for describing a device dependent transformation of color information content of the image to a device independent color space; and

second data for describing a device dependent transformation of spatial information content of the image in said device independent color space.

The District Court found the claims invalid and that decision has been affirmed by the Federal Circuit. Decision by Judge Reyna, joined by Judges Moore and Hughes. Because subject matter eligibility is a question of law, the Federal Circuit reviews that issue de novo without giving deference to the district court analysis.

Most subject matter eligibility cases rely upon the non-statutory limitations on eligibility (abstract idea, law of nature, natural phenomenon). However, the court here begins with the statute:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. §101. The statute identifies four categories of patent eligible inventions: processes, machines, manufactures, and compositions of matter. In considering the “device profile” claim, the appellate panel concluded that the claim did not properly fit within any category and is therefore not eligible for patenting. The court writes:

Data in its ethereal, non-physical form is simply information that does not fall under any of the categories of eligible subject matter under section 101.

At the Federal Circuit, the patentee argued that one of skill in the art would understand that the claims required hardware or software within a digital image processing system. However, in an implicit claim construction, the appellate panel rejected that argument – finding that the claims are not so limited. “The claims encompass all embodiments of the information contained in the device profile, regardless of the process through which this information is obtained or the physical medium in which it is stored.” The underlying problem with this analysis is the reality that data is always stored in a physical form lest it disappear.

This first portion of the opinion has the important resulting holding that patent eligible subject matter must be in “a physical or tangible form.” Quoting Burr v. Duryee (1863) (“a concrete thing, consisting of parts, or of certain devices and combination of devices”). The court declined to discuss how it would hold if the claimed data structure had been linked to a physical item such as some sort of computer hardware. Of course, this physicality test as an absolute rule was seemingly rejected by the Supreme Court in Bilski.

In the second part of the short opinion, the Federal Circuit addressed the method claims. Those claims clearly passed the statutory category test as being drawn to processes. For the method claims then, the court turned to the abstract idea limitation recently discussed by the Supreme Court in Alice Corp. v. CLS Bank Int’l, 573 U.S. ___ (2014).

Alice Corp. offers a two-step process for determining patent eligibility of a claimed invention:

  • Building Block: First, determine whether the claim recites or is directed to a patent-ineligible concept such as an abstract idea, law of nature, or product of nature.
  • Something More: Second, determine whether the claim recites sufficient additional inventive features such that the claim does not solely capture the abstract idea.

As the Court wrote in Alice:

At some level, “all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Mayo. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U. S. 175, 187 (1981). “[A]pplication[s]” of such concepts “‘to a new and useful end,'” we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U. S. 63, 67 (1972).

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). The former “would risk disproportionately tying up the use of the underlying” ideas, id., at ___ (slip op., at 4), and are therefore ineligible for patent protection. The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws.

Although the Supreme Court provided this two-step framework, it left some gaps for lower courts to discern, such as the meaning of “abstract idea” and “something more.”

The process claim at issue here is directed to a method of generating a device profile and includes three steps:

[Transform First Data] generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;

[Transform Second Data] generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and

[Combine Data] combining said first and second data into the device profile.

In reading these steps, the Federal Circuit identified what it sees as the abstract idea:

The two data sets are generated by taking existing information—i.e., measured chromatic stimuli, spatial stimuli, and device response characteristic functions—and organizing this information into a new form. The above claim thus recites an ineligible abstract process of gathering and combining data that does not require input from a physical device.

According to the court, the reason this result is abstract is that it is simply a “process that employs mathematical algorithms to manipulate existing information to generate additional information.” As the Supreme Court wrote in Flook,

If a claim is directed essentially to a method of calculating, using a mathematical formula, even if the solution is for a specific purpose, the claimed method is nonstatutory.

Parker v. Flook, 437 U.S. 584 (1978).

After identifying the abstract idea, the Court considered and rejected the notion that the patent provided “something more” that would be sufficient to transform the result into something patentable.

The Federal Circuit did not raise or discuss the presumption of validity afforded patents under 35 U.S.C. §282. In i4i, the Supreme Court ruled that invalidity for missing the §102(b) statutory-bar date must be proven with clear and convincing evidence. However, that defense is a question of fact. As discussed above, subject matter eligibility is a question of law and such questions are generally not controlled by the same evidentiary standards.

= = = = =

A major difficulty in abstract idea cases is defining the “abstract idea.” Here, the court’s description of the abstract idea at issue is somewhat confusing. Its clearest statement is that it is the “abstract process of gathering and combining data that does not require input from a physical device.” That statement has the qualities of (1) being well known and old; (2) being totally divorced from any physical device or technology; and (3) focused on information transformation rather than the transformation of anything in the physical realm. These clues here closely follow the machine-or-transformation test that the Federal Circuit implemented in its Bilski decision. Later, the Supreme Court rejected the reasoning that the MoT test was the absolute test, but agreed that it served as an important clue of subject matter eligibility.

Guest Post: Are APIs Patent or Copyright Subject Matter?

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Guest Post by Pamela Samuelson, Richard M. Sherman Distinguished Professor of Law at Berkeley Law School. I asked Professor Samuelson to provide a discussion of the recent Federal Circuit decision in Oracle v. Google. DC.

Application programming interfaces (APIs) are informational equivalents of the familiar plug and socket design through which appliances, such as lamps, interoperate with the electrical grid. Just as a plug must conform precisely to the contours of the socket in order for electricity to flow to enable the appliance to operate, a computer program designed to be compatible with another program must conform precisely to the API of the first program which establishes rules about how other programs must send and receive information so that the two programs can work together to execute specific tasks.

No matter how much creativity might have gone into the design of the existing program’s interfaces and no matter how many choices the first programmer had when creating this design, once that the API exists, it becomes a constraint on the design of follow-on programs developed to interoperate with it. Anyone who develops an API is, in a very real sense, designing that aspect of the program for itself and for others.

One of the many errors in Judge O’Malley’s decision in the Oracle v. Google case was her insistence that the merger of idea and expression in computer program copyright cases can only be found when the developer of an API had no choice except to design the interface in a particular way. If there is any creativity in the design of the API and if its designer had choices among different ways to accomplish the objective, then copyright’s originality standard has been satisfied and not just the program code in which the API is embodied, but the SSO of the API, becomes copyrightable. Indeed, harkening back to an earlier era, Judge O’Malley repeated the unfortunate dicta from the Apple v. Franklin case about compatibility being a “commercial and competitive objective” which is irrelevant to whether program ideas and expressions have merged.

The Ninth Circuit in the Sega v. Accolade case, as well as the Second Circuit in Computer Associates v. Altai, have rejected this hostility toward achieving software compatibility and toward reuse of the APIs in subsequent programs.

Although purporting to follow Ninth Circuit caselaw, Judge O’Malley in Oracle v. Google ignored some key aspects of the holding in Sega. Accolade reverse-engineered Sega programs in order to discern the SSO of the Sega interface so that it could adapt its videogames to run on the Sega platform. The principal reason that the Ninth Circuit upheld Accolade’s fair use defense as to copies made in the reverse engineering process was because “[i]f disassembly of copyrighted object code is per se an unfair use, the owner of the copyright gains a de facto monopoly over the functional aspects of his work—aspects that were expressly denied copyright protection by Congress,” citing § 102(b). To get the kind of protection Sega was seeking, the Ninth Circuit said it “must satisfy the more stringent standards imposed by the patent laws.”

Judge O’Malley in Oracle also ignored the Ninth Circuit rejection of Sega’s claim that Accolade infringed based on the literal copying of some Sega code insofar as that code was essential to enabling the Accolade program to run on the Sega platform. That Sega code might have been original in the sense of being creative when first written in source code form, but by making that code essential to interoperability, the expression in that program merged with its function, and hence Accolade’s reproduction of it was not an infringement.

The SSO of the Sega interface was almost certainly creative initially as well. Yet, once that interface was developed, it was a constraint on the design choices that Accolade and other software developers faced when trying to make videogames to run on Sega platforms. The Second Circuit similarly rejected Computer Associates’ claim that Altai had infringed the SSO of its program interface and suggested that patents might be a more suitable form of legal protection for many innovations embodied in software.

Under Sega and Altai, the SSO of APIs are not within the scope of copyright protection for computer programs. Subsequent cases—at least until the Federal Circuit decision in Oracle v. Google—have overwhelmingly endorsed this approach to compatibility issues in software cases.

Perhaps Judge O’Malley was worried that if she did not extend copyright protection to the Java APIs in Oracle v. Google, there would be too little intellectual property protection available to computer programs. After all, she was one of the Federal Circuit judges who would have upheld all of the patent claims for computer-implemented inventions in the CLS Bank v. Alice Corp. case that is now pending before the U.S. Supreme Court. She joined an opinion that warned that if courts struck down the claims in CLS Bank, this mean that hundreds of thousands of software and business method patents would be invalidated. Given the Supreme Court’s skepticism about the Federal Circuit’s rulings on patentable subject matter, there is reason to think that at least some software patents may indeed fall when the Court issues its opinion in Alice. Would such invalidations affect the scope of copyright protection for software?

In the most expansive interpretation of software copyright law since Whelan v. Jaslow, Judge O’Malley in Oracle v. Google endorsed dual protection for APIs from both copyright and patent law. This ignored an important statement from that court’s earlier ruling in Atari Games v. Nintendo that “patent and copyright laws protect distinct aspects of a computer program.” The Oracle opinion instead invoked the dicta from Mazer v. Stein that “[n]either the Copyright Statute nor any other says that because a thing is patentable it may not be copyrighted.”

While it may have been true that the statuette of a Balinese dancer in Mazer was eligible for both copyright as a sculpture and a design patent for an ornamental design of an article of manufacture (as a lamp base), nothing in that decision or any other has upheld utility patent and copyright protection in the same aspect of the same creation, and it seems unlikely that the Supreme Court would abrogate the longstanding tradition tracing back to Baker v. Selden that copyrights protects expression in works of authorship and patents protect utilitarian designs.

In “The Strange Odyssey of Software Interfaces as Intellectual Property,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1323818, I traced the tortuous evolution of the law in relation to the protection of software interfaces. At first, they were not treated as intellectual property at all. Firms published APIs so that others would make programs to run on their computing systems. As firms recognized that they could license interface information to generate revenues, APIs were protected as trade secrets. In the mid- to late 1980s, some argued that the “structure, sequence, and organization” (SSO) of APIs should be protected by copyright law, but by the early 1990s, courts decided they were unprotectable elements of programs, more suited to patent than to copyright protection. And so firms began patenting interface designs, as well as continuing to license them as trade secrets.

If Judge O’Malley’s opinion in the Oracle v. Google case is to be believed, APIs have migrated back into copyright’s realm big time. Unless overturned by the Supreme Court or repudiated or distinguished in subsequent cases, the Oracle decision may well reignite the software copyright wars that so many of us thought had died out after the Sega, Altai, and their progeny.