In what is beginning to look like a deluge, another district court has invalidated a set of asserted patents as lacking eligible subject matter under 35 U.S.C. 101 as interpreted by the Supreme Court in Alice Corp. (2014).
Every Penny Counts (EPC) v. Wells Fargo Bank (M.D. Fla. September 2014) EveryPennyCounts101
EPC’s invention is a computerized method for rounding-up credit and debit transactions to the nearest dollar and then putting the extra money to a special use. See U.S. Patent Nos. 8,025,217 and 7,571,849.
Claim 1 of the ‘217 patent is listed as follows:
1. A system for accumulating credits from a customer account belonging to the customer and managed by an institution and placing the credits into a provider account, comprising:
an information processor; said information processor including a data store with data identifying the customer, the rounding determinant, the managed institution, and the account;
said data store including machine readable instructions authorizing the processor to access and read the customer account;
said data store including machine readable instructions to calculate rounders after receiving a plurality of payment transactions from the read customer account and to calculate an excess based on the rounders;
said data store including machine readable instructions to withdraw the excess from the customer account;
said data store including machine readable instructions to transfer the withdrawn excess to the provider account.
In a previous decision (pre-Nautilus), District Court Judge Merryday had found the claim to “lack definiteness” but yet not fall to the standard set by the Federal Circuit for a finding of invalid-as-indefinite. Under the Supreme Court’s Nautilus decision the claim may in-fact be legally indefinite. However, Judge Merryday shorted the invalidity decision by finding all of the claims of both asserted patents invalid as indefinite.
In judging this claim under the two-step Alice Corp approach, Judge Merryday first identified the abstract idea that the claims are “drawn to” as “the concept of routinely modifying transaction amounts and depositing the designated incremental differences into a recipient account.” The court explained that this concept is an abstract idea because as in Alice and Bilski, it is a “basic concept” and a “fundamental economic practice long prevalent in our system of commerce.” Judge Merryday took steps to provide a variety of examples of how the concept has been historically known and used. Since an abstract idea was identified within the claim, the court then moved to the second step of the Alice Corp analysis — determining whether the claim contains an ‘inventive concept’ sufficient to transform the claimed abstract idea into a patent eligible application. On that point, the court found that each step in the method included “purely conventional” uses of a computer to do the type of tasks that you would expect a computer to be used for such as receiving data, rounding, adding, etc. As such, those steps were insufficient to overcome the step-two hurdle.
In sum, the ’849 patent, a method patent, is invalid under Section 101 because the patent claims an abstract idea that is implemented by “well-understood, routine, conventional activities previously known to the industry.” Alice (2014). Similarly, the ’217 patent, a system patent, is invalid under Section 101 because the patent merely implements – on a generic, unspecified computer – the ’849 patent’s (unpatentable) method.
What we’re still looking for is a post-Alice court decision that upholds a computer-method patent under Section 101.
Ned Heller September 13, 2014 at 7:12 pm wrote:
“The statute requires that a machine be new or improved, and useful. An economic principle is not a machine.”
Yes, but an “economic principle” is a process. Therefore the statute requires that a “process” be new or improved, and useful. And when a “process” meets those conditions it is statutory.
Ned then goes on to say: “Placing an economic principle on a machine does not improve the machine. Using a machine to assist in calculating economic principle improves the utility of the economic principle.”
However “Integrating” a process, (be it economic or otherwise) with a machine does improve the utility of the process, and makes the “process” statutory. This was established as controlling case law in Diehr, explicitly upheld in Prometheus, and was not overturned in Alice. Your new found obsession with the old pre atomic age case of ” Hotel Security” is largely irrelevant to the Court’s modern “Integration Analysis”.
Furthermore, your celebration of the overturning of software patents is vastly misplaced and will be short lived. As those cases are processes that can be performed independently of the technology of which they are being used on. Thus they are not legally “integrated”. However as we speak, astute Patent Attorneys and their clients are already filing new process inventions that are fully integrated with technology be it a pencil and paper, nail and hammer, or a complex information process system. This new crop of patent applications are untouchable at 101, ( although all will rise and fall on the merits of novelty and obviousness.) once a new “integrated” process application reaches the Supreme Court it will be upheld and a new floodgate of business methods, software, and computer system patents will be granted. And barring an act of congress there is nothing anyone can do to stop it.
IA, “Your celebration of the overturning of software patents is vastly misplaced…”
Obviously, you do not read my posts.
My “celebration” is that State Street Bank is effectively overturned. This has something to do with what kind of patent, IA?
IA, it appears you do not seem to understand Hotel Security. Just to make sure that you understand it, can you site or quote the passage that made it a landmark case?
Also IA, you state that an economic principle is a process as if that were the complete answer to it eligiblity.
Please then explain Bilski.
Good post. Don’t let all the negativity get you down there is quite an anti-information processing crowd around here and no more anon to beat them back.
Dennis: a few points
1) the anti-software patent crowd’s celebration is going to be short lived, because it is still relatively easy in prosecution to finesse claims to pass 101
2) once the new crop of cases is born immunized with the PTO “vaccination” they will be much harder to challenge in Court
3) some of the recent Court cases don’t do a Markman before finding the claims invalid; I bet those cases get challenged on administrative/due process grounds, or, if they don’t, it will lead to an interesting scenario later on when patents falling under #2 above are challenged without undergoing an invalidity analysis that mirrors PTO procedures – if the patent is presumptively valid the Court must demonstrate that the entire underlying examination was wrong
4) Clients want to avoid investing in a Markman so #3 is working in their favor now, and they are jumping on the bandwagon to get early dismissals… but paradoxically this works against defense bar interests who love to milk cases. As between the firm and the client you can guess who gets priority – I suspect the former won’t work ….too hard in favor of precedent that makes Markmans unnecessary as that will reduce their fees significantly.
In closing, while it will come as a surprise to the NPEs in the game, I predict an another faux “scholarly” study from the Lemleys of the world, arguing that the expedited 101 procedures are (shock!) …unconstitutional. This little bit of chicanery will be used to adorn their “objective scholar” credentials in all things patent.
Mark my words!
Great post JNG. I still would like Mark Lemley to tell us how he protects IP at his startup. My guess: draconian employment contracts and trade secrets. Oh boy, just the kind of world we want.
JNG – I think your post here is very important. The hardest lobbying in congress and pushes for reform are focused around already issued patents — either by folks who want to avoid those patents or by folks who want to enforce them. A much smaller number are working seriously on the long-game.
That said, some will celebrate a reprieve even if only for a few years.
As between the firm and the client you can guess who gets priority
Please tell us “who gets priority,” JNG, when a decision needs to be made between “milking a client” and ending a case quickly in the client’s favor because it can be done quickly.
If you believe the answer is “the firm”, can you tell everyone why that is the case? Otherwise it seems as though you are revealing only the choice that you would make if you were the attorney.
Please, commenters, don’t forget that not every attorney out there is motivated by making tons of money off the backs of naive clients.
“Please, commenters, don’t forget that not every attorney out there is motivated by making tons of money off the backs of naive clients.”
I could not agree with you more. Most I believe are focused on doing good work and being handsomely and justly rewarded for it.
JNG, 1) the anti-software patent crowd’s celebration is going to be short lived, because it is still relatively easy in prosecution to finesse claims to pass 101
Can you give us an example?
The question: Can a patent attorney take Alice Corp’s invention and make it patent eligible?
Dennis, ditto, Bilski.
JNG, we, an I bet, 10,000 other attorneys, are looking forward to you reply.
“circuits are just like those information”
Just like is not the same. “Just like” is an abstraction.
You seem to not understand the fundamentals.
Without something to TRANSLATE reality into the abstract information, and something to TRANSLATE from the abstract information back into reality – you have nothing.
And taking Mano out of context is just wrong.
drat – Apologies, this is in the wrong place for some reason.
It was supposed to be under 11.1.1.1.1.2.1
I am not taking Mano out of context.
And what abstraction are you talking about? I am talking real working software/hardware/firmware. Where is the abstraction?
And, let’s talk about real abstraction as understood by engineers in the ladder of abstraction (and not this term used by SCOTUS to mean anything that we feel like shouldn’t be a patent.)
Mathmematics is an abstract activity. Computers were created my mathematicians directing engineers.
The mathematics is abstract, whether you like it or not. A “computer” can be human, or machine. There is no difference in the math, and no difference in the result.
Jesse, all of engineering is working with abstractions. Read Newman’s dissent or concurrent can’t remember in Bilski en banc.
This bizzarro use of “abstract” is so odd as to have no retort. You make up some noun and say that information processing is this noun and that things of this noun are not eligible for patentability.
How about trying to functionally tell us why information processing isn’t eligible compared with say mechanical inventions.
ab·stract
adjective
adjective: abstract
abˈstrakt,ˈabˌstrakt/
1.
existing in thought or as an idea but not having a physical or concrete existence.
“abstract concepts such as love or beauty”
synonyms: theoretical, conceptual, notional, intellectual, metaphysical, ideal, philosophical, academic;
Is the name of the game … no longer the claim?
*Is the name of the game … no longer the claim?*
That has always been an oversimplified bromide. The Supreme Court has always said that the meaning and validity of claims does not “depend on the draftsman’s art.”
The actual substance and meaning of the claim taken as a whole in view of the disclosure in the specification and the state of the art … is the name of the game.
Isn’t “purely conventional” a lot like obvious? Which is it? – subject matter eligibility or obviousness?
Paul, it is Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir. 1908), a case followed by every court in the U.S., including the CCPA/Federal Circuit, e.g., In re Huai-Hung Kao, 639 F.3d 1057 (Fed. Cir. 2011).
The matter is handled under 101 if the statutory subject matter is known to be old.
I have not read that case. But, from a simple perspective, (one of statue – not case law), it seems to me that subject matter eligibility should answer the question of what is a patentable thing… If the statute did not include anticipation or obviousness, the subject matter eligibility may relate to those things. However, the statute does provide for things done in the past and things that are obvious to do.
With that perspective, how does one say that an invention is a “basic concept” and a “fundamental economic practice long prevalent in our system of commerce” and call it not subject matter eligible instead of obvious or anticipated with a straight face?
Paul, when a claim includes both — the eligible and the ineligible, the statutory and the nonstatutory, the courts simply give the nonstatutory no weight.
It apears they have given nonstatutory weight and the statutory no weight. The court called it a “fundamental economic practice long prevalent in our system of commerce”. “long prevalent” means to me that it was disclosed prior to the patent – anticipated. Perhaps obvious to put encapsulate it into software.
So what does that have to do with 101? Putting it on a computer improves it. Is an economic practice not subject matter eligible?
I’m not a lawyer, but the logic here is messed up.
to me it would look the same as patenting “on a tractor”.
Does attaching a plow “on a tractor” improve plowing? yes.
But is it something patentable? NOPE.
After all, a tractor is DESIGNED to have things attached.
Do you patent the “configuration” of a plow “on a tractor”? nope.
So a tracker is a Turing Machine? Or is it Jesse the truth that you really don’t understand information processing?
My guess is that is the ladder. If you have a background in this stuff, what grade did you get in theoretical computer science?
And if you haven’t figured it out yet Jesse software does make the GPC a new machine. That goes all the way back to the design of the GPC by von Neumann.
The best way to think about software is as a component.
A TRACTOR is like a Turing machine…
It takes abstract directions (start, stop, change speed, change gears, change direction, raise attachments, lower attachments).
It is designed to carry out a LOT of operations depending on the configuration… It can plow snow, plow a field, tow a trailer, water a field, apply fertilizer, harvest crops, pull other vehicles out ditches, cut grass, dig ditches, …
But each configuration does not convert the tractor into a new machine…
Jesse the tractor is not doing these things by itself. A human brain is doing this different things with the tractor.
You see that is why this line of cases the new use for an old machine rose as it is a back door to patenting a method the human brain is carrying out.
Some tractors are self directed… There are driverless tractors going back to the 40s. Not necessarily successful, but they did exist.
And my grade? A.
>some tractors are self-directed?
So, then the tractor is using information processing machine?
Please Jesse. Use your training to think.
What is the difference between a squirrel and human?
The tractor IS the information processing machine.
In one case it is by means of a cable that wraps around a pole. In another it is following a cable buried underground.
In most modern cases, it is carrying out directions from a GPS receiver and usually attached to a general purpose computer.
As for the difference between a squirrel and a human – Not much.
All the squirrels I know carry out a fairly large amount of computation. They can solve 3D mazes better than humans even. Some seem to be even smarter than humans at times.
I see so the tractor is self-propelled and able to do just a few things, but then when more hardware is added (or maybe software or firmware) the tractor is then able to plow snow.
So, a new component allows it to plough snow. Sounds like a great invention.
Just like adding a new peripheral to a computer…
Yet you don’t patent the computer again…
And you don’t patent the tractor again.
Or patent the use of the attachment…
After all, the tractor can do a LOT of things. It is still just a tractor.
The Nonstatutory is given No Patentable weight.
The logic is not backwards if you think about it for a moment.
The logic? What logic? According to you if it is a special purpose chip then it is eligible, but if it is a GPC + software it is not.
Right! So, two things that are identical from a functional point of view in operation get different results. You have dig deep into the black box before you decide if it is eligible. That is not logical.
Night, the circuit was in a larger machine, a graphic unit an oscilloscope. The machine was an oscilloscope.
It doesn’t seem like it should be that hard…
If a device is interpreting instructions to emulate a real function…. then the emulation must be abstract.
If the device is actually DOING the function… it is a mechanism.
I realize there may be some odd corner cases… But all digital circuits are an emulation of boolean algebra.
I don’t see a problem patenting an arrangement of digital circuits… but I don’t accept patenting the boolean algebra, or algorithms based on boolean algebra.
Jesse: there aren’t “odd corner cases.” What you say swallows almost all of electrical engineering. Why do people like you who are clearly ignorant of the technology feel like you understand computers?
I really don’t get it. I have been teaching computer science probably for more years than you are old. I have seen it go from people like J. Stevens having his eyes glaze over at the mere thought of a computer. Now, there are all these people that think that what you do is you just tell the computer what to do and it does it. And that’s it.
What ignorance. In fact, what is profound is how disappointed computer scientist are in themselves in how little progress they have made. WHY? Because it is so hard to get computers to do what we envision them to do.
But, here comes J. Stevens and Taranto. Oh no, the way it works is you just write down what you want and take it to a boy to program. Uh, no.
Ignorant. Ignorant. Ignorant.
Jesse: someone can put into almost any circuit a little loop to read from a ROM instructions rather than making a special purpose circuit. You see circuits are just like those information processing methods.
Ignorance. Ignorant.
I’m either not understanding or not making my point clear.
Statute says that something already done is anticipated or it is a obvious improvement.
The court called it a “fundamental economic practice long prevalent in our system of commerce”.
How can it be that something that existed is considered non-patentable subject matter instead of anticipated or obvious?
We are not talking about the same thing are we?
The statute requires that a machine be new or improved, and useful.
An economic principle is not a machine.
Placing an economic principle on a machine does not improve the machine. Using a machine to assist in calculating economic principle improves the utility of the economic principle.
I do recommend that you read Hotel Security and its progeny that distinguish between the nonstatutory economic principles, printed matter, and the like from the underlying statutory subject matter such as articles manufacture or machines. The cases required a statutory part to be new or improved, and useful.
Trust me, if you listen to the oral argument in Alice, the Supreme Court fully understands that the hardware in these claims is old and generic and is not improved. The innovation, if anything, is in the software are in the business method and that is not statutory.
>>An economic principle is not a machine.
The machine was working and useful. In all of these cases that is true. So there was a machine there doing useful work. So, according to you, it wasn’t an economic principle.
You are just a judicial activist Ned. Go to Congress.
Yet another case that demonstrates the Alice standard is broken. One result only appears to possible when it is applied: patent ineligibility.
Didn’t Our Judicial Mount Olympus scold the Federal Circuit for “inflexible tests.” What utter sophistry and hypocrisy from the Royal Nine.
But, EG, Hotel Security has been the law for 100 years without any disastrous effect.
The patents in this action describe an abstract idea that lacks a convenient, catchy moniker, such as Bilski’s “risk hedging” or Alice’s “intermediated settlement.” Perhaps the moniker most precisely identifying the present patent is “salami slicing.” See Larios v. Nike Retail Servs., Inc., 2013 WL 4046680 (S.D. Cal. Aug. 9, 2013) (Curiel, J.) (defining “salami slicing” as the method of “remov[ing] something gradually by small amounts at a time”).
That is the nut of the case. That is what we have devolved into. Can a judge capture your invention in what he/she thinks is a concept or abstract idea that they understand and believe is old, but as Dennis brought up is likely not a needed element. So, take away: watch out for those catchy monikers.
Again, another 103 analysis done under Mayo. Conclusion Mayo has over ruled Graham. I don’t think Graham should be considered good law anymore.
Night, the most important part of the case is the discussion of the hardware, part II. That part, the statutory part, was old.
Hotel Security.
So, if they make a special purpose chip that does EXACTLY the same thing then it is statutory?
I would think so… after all, the patent would be on the chip, not the algorithm.
Now in my opinion it should still have a problem if the chip is a SOC as it is still a mathematical algorithm being interpreted. An ASIC would seem to be direct implementation. Again, may be problem for FPGAs as the FPGA is already designed to handle anything (most even have a CPU builtin for doing interpretation, as do some ASICs). I still have qualms over patenting “configurations” of an existing patented device designed to handle any “configuration” of that device.
jesse, the rasterizer in Alappat was hardware — digital circuit for an oscilloscope.
Not exactly. It was using a general ALU for arithmetic… which in itself is the hardware, but not the algorithm directing the hardware… and the patent was on the algorithm.
A separate item not pointed out is that using such a filter hides the actual signal – which has a much higher frequency than what the A/D converters could handle, thus the resulting “waveform” is inaccurate, but within the measuring limits of the hardware used.
If they had used actual hardware implementation, it would have been using an op-amp to handle the arithmetic on the raw signal… Much faster than digital, and could be more accurate as well.
BTW, it looks like the algorithm is also the same as what is used in CD players when converting digital audio stream back into analog…
In both case, higher frequencies are lost, and not reproduced, which turns it into a low pass filter.
Jesse, whether or not it is eligible should not depend on its form. Frankly, Ned’s analysis is right out of the iron age.
You men physically existing is not required… isn’t that called “abstract”?
jesse: software does physical exist. You see we are hitting here your ignorance. You think like someone from about 1900 like J. Stevens.
Where is the software jesse if it does not have physical form? And it must have structure to have physical form.
That is reality jesse. Ideas exist in your brain. They have physical form. J. Stevens doesn’t believe that. He believes his spirit thinks in the ether.
There is no fixed form for information.
As for ideas in the brain – where. Even memories have not been identified yet – there is no molecule for memory. Even when parts of the brain are removed with people “forgetting”… it still isn’t gone, just made more difficult to recall.
You just don’t want to believe it. Memory appears to just be a state… If it existed in a structure in the brain, it would STILL exist when the brain is dead – yet it still can’t be identified or even located.
Abstract thought should not be patentable. It is a sure way to slavery.
No fixed form? Yes it does have a fixed form. And as to your brain it must exist in your brain as structure or it wouldn’t exist.
Physical form means structure. No two ways about that.
And information processing methods have structure. Do you know how to make a chip?
Slavery? The opposite is true. The patents free up the worker by forcing the company to disclose and thus freeing the worker to be mobile and interact with others outside the company. The slavery comes from the company turning things into trade secrets.
Yes, information in the brain is not in a fixed form. That is one of the reasons you FORGET things. And if you don’t USE THEM you also will forget them….
The living brain is constantly replacing itself… so any “fixed form” there is an illusion, not reality.
Making a chip? In practice, no. But I do know that every computer chip emulates boolean operations. And boolean operations is the first level of abstraction.
The second level is using boolean operations to emulate the math based instruction cycle.
The third level is the instruction set of a given CPU.
The fourth level is the machine code program to direct the CPU.
And depending on higher level languages (such as C) is a fifth level abstraction.
Using other programs to write programs (such as Mathmatica, that read math formula for instance, and write C code) is yet another abstraction level.
There have even been experimental applications that read English text and write programs. (As I recall, they worked fairly well when the English was restricted to about an 8th grade level, but that was too restrictive for general use…).
So when they get better (hello Watson) I highly suspect that for most programs they will be using English to write programs. I think you will find it rather hard to patent English….
Ideas do exist in my brain, but they don’t have any fixed structure. In a sense, they reside in the brain like a boat floating on water. The water supports the boat, but you can’t point to any specific water and say “that supports the boat” (I grant the possibility of frozen water supporting a boat though. So far, freezing a brain doesn’t work at keeping ideas…)
So far, mathematics has shown formula for what the neuron appears to do, but still no structure for a thought is shown (personally, I think the simulations are flawed – a single neuron has billions and billions of possible states – several states for every atom associated with a neuron… No simulation comes anywhere NEAR enough states. And then there is the problem that neurons will create and break additional inputs and outputs dynamically. )
Jesse: just because you don’t know what their physical form is doesn’t mean they don’t have one.
And don’t be silly of course software has physical form and structure. Is there a difference between a parallel and serial resistor? Is that a structural difference?
Please. Equivalent to hardware the hardware has structure ergo the software must have structure.
Night: just because you don’t know what their physical form is doesn’t mean they have one.
You totally miss the dynamic reconfiguration that goes on constantly… There is no molecule that carries human memory.
“Equivalent to hardware the hardware has structure ergo the software must have structure.”
really? what structure. The reference to electrical circuits? Same structure for all “software”… So what structure is the software? They are all just numbers….
*if they make a special purpose chip that does EXACTLY the same thing then it is statutory?*
Shouldn’t it be? That would be a machine. Likewise you could possibly — subject to §102 — patent a memory chip (firmware) that contained a specific program that implemented your method, but the patent would be on that exact program in that specific chip, not one the broad functionality. You’d be better off with the copyright, as is always the case with software.
Night, the Rasterizer in Alappat WAS just such a special purpose chip.
So according to you if we put a GPC there and software it would suddenly become ineligible. That is absurd.
Even older prior art than the movie mentioned was a published report from England of someone who had likewise modified bank software to move rounded off pennies from numerous accounts into an account he set up for himself.
Are there any pending cases to watch that might be the first case where 101 is upheld?
Yes indeed — Ultramercial.
Does Ultramercial go back to a panel of O’Malley and Laurie and one new judge to replace Rader? If it does, that should be exciting. O’Malley is reliably anti-software and will want to uphold the patent while Laurie is a radical for broad patentability of everything who has reluctantly acquiesced to Supreme Court rulings because he has sworn to uphold the law and honors precedent.
Meanwhile Ultramercial is an even more clear cut case than Alice, but the patent makes much more effort to complicate matters with quality forward-thinking draftsmanship.
Add one more at random to that crew and anything could happen.
Owen, after twice being vacated (for misapplying the law one would think) it would be incredible if the Federal Circuit once again forced the Supreme Court to consider a cert. If the panel did not comply with the law, once again, the entire court would or should take the matter up en banc sua sponte.