by Dennis Crouch
Smart Sys. Innovations v. Chicago Transit Authority (Fed. Cir. 2017)
In a split opinion, the Federal Circuit has affirmed the district court’s judgment on the pleadings – R. 12(c) – that the asserted claims of SSI’s four patents are invalid under Section 101 for claiming an abstract idea. U.S. Patent Nos. 7,566,003, 7,568,617, 8,505,816, and 8,662,390. (Claim 14 of the ‘003 patent – covering a method for validating entry to a city bus or train – is reproduced below).
The baseline for eligibility analysis is the two-step Alice test:
A patent claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2) if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”
Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (quoting Alice).
The patents here are are directed to a method for collecting fares – without dedicated fare-cards, paper tickets, or tokens. Instead, the system uses credit/debit cards. After “stripping” the patent claims from their technical jargon and obtuse syntax, the District Court ruled that the patents “really only cover an abstract concept [of] paying for a subway or bus ride with a credit card.”
On appeal, the Federal Circuit affirmed – holding that these steps were – as a whole – directed toward an abstract idea:
The Asserted Claims are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes. Rather, the claims are directed to the collection, storage, and recognition of data. We have determined that claims directed to the collection, storage, and recognition of data are not [sic] directed to an abstract idea.
Note here the suggestion from the court that “a new type of bankcard, turnstile, or database” could be patent eligible. Here, the limitation to the field of mass-transit did not help the patentee: “merely limiting the field of use . . . does not render the claims any less abstract.” Quoting Affinity Labs. In thinking through the step one, the majority looked toward the Alice focus on whether the claims are “directed to” an abstract idea. According to the court – that question is separate and distinct from the “thrust,” “heart,” or “focus” of the invention.
According to the majority, Alice Step 2 is also easily met – because the tech-focused aspects of the claims are simply directed to the use of a general purpose computer and thus “offer no inventive concept that transforms them into patent-eligible subject matter.” In the process of reaching this result, the court distinguished both Diehr and DDR Holdings:
- Diehr does not apply when, as here, the claims at issue use generic computer components “in which to carry out the abstract idea.”
- DDR Holdings does not apply when, as here, the asserted claims do not “attempt to solve a challenge particular to the Internet.”
Finally, the majority considered several ‘other arguments’ regarding eligibility:
- No preemption: Although one purpose of the abstract-idea exception is to limit preemption, the test itself does not actually consider preemption. Thus, once the abstract idea analysis is completed “preemption concerns are … moot” Ariosa.
- Transformation: Although the machine-or-transformation test “can provide a useful clue to the second step of the Alice framework” it does not overwhelm the primary search for an ‘inventive concept.’ Quoting Ultramercial.
Thus, the claims were all affirmed to be invalid and thus not enforceable.
The majority opinion was penned by Judge Wallach and joined by Judge Reyna. Judge Linn filed an opinion dissenting in part. Judge Linn argues that the “gist” analysis by the Federal Circuit is improper:
The majority commits the same error as the district court in engaging in a reductionist exercise of ignoring the limitations of the claims in question and, at least with respect to the ’003 and ’617 patents, in failing to appreciate that the abstract idea exception—if it is to be applied at all—must be applied narrowly, consistent with its genesis. . . . All three nonstatutory exceptions are intended to foreclose only those claims that preempt and thereby preclude or inhibit human ingenuity with regard to basic building blocks of scientific or technological activity. They are intended to be read narrowly.
As the Supreme Court has done in its 101 analysis, Judge Linn linked his work back to cases such as Le Roy, Mackay, and Funk Bros. The language of those cases focus on “fundamental truths” and “hitherto unknown phenomenon of nature.” In Benson and Alice, the court also explained “Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.”
For Judge Linn, a method of charging a bank-card at a bus-turnstile does not fit into those expansive definitions.
Judge Linn’s opinion recognizes that his concern directly stems from the Supreme Court’s approach in Alice and Mayo. He writes: “The problem with this test, however, is that it is indeterminate and often leads to arbitrary results.” His solution is that the two part test should not be “applied in a legal vacuum divorced from its genesis” and the three exceptions should be treated consistently. Patents should not be struck down simply because they “seemingly fail the Supreme Court’s test.” Rather, the focus should be on whether the patents “attempt to appropriate a basic building block of scientific or technological work.”
The solution for Judge Linn: Focus on the language of the claims and each limitation when determining whether a claim is directed to an abstract idea – “a basic building block of scientific or technological activity” or instead to a “tangible application” that serves a “new and useful end.”
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Here is Claim 14 of the ‘003 patent:
A method for validating entry into a first transit system using a bankcard terminal, the method comprising:
downloading, from a processing system associated with a set of transit systems including the first transit system, a set of bankcard records comprising, for each bankcard record in the set, an identifier of a bankcard previously registered with the processing system, and wherein the set of bankcard records identifies bankcards from a plurality of issuers;
receiving, from a bankcard reader, bankcard data comprising data from a bankcard currently presented by a holder of the bankcard, wherein the bankcard comprises one of a credit card and a debit card;
determining an identifier based on at least part of the bankcard data from the currently presented bankcard;
determining whether the currently presented bankcard is contained in the set of bankcard records;
verifying the currently presented bankcard with a bankcard verification system, if the bankcard was not contained in the set of bankcard records; and
denying access, if the act of verifying the currently presented bankcard with the bankcard verification system results in a determination of an invalid bankcard.