Is Ineligibility a Statutory Defense to Patent Infringement

Will Justice Gorsuch bite at the new petition in Integrated Tech. Sys. v. First Internet Bank of Ind., Supreme Court Docket No. 17-1590 (2018)?   Petitioner relies heavily on Patently-O writings from Prof. Hricik and myself for its argument that the lack of patent eligibility is not a statutory defense under 35 U.S.C. § 282. [Ed note – I will eventually get his name correct.]

The petition asks the following questions:

  1. Does 35 U.S.C. § 282 allow for challenges to a patent’s validity based on patent eligibility under 35 U.S.C. § 101?
  2. In addition, and in close alignment with the first question, is it proper to find patents invalid under 35 U.S.C. § 101 after full examination before the U.S. Patent and Trademark Office in response to 12(b)(6) challenges when they are presumed valid under 35 U.S.C. § 282?
  3. Is it proper to grant a Rule 12(b)(6) motion to dismiss when the record contains unrebutted factual evidence that the invention is patent-eligible under § 101?

[Case Docket]

The patents here cover systems and methods for person-to-person fund transfers — something like paypal but without any need for a funded account.  United States Patent Nos. 7,912,786 (“the ‘786 patent”), 8,131,643 (“the ‘643 patent”), 8,321,347 (“the ‘643 patent”), and 8,620,809 (“the ‘809 patent”).

Claim 11 of the ‘809 patent reads as follows:

11. A method for automatically transferring funds, comprising:

providing a computer configured to provide a person to person funds transfer system; providing for the computer system to be accessible to a communication medium device that is controlled by a sender, said computer system being accessed by the communication medium device to receive information data related to a debit account of the sender and information data related to a receiving debit accessible escrow account;

receiving account information data and transfer authorization data by the computer system; processing the data in automated modes by the computer system;

transferring funds from the debit account of the sender to the receiving debit-accessible escrow account without requiring a pre-established relationship between the debit account of the sender and the receiving debit-accessible escrow account; and

repeating the above steps by the computer system, thus effecting additional transfers between different sending debit accounts and different receiving debit-accessible escrow accounts to cause fund transfers from the different sending debit accounts to the different receiving debit-accessible escrow accounts.

50 thoughts on “Is Ineligibility a Statutory Defense to Patent Infringement

  1. 10

    The argument that “patent eligibility is not a condition of patentability,” because those words do not appear in the title of Section 101, should just die already.

    To judges who actually decide patent cases, this 101 argument stirs the same kinds of feelings the judges get when tax protesters make frivolous arguments, such as the tax code being unconstitutional because the 16th Amendment was never ratified by the states.

  2. 9

    Re Cert question presented number 3: “Is it proper to grant a Rule 12(b)(6) motion to dismiss when the record contains unrebutted factual evidence that the invention is patent-eligible under § 101?”

    No doubt this is intended to avoid cert denial on the grounds that it is an attempt to re-argue facts, rather than law, on appeal. But in this case asserting “unrebutted factual evidence that the invention is patent-eligible under § 101” raises the natural question of “then why are you here after losing below on that issue?”

    1. 9.1

      Obviously (sic), they are there because they think that they should have prevailed below.

      See post 4, second line.

  3. 8

    What exactly is “unrebutted factual evidence that the invention is patent-eligible?”

    I’ve seen complaints that try to manufacture a factual dispute about patent eligibility. Often they talk about the technological problems of the field or the novelty of the invention. Rarely do they connect how the claims solve the technical problem is a technical way.

    1. 8.1

      Without more, it is not possible to answer your question.

      You appear to be conflating facts as part of an issue with an issue being (entirely) a matter of a factual nature.

      Also without more, it is not possible to understand what it is that you feel is lacking connection.

      Lastly (and generally), I would advise against getting into the “technical solution” approach as US law is not Euro law, and there is no such thing here as a “technical arts” test (no matter how the courts may wish to bandy about that term).

      1. 8.1.1

        there is no such thing here as a “technical arts” test

        How does one distinguish useful ornamental arts from useful technical arts?

        1. 8.1.1.1

          Sadly (and something to which I have noted previously that we agree upon), our illustrious Congress has force fit Design patent law into Utility patent law.

          But outside of that point, you seem to be hinting at the meaning of the Useful Arts. The Useful Arts are broader than the Euro-style “technical arts,” due in part because “technical” has a smaller scope utility-wise than the Useful Arts.

          Directly here, business method may very well be beyond merely “technical,” and fully fall comfortably within the Useful Arts. If you have any questions on this, may I suggest (as I have done before), that you take some rudimentary courses on the teachings of Deming, et al.

          1. 8.1.1.1.1

            Deming? You mean the famous guy who revolutionized thought about quality, consistency, reliability, in factories busy making things in Japan:

            link to en.wikipedia.org

            Are you contending that there are some methods of new manufacture that fail to make the eligibility cut under the EPC, because they aren’t “technical” enough?

            Or are you contending that inventions in a very “useful” business method area such as creative accounting become eligible because……Deming!

            In short, you still haven’t pinned down where “useful arts” exceeds the ambit of the EPC’s “technical”.

            1. 8.1.1.1.1.1

              You have a “per se” rule and a as such” rule while we do not.

              That alone exceeds the ambit.

              But you already knew that, eh?

              1. 8.1.1.1.1.1.1

                Lost me there, anon. EPC Art 52 recites “per se” to confine the exception to eligibility jn Europe to the minimum. General rule: statutory exceptions to be construed narrowly, right? The consequence? The EPO routinely finds eligible stuff that falls foul of S 101. No “inventive concept” necessary.

                Here a link:

                link to epo.org

                I don’t get it. How do you come to the idea that “per se” expands the ambit of Europe’s eligibility exclusion?

                1. It’s quite trite that you find yourself lost yet again MaxDrei.

                  It appears that your own backyard confuses you:

                  (from your own link – emphasis added)

                  European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application.

                  Did you actually write “ No “inventive concept” necessary.“…?

                  Still you want to pretend that the technological arts are as broad as the Useful arts, as well?

                  Sorry MaxDrei, no one can teach you what you refuse to learn.

              2. 8.1.1.1.1.1.2

                On useful arts vs technical, you replied earlier today to my answer of yesterday. We are talking past each other. For the benefit of other readers, I will therefore rinse and repeat.

                The eligibility section of the EPC is its Article 52. It excludes methods of doing business. Art 52(3) confines the exclusion to business methods “as such”.

                You suppose that Art 52(3) pushes the envelope of non-eligibility. At the limit, one might say, even 1% of business method content renders the claim non-eligible.

                But the reality is that the “as such” language of Art 52(3) crimps down to the absolute minimum the business method exclusion. Only stuff that is 100% pure business method suffers exclusion under Art 52(3) EPC. Even 1% of “technical character” in the claim will save it from exclusion as non-eligible. Read Article 52 EPC again, please.

                Indeed I wrote “no inventive step necessary” but that is in the context of the patent eligibility of business method/abstract idea subject matter at the EPO. When the EPO is checking out eligibility, it has no truck with the question whether or not there is present an “inventive concept”. At the EPO, eligibility is decided without reference to the state of the art. This is unlike some other jurisdictions I could mention.

                But you already knew all that, didn’t you?

                1. We are talking past each other. For the benefit of other readers, I will therefore rinse and repeat.

                  So….

                  You want to talk past me, and then do it again….

                  You suppose that Art 52(3) pushes the envelope of non-eligibility.

                  Care to explain how the plain words do anything but that?

                  Especially as “technical character” is NOT a requirement in the US Sovereign choice of a system (which was kind of the point here: distinguishing the two systems).

                  It is not I that needs to read that section again . It is you that needs to understand the difference – as I have plainly put it to you.

                  At the EPO, eligibility is decided without reference to the state of the art.

                  Here, you become as confuddled as our own Court has made things. Under the words of Congress, our 101 has not reference to the state of the art either.

                  As it should be.

                  But that similarity has zero to do with the point at hand.

                  Do not confuse the mess that the Court has made with the (proper) choice – as with the authority allocated under our Constitution – as you drag a different point up while NOT “seeing” the point presented.

                2. Do I “care to explain” how it is that EPC Art 52(3) does anything but push the envelope of non-eligibility? Yes.

                  Suppose the list of subject matter excluded by Art 52(2) from eligibility were to include “abstract ideas”. Art 52(3) limits, to the abstract idea “as such”, the exclusion from eligibility. Everything else but that is non-excluded. The general rule is that, in statutes, exceptions to the general rule are to be construed narrowly. Art 52(3) is a specific implementation of that general rule, OK?

                  Art 52(3) does not confuse the degree of exclusion, or render it woolly and opaque, with such expressions as “directed to”.

                  But hey, no need to take it from me. Take it from the authoritative source, Europe’s Supreme Court when it concerns eligibility/patentability under the EPC, namely, the Enlarged Board of Appeal of the EPO. See the White Book, the Established Caselaw of the Boards of Appeal of the EPO.

                  Or ask Night Writer. He does seem to know something about practice/prosecution in Europe.

                  S.101 of the US patent statute includes the word “new”. In a statute, every word is there for a reason.

                  In contrast, Art 52(2) EPC, the non-eligibility provision, the word “new” does not appear.

                  Courts must give effect to the words of the statute. The courts are trying their best, in both jurisdictions.

                3. You are clearly clueless if you think that the Court is trying it’s best to hew to what Congress has written.

            2. 8.1.1.1.1.2

              become eligible because……Deming!

              ?

              Do you not understand that Deming is not a cause, but an example?

              It must take a lot of effort to try so hard to NOT have a mind willing to understand.

  4. 7

    1. “If Congress lacks the Constitutional jurisdiction to perform an act, may they delegate that act to the executive and then create a statutory scheme to prevent judicial review?”

    2. “Is summary judgment appropriate when there are no material facts in dispute and legal precedent is clear despite non-lawyers from an administrative agency having made a contrary judgment based on case law that has substantially changed?”

    3. “If a plaintiff argues facts which are not relevant to a legal determination, but argues them really really hard, shouldn’t he win the legal determination by default?”

    1. 7.2

      Your question 1 is a little too compact (for example, judicial review does not apply to any and all items – vis a vis, such things as “present case or controversy” must be met to enable the courts to have proper authority).

      Your question 3 is a ([n] admittedly funny) strawman. No one is actually saying “I’m wrong, but I am arguing really hard so I should win. Here are a bunch of other facts that are facts.”

      Now instead, when facts that are pertinent are present – that’s an entirely different ball game. Especially when no cogent reply is forthcoming to those other pertinent facts. There, the absence of the legal win is an indicator that something is amiss.

      1. 7.2.2

        Now instead, when facts that are pertinent are present – that’s an entirely different ball game. Especially when no cogent reply is forthcoming to those other pertinent facts. There, the absence of the legal win is an indicator that something is amiss.

        There’s a link to the docket with the brief, the brief contains the original logic which has been twice adopted by higher tribunals. The logic is internally consistent and deals with all the issues here.

        From the holding:
        While it may be true that FIB’s motion raises factual issues, those issues are not material to the subject-matter eligibility of the asserted patents. Whether the steps recited in the claims can be performed by a “human bank teller,” for example, is not necessary to decide Alice Step One when the claims can adequately be compared to claims declared abstract in past cases.

        From the petition (broken down by error):
        The inventions are directed toward a variety of different software and hardware solutions to the longfelt need of providing systems to transfer funds any time of day from any location to any other location without the existence of a pre-existing, specific account link.

        Relevant to obviousness, not eligbility.

        The inventions arranged the hardware components for banking and other fund transfer systems to achieve the transfer of funds in the manner claimed in the patents found ineligible under § 101. The claims present a unique solution for directly accessing and electronically and virtually transferring funds using a touch-tone telephone, computer, or mobile device to send cash transfers from a sender’s account to a different receiving account as claimed in each distinct embodiment. Following different claims, users could directly access funds contained in their debit or bank account to send funds to a recipient account
        accessible at any ATM or point-of-sale (“POS”) terminal. The sender could use electronic, virtual interfaces to transfer these funds.

        Relevant to utility, admission of using conventional hardware.

        While developing a prototype that would include producing a new system for person-toperson transfers and development of configured adapters, ITS attained a cost estimate of about $2.5 million to develop the new system and components, indicating these components were not off-the-shelf generic components at the time of the invention.

        Both the spec and claims state what was just stated above, that the system could use a touch-tone phone, computer, mobile device, or ATM. The word “component” here means the software. Patentee paid $2.5 million to write code to apply it on a computer. There is no allegation in the spec that there was a technical problem, and the claims do not have a *technical* solution. The claims, as illustrated above, are commands to apply person to person transfers. Even assuming that “without requiring a pre-established relationship between the debit account of the sender and the the receiving-debit accessible escrow account” is a technical rather than fiduciary solution, the solution is functionally claimed rather than directed to particular solving steps, which would make it deficient under Enfish and EPG. This isn’t relevant to anything.

        ITS submitted declarations from the examination of the patents—which was thus part of the pleadings— describing the disclosure and claimed components contained aspects that were not routine, well-understood, or conventional when considering the components as an ordered combination, and these were ignored by the District Court.

        Not factually true, the declarations were considered as true and irrelevant anyway, from the holding: ITS highlights that the claims include a particular limitation that is novel— “without the necessity of a pre-established relationship between the sending debit card account and the receiving debit card account,” as recited in claim 1 of the ’786 patent, for example. See, e.g., Dkt. No. 29-1 at 4. Indeed, the Examiner allowed the claims over prior art that did not describe a computer system “adapted to being accessed . . . without the necessity of a pre-established relationship between the sending account and the receiving account.” Dkt. No. 29-6 at 5-6. It is possible, however, that “[a] novel abstract idea is still an abstract idea.” Netflix, Inc. v. Rovi Corp., 114 F. Supp. 3d 927, 937 (N.D. Cal. 2015)…

        The holding correctly ignored the non-conventionality of the abstract idea, because the correct Alice standard is to subject the features that are not abstract ideas to the conventionality test, not the abstract idea itself. The petition shows its hand by saying:

        This Court should embrace the Berkheimer standard and require that District Courts engage in adequate factual analysis to be persuaded by clear and convincing evidence that the party challenging the patent has demonstrated that the patent claims contain no more than what is routine, conventional, or well-understood.

        That’s not what Berkheimer said, that’s not what Alice said, and that’s not the law. If conventionality over the the entire claim were the test, you could throw out the Alice test and replace it with 102.

        1. 7.2.2.2

          By the way,

          The logic is internally consistent and deals with all the issues here.

          is certainly a gross overstatement, seeing as the one reviewing court pulled a Rule 36, and the lower court merely presents an abysmal conclusory statement, paraphrasing a portion of case that had actually reversed a lower court finding of ineligibility.

          1. 7.2.2.2.1

            “reversed a lower court”

            Should read:

            “reversed another court”

            That other court was not a lower court, but rather was the CAFC.

  5. 6

    Sort of amusing that Patently-O won’t give up on its incorrect argument that Section 101 is not a basis for invalidating a patent.

    1. 6.1

      There’s no accounting for taste.

      Mango Hairb@ll: “I don’t think people should be staying in locker rooms. But still, it’s good. You have to stand, proudly, for the National Anthem. Or you shouldn’t be playing. You shouldn’t be there. Maybe you shouldn’t be in the country.”

      But Hillary Clinton gave a speech to some bankers, so … both sides.

      1. 6.1.1

        Nice – an affirmation followed by a complete non sequitur into something that had ZERO to do with patent law.

        Do you really have such little self-control that you cannot abide by the fact that this is just not the proper forum for your political rants Malcolm?

    2. 6.2

      JRG,

      Care to do more than merely assert that the argument is incorrect?

      (Not that I am disagreeing with you that the argument is not correct – over on the Hricik side, I myself have put a few holes into that position). I’m just curious as to why you think it to be incorrect.

      1. 6.2.2

        It’s set forth in this BIO in a case which raised this very issue. The Court denied cert. Dennis repeats this “101 is not a defense” every so often doesn’t address the merits of the argument or the well-known reasoning that supports the conclusion that 101 is a defense. link to scribd.com

        1. 6.2.2.1

          Big Bank and Lee teaming up…?

          Do you have a pincite – or at least hipwaders?

          1. 6.2.2.1.1

            ps – all I see is on page 17 a conclusory statement that assumes the proposition to be proven…

            That is neither addressing the merits of the argument or providing (well-known or otherwise) reasoning.

            To wit:

            Section282(b) (2) of Title 35 authorizes an invalidity defense
            based ’on any ground specified in part II of this title
            as a condition for patentability***. By authorizing review based
            on a condition for patentability, as specified in part II
            of Title 35, ?
            Congress necessarily authorized**** review for
            subject matter eligibility compliance under § 101.
            First, as Petitioner acknowledges, part II of Title 35
            includes § 101, as well as § 102, 103, and 112–all common
            grounds for invalidating issued patents or rejecting patent
            applications. By the AIA’s plain terms then, CBM review
            must include § 101.

            There is a parsing here – *** – misreads ALL of part II of Title 35, when the correct reading – in context – is to take ONLY those items of part II that meet the condition expressed (there is a condition expressed to be met FOR inclusion – and NOT a defining of the entirety TO BE included).

            The logical error sets up the “it must be – **** – based on a first error of misreading a statement in incorrect context.

            Page 18 just doubles down on the first error of attempting to globalize something that was never meant to be a global definition. The “particularity” sought by analogy is already present when the context is corrected, so the argument on page 18 actually works against those providing that argument.

            Also, the reference to Deere attempts TOO much – and is not what the Court indicated. One should also keep in mind that Deere is evidence of the Court reaching beyond its own constrained authority (constrained per the Act of 1952). While that reach does not impact our point under discussion, it does indicate that one should NOT seek to place statutory law authority in the words of a body that is not respecting that very same statutory law authority.

            The coupled admission and then “it must be” “logic” immediately follows the fallacy of appeal to higher authority:

            While true that no opinion of the Court has explicitly stated that § 101 is acondition for patentability as specified in part II of Title35, that is the only logical way to understand the Court’s
            precedent.

            It CLEARLY is not “the only logical way” and merely trying to understand the Court’s precedent is a logical fallacy given that the Court ITSELF feels free to NOT follow its own precedent whenever it merely feels like it.

            It is entirely NOT logical then to buy the line of:
            To adopt Petitioner’s interpretation would render the Court’s decision in Alice nonsensical” as the Court;s decision in Alice NEEDS NO HELP to be in and of itself nonsensical. It is not anyone else “adding interpretation” that is doing the mischief.

            The argument on 20 is the “best bet” but even that MUST take into account the fact that Congress DID ACT (in 1952) to curtail the “the only valid patent is one not yet appearing before us” anti-patent Supreme Court.

            Again, the argument that is closest to having merit speaks to the opposite direction of the party presenting that argument.

            Lastly, the context that Congress acted SEPARATELY to create CBM review (as an adjunct to IPR) indicates a LACK of inclusion of 101 in the general conditions.

            Your link then, and the argument therein (or perhaps more precisely, the failures of the argument therein) point in the opposite direction that you want to go.

            For your choice of moniker then, you have taken a position opposite that which the actual Judge Rich would have taken, as Judge Rich had the ba11s to not kowtow to the Supreme Court. With that “backwards” tendency, I have to wonder (and quite apart from the merits of our discussion) if you post under the other historical pseudonyms such as Morse…

            1. 6.2.2.1.1.1

              btw, I note that Matt Dowd is listed as one of the writers, and he has made these types of errors several times now

              I am simply not compelled by your offering. Quite in fact, it strengthens the view opposite of yours.

  6. 5

    Will Justice Gorsach bite at the new petition…?

    How would we ever know? Cert denials do not come with vote break downs, and the justices would have to acknowledge Alice to have been a mistake in order for this case to end with reversal. Alice Was a unanimous decision, so it seems unlikely that there will be any more than one vote to take cert here, if that. It seems unlikely, then, that we will ever know who voted how when this one is denied.

    1. 5.1

      I agree. This cert is basically will you justices admit that you contrived Alice when you knew it was unconstitutional and not legal under the patent act.

      Never happen.

    2. 5.2

      I disagree. A cert denial with a dissenting opinion constitutes a vote break down.

      1. 5.2.1

        Well, yes, that is true. Such are rare, but you are right that if Justice Gorsuch authors a solo dissent from denial of cert., we would know that he (and he alone) is willing to revisit Mayo/Myriad/Alice.

  7. 4

    This petition will be denied.

    This has been another edition of short answers to easy questions.

    1. 4.2

      Yup. Everything about this petition screams deny.

      1. Terrible, terrible patent. Not even E.D. Texas thought it should go to trial. The patent sounds a lot like the patent the Supreme Court killed in Alice and that pretty much no one thinks should be patentable. Here’s how the petition describes it.

      “The inventions are directed toward a variety of different software and hardware solutions to the long-felt need of providing systems to transfer funds any time of day from any location to any other location without
      the existence of a pre-existing, specific account link.”

      2. Question Presented #2 asks the Supreme Court to make a special exception for patent cases to 12b6–pretty much what the Supreme Court has been telling the Federal Circuit not to do over and over again for the past 10 years.

      3. No court of appeals opinions grappling with this point: just a Rule 36 from the Federal Circuit and a request to the Supreme Court to make new law with only some blog posts to work with.

      4. The core of the argument seems to be that the Supreme Court has gotten 101 wrong for decades. Stare decisis is generally the strongest when it comes to statutes.

      Assuming the respondent waives, I’ll be surprised if the court even asks for a response to the petition.

  8. 3

    is it proper to find patents invalid under 35 U.S.C. § 101 after full examination before the U.S. Patent and Trademark Office in response to 12(b)(6) challenges when they are presumed valid under 35 U.S.C. § 282?

    Why on earth wouldn’t it be proper? The presumption of validity arguably establishes who has the burden of proof and the standard for finding invalidity. But it remains a rebuttable presumption.

    1. 3.1

      Your query needs to go (at least) one step further:

      GIVEN that the presumption remains a rebuttable presumption, and one overcome ONLY with clear and convincing evidence (See i4i), can a challenge under 12(b)(6) that (presumptively) lacks such clear and convincing evidence (i.e., a motion in and of itself that provides no evidence) act to reach the required level of rebutting the Congress set presumption (a setting left unchanged in the AIA)?

      I know in this particular instance, you have performed your “sniff” and just want to move on, but the LARGER LEGAL question requires more than a sniff.

  9. 2

    How much do “funds” weigh? Do “funds” set aside for buying Blu-Rays tend to be more dense or heat-absorbing than “funds” set aside for rainy days?

    Let’s stare into the abyss for twenty years and pretend that the structure of a logical argument is the same as the structure of a bicycle.

    1. 2.1

      Why do you think that weight is determinative?

      How much does ANY mixture claimed as comprising a certain percentage of something weigh (while leaving entirely open the remaining percentage to be of anything that may weigh anything) ?

      You appear to want something that is not required.

      Again.

      No abyss necessary to see that your view is in error here.

  10. 1

    Is it proper to grant a Rule 12(b)(6) motion to dismiss when the record contains unrebutted factual evidence that the invention is patent-eligible under § 101?

    LOL

    Nothing like assuming your conclusion.

    1. 1.1

      I confess to not knowing what a debit account and a debit-accessible escrow account are or what the difference is between them. And, I’m not precisely sure what you mean by something like paypal but without any need for a funded account.

      However, you don’t have to fund a paypal account before initiating a transaction. You can tie a paypal account to a credit card or, you can begin the transaction and mail paypal a check. You can also tie a paypal account to a bank account and transfer the transaction amount from the bank account through the paypal account to the recipient automagic like. Also, the recipient doesn’t have to have a paypal account before the transaction, only an email address. The recipient does need to set up a paypal account once notified of waiting funds in order to access the funds. Else the funds will be returned to sender after some number of days/months.

    2. 1.2

      Nothing like assuming your conclusion.

      What is the “conclusion” that you think is being assumed in the question?

      The question provides a premise that is to be taken as true in order to reach an answer WHENEVER that premise is true. This is NOT the same as “assuming a conclusion.”

      At least try just a little, Malcolm.

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