Tag Archives: Abstract Idea

Supreme Court Slows its Patent Law Jurisprudence?

Patent, ,

The Supreme Court had denied petitions for certiorari in three IP cases out of the Federal Circuit:

  • Google v. Oracle (Federal Circuit held that the Java API naming scheme was copyrightable and not an ineligible “system or method of operation”).
  • Google v. Vederi (Federal Circuit held that an amendment during prosecution to overcome a rejection need not be “strictly construed against the applicant”).
  • Ultramercial v. WildTangent (Federal Circuit held the patented method of distributing media content with advertising to be a patent ineligible abstract idea).

Apart from leaving-stand the particular holdings, these outcomes may collectively signal a time of out-breath for Supreme Court patent law jurisprudence.  By my count, there are no patent decisions pending before the Court (with certiorari granted) and none of the petitions on file carry a substantial chance of being granted.

Judge Newman: Functional Claim at Point of Novelty => Abstract Idea

Patent, , ,

by Dennis Crouch

Internet Patents Corp. v. Active Networks (Fed. Cir. 2015)

In an opinion by Judge Newman, the Federal Circuit has affirmed the lower court dismissal of IPC’s infringement lawsuit — holding that the claims of U.S. Patent No 7,707,505 are invalid for lacking patent eligible subject matter under 35 U.S.C. 101 as interpreted by Alice Corp.

The claims are directed to a method of providing a multi-pane (tab) user interface with icons as follows:

1. A method of providing an intelligent user interface to an online application comprising the steps of:

furnishing a plurality of icons on a web page displayed to a user of a web browser, wherein each of said icons is a hyperlink to a dynamically generated online application form set, and wherein said web browser comprises Back and Forward navigation functionalities;

displaying said dynamically generated online application form set in response to the activation of said hyperlink, wherein said dynamically generated online application form set comprises a state determined by at least one user input; and

maintaining said state upon the activation of another of said icons, wherein said maintaining allows use of said Back and Forward navigation functionalities without loss of said state.

Walking through the two-step analysis of Alice Corp., Judge Newman first identified the gist of the invention or “the basic character of the subject matter.”   In reading the patent document, the court found that it described the “most important aspect” of the invention is that it “maintains data state across all [browser] panes.”  In other words, the basic function of the invention is “the idea of retaining information in the navigation of online forms.”  Without further analysis, Judge Newman identified this basic function as an unpatentable abstract idea and immediately moved to Alice/Mayo step-2.

In Step 2, the Supreme Court instructs us to seek-out an “inventive concept” within the claims that goes beyond the unpatentable abstract idea and that is more than “well-understood, routine, conventional activities previously known.”  In reviewing the claim, Judge Newman could find nothing beyond conventional browser elements and the claimed end-result of “maintaining [the] state.”  However, that final and admittedly critical element of the invention was not limited to any particular method or mechanism and thus remained abstract.

The mechanism for maintaining the state is not described, although this is stated to be the essential innovation. The court concluded that the claim is directed to the idea itself—the abstract idea of avoiding loss of data. IPC’s proposed interpretation of “maintaining state” describes the effect or result dissociated from any method by which maintaining the state is accomplished upon the activation of an icon. Thus we affirm that claim 1 is not directed to patent-eligible subject matter.

The court also invalidated parallel system and computer claims — noting that “the statement that the method is performed by computer does not satisfy the test of ‘inventive concept.'”  The court also held that dependent claim limitations requiring differing responses to ‘quasistatic’ and ‘dynamically generated’ content was insufficient to overcome the Section 101 hurdle because they merely represent “the siting the ineligible concept in a particular technological environment.”

= = = = =

Judges Moore and Reyna joined Judge Newman on the panel.

= = = = =

Major case here that again appears to coincide with the ongoing battles over functional claim limitations.  Here, Judge Newman focuses on the reality that the admittedly fundamental aspect of the invention was claimed in functional form without providing any limitations as to its particular mechanism of function.  Result: unpatentable as an abstract idea.

= = = = =

Mike Borella covers the case at Patent Docs. (“The general rule that many of us follow post-Alice is to draft rich, detailed, technical specifications, and undoubtedly we will double-down on that approach in light of this decision.”)

 

 

Eligibility 101: Motion to Dismiss Ends Another Patent

Patent, , ,

OIP v. Amazon (Fed. Cir. 2015)

In a short-but-important opinion, the Federal Circuit has affirmed a district court’s finding (on motion-to-dismiss) that OIP’s patent claims are invalid as lacking patent eligible subject matter.

The claims are directed to a multi-step process of using an offer-based inquiry method for setting product price.  (U.S. Patent No. 7,970,713).  The basic problem is that it is difficult to figure-out the profit-maximizing price for any given product. The inventor’s insight here is that, unlike a land-based grocery store where prices are publicly labeled, an internet-based store can offer a different price to each consumer.  The invention spells out a method of testing various price-points by actually offering the product for sale to consumers different consumers being given different prices.  The results of those offers (whether or not consumers purchased at the given price) can then be used to automatically calculate the price-point.

In reviewing the claimed invention, the Federal Circuit found it to be “no more than an abstract idea coupled with routine data-gathering steps and conventional computer activity.” As such, the claims are ineligible for patent protection.

 

Following the two-step approach of Alice Corp v. CLS Bank, the Federal Circuit first found that the claims did encompass an abstract idea — namely the abstract idea of “offer-based price optimization.”  We know that the price optimization is an abstract idea because it is similar to the “fundamental economic practices” that the Supreme Court has previously found to be abstract ideas.  (Note – here the appellate panel misquotes the Supreme Court as saying “fundamental economic concepts” rather than practices.)  The court also states: the fact that “the claims do not preempt all price optimization or may be limited to price optimization in the e-commerce setting do not make them any less abstract.”

The second step of Alice Corp considers whether the claims include an additional inventive concept sufficient to transform the abstract idea into a patent eligible invention.  Here, the court finds that additional limitations and concepts are all well understood, routine, and conventional activities that merely require conventional computer technology.  “[R]elying on a computer to perform routine tasks more quickly or more accurately is insufficient to render a claim patent eligible.”

The opinion of the court was penned by Judge Hughes and joined by Judge Taranto. Judge Mayer published an additional concurring opinion indicating that eligibility is properly addressed at the motion-to-dismiss stage.

Failure to recite statutory subject matter is the sort of “basic deficiency,” that can, and should, “be exposed at the point of minimum expenditure of time and money by the parties and the court,” Twombly, 550 U.S. 544 (2007). Addressing 35 U.S.C. § 101 at the outset not only conserves scarce judicial resources and spares litigants the staggering costs associated with discovery and protracted claim construction litigation, it also works to stem the tide of vexatious suits brought by the owners of vague and overbroad business method patents. Accordingly, where, as here, asserted claims are plainly directed to a patent ineligible abstract idea, we have repeatedly sanctioned a district court’s decision to dispose of them on the pleadings. . . . I commend the district court’s adherence to the Supreme Court’s instruction that patent eligibility is a “threshold” issue, Bilski v. Kappos, 561 U.S. 593 (2010), by resolving it at the first opportunity.

Still fighting against this tide, Judge Gilstrap (E.D. Tex.) requires an accused infringer to must obtain leave of the court after showing good cause before filing a motion to dismiss on patent eligiblity. (Joe Mullin Article).

Despite the suggested cost of patent litigation, I expect that winning on motion-to-dismiss is considerably less expensive than the IPR/PGR/CBM process.

 

Guest Post by Prof. Lefstin: Ariosa v. Sequenom and the Path Ahead for Subject-Matter Eligibility

Patent, ,

Guest post by Jeffrey A. Lefstin, Professor of Law at the University of California Hastings College of Law.  Professor Lefstin’s forthcoming article, Inventive Application: a History, was cited by Judge Linn in his concurrence in Ariosa. 

The Federal Circuit has issued its decision in a closely-watched biotechnology case, Ariosa Diagnostics v. Sequenom. The opinion clarifies several aspects of the patent-eligibility inquiry in the wake of Mayo v. Prometheus, and has significant long-term implications for patent-eligibility not only in biotechnology, but in other fields where invention is based primarily on discovery.

The invention in the case derived from the inventors’ discovery that the cell-free fractions (serum and plasma) of a pregnant woman’s blood contain surprisingly large amounts of DNA from the fetus. Based on this discovery, the Sequenom patents claimed methods for prenatal diagnosis of fetal abnormalities, the methods comprising amplifying paternally-inherited sequences from the cell-free fractions of the mother’s circulation.

Applying Mayo, the Federal Circuit held all the claims in suit ineligible. In step one of the Mayo inquiry, the court found that the claims were all directed to a natural phenomenon: the existence of paternally-inherited cell-free fetal DNA (cffDNA) in the maternal bloodstream. In step two, the search for an ‘inventive concept,’ the court invoked Parker v. Flook for the following proposition:

For process claims that encompass natural phenomenon [sic], the process steps are the additional features that must be new and useful.

Because methods of amplifying DNA were well-known at the time of the invention, the court determined that the claims disclosed only well-understood, routine, conventional activity beyond the underlying natural phenomenon. The claims therefore lacked an inventive concept sufficient to transform the natural phenomena into a patent-eligible application. So Ariosa makes clear that the test for patent-eligibility is whether a claim represents an ‘inventive’ application of an underlying natural phenomenon, at the time the invention was made.

Another notable aspect of the case is the court’s discussion of preemption. After Mayo and Alice, some district courts have treated preemption as an operative test for patent-eligibility, while others have regarded preemption as the underlying justification for the doctrine. In Ariosa, the Federal Circuit seemed to adopt the latter view, stating that once claims are determined to disclose only ineligible subject matter under the Mayo test, “preemption concerns are fully addressed and made moot.” However, the court also wrote that “[w]hile preemption may signal ineligible subject matter, the absence of complete preemption does not demonstrate patent eligibility.” So the Federal Circuit seems to be suggesting that arguments regarding preemption can be taxed against the patentee in the § 101 inquiry, but not counted in the patentee’s favor.

In Ariosa, the Federal Circuit has endorsed a highly restrictive interpretation of the test for patent-eligibility, one that was not mandated by Mayo itself. A test for ‘inventive’ application was only one of several possible analytical approaches set forth in Mayo. Mayo also suggested a test of non-generic application for patent-eligibility: that a claim must do more than state a law of nature or abstract idea, and append an instruction to ‘apply it.’ That was the aspect of Mayo stressed by Alice, which emphasized generic application far more than inventive application.

As I argued in a recent paper, under a test of generic application, the claims in Ariosa might fare differently than the claims in Mayo. The claims in Mayo represented generic applications, because they did no more than reveal the results of the underlying relationship between 6-thioguanine levels and therapeutic efficacy. Arguably, at least some of the Ariosa claims do more than that: rather than claiming the natural phenomenon (cffDNA in the maternal circulation) itself, they employ the natural phenomenon as a means to a achieve a different end (diagnosing a genetic condition of the fetus).

Moreover, the Ariosa opinion appears to endorse dissection of the claim to a degree not only contrary to Diehr, but beyond that suggested by Flook itself. While Flook explained that “the process itself” must be new and useful, Ariosa suggests that the individual steps of the process must be new and useful, and identifies the discovery of cffDNA as “[t]he only subject matter new and useful as of the date of the application.” Given that most inventions consist of rearrangements of old elements, it is difficult to understand how the court can refrain from addressing the claim steps as an ordered whole, as mandated by Mayo itself.

And that highlights what is perhaps the most puzzling (or disturbing) aspect of Ariosa. According to Judge Linn’s concurrence, the steps of the method were new: at the time of the invention, no one was amplifying paternally-inherited sequences from maternal serum or plasma, because no one thought that those fractions contained significant amounts of fetal DNA. That contrasts with Mayo, where the acts recited in the method were identical to those performed in the prior art. Yet Judge Linn believed that the Supreme Court’s “blanket dismissal of conventional post-solution steps” in Mayo left no room to distinguish the Ariosa claims on those grounds.

If the step of amplifying paternally inherited DNA from serum or plasma was new, by what analysis could the court could regard it as “well-understood, routine, and conventional activity”? One way would be to sub-dissect that step into the conventional step of obtaining a cell-free fraction, and the conventional step of amplifying a sample containing DNA. That approach seems to lead to the reductio ad absurdum that most biotechnology processes are patent-ineligible, because they consist of the conventional steps of transferring drops of fluid from one tube to another.

The alternative way would be to ask if the step of amplifying paternally inherited DNA would be obvious once it was known that there was cffDNA in the maternal bloodstream. In other works, assume the patentee’s discovery to be already known, and ask if the invention is obvious once the discovery is assumed away. If that is truly the interpretation of Mayo signaled by Ariosa, then the case promises to cast a long shadow on the patent-eligibility of inventions based on discovery in the future.

 

Guest Post: Technical Detail in Senate PATENT Act Could Have Major Impact in Eastern District of Texas Patent Litigation

Patent, , ,

Guest Post by Christian E. Mammen.  Dr. Mammen is a litigation partner in the San Francisco office of Hogan Lovells.

The recently-introduced PATENT Act (S. 1137) tracks, in substantial part, many of the reforms proposed in the House’s Innovation Act (H.R. 9). However, the PATENT Act differs in several ways from the Innovation Act. Many of the differences between the two bills have been discussed elsewhere at length.   This article focuses on just one feature of the PATENT Act, which has some potentially far-reaching implications for patent litigation in the Eastern District of Texas, the nation’s most popular patent litigation forum.[1]

Discovery is one of the most costly and time-consuming phases of patent litigation. In patent litigation brought by NPEs, the burdens of discovery are asymmetrical, with the burden falling more heavily on the accused infringer. Particularly where the NPE-plaintiff acquired the patent on the secondary market, it will have few or no documents to produce relating to the invention process, patent-related products, or the like. The cost of discovery, which falls disproportionately on accused infringers, can motivate those accused infringers to settle patent litigation for valuations based on the cost of avoiding further litigation, rather than on the value of the patented technology.

To address this issue, the Innovation Act initially proposed that discovery be stayed until the court issues a claim construction ruling. However, this proposal was in tension with widely accepted practices concerning discovery prior to claim construction. For example, a 2008 Federal Judicial Center report indicated that most courts surveyed held claim construction after at least some fact discovery, and Berkeley Law Professor Peter Menell’s Patent Case Management Judicial Guide (2d ed. 2012), explains, “it is only by knowing the details of the accused product and the relevant prior art that the parties are able to determine which claim terms need construction.” Further, many courts have now adopted Patent Local Rules that require early production of infringement contentions and related documents, and invalidity contentions and related documents, and it is not clear whether those disclosures would also be stayed under the Innovation Act.[2]

Presumably in order to balance these competing concerns, the PATENT Act also includes the idea of a discovery stay in early phases of patent cases, but changes the triggering event. Rather than staying discovery until claim construction, the PATENT Act would stay discovery only while any one of three pre-answer motions is pending: (1) motions to dismiss, (2) motions to transfer venue, or (3) motions to sever accused infringers.

At first glance, this proposed scheme is a bit puzzling, since all three types of motions are typically filed – and resolved – early in the case, generally before discovery even starts.[3] Under the Federal Rules of Civil Procedure, discovery is stayed until the parties have held an initial conference concerning case management under Fed. R. Civ. P. 26(f). The Rule 26(f) conference generally happens about 3-4 months after the case is filed.

However, on closer examination, the PATENT Act’s proposed discovery stay has the potential to disrupt the status quo in one important circumstance. While there is a general preference that motions to transfer venue be brought as quickly as possible (generally before the answer is filed—indeed, the PATENT Act would only stay discovery when such motions are “filed prior to the first responsive pleading”), some courts delay resolution of these motions, and the PATENT Act’s stay of discovery would remain in place until the court rules on the motion. Furthermore, if the motion to transfer venue were filed sequentially after a motion to dismiss—a not implausible scenario under plausible readings of the PATENT Act—the filing date of the venue transfer motion could approach the date of the Rule 26(f) conference, thus extending the discovery stay well into the case’s discovery period. And if the court delays ruling on the motion, the commencement of discovery could be significantly delayed as well.

Famously, the Eastern District of Texas has gained a reputation for deferring rulings on venue transfer motions until the case is substantially advanced. As the Federal Circuit observed in one recent case challenging the Eastern District of Texas’ ruling on a transfer motion, “This case is a prime example of the importance of addressing motions to transfer at the outset of litigation … Congress’ intent to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense may be thwarted where, as here, defendants must partake in years of litigation prior to a determination on a transfer motion.” In re EMC Corp., 501 Fed. Appx. 973, 975-976 (Fed. Cir. 2013) (citations omitted).

Data recently obtained from Lex Machina indicates that, on average, when motions to transfer cases out of the Eastern District of Texas are granted, the ruling comes in 143 days, or about 4½ months. But when such motions are denied (meaning the case remains in the Eastern District of Texas), the ruling languishes for an average of 225 days, or 7½ months. According to Lex Machina, there were 33 cases in the Eastern District of Texas between January 1, 2010 and May 1, 2015 in which a venue transfer motion was pending for over a year before being ruled on – and only five of those longest-pending motions were ultimately granted in whole or in part. [4]

Particularly for Eastern District of Texas cases in which transfer is denied, the PATENT Act’s proposed discovery stay would prevent the start of discovery for up to 7-10 months from filing. This could have several effects. Without any other changes to the status quo, it could significantly clog the docket with discovery-stayed cases. Additionally, it will provide defendants with a strong incentive to file venue transfer motions, probably as late as possible before the start of discovery, in order to maximize the discovery-stay effect. Alternatively, the court could respond by substantially speeding up its rulings on venue transfer motions.

It is difficult at this time to say whether the drafters of the PATENT Act intended this particular scenario. But if they did, it is very clever indeed, and it will be interesting to watch it play out.

UPDATE: On June 10, Rep. Goodlatte introduced a Manager’s Amendment to the Innovation Act that scales back its proposed discovery stay. Like the PATENT Act, it would stay discovery during the pendency of pre-answer motions[5] to transfer venue or to sever claims or dismiss parties (but it does not provide for a stay pending motions to dismiss).[6] Additionally, the Manager’s Amendment would require the court to rule on any such motion before the court issues a case management order under Federal Rule of Civil Procedure 16. In view of the deadlines specified in the Federal Rules of Civil Procedure, the discovery stay in the Manager’s Amendment would normally only last for a maximum of three to four weeks (from the Rule 26(f) conference until the case management order issues). But it would also (albeit in a roundabout way) require courts to provide timely rulings on venue motions.

[1] In 2014, an estimated 32% of all patent infringement cases, and 48% of all NPE patent cases, were filed in the Eastern District of Texas.

[2] The Innovation Act is silent on whether early Patent Local Rule disclosures would be blocked by such a stay. However, the PATENT Act explicitly exempts from its proposed discovery stay early exchanges of infringement and invalidity contentions (whether by local rule or interrogatory).

[3] “Motions to dismiss” presumably refers primarily to pre-answer motions brought pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, including motions based on lack of jurisdiction, failure to state a claim, improper venue or improper service. Such motions must be brought within 21 days of service of the summons and complaint, and are frequently resolved substantially before the Rule 26(f) conference. Actually, though, “motion to dismiss” is ambiguous, and could also refer to other procedures, such as a motion to dismiss brought by a plaintiff pursuant to Rule 41(a)(2). It is not immediately clear, however, what purpose would be served by staying discovery pending a plaintiff’s Rule 41 motion to dismiss.

“Motions to sever accused infringers” evidently refers to motions to sever a claim or drop a party for misjoinder under Rule 21. While such motions should ordinarily be brought as soon as practicable, on its face, Rule 21 motion permits the court to provide such remedies “at any time, on just terms.” Although not fully analyzed here, motions to sever could potentially provide leeway for the same kind of procedural gamesmanship described in this article in relation to venue transfer motions.

[4] Complete data on file with the author.

[5] During the committee markup on June 11, the committee approved a further amendment, permitting stays to be triggered by such motions if they are filed “within 90 days of service of the complaint” rather than “before a responsive pleading is due.”

[6] The Manager’s Amendment remains silent on the status of early disclosures under Patent Local Rules.

Ultramercial Shoots for the Moon

Patent, ,

In its newly filed petition for writ of certiorari, Ultramercial asks the U.S. Supreme Court:

Whether computer-implemented or software-based claims, reciting novel or non-routine steps with no conventional counterparts, still cover only patent-ineligible “abstract ideas” as this Court has interpreted 35 U.S.C. § 101?

Ultramercial v. Hulu (Supreme Court 2015) (Ultramercial Petition).

U.S. Patent No. 7,346,545 is directed to a method of distributing copyrighted media content over the internet with a consumer receiving a copyrighted product in exchange for watching an advertisement that pays for the content.  Claim 1 is an eleven-step process that spells out the method for accomplishing the aforementioned goals.

The district court originally assigned to the case found the patent invalid as unduly claiming the abstract idea of “advertising as currency.”  The subsequent appellate history is interesting. Initially, the Federal Circuit reversed – finding that the claimed computer programming elements were sufficient to limit the claims in concrete wasy and to avoid the problem of preemption of an entire field or idea. However, after being twice vacated (Following Bilski and Alice) the Federal Circuit changed its opinion – now finding the claims to be lacking patent eligibility.

Federal Circuit: Software is not Patent Eligible unless Claimed as a Process or Physical Object

Patent, ,

In an interesting – though non-precedential – opinion, the Federal Circuit has ruled that a “speech-recognition interface” software lacks subject matter eligibility “because [the claims] are not directed to one of the four statutory categories of inventions identified in 35 U.S.C. § 101. The court writes: “[s]oftware may be patent eligible, but when a claim is not directed towards a process, the subject matter must exist in tangible form. Here, the disputed claims merely claim software instructions without any hardware limitations.”

AllVoice Developments v. Microsoft (Fed. Cir. 2015)

Recent action in patent eligibility doctrine has primarily focused on the judicial prohibitions against patenting abstract ideas, laws of nature, and natural phenomena.  However the statute does have some meat of its own.  In particular, Section 101 particularly creates eligibility for four categories of inventions: processes, machines, manufactures, and compositions of matter.  Inventions that cannot fit within the four statutory categories are not patent eligible.

Machine, Manufacture, Composition of Matter: These terms go back to the 1793 patent act and have been interpreted in dozens of cases.  Here, the court summarizes:

Except for process claims, “the eligible subject matter must exist in some physical or tangible form.” Digitech, 758 F.3d 1344 (Fed. Cir. 2014). To be considered a machine under section 101, “the claimed invention must be a ‘concrete thing, consisting of parts, or of certain devices and combination of devices.’” Id. (quoting Burr v. Duryee, 68 U.S. 531 (1863)). Similarly, “[t]o qualify as a manufacture, the invention must be a tangible article that is given a new form, quality, property, or combination through man-made or artificial means. Likewise, a composition of matter requires the combination of two or more substances and includes all composite articles.” Id.

The question in this case is whether Claim 60 of AllVoice’s U.S. Patent No. 5,799,273 fits within any of the four categories.  The claim reads as follows:

60. A universal speech-recognition interface that enables operative coupling of a speech-recognition engine to at least any one of a plurality of different computer-related applications, the universal speech-recognition interface comprising:

input means for receiving speech-recognition data including recognised words;

output means for outputting the recognised words into at least any one of the plurality of different computer-related applications to allow processing of the recognised words as input text; and

audio playback means for playing audio data associated with the recognised words.

In considering the claim, the court found that no tangible or physical object claimed.  Rather, the patentee admitted that the claim elements are all software elements that do not expressly require hardware elements.  Without any actual “machine” or “composition of matter”, the claim failed for lack of subject matter eligibility.

Eon v. AT&T and the role of “Pure Functional Claiming”

Patent, , , ,

by Dennis Crouch

In a major 2014 decision, the Supreme Court raised the standard of definiteness under 35 U.S.C. 112(b) – now requiring that the scope of patent claims be “reasonably certain” to one of skill in the art. Nautilus v. Biosig. Historically, “reasonably certain” is a high standard and has been linked with the beyond-a-reasonable-doubt standard in criminal law. I.e., claim scope that is reasonably certain may also be seen as having its scope defined beyond a reasonable doubt.  The higher standard can also be contrasted with the prior Federal Circuit that only invalidated ambiguous claims that were both insolubly ambiguous and not amenable to construction.

Despite the dramatic potential of Nautilus, the Federal Circuit has largely muted its impact.

The one area where patent-challengers see continued success is when means-plus-function claims lack appropriate structural support in the underlying patent document.  35 U.S.C. 112(f) allows a patentee to claim a “means” for accomplishing a specified function without reciting the actual structure of the mechanism or material used to accomplish the function.  However, as a rule of construction, the statute indicates that the “means” will be construed to “cover the corresponding structure, material, or acts described in the specification and equivalents thereof.”  The impact is that, although the claim appears to broadly cover a “function” it will be construed to be much more limited.  When an applicant follows this claiming approach, but fails to specify any corresponding structure within the specification then the claim is deemed invalid as indefinite.

In Eon Corp v. AT&T (Fed. Cir. 2015), the Federal Circuit has affirmed that Eon’s asserted patent claims are invalid for failing to specify the structure associated with a purely functional claim element.

Eon’s U.S. Patent No. 5,663,757 covers a data processing station that facilitates instant purchases while watching a television program.  The patent was written back when the wort “means” was still popular among patent drafters.  Here, the district court found that eight separate “means” claims were directed to “complex” computer software such as “causing selected themes to automatically display a second menu.”  Based upon that undisturbed complexity fact-finding, the appellate court found that a structure in the form of the software algorithm should have been disclosed.  Because no software algrithms were disclosed, the software means claims failed and were properly held invalid as indefinite.

Of interest here, the Federal Circuit reasoned that the algorithm is necessary to “avoid pure functional claiming.”  Quoting Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 521 F.3d 1328 (Fed. Cir. 2008).

A general purpose computer is flexible—it can do anything it is programmed to do. Therefore, the disclosure of a general purpose computer or a microprocessor as corresponding structure for a software function does nothing to limit the scope of the claim and “avoid pure functional claiming.” Aristocrat. As such, when a patentee invokes means-plus-function claiming to recite a software function, it accedes to the reciprocal obligation of disclosing a sufficient algorithm as corresponding structure.

Although the court here highlights the doctrinal point of “pure” functional claiming — claiming function with no limiting structure — the actual facts are that the disclosed microprocessor and does provide some amount of structure.  As with abstract-idea analysis, it seems here that the question is not so black-and-white, but rather whether some magical threshold has been crossed.

The case also offers some hints to the ongoing debate over subject matter eligibility of computer implemented inventions.  In particular, the court reiterated its prior statements that a “the general purpose computer becomes a special purpose computer when loaded with the special programming.”

Are Specific Information-Processing Claims Abstract Ideas?

Patent, ,

Guest Post by Jeffrey A. Lefstin, Professor of Law at the University of California, Hastings College of Law.

The Supreme Court’s decision in Alice v. CLS Bank resolved the easy cases: claims that merely recite a mode of organizing activity coupled with a generic instruction to “do it on a computer” or “do it on the Internet.” The key question left open by Alice is whether claims to specific information-processing techniques represent ineligible abstract ideas or eligible applications. Answering that question will be critical to resolving cases like California Institute of Technology v. Hughes Communications, Inc., and McRO v. Activision, discussed in Robert Stoll’s Patently-O post last month.

The patents in Caltech were directed to a method of generating error correction codes in digital transmissions. They described a method of generating parity bits by accumulating previously generated parity bits, and a sum of randomly chosen irregular repeats of message bits. Notwithstanding that the patents claimed only information-processing steps, Judge Pfaelzer of the Central District of California ruled that the claims were patent-eligible: while the claims were directed to the abstract idea of error correction, the algorithm for generating parity bits represented an inventive application of the underlying idea.

As Judge Pfaelzer recognized, that holding might be in tension with Digitech Image Technologies v. Electronics for Imaging, where the Federal Circuit, relying on Benson and Flook, suggested that any claim merely transforming information with “mathematical algorithms” is not patent-eligible. So Caltech squarely raises the question of whether specific information-processing algorithms are patent-eligible after Alice.

More generally, the significance of Benson and Flook after Alice is a critical question for future § 101 jurisprudence: much of the difficulty faced by the lower courts and the USPTO arises from attempts to reconcile the Supreme Court’s earlier caselaw with its decisions since Bilski.

It is time to acknowledge that they cannot be reconciled, and they need not be. While the Court maintains a pretense that all its opinions are coherent with each other, the regime the Court has crafted since Bilski represents a sharp break from its earlier decisions. Courts that continue to rely on Benson and Flook have not recognized the significance of Alice’s reaffirmation of the Mayo framework for patent-eligibility. For Mayo established both a different structure and a different rationale for subject matter eligibility than the Court had employed in its prior cases.

First, Mayo provided a new structure for the § 101 inquiry: step one is to identify an abstract idea or law of nature underlying the claim, and step two asks whether the claim further recites an ‘inventive concept’ that transforms the abstract idea or law of nature into a patent-eligible application. If that was not the analytical framework employed in the Court’s earlier cases, then the analysis and holdings of those cases are not necessarily relevant after Mayo and Alice. The Court itself told us in Bilski that its earlier opinions represented nothing more than explanations of the basic exceptions for laws of nature and abstract ideas.

Second, Mayo and Alice reoriented the rationale for subject-matter exclusions. Benson and Flook were premised in large part on the exclusion of subject matter not expressly authorized by Congress, the restriction of patents to tangible processes, or the exclusion of preexisting truths that exist apart from human action. Those premises were rejected in Chakrabarty, Bilski, and Alice, respectively. Instead, Mayo and Alice grounded subject matter exclusions on the ‘building-block’ concern: that patents on fundamental principles risk foreclosing more innovation than they promote.

Given the Court’s reorientation of the doctrine, Benson and Flook’s focus on ‘algorithms’ is no longer relevant. Abstract ideas, after Bilski, Mayo, and Alice, are not characterized by intangibility or field of invention. They are characterized by ‘fundamentalness’ – the concern that patents on basic concepts will foreclose too much further development. In this framework, a specific information-processing algorithm, such as an algorithm for generating parity bits, does not qualify as an abstract idea.

Caltech defined the abstract idea as the purpose of the claim, recited at a reasonably high level of generality: error correction, in the claims at issue. Identifying the abstract idea with the purpose or effect of the claim follows from the structure of the Mayo/Alice test. Step one defines the abstraction (if any) underlying the claim, while step two asks whether the application of that abstraction contains an inventive concept. The object of step one must therefore be to separate the idea of the invention from the means of application, which will be the subject of step two.

We already differentiate between idea and means of application in the law of inventorship: courts have long distinguished between formulating a goal, effect or result – which is not a contribution to conception – and formulating the means of attaining that result – which is a contribution to conception. So the Caltech analysis merely maps that long-standing distinction onto the subject-matter inquiry under § 101.

I discuss these ideas further, and develop a framework of ‘inventive concept’ applicable to both abstract ideas and laws of nature, in a forthcoming paper available here.

Patent Law Moot Court: Disembodied Genetic Information as an Abstract Idea

Patent, ,

In our Fourth Annual Patent Law Moot Court here at Mizzou Law, the students are grappling another Myriad lawsuit asserting its BRCA1 gene patents.  The question presented is whether the cDNA claims that the Supreme Court suggested are patent eligible could be voided as improperly claiming an abstract idea.

= = = = =

Order: Presently before the Court is Defendant’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).  In its oral motion, Defendants’ asserted that Claims 2 and 6 of Myriad’s U.S. Patent No. 5,747,282 are directed toward unpatentable subject matter under 35 U.S.C. § 101 as improperly claiming an abstract idea.[1]  Plaintiffs disagreed and further responded that the issue had been foreclosed in its favor by the Supreme Court’s recent decision regarding the claim and patent at issue and that the issue was not the proper subject of a motion to dismiss.

Parties will brief the issue and particularly address the following:

  • Whether the asserted claims of the patent-in-suit are directed toward an unpatentable abstract idea in violation of the requirements of 35 U.S.C. § 101.
  • The direct impact of Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013) on this motion.
  • Whether a challenge to subject matter eligibility is the proper subject of a motion to dismiss.

Briefs will be submitted simultaneously by 5:00 pm on April 6, 2015 and will otherwise follow the requirements set out in Local Rule 4.3.  The Court will entertain oral arguments on April 10, 2015 at 3:30 pm. Each party will be given up to 20 minutes to present its case.

= = = =

[1] The parties have stipulated that Claim 2 is directed toward a cDNA version of the naturally occurring BRCA gene and that Claim 6 is a fragment of the cDNA sequence defined by Claim 2.

= = = =

Should be interesting.  How would you argue the case for/against?

= = = =

SPONSOR US: I’m looking for a sponsor for the event so that I can give the winner a cash prize.  A tax-deductable donation of $5,000 will fund the system for the next four years and get your name mentioned in Patently-O each year!

Dennis

 

Federal Circuit Cases to Watch on Software Patentability – Planet Blue

Patent, , , ,

 Guest Commentary by Robert Stoll

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Million Dollar Mistake? The Cost of Limiting or Canceling IP Rights

Patent, , , , ,

Guest post by  Cynthia M. Ho, Clifford E. Vickrey Research Professor, Loyola University of Chicago School of Law.

Philip Morris and Eli Lilly think that they are entitled to millions in compensation from countries that limit or deny desired intellectual property rights.  These companies are the first to challenge IP issues pursuant to international agreements protecting investments of foreign companies. However, they join a trend of companies increasingly suing states before a panel of private arbitrators pursuant to investor-dispute settlement (ISDS).  The substantial financial stakes may have a chilling effect on traditional domestic laws and policies.

Although there are only two IP related ISDS disputes so far, IP policy makers should be concerned and oppose pending fast-track legislation that would permit President Obama to easily conclude more agreements with these problematic provisions.  Indeed, pending agreements have been criticized by a diverse group of individuals and countries including Nobel Prize winner Joseph Stiglitz, Elizabeth Warren, the Cato Institute and countries such as France and Germany.  The USTR recently issued a fact sheet, which was promptly debunked.

What is ISDS?

ISDS is a mechanism in over 3000 international agreements that permit foreign investors to seek compensation against countries.  The agreements guarantee freedom from discriminatory measures, a guarantee of being treated no less favorably than domestic companies, compensation for expropriation of investments, and “fair and equitable treatment.”  If these rights are allegedly violated, investors can bring a dispute before a tribunal of private (usually commercial) lawyers chosen by the parties to the dispute. There is not only no independent judiciary, but also no binding precedent and no appellate review, such that there can be inconsistent and unpredictable results.

Historically, these provisions were first added to international agreements promoting investments after World War II when newly independent nations wanted to encourage foreign investment.  ISDS was intended to provide protection to companies that lacked any legal recourse against unlawful state action.  ISDS was conceived as an improvement over “gunboat diplomacy” that nations used to protect their companies.

Why is ISDS relevant to IP?

Although ISDS was not originally designed to protect IP, companies are trying to use it for this purpose.

Most agreements providing ISDS do so only for investments of foreign companies.  These investments can include not only tangible, but also intangible property, which would seem to include IP.

Is a Canceled IP Right an “Investment” Subject to ISDS?

Even if IP is within the scope of covered investments, a critical question is whether this should include canceled IP.  IP lawyers and even students know that IP is at most presumptively valid, such that it can and often is canceled when found to not meet basic requirements.  Although canceled IP has never been considered to provide rights, Eli Lilly assumes it has rights.  In particular, it is seeking $500 million from Canada after failing to convince both a trial and appellate court that two of its patents were valid.

Highlights of Existing ISDS Claims Regarding IP

Eli Lilly’s case involves a challenge to Canada’s “promise doctrine” for assessing utility of patents and applications that make certain promises.  The promise doctrine is unusual as a utility requirement, but similar to disclosure and other patentability  requirements of other countries.  Eli Lilly claims that because this doctrine developed after its patents were granted (a point that is contested, even by some lawyers), it is improper to retroactively apply it to invalidate its patents, such that its patents have been improperly “expropriated,” which is roughly similar, but broader than US takings.  However, patents are routinely invalidated after common law modifications to laws, such as the scope of patentable subject matter with no claims of takings.

Eli Lilly seems to assume both that an issued patent is a state representation that it will remain forever valid and also that a nation can not modify its laws without violating legitimate expectations.  The supposed violation of its legitimate expectations figures prominently in a claim for denial of the amorphous condition of “fair and equitable treatment.”

Problematically, although a patent lawyer would readily reject the idea that patents are always valid and untouchable by subsequent law, they will not be deciding Eli Lilly’s case. Notably, when I presented a forthcoming article about this case to an international law colloquium, I was surprised that the audience resisted the basic principle that patent rights can and should be invalidated when found not to satisfy fundamental requirements.

Philip Morris also claims its legitimate expectations were violated, but in a different way.  Philip Morris asserts that it had a legitimate expectation that Australia would uphold its obligation to comply with TRIPS requirements for trademarks.   This suit fundamentally challenges the process for resolving alleged TRIPS violations.  Only countries, not companies, have standing to adjudicate alleged violations under TRIPS.  Thus far, countries have been cautious in doing so since there are often political implications for their actions. Moreover, permitting violations of TRIPS to be litigated outside of the WTO forum would seem wholly inconsistent with the WTO dispute settlement process that is intended to be the only forum for litigating such disputes.  In addition, there could be conflicting results; indeed, there is a pending WTO case.

ISDS for IP Threatens Flexibilities Under TRIPS

Eli Lilly’s case poses a serious threat to the minimum standard approach of TRIPS (and NAFTA).  Although these agreements have been widely understood to permit nations flexibility to define key terms, such as what is “new” or what counts as “useful,” Eli Lilly falsely claims that Canada’s definition is impermissible.

Ironically, these cases are arising at a time when many academics and policy makers (Eastern Europe, South Africa) have been encouraging countries to take greater advantage of their already limited flexibilities under TRIPS.  The present disputes may have chilling effects at a time when countries such as South Africa and Brazil have been considering modifying patent laws.

Future Problems

In the near future, companies may use ISDS to challenge patent provisions, such as compulsory licensing and India’s patent law designed to prevent “evergreening” of drugs that have attracted criticism, but no WTO dispute.  Moreover, regulatory provisions are also ripe for challenge.  For example, countries that fail to provide data exclusivity desired by the pharmaceutical industry could be subject to challenge.  In addition, a pending EU law hailed by public health advocates for increasing transparency concerning data of approved drugs is also at risk.

Given the wide range of issues at the intersection of intellectual property and public health that are potentially threatened by ISDS, this should be an issue of major concern.  Those who want to preserve policy space for countries should oppose pending agreements that permit ISDS, such as the pending Trans Pacific Partnership Act, especially because there is no public access to draft text of pending agreements except through sources such as Wikileaks, which just released the secret investment chapter of the TPP, that permits ISDS.   Public opposition is important; the EU has now delayed consideration of ISDS in its pending Transatlantic Trade and Investment Partnership (TTIP) agreement with the US.  In addition, although “fast-track” legislation is presently stalled, it should be opposed if re-introduced mid-April.  In the meantime, you can join  a petition to Congress, or directly contact your Congressman to oppose fast track bills.

Cynthia is a Law Professor at Loyola University of Chicago School of Law.

Guest Post: Despite Alice Corp, McRO’s Software Patents Should be Seen as Eligible under Section 101

Patent, , ,

This is a guest post written by Tim Molino who is the Policy Director for BSA, which as shortened its name to The Software Alliance. Prior to joining BSA, Tim was Chief Counsel for Sen. Klobuchar (MN) and before that, he was a patent litigator for eight years.  The BSA has just filed an amicus brief in the Activision Blizzard case whose Section 101 issue is pending before the Federal Circuit.  This is one of the several cases where parties are testing for the boundaries of Alice Corp. – Dennis

= = = = =

by Tim Molino

The highly-anticipated Alice Corp. v CLS Bank case was widely expected to clarify the application of Section 101 to computer-implemented inventions and many expected the decision would answer the contentious question of whether software is eligible for patent protection.  Instead, the Supreme Court issued a relatively narrow ruling that cast doubt on the eligibility of most business methods, but suggested that software-based inventions that “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field” would likely be eligible.

Now lower courts are beginning to apply the Alice and the Supreme Court’s distinction between abstract business practices and technological inventions. To date, the bulk of the district court decisions have dealt with so-called business method patents that recite a business practice or economic concept combined with a token recitation of implementation on a computer.  District courts have correctly invalidated these patents under 101 in the wake of Alice and Bilski. But we have also seen some troubling decisions where Alice has been misapplied to invalidate patents directed to real technology, rather than abstract business concepts.

Docket Navigator data suggests that in 2015, we could see more than 150 patent cases in district courts, arguing the patents are invalid on 101 grounds – and if the current trends continue, the patent would be invalidated in as many as 111 of those cases. These trend lines are troubling. With more than $50 billion in software research and development incentives at stake, it is imperative that the Federal Circuit make a course correction and send a clear signal that software-based technology is eligible for patent protection.

McRO v. Activision Blizzard – An Opportunity

Fortunately, the Federal Circuit has an opportunity to provide much-needed guidance to the lower courts in the upcoming McRO v. Activision Blizzard appeal. The McRO patents describe a computerized process for “automated rules-based use of morph targets and delta sets for lip-synchronized three-dimensional animation” that was a significant improvement over computer-aided processes previously used in the industry.

In this case, the Federal Circuit will use the Mayo and Alice decisions to guide their ruling. The Mayo and Alice decisions set forth a two-step analysis for eligibility:  First, the court must “determine whether the claims at issue are directed to” an ineligible “abstract idea, law of nature, or a natural phenomenon.”  If so, the court must then consider the elements of each claim to determine whether they contain sufficient detail and additional limitations “to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”

The lower court began its eligibility analysis in McRO v. Activision by noting that “[f]acially, these claims do not seem directed to an abstract idea. They are tangible, each covering an approach to automated three-dimensional computer animation, which is a specific technological process.”  However, instead of stopping there and recognizing that the patents did not involve an “abstract idea,” the court proceeded to invalidate them based on its conclusion that the claims covered nothing significantly more than the abstract idea of “using a rules-based morph target approach” to accomplish “automatic lip synchronization for computer-generated 3D animation.”

As we argue in our brief, reaching this counterintuitive (and seemingly counterfactual) conclusion required fundamental errors in applying both steps of the Alice analysis.

Step One – Are the claims directed to an abstract idea?

The claims at issue are directed to a specific, practical and useful improvement to an existing technological process.  Claim 1 of the ‘576 patent reads:

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

obtaining a first set of rules that define output morph weight set stream as a function of phoneme sequence and time of said phoneme sequence;
An apparatus for automatically animating lip synchronization and facial expression of three-dimensional characters comprising:
obtaining a timed data file of phonemes having a plurality of sub-sequences; generating an intermediate stream of output morph weight sets and a plurality of transition parameters between two adjacent morph weight sets by evaluating said plurality of sub-sequences against said first set of rules;
generating a final stream of output morph weight sets at a desired frame rate from said intermediate stream of output morph weight sets and said plurality of transition parameters; and
applying said final stream of output morph weight sets to a sequence of animated characters to produce lip synchronization and facial expression control of said animated characters.

Clearly, this claim describes a concrete, real-world innovation that solves the difficult problem of accurately replicating the human face and speech in CGI and animation.

So how did the lower court conclude that it recites nothing more than an abstract idea?  It did so by reversing the order of Alice’s two analytical steps and by collapsing them into a single inquiry.

Rather than first determining whether the claim as written was directed to an abstract idea and then assessing the claim’s “additional element” to determine whether they add significantly more to the idea, the court began by seeking to uncover the “abstract idea” lurking underneath the claim language by stripping away all elements that were known in the prior art in an attempt to discover the claims “point of novelty.”

Step Two – Does the claim contain additional elements that ensure the patent amounts to “significantly more” than the underlying abstract idea?

The lower court’s application of step-two is equally misguided and problematic. In step two of the Alice test, the court must assess whether the “additional elements” (i.e., any element beyond the abstract idea itself) places meaningful limitations on the scope of the claim.

In describing step two, the Supreme Court stated in Mayo that “well-understood, routine, conventional activity” previously used in the field “is normally not sufficient to transform an unpatentable [abstract idea] into a patent-eligible application . . . .”  In other words, it is not generally “enough” simply to append routine, conventional steps – described at a high level of generality – to the abstract idea.

Unfortunately, the lower court fundamentally misinterprets this statement to mean that only novel elements (rather than all “additional elements”) should be considered for purposes of the “significantly more” analysis.  The court then proceeds (yet again) to read all of the additional elements out of the claim because they lack sufficient novelty.  Unsurprisingly, once all of the additional limitations recited in the claim are stripped away, all that is left is the abstract idea, leading the court to conclude that the claim fails the “significantly more” test.

This approach lacks any basis in the case law and ignores the fundamental difference between what is “known” in the prior art and what is “conventional” in industry practice.  For something to be conventional it must not only be known, but widely-adopted. Put simply, the fact that space travel is “known” in human society by no means makes it a “conventional” practice.

Conflating these two concepts and disregarding any element that has a basis in the prior art makes it virtually impossible to satisfy step two.  As the Supreme Court recognized in Mayo, “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” and as a result “too broad an interpretation” of these implicit exclusions from eligibility would “eviscerate patent law.”

The approach taken by the lower court would fulfill this dismal prophesy.  As Judge Pfaelzer noted in a subsequent decision, “it is difficult to imagine any software patent that survives under McRO’s approach—most inventions today build on what is known in the art, and an improvement to software will almost inevitably be an algorithm or concept which, when viewed in isolation, will seem abstract. This analysis would likely render all software patents ineligible, contrary to Congress’s wishes.”

The Federal Circuit must be clear and decisive in nipping this in the bud. In deciding McRO, not only should they overrule the lower court’s erroneous conclusion, but they should take care to provide additional guidance regarding the correct application of the Alice test to avoid similar misapplication in other cases. This would provide much-needed clarity and certainty to patent holders and industries that rely on technology and software patents, shoring up our economic competitiveness and maintaining more than 2.5 million American jobs.

******

BSA’s members include: Adobe, Altium, Apple, ANSYS, Autodesk, Bentley Systems, CA Technologies, CNC/Mastercam, Dell, IBM, Intuit, Microsoft, Minitab, Oracle, PTC, salesforce.com, Siemens PLM Software, Symantec, Tekla, The MathWorks, and Trend Micro.

******

Briefs Filed Thus Far:

Smartflash v. Apple: Is the Invention an Abstract Idea?

Patent, ,


Apple-logo[1]by Dennis Crouch

In the upcoming $500 million Apple v. Smartflash appeal, a central question will be whether the Smartflash patents properly claim eligible subject matter under 35 U.S.C. 101 as interpreted by Alice v. CLS Bank (2014).  (These issues will first arise in post-verdict motions before the district court).  If these claims are patent eligible, then Alice will ultimately have only a minor shift in the law.

Although there may be factual underpinnings, patent eligibility is generally thought to be a question of law that is decided by a judge rather than jury.  In this case, Apple motioned for summary judgment of ineligibility under the Alice standard.  That motion was first considered and rejected by Magistrate Judge Nicole Mitchell and then confirmed without opinion by Judge Rodney Gilstrap.

Lets look at the Smartflash claims. Claim 32 of U.S. Patent No. 8,118,221 is fairly indicative and claims a data access terminal that is designed to take-in data from a supplier and provides the data to a carrier.  The arguably novel features of the apparatus is found in the claimed software code that (1) receives payment data and payment validation; and (2) once payment is made then retrieving data and a “condition for accessing the data” from the supplier and send it to the carrier. The claim further points out that the condition is “dependent upon the amount of payment.” [Text of the claim is at the bottom].  That condition might, for instance, be that the data file (i.e.,  movie) is permanently accessible based upon a larger payment, but only available for a seven days based upon a smaller payment. The eligibility question will be whether this claim is effectively directed to an unpatentable abstract idea.

In Alice Corp., the Supreme Court explained a two step process for its abstract idea analysis. In step one, the court asks whether the claim is directed to or encompasses an abstract idea. For some, it appears that this approach involves considering the gist of the invention as claimed.  Thus, in Alice Corp., the Supreme Court saw that the claimed invention was directed toward the general idea of “mitigating settlement risk” even though the particular claim at issue involved more particularized elements. In step two, the court asks whether any of the specifically claimed elements or combination of elements in the claim are sufficient to ensure that the claim amounts to significantly more than the abstract idea itself.  Here, the question could be restated as to whether the claim in question includes an innovative or otherwise sufficient practical application of the aforementioned abstract idea.

In thinking through the claims at issue in Smartflash, the district court (through the magistrate judge) followed the two-step approach of Alice to ultimately find the claims patent eligible.

In step one, the district court sided with Apple – finding that the patent claims do recite abstract ideas. In particular, the court found that “the asserted claims recite methods and systems for controlling access to content data … and receiving and validating payment data” with the state purpose of “reduc[ing] the risk of unauthorized access to content data.” Generalizing further upon these notions, the court found that the general purpose of the claim to be “conditioning and controlling access to data based on payment” and concluded that to be an “abstract and a fundamental building block of the economy in the digital age.”  In considering this approach, the district court interpreted Alice step one as focused on the “general purpose” of the invention and that Alice only “considers specific limitations at step two.”

In step two, the district court ruled against Apple — finding that the specific limitations found in the claims were sufficient to transform the abstract purpose to a patent eligible invention. “The asserted claims contain meaningful limitations that transform the abstract idea of the general purpose of the claims into a patent-eligible invention.” Here, the court pointed to the recited limitations such as “status data”, “use rules”, and “content memory.” Although those none of those individual limitations may be substantial enough, the court found them indicative of the reality that the “claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”  Finally, to drive-home this point, the court attempted to draw an analogy to pre-internet days and found that the solutions offered here is fundamentally different from prior solutions of the general abstract problem in pre-internet days.

In its step-two analysis, the district court attempted to hone its decision closely to Judge Chen’s decision in DDR Holdings.

[Read the Magistrate Judge opinion adopted by the District Court: 6-13-cv-00447-JRG-KNM-423-PRIMARY DOCUMENT]

In the same way that the Supreme Court’s Alice Corp analysis is deeply unsatisfying, the district court’s analysis here is also fails to be compelling.  In each case, application of the legal rule to the particular facts is done in merely a conclusory way without support of either facts or substantial analysis.

= = = = = =

 

Claim 32.
A data access terminal for retrieving data from a data supplier and providing the retrieved data to a data carrier, the terminal comprising:
a first interface for communicating with the data supplier;
a data carrier interface for interfacing with the data carrier;
a program store storing code; and

a processor coupled to the first interface, the data carrier interface, and the program store for implementing the stored code, the code comprising:

code to read payment data from the data carrier and to forward the payment data to a payment validation system;
code to receive payment validation data from the payment validation system;
code responsive to the payment validation data to retrieve data from the data supplier and to write the retrieved data into the data carrier;
code responsive to the payment validation data to receive at least one access rule from the data supplier and to write the at least one access rule into the data carrier, the at least one access rule specifying at least one condition for accessing the retrieved data written into the data carrier, the at least one condition being dependent upon the amount of payment associated with the payment data forwarded to the payment validation system; and
code to retrieve from the data supplier and output to a user-stored data identifier data and associated value data and use rule data for a data item available from the data supplier.

 

 

 

 

 

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.

Guest Post: Transfer Prices Are an Evidentiary Gold Mine for Patent Defendants

Patent, , , ,

Guest Post by Andrew Blair-Stanek, Assistant Professor of Law at University of Maryland Carey School of Law

Patent owners routinely tell the IRS, under penalties of perjury, that their patents have little value.  Litigators representing defendants should take advantage of these remarkable admissions.

IP has become the world’s leading tax shelter.  Multinational corporations develop IP in the U.S. and promptly transfer it for artificially low prices to subsidiaries in tax havens, where profits from the IP escape tax.  As IP becomes increasingly essential to economic activity, more and more profits have been siphoned off to tax havens.  The low transfer price is crucial to this strategy, minimizing the tax paid in the U.S.  Tax law cannot easily stop this abuse, because of international tax law norms enshrined in bilateral tax treaties.

But this tax avoidance presents great opportunities for litigators representing IP defendants sued by multinationals.  As I discuss in a new UCLA Law Review article, defendants can discover transfer-pricing evidence and use it to argue for invalidity, non-infringement, lower damages, and no injunctions.

For example, a low transfer price for a patent weighs towards lower damages.  Tax law requires multinationals to use a transfer price equal to a patent’s fair market value.  Multinationals must hire appraisers to justify this valuation and then attest that the valuation is accurate under penalties of perjury.  The fair market value of a patent approximately equals the profits or royalties that it is expected to generate, so a low transfer price is an admission by the multinational that it expected low profits or royalties.  Since patent damages are measured by either lost profits or royalties, the low transfer price is evidence weighing towards lower damages.

As another example, a patent’s low transfer price is nontechnical evidence – akin to the existing secondary considerations – that the patent is invalid for obviousness.  Obviousness is measured by reference to a person having ordinary skill in the art before the patent application’s filing date.  To minimize taxes, multinationals typically transfer patent rights as soon as possible, often around the same time the patent application is filed.  A multinational is ideally situated to evaluate how substantial the advance was, because it employs the inventors, who have ordinary or above-ordinary skill in the art.  In short, low transfer prices are admissions, at the relevant time, by an ideally-situated party, that the invention was not a substantial advance.

A low transfer price also negates evidence of a patent’s commercial success.  Courts consider commercial success to be evidence of nonobviousness under the reasoning that if the invention had been both obvious and lucrative, then someone would have thought of it earlier.  But this reasoning rests on the implicit assumption that the invention’s potential commercial success was perceived before its development.  A low transfer price refutes this implicit assumption and severs any logical connection between commercial success and nonobviousness.  A low transfer price proves that the multinational perceived little potential commercial success from the invention, even after its development.

Low transfer prices can also help defendants fight injunctions, which require the patentee to demonstrate that it faces irreparable injury that cannot be compensated by damages.  But a patent’s value roughly correlates with the maximum damages for infringing it.  A low transfer price for a patent demonstrates that harm from infringement can be quantified and, indeed, was quantified at a low number.

The transfer prices themselves are only half of the evidentiary gold mine.  IRS regulations require that multinationals hire appraisers to prepare rigorous documentation justifying the low transfer prices as accurate valuations.  This documentation typically makes as strong a case as possible that the patents have little profit or royalty potential.  Sometimes the documentation even contains damaging opinions or facts about the patent’s validity or scope.

My article’s arguments do not impact patents transferred between unrelated parties, such as an individual inventor selling a patent to a manufacturer.  When unrelated parties sell or license patents, the prices can reflect any number of distortions ranging from information asymmetries to differences in bargaining power.  None of these distortions exist when a multinational transfers a patent to its own tax-haven subsidiary.

Individual inventors, start-ups, and other small businesses cannot avoid taxes by transferring their IP to tax-haven subsidiaries.  Multinationals can.  This advantage distorts the employment market for scientists and engineers, making them more likely to work for multinationals.  This distortion likely reduces the overall progress of the useful arts, given the higher research productivity of start-ups and other small firms.  By making the arguments discussed in the article, litigators representing patent defendants can not only serve their clients’ interests, but also reduce this distortion.

In sum, during discovery, patent defendants should request transfer prices and the supporting appraisal documentation.

Tidbits from SPEs at the Life Sciences Conference

Ethics, ,

If you learn that your case is being examined and you have related ones in front of that examiner/art group, call him.  They have incentives to get them done that way if they can.  There’s also something called “first office action estimator” on the PTO site that you can use to guestimate.

If you’re pondering doing an RCE versus a CON, call the examiner because they may be able to give you timelines on each, suggesting which will get you a patent more quickly.

I’ll add to this as it goes on.  Again, live-posting so excuse any typos.

They’re doing a lot of live and on-line examiner training to deal with AIA/FITF cases, since those will be popping up for examination “soon” (in patent-prosecution terms).  They all say don’t check the “statement under 37 cfr 1.555 or 1.78” box on the application data sheet for a CON or DIV if a claim has an effective filing date after the AIA, because they’ll treat it as AIA forever until you fix it.  “You are committing malpractice.”  I’m not sure I understand their point – hard to read the slide and I don’t know this form.  The more I think about what they said, the less sense it makes: if it does have a post-AIA claim then you have to check that box.  See 2 paragraphs below.

The training materials are on the PTO web page.

There’s a lot of discussion about whether to file a preliminary amendment the day after a CON to avoid having an entire case become AIA if you added new matter after the ultimate parent and post-AIA to support a new claim.  The SPEs seemed confused about this issue, so that may explain why my notes are not clear. This relates to that box – be careful about that box is the only clear lesson!

I now own a cool laminated card that shows what counts/doesn’t under the AIA.  If you email me I’ll try to send a photo copy.  Nice and in color!  Shows the grace periods, etc for the 102 provisions.  If many of you email I’ll put it up here.

Surprisingly, a few people actually are examining AIA/FITF cases (besides the Track 1 stuff).

In traversing rejections, they highly recommend to refer to the MPEP/guidance document (e.g., from the 101 guidelines).  “Don’t rub their nose in it” but if, e.g., unexpected results exist point to the MPEP section that says “unexpected results means non-obviousness.”  “Don’t paraphrase the MPEP” but instead quote it.  The examiner will have more comfort — know you’re not shading/spinning.

Regarding new matter, don’t rely on the examples in the MPEP blindly but if you find one point the examiner to it so you can better cabin and identify the issues.  If you are adding new language to claims, even though not required, point to where in the spec the support is, so they don’t waste time. This is also a good check for you to make sure you have support.  But, don’t be too specific where you point to (for litigation/enforcement).  Use general language or “for example, support can be found at…”  This is especially useful to point out support if there’s one spot in a huge spec for the support.  Some practitioners are using page/line to point out support to avoid the new matter rejection.

Regarding interviews, they’re helpful but be sure to ask that the SPE or primary be present.  Often examiner and lawyer will be talking past each other and so having third party hear the problem.  Interviews can be helpful even if don’t result in allowance it will cut down on the number of issues.  Ask if the rejection can be overcome by X, Y, or Z.  When you call to set up an interview, say “I want to compact prosecution.”  Don’t show up in a suit and let them know ahead of time you’re not dressing up to make it more informal/negotiation.  (That’s a smart one!).  If you want to have discussion-purposes-only claims, that will not work:  regs/procedures say everything written has to be part of the file.  (Apparently some folks are doing this.  Anything written/emailed should end up in the interview summary.)  SPE said “ask for copies back.”  Not sure I’d be comfortable with that since a reg says anything in writing must be part of the file.  Thoughts?

In person interviews deemed to be marginally more helpful than phone interviews.  (Interesting.)

Timing of interview:  after first OA, before response. Not after response.  Don’t put at end “if this doesn’t work call me.”  The time to interview is before you write response, due to examiner incentives.  But, some examiners want the response before responding to the OA.

They’re about to get to eligibility!  The flow-chart (infamous) about if the claim “directed to” a law of nature, a natural phenomenon, or an abstract idea you have a 101 problem unless the claim adds “significantly more”.

Sigh.

I’ve got to head off.

The Huge Assumption in 101 Jurisprudence

Ethics,

(Back to business soon. I’ve been grading and managed to do what many of you have done, I’m sure, and catch this nasty bug going around.)

I’ve posted elsewhere at length and exhaustively about why the statutory text after 1952 makes it clear that failure to “comply” with the permissive language in 101 is a not defense to infringement.  I’ve shown that the statutory text doesn’t make 101 a “condition of patentability” and it otherwise is not listed within section 282. I’m not going to repeat those earlier posts here.  As courts say, familiarity with my prior decisions is assumed.

In that context, I note the recent case, where the court wrote:

The Supreme Court, however, has long interpreted § 101 and its statutory predecessors to contain an implicit exception: “laws of nature, natural phenomena, and abstract ideas” are not patentable. Alice Corp. Pty Ltd. v. CLS Bank Int’l, 573 U.S. __, 134 S. Ct. 2347, 2354 (2014).

Content Extraction and Transmission LLC v. Wells Fargo Bank, NA (Fed. Cir. Dec. 23, 2914) (Chen-auth; Dyk; Taranto).

The problem, in my view, is that the Court has never analyzed whether its pre-1952 case law survived the changes to the Patent Act in 1952.  Perhaps “invalidity” based on section 101 was a “defense” before 1952. It no longer is, though the court marches onward.  Worse, now this “defense” can be raised under 12(b)(6), without evidence, and with no burdens.  Whatever limitations on courts’ power to invalidate patents Congress thought it had created in 1952, this “thing that makes patents go away but is not invalidity or enforceability but is just sort of floating out there” marches onward thanks complete lack of analysis and respect for separation of powers, the rules of civil procedure, and the presumption of administrative competence.

Sigh.

 

The Interpretation-Construction Distinction in Patent Law

Patent, , ,

By Jason Rantanen

Last week, I wrote about my view that patent rights are malleable; that is, their scope and strength can be altered by the parties who interact with them after their issuance.  Malleability is different from ideas that patent rights are simply uncertain; that the scope and strength of patents that revolve around chance or indeterminacy, as it involves changes to the patent right rather than resolution of an unknown variable.

In connection with that work, I’ve recently had several valuable exchanges with Professor Tun-Jen Chiang, whose ability to articulate theoretical concepts in patent law is possibly without equal.  This is not to say that I agree with Chiang’s perspectives; I frequently do not.  But his work bears strong traces of both Richard Epstein and Timothy Dyk in the rigor of its analysis and lucidity of its explanations.

One of Professor Chiang’s most recent works, The Interpretation-Construction Distinction in Patent Law, 123 Yale L. J. 530 (2013), co-authored with Professor Lawrence Solum, takes head-on the issue of indeterminacy in claim scope.  Chiang and Solum argue that this indeterminacy is not so much due to linguistic ambiguity as it is to “a conflict about the underlying goal of claim construction: is it to give effect to the linguistic meaning of text, or is it to tailor patent scope to the real invention?”  Id. at 536.  This conflict, they argue, involves two fundamentally different goals, and determining claim meaning is an incoherent inquiry when judges move between them.  The result is indeterminacy not due to linguistic ambiguity but due to an inability to resolve whether to apply linguistic analysis in the first place.

I’ve provided the abstract below; the full article is here: http://www.yalelawjournal.org/article/the-interpretation-construction-distinction-in-patent-law

The ambiguity of claim language is generally considered to be the most important problem in patent law today. Linguistic ambiguity is believed to cause tremendous uncertainty about patent rights. Scholars and judges have accordingly devoted enormous attention to developing better linguistic tools to help courts understand patent claims.

In this Article, we explain why this diagnosis is fundamentally wrong. Claims are not often ambiguous, and linguistic ambiguity is not a major cause of the uncertainty in patent law today. We shall explain what really causes the uncertainty in patent rights, how the erroneous diagnosis of linguistic ambiguity has led the literature off track, and what will get us back on track to solving the uncertainty problem.

Tomorrow, Camilla Hrdy will guest-blog about her response to The Interpretation-Construction Distinction in Patent Law.  For this series of posts, we’ll be doing something a bit different for comments.  Only comments with the author’s real name will be permitted; all others will be removed.

The Malleability of Patent Rights

Patent, , ,

By Jason Rantanen

Folks who write about patents commonly explain the concept by drawing an analogy to real property rights, with the metes and bounds of a patent set out in the claims rather than a deed description.  Drawing upon this analogy, a common critique of by scholars such as Jim Bessan and Mike Meurer is that patent boundaries are much less clear than those of deeds.  Related to this uncertainty in scope is the fact that the very existence of the rights themselves is hardly certain.  While issued patents come with a presumption of validity, it is only that: a presumption.  Patent claims can be and are invalidated by courts.  Commentators have used various terms to describe these attributes, terms that when unpacked mean somewhat different things.  Indeterminacy and probabilistic rights are two of the most common.  Regardless of the terminology, the core idea is that that patent rights are characterized by a degree of uncertainty.

In my most recent long-form work, I describe another important characteristic of patent rights: their malleability.  By malleable, I mean that the scope and strength of the right can be changed after the patent is issued through an array of mechanisms, thus allowing actors operating within the patent system the ability to change the very contours of the right.  In other words, not only can patent rights involve something akin to a roll of the dice or an inability to definitively pin down their scope, but the outcome of that roll or the contours of the uncertainty can be changed by the actions of the parties involved.  An obvious example is the role that skilled counsel play in litigation, but that’s not the only way that patent rights can be altered after issuance.

Over the past few months, we’ve seen quite a few manifestations of this malleable nature of rights; most recently in the Federal Circuit’s decision this morning in Content Extraction v. Wells Fargo Bank invalidating an issued patent on section 101 grounds.  The rise in importance of Section 101 is in large part the result of individual actions pushing and pulling on patent rights using those tools at their disposal, as attorneys develop creative new ways to deploy the legal precedent and policy arguments.  The consequence in this case is that the patent rights are eliminated well after the patent issued.  There are, of course, better examples of malleability than invalidation: claim construction is the one that most quickly comes to mind.

Ultimately, it’s not clear to me that malleability is a desirable characteristic.  Although there are individual doctrines where malleability may be necessary, I have yet to come up with a good theoretical justification for it on a broad scale.

Read The Malleability of Patent Rights here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2540356.  The article is still a draft, so well thought out comments and responses are particularly welcome.