Tag Archives: Abstract Idea

Federal Circuit: Next Round of Myriad Patent Claims Are Also Invalid

Patent, , ,

by Dennis Crouch

In an important decision, the Federal Circuit has affirmed the invalidity of a number of additional genetic testing claims.  Based upon this decision, the USPTO may need to again reevaluate its subject matter eligibility procedures. 

In AMP v. Myriad (2013), the Supreme Court found that some of Myriad’s BRCA gene patent claims were valid – or at least that they did not violate the prohibition against patenting products of nature.  Following the decision, several companies – including Ambry – began marketing BRCA genetic testing, and Myriad sued.

The new lawsuit – captioned In re BRCA1- and BRCA2-Based Heredity Cancer Test Patent Litigation (Fed. Cir. 2014) – was brought by Myriad (the exclusive patent licensee) along with patent owners University of Utah and University of Pennsylvania. The plaintiffs here assert a set of patent claims that were not previously a part of the Supreme Court or lower court analysis.  Now asserted are U.S. Patent Nos. 5,753,441 (claims 7 & 8); 5,747,282 (claims 16 & 17); and 5,837,492 (claims 29 & 30).

The appeal here stems from the Utah District Court’s denial of Myriad’s motion for a preliminary injunction based upon its conclusion that the asserted claims are “likely drawn to ineligible subject matter.”  On appeal the Federal Circuit has now affirmed and taken a step further by holding on de novo review that none of the asserted claims are patent eligible.

DNA Primers: The asserted claims from the ‘282 and ‘492 patents are all directed to DNA primers used to bind the chromosomal section of the BRCA1 gene during PCR (the DNA-amplification process).  In reviewing these claims, the Federal Circuit found that the “primers before us are not distinguishable from the isolated DNA found patent-ineligible in Myriad and are not similar to the cDNA found to be patent-eligible.”

Now, although not particularly claimed, it appears that the primers are synthetically created through a lab process. In the appeal, the Federal Circuit rejected the importance of that distinction – holding that “it makes no difference that the identified gene sequences are synthetically replicated.”  Rather, the rule of law is that:

[N]either naturally occurring compositions of matter, nor synthetically created compositions that are structurally identical to the naturally occurring compositions, are patent eligible. . . .  A DNA structure with a function similar to that found in nature can only be patent eligible as a composition of matter if it has a unique structure, different from anything found in nature. . . . Primers do not have such a different structure and are patent ineligible.

The difference here from the cDNA patents that were allowed in Myriad is that(a) the cDNA is structurally different from naturally occurring DNA because the introns had been removed leaving exons only and (2) the cDNA is structurally different from naturally occurring exon-only mRNA because cDNA is a different substance. “To the extent that the exon-only sequence does not exist in nature, the lab technician “unquestionably creates something new when cDNA is made.”

Method of Screening: The asserted ‘441 patent claims are directed to a particular method of screening for BRCA1 mutation by comparing a patient’s gene sequence with a germline BRCA sequence. Both claims 7 and 8 depend from claim 1 that the Federal Circuit found invalid in its 2012 decision as “a patent-ineligible abstract idea of comparing BRCA sequences and determining the existence of alterations.”

Following the two-step analysis from Mayo and Alice, the Federal Circuit first determined that the asserted claims embody an abstract idea through the comparison steps.

Here, under our earlier decision, the comparisons described in the first paragraphs of claims 7 and 8 are directed to the patent-ineligible abstract idea of comparing BRCA sequences and determining the existence of alterations. The methods, directed to identification of alterations of the gene, require merely comparing the patient’s gene with the wild-type and identifying any differences that arise.

Going to the second part of the Alice/Mayo test, the court looked to the claims to find any “non-patent-ineligible elements” sufficient to “transform the nature of the claim into a patent-eligible application.”  Here, the claims require various physical transformations, including hybridizing the gene probe; amplification of the gene; and sequencing the gene.   However, according to the appellate panel, those transformations are insufficient – primarily because those steps “set forth well-understood, routine and conventional activity engaged in by scientists at the time of Myriad’s patent applications” and are the activities that a scientist would have relied upon to achieve the goals of the invention.

The second paragraphs of claims 7 and 8 do nothing more than spell out what practitioners already knew—how to compare gene sequences using routine, ordinary techniques. Nothing is added by identifying the techniques to be used in making the comparison because those comparison techniques were the well-understood, routine, and conventional techniques that a scientist would have thought of when instructed to compare two gene sequences.

With the claims invalid, Myriad has now lost the case.  In my view, an en banc reversal is highly unlikely.

IP as a Corporate Human Right

Patent, ,

by Dennis Crouch

I am enjoying Professor Osei-Tutu’s (FIU) new article on intellectual property as a human right.  Corporate ‘Human Rights’ to Intellectual Property Protection, ___ Santa Clara L. Rev. ___ (2015) (forthcoming).

The background of the article stems from movements in both Europe and the developing world to define aspects of intellectual property as a fundamental human right.  In one recent case, for instance, the European Court of Human Rights looked to balance the human right to freedom of expression against the human right of intellectual property ownership.  See Kolmisoppi v. Sweden (40397/12), [2013] E.C.H.R.

Osei-Tutu sees a real problem with identifying IP as a human right – especially in the U.S. context where non-human actors (e.g., corporations) are increasingly able to claim fundamental rights. See Citizens United v. Fed. Election Comm’n, 558 U.S. 310 (2010) (concluding that a “prohibition on independent corporate expenditure is a ban on speech”) and Burwell et. al v. Hobby Lobby Inc. et. al, 573 U.S.__ (2014) (protecting corporate persons’ free exercise of religion).  For the author, this corporate co-opting would largely eliminate the distributive justice that has been a major purpose of the human right schema. Osei-Tutu is writing to an international audience where human rights have become a major part of the international legal framework, but the framing of this debate will also impact the US.  In the U.S., although we do not identify human rights, we do recognize fundamental rights to corporate property ownership. Thus, for the U.S., the boat may have already sailed on this idea.

Examination Guidelines on Patent Eligibility

Patent,

The US Patent Office has released a new set of guidelines for judging patent eligiblity based upon the Supreme Court’s recent quartet of Bilski, Mayo, Myriad, and Alice.  The guidelines do not carry the force of law but are designed to serve as a manual for examiners when determining eligibility.

The guidelines follow the same two-step analysis described in Mayo and Alice. And,  although the two-step test was not applied directly in the cDNA case of Myriad, the guidelines suggest that the test is uniform across the subject matter areas.   However, the particular examples show that the USPTO intends to be less aggressive at finding eligibility problems with products of nature or natural phenomenon as compared those directed toward abstract ideas.

It will take some time to digest these, but the info is below:

DDR Holdings – Federal Circuit Forges a Sensible Path on Software Patents

Patent, , ,

Guest post by Bart Eppenauer. 

Amidst all the angst and uncertainty following the Supreme Court’s decision in Alice Corp. v. CLS Bank (2014), patent owners and inventors in the Information Technology world should be celebrating the decision last week in DDR Holdings v. Hotels.com from the Federal Circuit.  While the Alice decision fell short of ushering in a bright line test with absolute clarity, a vocal minority has grabbed the opportunity to generate headlines suggesting that software patents are all but dead in the water.  This kind of hysteria is not only unfounded, but it sends the wrong message to our policymakers, and to startups and innovative companies of all sizes across all industries.  Perhaps its wishful thinking to expect that DDR Holdings will quell opponents of software patents in any respect, but the decision should send a strong signal that software patents are far from dead.  As I’ve recently urged, the proper course of action at this point is to take a calm, measured and rational approach as we work through the current state of affairs.

As noted by Professor Crouch in his earlier post on DDR Holdings, the DDR ‘399 patent at issue under Section 101 involved an e-commerce syndication system for generating a composite web page that combines selected visual elements of a host website with content of a third-party merchant.  While I can acknowledge the view that the analysis in DDR Holdings could be in tension with the Federal Circuit’s Ultramercial decision, I firmly believe that the DDR patent falls within the contours of patent eligible subject matter.  And I respectfully take issue with the characterization of the DDR patent as a “business method” patent.  In my view, the DDR patent, both in the disclosure and in the claims, sets forth and defines a technical solution to a technical problem through the implementation of computer software in the context of e-commerce.  A cursory review of the specifications and claims of the DDR patent, the representative Alice patent and the Ultramercial patent reveals the stark differences in the level (or absence thereof) of technology-based, software-based disclosure in these patents.

The Alice patents were drawn to an abstract business method for intermediated settlement – i.e., escrow – hardly a new business concept.  The patents contained token references to performing the purported invention on a generic computer.  The patent in Ultramercial involved a business method for allowing consumers to access copyrighted content over the internet in exchange for viewing an advertisement.  In that patent, there is absolutely no disclosure whatsoever of software or computer technology, or of any other technological advancement in the form of computer software or hardware, or anything else.  The Ultramercial patent was simply a business method and nothing more.  In both cases, the now-defunct patents mentioned computers, but did not provide a technological connection between their described method and any kind of actual software innovation.

That connection is exactly what real software enables.  The Supreme Court explicitly stated that the Alice patent claims did not purport to improve the functioning of a computer itself, nor did they advance an improvement in any other technology or technical field.  And contrary to the assertions that the decision threatens all software patents, the Supreme Court specifically acknowledged, as if there was any question to begin with, that many computer-implemented claims (i.e., software) are indeed within the domain of patent-eligible subject matter.  In Ultramercial, the Federal Circuit followed suit in its recognition that at some level all inventions embody or otherwise use abstract ideas or laws of nature, but that they “do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea.” Ultramercial at p. 10 (emphasis added).

Turning to the DDR patent, the Federal Circuit justifiably recognized that “the claimed solution is necessarily rooted in computer technology to overcome a problem specifically arising in the realm of computer networks” (DDR at p. 20), whereas the patents from earlier cited decisions claimed nothing more than the performance of abstract business practices on the Internet or using a generic computer.  Just a brief snippet of technical disclosure from the DDR patent illustrates that this is so:

  • The Link Generator allows host to create and maintain the shopping opportunities that they can then place on their site. Each Link is assigned a unique Link ID. The Link ID identifies who the host is, who the merchant is, and what commerce object (catalog, category, product or dynamic selection) is linked to.
  • The first time a host builds a Link to a merchant’s product, category or catalog, an approval of that host for that merchant may be made. Until the host is approved, they cannot see the Link ID that has been assigned to the newly created Link.
  • The code the host embeds on their web site is as follows:
    < !—BEGIN NEXCHANGE LINK—>
    < !—For more information go to http://www.nexchange.com—>
    < !—The following 2 lines MUST NOT BE CHANGED to ensure proper crediting—>
    < IMG BORDER=‘0’ SRC=‘http://www.nexchange.net/img.asp?LinkID=xxxx’>
    < a href=‘http://www.nexchange.net/route.asp?LinkID=xxxx’>
    < !—Substitute your own text or image below—>
    **YOUR TEXT OR IMAGE HERE**</a>
    < !—END NEXCHANGE LINK—>
  • There are several points to note here:
    • The image src (img.asp) is actually an ASP program that returns a single transparent pixel. This is used to track impressions (how many times the link was displayed on the host site).
    • The route.asp page is a page that routes the customer to the shopping page. As additional servers are added, this will become very important for load balancing.
    • The ‘xxxx’ for the LinkID=‘xxxx’ is the Link ID assigned to the Link in the Link Generator.

This, along with many other examples of software-based technical disclosure in the patent specification, supports the Federal Circuit’s conclusion that the DDR patent claims “specify how interactions with the Internet are manipulated to yield a desired result” and “recite an invention that is not merely the routine or conventional use of the Internet.” (DDR at pp. 22-23).  In other words, the DDR patent claims, while relating to a business challenge, are simply not directed to an abstract idea under the Alice test.

So why all the purported confusion surrounding software patents, business method patents, and the differences there between?  After more than two decades in the IP field, I believe it comes down to a fundamental misunderstanding (and sometimes willful disregard to advance an ideology) of the true nature of “software.”

By way of the briefest of explanations, the execution of a typical software program illustrates that software implemented processes perform rapid activation and deactivation of transistors.  Software defined instructions operate on the information stored within transistor elements.  A software program in a modern computer can perform at least hundreds of millions of such operations per second.  In essence, software instructions literally, but temporarily, reconfigure electronic pathways and transform computing hardware to perform real, useful, and physical activity.

When an algorithm is implemented “purely in software,” it necessarily controls hardware components to carry out computerized actions.  I was struck by Professor Crouch’s Halloween report on his 9 year old daughter’s amazingly insightful viewpoint on how software actually transforms computers into different machines and provides very different experiences.  In discussing the differences between using Microsoft Word and playing her WarriorCat game, she explained – “Sure, the box is the same in both situations.  But, Microsoft Word obeys me and the game thwarts my moves. I see them as very different.  Its brain changes.”

Reducing software code to “just math” or sweeping it away as an abstraction is an inaccurate reading of patent case law that could jeopardize the future of innovation in this country.  The vast majority of companies that obtain software patents are manufacturing companies that integrate software into products they manufacture to deliver valuable new advancements.  These inno­va­tions power technologies ranging from modern smartphones to advanced robotic manufacturing, fly-by-wire aircraft systems, artificial retinas, driverless cars, GPS, medical and diagnostic tools, just to scratch the surface.

The past few years have been a time of unprecedented change to patent law.  Clearly there will be many more Section 101 cases to come that land on both sides of the abstract idea line (whatever and wherever that line may be).  While we’re just at the early stages of a post-Alice world, in my view the DDR decision forges a sensible path on software patentability.  With so much at stake in terms of America’s role as an innovation leader and the incredible economic impact that the IT industry fuels, let’s hope that more decisions follow the path of DDR.

Bart Eppenauer is the Managing Partner of the Seattle office of Shook Hardy & Bacon.

Obviousness: Analogous Art and Hindsight

Patent, , , , ,

by Dennis Crouch

In an interesting September 2014 decision, the Federal Circuit upheld a USPTO determination of obviousness.  The majority decision (authored by Judge Newman) touches on both (1) analogous-art and (2) motivation to combine references. The problem-focused approach taken by the majority in determining analogous art is fascinatingly similar to parts of the abstract-idea analysis in Alice Corp. — looking generally to the problem-to-be-solved as the overarching focus of the invention.  Writing in dissent, Judge Moore characterized the obviousness determination as “[h]indsight, hindsight, hindsight.”  [Decision]

Scientific Plastic Products (SPP) holds a number of patents relating to cartridges for low pressure liquid chromatography (LPLC) with a resealable screw-on cap. See U.S. Patent Nos. 7,138,061, 7,381,327 and 7,410,571. When SPP sued Biotage for infringement, the defendant responded by filing an inter partes reexamination.  Reexam Nos. 95/000,495, ‘496, and ‘497 (filed in 2009, pre-AIA).  Based upon his consideration of the prior art, the patent examiner rejected all of the claims of each patent — finding them obvious under 35 U.S.C. 103. That decision was affirmed by the PTAB and is the subject of the appeal here.  Meanwhile, the district court case has been stayed pending outcome of the reexamination.  On appeal here, a split panel of the Federal Circuit has affirmed the USPTO rejection – with Judge Newman joined by Judge Wallach writing the majority and Judge Moore in dissent.

The primary obviousness reference in the case apparently discloses all of the elements of the patented LPLC cartridge except for one – a tapered lip of the cartridge that corresponds to a taper in the screw-on cap.  The tapering helps create a better seal and avoid leakage when the cap is on.  It turns out that the tapered lip feature is not new, and the USPTO identified two different patents from the soda-pop bottle industry that disclosed the approach.  See for example, Strassheimer (Patent No. 5,100,013).

Obviousness: Section 103 of the Patent Act provides the basic test for obviousness — whether “differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious . . . to a person having ordinary skill in the art to which the claimed invention pertains.”   The two primary interpretations of this decision are Graham v. John Deere Co., 383 U.S. 1 (1966)(outlining test) and KSR Int’l Co. v. Teleflex, Inc, 550 U.S. 398 (2007) (explaining that test should not be rigid but instead apply common sense).

Deere explained that there are four factual prerequisites to consider when determining the legal question of obviousness.

  1. The level of ordinary skill in the art;
  2. The scope and content of the prior art;
  3. The differences between the claimed invention and the prior art;
  4. Any objective indicia of nonobviousness.

Those who know Deere well will notice that I have re-arranged the order of the test by placing the level of ordinary skill in the art as the first step in the analysis. I do that because – as explained below – the scope-and-content of the prior art is impacted by the level of skill in the art.

In many obviousness cases, all of the elements of the invention are found within a limited set of prior art references. The argument then is that it would have been obvious for one skilled in the art to think of combining the elements from those references to create the claimed invention.  In KSR, the Court held that the justification for such a combination can be based upon common sense or other evidence and does not require a particular teaching-suggestion-or-motivation found within the prior art itself.

Scope of the Prior Art: The scope and content of prior art is determined by several factors. First, evidence must fall within the prior art definitions for anticipatory references under 35 U.S. 102.  Second, the prior art must also be seen as “analogous art.”  The analogous art requirement is based upon the idea that someone working in a particular field would be unlikely to search through or know all possible prior art but rather would focus attention on what is known (1) in the same field of endeavor or (2) to be addressing the same problem.  The general question is whether it would have been “reasonable” for a person of ordinary skill in the art to consider the given prior art in order to solve the problem confronting the inventor. In re Clay, 966 F.2d 656 (Fed. Cir. 1992).

Here, the problem identified by the inventor was to prevent leakage on a plastic screw-cap and everyone knows that the soda-pop bottles have solved that problem. From that framework this is an easy case.  However, the patentee here argued that this analysis involves improper hindsight because the leakage problem was one identified by the inventor as part of the invention process and was not previously identified in the prior art.

The Federal Circuit implicitly agreed that it would be improper hindsight to rely upon the problem first identified by the inventor for determining analogous art. However, the court rejected that argument as applied to the facts here.  In particular, the PTAB noted that the primary LPLC reference includes a particular o-ring seal that serves as an implicit recognition leakage could be a problem. On appeal, the Federal Circuit confirmed that the implicit concern was sufficient to avoid  hindsight concerns.  Affirmed.

= = = =

Writing in dissent, Judge Moore argues that majority opinion is hindsight of the worst kind, ‘wherein that which only the invention taught is used against its teacher.’ quoting W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540(Fed. Cir. 1983).

The patents do not indicate that leakage was a problem identified in the prior art or a problem known to those of skill in the art. Rather they indicate that the claimed design will avoid leakage. These inventors identified a design problem, articulated it, and solved it. There is absolutely no evidence of the existence of a known leakage problem that would have motivated skilled artisans to modify Yamada. The Board is taking the ingenuity of these inventors and, without any record basis, attributing that knowledge to all skilled artisans as the motivation to make the inventions at issue. Hindsight, hindsight, hindsight. . . .

I would reverse because I conclude that the Board’s cancellation of the claims at issue was based entirely on hindsight reconstruction—there is no record evidence that one of skill in the art would have been motivated to modify Yamada with soda pop bottle sealing closures.

An implicit suggestion from Judge Moore is that in hotly contested post-issuance cases invalidating evidence should be high quality:

These were inter partes reexamination proceedings between sophisticated parties. Both parties put on expert testimony regarding obviousness. Yet there is no evidence that the chromatography cartridges in Yamada had
a leakage problem that skilled artisans would have been motivated to address.

Judge Moore also challenged the PTAB’s failure to determine the level of ordinary skill in the art.  “An ordinarily skilled chemist would have likely looked to a different body of prior art than an ordinarily skilled mechanical engineer with industrial design experience. . . We cannot answer the analogous art question without knowing who the person of ordinary skill is.”

Slicing the Bologna: Judge Chen Distinguishes this Business Method from those Found Ineligible in Alice, Bilski, and Ultramercial

Patent, , , ,

By Dennis Crouch

Typically, Supreme Court patent cases alter Federal Circuit precedent, while – at the same time – leaving many open questions for the appellate court to address.  That standard certainly fits the recent set of patent eligibility cases.  In Alice Corp v. CLS Bank (2014) the Supreme Court outlined an eligibility test whose practical impact will vary greatly depending upon how it is implemented by the Patent Office and the court: broadly or narrowly?

In DDR Holdings v. Hotels.com, the Federal Circuit has affirmed the patent eligibility of DDR’s eCommerce patent.  U.S. patent No. 7,818,399. Particularly, Judge Chen authored the majority opinion that was joined by Judge Wallach. Judge Mayer wrote in dissent.  The case is close enough to the line that I expect a strong push for en banc review and certiorari.  Although Judge Chen’s analysis is admirable, I cannot see it standing up to Supreme Court review and, the holding here is in dreadful tension with the Federal Circuit’s recent Ultramercial decision.

The basic idea behind DDR’s patent (as claimed) is to allow a website operator to include various pages within its website that each corresponds to a different merchant (such as a cruise line) with products being sold through a broker (such as a cruise broker).  The various pages will have a look-and-feel that corresponds to the particular merchant (by including, for instance the cruise line logo).  And, the system dynamically populates product options on the site by pinging the broker’s server.  To accomplish all this, the invention uses computer networks in what appears to be standard form without what I would call “new technology.”  Judge Chen writes that a major purpose of this setup is to be able to provide a diversity of stores while keeping customers on the same overall website. Representative claim 19 is posted below.  The accused infringers summarize this as simply “syndicated commerce on the computer using the Internet.”

Patent Eligibility under Alice Corp: The two-step approach to eligibility decreed by Alice Corp first queries whether the invention is directed to an abstract idea. And, if so, then looks to whether the invention includes an “inventive concept” sufficient to “transform” that abstract idea into a patentable invention. In Alice, the Supreme Court particularly held that transformation is not satisfied by merely the recitation of generic computer limitations.

Here, Judge Chen finds that neither step of Alice Corp implicate the patent in question.  In doing so, Judge Chen attempts to cabin-in the scope of ideas that qualify as “abstract ideas.”

Not An Abstract Idea: First, Judge Chen found the solution here to be internet-focused with no direct corresponding offline equivalence. That conclusion is important because it helps distinguish Alice Corp where the Supreme Court found the patented invention there abstract because it related to a longstanding business practice. Judge Chen writes:

[The asserted claims do not] recite a fundamental economic or longstanding commercial practice. Although the claims address a business challenge (retaining website visitors), it is a challenge particular to the Internet.

In the dissent, Judge Mayer challenges this conclusion by drawing an analogy to the pre-internet business of having kiosk within a mall or warehouse shore that sells third-party cruise vacation packages.  Judge Chen rejects that analogy because it does not “account for the ephemeral nature of an Internet “location” or the near-instantaneous transport between these locations made possible by standard Internet communication protocols.”  According to Judge Chen, those differences introduce new problems – and it is those problems that are particularly addressed by the patented invention.

In Ultramercial, the Federal Circuit found that even novel ideas can be abstract. Distinguishing from that case, Judge Chen writes that the claims here:

are different enough in substance from those in Ultramercial because they do not broadly and generically claim “use of the Internet” to perform an abstract business practice (with insignificant added activity). Unlike the claims in Ultramercial, the claims at issue here specify how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequenceof events ordinarily triggered by the click of a hyperlink.

Moving on, Judge Chen finds that – even if the claims are directed to an abstract idea – they do not preempt that idea but instead represent a “specific way” of creating a composite web page “in order to solve a problem faced by websites on the Internet.”

Writing in dissent, Judge Mayer argues that the patents at issue here are “long on obfuscation but short on substance. Indeed, much of what they disclose is so rudimentary that it borders on the comical.”

DDR’s claims … simply take a well-known and widely-applied business practice and apply it using a generic computer and the Internet. The idea of having a “store within a store” was in widespread use well before the dawn of eCommerce. For example, [NLG], one of the defendants here, previously “sold vacations at . . . BJ’s Wholesale Clubs through point of purchase displays.” . . . DDR’s patents are directed to the same concept. Just as visitors to [BJ’s] could purchase travel products from NLG without leaving the BJ’s warehouse, the claimed system permits a person to purchase goods from a third-party vendor, but still have the visual “impression that she is viewing pages served by the [original host merchant].” Indeed, any doubt as to whether the claimed system is merely an Internet iteration of an established business practice is laid to rest by the fact that one of the named inventors acknowledged that the innovative aspect of his claimed invention was “[t]aking something that worked in the real world and doing it on the Internet.”  . . .

The solution offered by DDR’s claims, however, is not rooted in any new computer technology. Its patents address the problem of preventing online merchants from losing “hard-won visitor traffic,” and the solution they offer
is an entrepreneurial, rather than a technological, one. DDR has admitted that it did not invent any of the generic computer elements disclosed in its claims. There is no dispute, moreover, that at the time of the claimed invention the use of hyperlinks to divert consumers to particular web pages was a well-understood and widely-used technique. While DDR’s patents describe the potential advantages of making two web pages look alike, they do not disclose any non-conventional technology for capturing the “look and feel” of a host website or for giving two web pages a similar appearance.

In concluding that DDR’s claims meet the demands of section 101, the court focuses on the fact that “they recite a specific way to automate the creation of a composite web page . . . .” The Supreme Court, however, has emphatically rejected the idea that claims become patent eligible simply because they disclose a specific solution to a particular problem. . . . Indeed, although the claims at issue in Alice described a very specific method for conducting intermediated settlement, the Court nonetheless unanimously concluded that they fell outside section 101.

= = = = =

This case may end up again delaying the expected USPTO examiner guidance on abstract idea analysis.

= = = = =

The patent itself issued in 2006 but claims priority to a 1998 filing.  Five inventors are listed including father-son pair: DD Ross, Sr. and Jr. – hence DDR Holdings.

= = = = =

Claim 19. A system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising:

(a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements, which visually perceptible elements correspond to the plurality of first web pages; (i) wherein each of the first web pages belongs to one of a plurality of web page owners; (ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and (iii) wherein the selected merchant, the outsource provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other;

(b) a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to: (i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages; (ii) automatically identify as the source page the one of the first web pages on which the link has been activated; (iii) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and (iv) using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page.

Federal Circuit: Novelty in Implementation of an Abstract Idea Insufficient to Overcome Alice

Patent, ,

by Dennis Crouch

The key language from the Federal Circuit’s most recent pronouncement in  Ultramercial v. Hulu (Fed. Cir. 2014) is as follows:

We do not agree with Ultramercial that the addition of merely novel or non-routine components to the claimed idea necessarily turns an abstraction into something concrete. In any event, any novelty in implementation of the [abstract] idea is a factor to be considered only in the second step of the Alice analysis. . . . [And, the Internet] is a ubiquitous information-transmitting medium, not a novel machine. And adding a computer to otherwise conventional steps does not make an invention patent-eligible. Any transformation from the use of computers or the transfer of content between computers is merely what computers do and does not change the analysis.

= = = = =

Following Alice Corp., the Federal Circuit has now flipped its prior two rulings in the Ultramercial case — finding this time that the computerized business method patent lacks patent eligibility.  Both prior Federal Circuit decisions in favor of patent eligibility had been vacated by the Supreme Court without opinion except with orders to consider Mayo v. Prometheus and Alice Corp v CLS Bank respectively.

This decision offers a strong signal from the Federal Circuit that the court is now understanding what the Supreme Court meant in its recent quartet of Bilski, Mayo, Myriad, and Alice and that the court will support the 101 eligibility decisions being laid-down by the lower courts and the Patent Office.

The patent at issue here covers a method of distributing copyrighted products over the internet – instead of paying for the product, the consumer watches a paid-advertisement. U.S. Patent No. 7,346,545.  The claims include some further limitations, such as using an “activity log” to select the advert to be shown based upon criteria (such as whether the advertiser has paid for another transaction). Claim 1 is pasted below.

It turns out that the advertising model works for the internet just as it previously worked for radio and television. And, as a result, the patent would be quite valuable, but only if it were valid.  It is not valid. The decision here does not eliminate all software patents, but it again calls-into question patents where the focus of the invention is either the content of information being transferred/transformed or a business transaction.  It is telling that the court added the following the caveat to its decision here: “[W}e do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea. Future cases may turn out differently.”

The district court in this case found that the claims embodied the abstract idea of using “advertisement as an exchange or currency.” On appeal, the Federal Circuit rejected that restatement for a more detailed analysis:

The process of receiving copyrighted media, selecting an ad, offering the media in exchange for watching the selected ad, displaying the ad, allowing the consumer access to the media, and receiving payment from the sponsor of the ad all describe an abstract idea, devoid of a concrete or tangible application. Although certain additional limitations, such as consulting an activity log, add a degree of particularity, the concept embodied by the majority of the limitations describes only the abstract idea of showing an advertisement before delivering free content.

With that abstract idea in hand, the court moved to the second step of the Alice Corp test — whether the claim adds significantly more in its implementation such that the abstract idea is transformed into a patent eligible invention.

We conclude that the limitations of the ’545 claims do not transform the abstract idea that they recite into patent-eligible subject matter because the claims simply instruct the practitioner to implement the abstract idea
with routine, conventional activity. None of these eleven individual steps, viewed “both individually and ‘as an ordered combination,’” transform the nature of the claim into patent-eligible subject matter. The majority of those steps comprise the abstract concept of offering media content in exchange for viewing an advertisement. Adding routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet does not transform an otherwise abstract idea into patent-eligible subject matter. Instead, the claimed sequence of steps comprises only “conventional steps, specified at a high level of generality,” which is insufficient to supply an “inventive concept.”  Indeed, the steps of consulting and updating an activity log represent insignificant “data-gathering steps,” and thus add nothing of practical significance to the underlying abstract idea. Further, that the system is active, rather than passive, and restricts public access also represents only insignificant “[pre]-solution activity,” which is also not sufficient to transform an otherwise patent-ineligible abstract idea into patent-eligible subject matter.

The claims’ invocation of the Internet also adds no inventive concept. As we have held, the use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under § 101. Narrowing the abstract idea of using advertising as a currency to the Internet is an “attempt[] to limit the use” of the abstract idea “to a particular technological environment,” which is insufficient to save a claim. Given the prevalence of the Internet, implementation of an abstract idea on the Internet in this case is not sufficient to provide any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.”  In sum, each of those eleven steps merely instructs the practitioner to implement the abstract idea with “routine, conventional activit[ies],” which is insufficient to transform the patent-ineligible abstract idea into patenteligible subject matter.

That some of the eleven steps were not previously employed in this art is not enough—standing alone—to confer patent eligibility upon the claims at issue. 

While the Supreme Court has held that the machine-or-transformation test is not the sole test governing § 101 analyses, that test can provide a “useful clue” in the second step of the Alice framework. A claimed process can be patent-eligible under § 101 if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”  The claims of the ’545 patent, however, are not tied to any particular novel machine or apparatus, only a general purpose computer. As we have previously held, the Internet is not sufficient to save the patent under the machine prong of the machine-or-transformation test. It is a ubiquitous information-transmitting medium, not a novel machine. And adding a computer to otherwise conventional steps does not make an invention patent-eligible. Any transformation from the use of computers or the transfer of content between computers is merely what computers do and does not change the analysis. Although the preamble of claim 1 also requires a facilitator, the specification makes clear that the facilitator can be a person and not a machine. Thus, nowhere does the ’545 patent tie the claims to a novel machine. The claims of the ’545 patent also fail to satisfy the transformation prong of the machine-or-transformation test. The method as claimed refers to a transaction involving the grant of permission and viewing of an advertisement by the consumer, the grant of access by the content provider, and the exchange of money between the sponsor and the content provider. These manipulations of “public or private legal obligations or relationships, business  risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances.”  We therefore hold that the claims of the ’545 patent do not transform any article to a different state or thing. While this test is not conclusive, it is a further reason why claim 1 of the ’545 patent does not contain anything more than conventional steps relating to using advertising as a currency.

The majority panel here was written by Judge Lourie and joined by Judge O’Malley.  Judge Mayer (who replaced Judge Rader on the panel) wrote in concurrence to emphasize the following three points:

First, whether claims meet the demands of 35 U.S.C. § 101 is a threshold question, one that must be addressed at the outset of litigation. Second, no presumption of eligibility attends the section 101 inquiry. Third, Alice Corporation v. CLS Bank International, for all intents and purposes, set out a technological arts test for patent eligibility.

Although Judge Mayer’s conclusions here veer somewhat from the patent eligibility doctrine, he provides a roadmap for district courts to use the doctrine in deciding Section 101 cases going forward.

Gray-Le Coz and Duan: USPTO’s Immediate Implementation Alice v. CLS Bank

Articles and Publications, Journal,

In our newest Patently-O Patent Law Journal article, Charles Duan and Tristan Gray-Le Coz of Public Knowledge provide details of the USPTO’s recent implementation of Alice Corp. Pty. Ltd. v. CLS Bank International.  In particular, the pair used a FOIA request to obtain information on applications withdrawn from issuance and analyzed the 800+ cases whose allowances were withdrawn following Alice.  The pair writes:

Unsurprisingly, we found that business methods patents were particularly vulnerable to rejection. However, the diversity of USPTO classifications in the withdrawn allowance data set indicates the range of subject matter that is suspect under Alice. In many fields it is apparently common to draft “computer-plus” patents that inappropriately try to take a monopoly on abstract ideas, fundamental economic practices, or methods of organizing human behavior by carrying out bare concepts on a generic computer, at least in the interpretation of USPTO examiners.

Read the Article: Tristan Gray–Le Coz and Charles Duan, Apply It to the USPTO: Review of the Implementation of Alice v. CLS Bank in Patent Examination, 2014 Patently-O Patent Law Journal 1.

More Engineers => More Patents

Patent,

In a new article, Economist John Winters (OSU) looked at the link between collegiate STEM training (university degree) and innovation-intensity (per capita patenting). The findings are not surprising — locations with more STEM graduates have a higher per capita rate of patenting.  Of importance, Winters found this to be true regardless of whether the graduates were US-native or foreign trained.

STEMGraduatesPatentRate

 

Figure 1 above charts the per-capita patenting (log) against the population-share of STEM-graduates.  Each point represents one of the 300+ U.S. metropolitan area in the study.  The outlier at the right is Silicon Valley which has both the highest per-capita patenting rate and the highest population-share of STEM graduates. You’ll note that the per-capita patenting rate is on a log axis and that the SV patenting rate is much greater the chart suggests if thinking linearly.  Winters does not report on the identity of the low-end regions.

Although the paper does not delve into this, the phenomenon here is almost certainly not one of straight causation.  Silicon Valley and Boulder (No. 2 on the list) have both learned how to invest in research and investment likely leads to more local STEM graduates.  In that sense, the solution of ‘getting more STEM graduates’ is unlikely to be a success on its own.

A second problem with the paper is that it talks about ‘innovation’ but simply uses a patent-count measure as a proxy for innovation.  Although innovation is a legally necessary element of a patent, many important innovations are not patented. Further, although per-capita patenting provides a simple and easy to explain measure, it avoids the reality that some inventions are highly innovative and important while others are not.

Bucking the Trend: Security Software Patent Not Yet Ruled Ineligible

Patent, , ,

ScreenShot142Card Verification v. Citigroup (N.D. Ill. 2014)

A growing number district court decision have followed the Supreme Court’s Alice Corp. decision by finding the asserted patent claims to be patent-ineligible as unduly encompassing an abstract idea.

In one recent decision, N.D. Ill. Judge Kendall has tepidly bucked the trend by denying a Fed R. Civ. Proc. R. 12(b)(6) motion for failure to state a claim — instead finding the asserted claims plausibly eligible.

The asserted patent claims cover a transaction verification method and the Judge agreed with defendant-Citygroup the general idea of verifying a transaction is an unpatentable abstract idea.  (Claim 1 is pasted below. See Patent No. 5,826,245).

Moving to the second step of Alice, Judge Kendall found that the claims plausibly avoid the mental steps doctrine by requiring “pseudorandom tag generating software” and also plausibly requires a sufficiently concrete transformation so as to ground the abstract idea to a particular inventive implementation.  Notably, for the second step, Judge Kendall did not draw the law from Alice, which seemingly required novelty in the ‘something more’ but instead quoted from the Federal Circuit’s 2013 holding that “additional substantive limitations [are required that] narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.” Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1341 (Fed. Cir. 2013).  Applying that law to the case, the court ruled that the claimed process of adding random number tags to data in the computer could be seen as “fundamentally altering the original confidential information.”  With this analysis in hand, Judge Kendall denied the defendants’ motion to dismiss for failure to state a claim without prejudice.

The decision here is probably most important for its procedural stance. First, the defendants’ bold move was to file its motion to dismiss as a R. 12(b)(6) motion even before filing its answer to the complaint that would include defenses and counterclaims.  Under Iqbal and Twombly, the complaint must state a claim that is ‘plausible on its face.’  Here, all that the court held was that the claim is plausible.

Although the outcome favored the patentee, the case is also a break from the tradition that a patent’s presumption of validity is generally sufficient to survive such a motion to dismiss. In Ultramercial, the Federal Circuit addressed a similar finding and held that dismissal at such an early stage is only appropriate when “the only plausible reading of the patent [is] that there is clear and convincing evidence of ineligibility.”  Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013) vacated on other grounds 132 S. Ct. 24131 (2012). Of course, the clear-and-convincing standard is with regard to questions of fact while the eligibility inquiry is a question of law that depends upon few (if any) questions of fact.

= = = = =

Read the decision here: Kendall101

Claim 1:

A method for giving verification information for a transaction between an initiating party and a verification-seeking party, the verification information being given by a third, verifying party, based on confidential information in the possession of the initiating party, the method comprising:

on behalf of the initiating party, generating first and second tokens each of which represents some but not all of the confidential information,

sending the first token electronically via a nonsecure communication network from the initiating party to the verification-seeking party,

sending the second token electronically via a nonsecure communication network from the initiating party to the verifying party,

sending the first token electronically via a nonsecure communication network from the verification-seeking party to the verifying party,

verifying the confidential information at the verifying party based on the first and second tokens, and sending the verification information electronically via a nonsecure communication network from the verifying party to the verification-seeking party.

The Patentee’s Risk of Multiple-Jeopardy

Patent, , ,

In Blonder-Tongue Labs., Inc. v. Univ. of Ill., 402 U.S. 313 (1971), the Supreme Court precluded a patentee from re-asserting a patent that had been found invalid in a separate suit.  Prior to that case, a patentee who lost on validity against one party was not generally precluded from asserting the same patent against another party.  The doctrinal hook in Blonder-Tongue is known as non-mutual collateral estoppel and it allows a new-challenger to take advantage of the success of a prior-challenger. In a new decision, Judge Bryson has applied the doctrine mid-stream to quickly conclude a pending lawsuit by simply precluding the patentee from continuing to assert the patent after another court has ruled it invalid.  DietGoal v. Chipotle, 12-cv-764 (E.D.Tex. 2014).

Risk of Multiple Jeopardy: The case here highlights the difficulty faced by patent assertion entities seeking to enforce their patents against multiple parties.  Each accused infringer has the right to independently challenge a patent’s validity. But, if the patentee loses even one of those challenges, then the patentee will be estopped from further asserting the patent.  Importantly, an invalidity finding in one case operates to shut down both pending and future assertions of the patent.  Prior to the America Invents Act of 2011 (AIA), many patent enforcers had begun joining multiple defendants into single lawsuits and that setup-at least procedurally-helped patentees avoid the multiple-jeopardy risk.  However, the AIA has forced a separation of these lawsuits in a way that again highlights the one-way risk.  Under this new system, parallel infringement actions (same patent, different defendants) are now more likely to be heard in different venues and before different judges in a way that makes alternative outcomes more likely.  And, the rise in post-issuance challenges further removes the risk-decision from the patent holder’s discretion.

Here: Federal Circuit Judge Bryson is sitting by designation in DietGoal v. Chipotle.  The infringement litigation was filed in back in 2012 and involves U.S. Patent No. 6,585,516 that covers a computerized meal planning tool. Claim 2 of the patent is listed below:

2. A system of computerized meal planning, comprising:
a User Interface;
a Database of food objects; and
a Meal Builder, which displays on the User Interface meals from the Database, and wherein a user can change content of said meals and view the resulting meals’ impact on customized eating goals.

The same patent has been asserted in 60 other recent infringement lawsuits.  Importantly, in one-such-case – DietGoal v. Bravo Media – the district court judge found all claims of the patent invalid as impermissibly claiming an abstract idea.  In that decision, Judge Engelmayer (S.D.N.Y.) wrote:

[T]he claims of the ’516 Patent recite nothing more than the abstract concept of selecting meals for the day, according to one’s particular dietary goals and food preferences.

Following that decision in favor of Bravo, the defendants here (Chipotle) asked Judge Bryson to apply issue preclusion to end its case as well.

Collateral estoppel – also known as issue preclusion – applies to bar a party from re-litigating certain issues.  There are typically four elements that must be met before estoppel will attach:

  1. The issue sought to be precluded from relitigation is identical to the issue decided in the earlier proceeding;
  2. The issue was actually litigated in the former proceeding;
  3. The determination on the issue in the prior action was necessary to the resulting judgment in that case; and
  4. The person against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior action.

Here, Judge Bryson found that all four of those elements had been met with regard to patent-ineligibility as decided in the prior Bravo case.

In Blonder-Tongue, the Supreme Court noted that estoppel might not apply in “those relatively rare instances where the courts wholly failed to grasp the technical subject matter and issues in suit.” DietGoal here argued, that this was one of those relatively rare instances — especially since the district court in Bravo failed to conduct a claim construction before making its determination. However, according to Judge Bryson, DietGoal failed to indicate how claim construction would have been important to the 101 analysis.  Judge Bryson also cited the several Federal Circuit decisions that

On Appeal: The Bravo decision is on appeal. That said, an important element of collateral estoppel is that it applies after the original district court final judgment – even if an appeal is pending and even if the “later” case was well underway at the time of the prior decision.  Now, assuming that DietGoal can keep this case alive (likely via appeal) until the Bravo appeal is decided, and assuming that DietGoal wins on appeal (which I suspect is unlikely), then Judge Bryson would be forced to reconsider the case on its merits.

Software as an Abstract Idea

Patent, ,

Amdocs v. Openet Telecom (E.D.Va. 2014)

In yet another case, a district court has invalidated a set of software patents as unduly abstract under Alice Corp., Mayo, and 35 U.S.C. 101.  In this case, E.D. Va. Judge Brinkema issued a judgment-on-the-pleadings that all of the asserted claims of the four Amdocs patents were invalid as patent-ineligible. The Decision.

In Alice Corp., the Supreme Court outlined a two step process for determining eligibility: (1) determine whether the claim encompasses excluded subject matter and then (2) determine whether the claim includes “something more” sufficient to “transform the nature of the claim into a patent-eligible application.”  As it turns out, neither of these tests are straightforward.

The patents-in-suit here relate to computer software designed for reporting network usage. Claim 16 of Amdocs Patent No. 6,836,797 is on point:

16. A computer program product stored in a computer readable medium for reporting on a collection of network usage information from a plurality of network devices, comprising:

computer code for collecting network communications usage information in real-time from a plurality of network devices at a plurality of layers;

computer code for filtering and aggregating the network communications usage information;

computer code for completing a plurality of data records from the filtered and aggregated network communications usage information, the plurality of data records corresponding to network usage by a plurality of users;

computer code for storing the plurality of data records in a database;

computer code for submitting queries to the database utilizing predetermined reports for retrieving information on the collection of the network usage information from the network devices; and

computer code for outputting a report based on the queries;

wherein resource consumption queries are submitted to the database utilizing the reports for retrieving information on resource consumption in a network; and

wherein a resource consumption report is outputted based on the resource consumption queries.

In applying Alice, Judge Brinkema first examined the claim to determine whether it is directed to an abstract idea.  Brinkema’s particular approach here follows the “gist approach” used by other post-Alice district court decisions.  Notably, to find the abstract idea, Brinkema “look[ed] past the mere claim language” to determine that the claim is “directed to the abstract idea of using a database to compile and report on network usage.”  It is probably important to pause here to consider what considerations make us think that a network usage database creation and report tool is abstract.  Unfortunately, Judge Brinkema does not.

At step two, Judge Brinkema looked for “something more” but found instead that “the claim does not add much” beyond the stated abstract idea.

In claim 16, a generic computer collects, filters, aggregates, and completes network communications information.  The generic computer then stores the information in a database, and queries the database to retrieve reports. Collecting, filtering, aggregating, and completing network information amounts to “electronic recordkeeping,” which is “one of the most basic functions of a computer.” (quoting Alice).  Similarly, storing and querying information in a database, and building reports based on that information, is one of the most basic functions of a database system. Accordingly, claim 16 is directed to a computer functioning in a conventional way, and a database functioning in a conventional way. The claim does not add any specific implementation beyond the abstract idea that information is collected and stored, and reports are generated.

The result then is that the claim is ineligible and thus invalid. The opinion similarly walks through other challenged claims and rejects them.  Throughout the opinion, the Judge’s largest concern appears to be that the claims lack “specific hardware” as well as “any detail” regarding how the claimed functions actually operate.

The Judge was also clear that overall novelty is irrelevant to patent eligibility. “That argument misses the point. The concern of § 101 is not novelty, but preemption.”

A person may have invented an entirely new and useful advance, but if the patent claims sweep too broadly, or only claim the idea that was achieved rather than implementation of the idea, § 101 directs that the patent is invalid. Amdocs’s asserted claims recite such conventional operation, in such a general way, that even if the inventor had developed an actual working system, the patent claims could foreclose fields of research beyond the actual invention. Accordingly, all asserted claims are invalid as patent-ineligible.

= = = = =

Notes:

Software?: Although the court made a few pushes for “hardware” in its analysis, it did not make any express statements that software is problematic from an eligibility standpoint. An open question following Alice Corp., is whether any claimed invention would be patent eligible if beginning with the preamble: “A computer program product stored in a computer readable medium…”

How is Patent Litigation like Baseball?

Patent, ,

By Jason Rantanen

I’m a moderately-dedicated baseball fan*, so I’ve been listening** to quite a few baseball games over the past few weeks.  And as I’ve been listening to the games, it’s struck me that in many ways, patent litigation is a lot like a baseball game well beyond the Cubs reference.  Both are a game of one against many on a field where the participants operate under asymmetric rules.  For both, too, the individual success rate in an active contest isn’t all that high.

One of the most distinguishing aspects of baseball is the challenge an individual batter faces in actually achieving a positive result at the plate.  Most of the time, players don’t actually get a hit; a batting average of over .300 is considered exceptional.  This statistic has sparked the idea that baseball is a game of failure: there are numerous references to even the greatest baseball legends being failures 7 times out of 10.  Even when other measures of success are taken into account (such as drawing a walk), it’s still the case that most of the time a batter will make an unproductive out.

But, as other folks have pointed out, a batter’s performance is not so much a question of the individual triumph (or failure) of the batter; rather, it is a contest between the batter and the pitcher.  When the batter loses, the pitcher wins.

Or more accurately, when the batter loses, the other team wins.  This is a large part of what makes baseball so fascinating to me: it’s a lone batter facing off against a whole squad of nine opponents.  One against many.  Even the best players in the world are still the underdog here: Ted Williams, the all-time leader in getting on base, did so about 48% of the time over his career.

So too in patent law.  A patent holder is only one against many.  True, like a batter, the patent holder has an advantage: the patent, with its presumption of validity.  But there is only one patent holder and there is a whole world of potential infringers.  Including many creative, knowledgeable, and smart players who can develop arguments and theories and ideas that the patent holder could never have anticipated.

The end result is that perhaps we shouldn’t be all that surprised when patent holder success rates in infringement litigation tend to look a lot like batting averages.  Added to the challenge of one patent holder against many possible infringers is the difficulty of actually winning a patent suit: there are a multitude of possible validity challenges that an alleged infringer might raise and the patent holder must win on them all – and prove infringement – in order to prevail.   As in baseball, patent infringement litigation is an asymmetric contest with different rules for the batting team and the fielding team.***

None of this is to discount the very real challenges that our patent system faces, particularly when it comes to anything other than substantive merits determinations by a court.  We don’t really have a good sense from an empirical standpoint about the nature of post-filing settlements, let alone those that occur prior to the filing of the complaint.  And none of this should suggest that patent litigation is working as optimally as it might; it’s still extremely costly, complex litigation and there’s always room for improvement in patent law.  But thinking of patent litigation as akin to a baseball game also might help to put the Allison/Lemley/Schwartz study I posted about earlier this week in some context.

*By which I mean that I watch a fair number of Giants games via MLB TV, listen to many more, and have been to a dozen games or so over the last seven years.  Of course, it’s easy being being a fan when the team you follow makes it to the World Series three times out of the past five years…

**A cost of getting rid of cable tv is that one can only listen to postseason baseball games that are currently being played.  Which is actually my preferred way to follow the game.  Except for the constant repetition of political advertisements directed at a state in which I do not live.

***There are another analogies I could draw, such as the role of money in paying for players in the game.  Of course, that didn’t work out to well for the Dodgers this year…

Also, at some point the analogy stops working; a baseball game in its entirety is not all that asymmetric.  The team that bats will get its turn in the field.  The team that fields will get its turn at bat.  The analogy works best when talking about batting success.

Allison, Lemley & Schwartz on Patent Litigation

Patent, , , , ,

By Jason Rantanen

In 1998, John Allison and Mark Lemley published a groundbreaking empirical study of patent litigation, Empirical Evidence on the Validity of Litigated Patents.  Allison and Lemley’s focus in that article was on written, final validity decisions by either district courts or the Federal Circuit from 1989 through 1996.  The basic study design philosophy was to look at patent case outcomes; that is, what was the final outcome for patents that were litigated.  That study is still widely cited.

Working with Dave Schwartz, Allison and Lemley recently completed an updated (and much expanded) version of their 1998 study.  The results of that study are being published in several articles, but the one that links most closely with the earlier study is Understanding the Realities of Modern Patent Litigation.

Their undertaking in this project is truly quite impressive.  The authors expanded their scope to all available decisions (not just those that were published in the U.S.P.Q., as in the earlier study) for utility patent infringement suits filed in 2008 and 2009, and personally coded the relevant case information from the docket sheets, district court opinions, briefs, and Federal Circuit decisions for hundreds of cases.  As in the earlier study, the record unit they used were patent cases, with only final decisions for a given patent being counted; in other words, where there was more than one decision in a case, they reported the last final decision on the validity of the patent.  Thus, if there was a final Federal Circuit decision, it superceded a previous district court decision; if there was a remand and subsequent final decision by the district court, it superceded the Federal Circuit ruling, and so on.  Within this set of cases, Schwartz and Lemley coded information about the cases while Allison coded patent-specific information.

Study Findings

The vast majority of patent cases still settle: Out of the roughly 5,000 patent infringement suits filed in 2008 and 2009, only 290 patents went to trial.  All together, less than 10% of the patent suits filed in these years resulted in any merits decision (that is, a summary judgment ruling or trial).  The remainder settled before that point (although, the authors note, there are a small number of cases still pending that may add another 2-3% to the number of suits resulting in a merits decision).

More indefiniteness challenges: One notably change from the 1998 study was the dramatically grater number of indefiniteness challenges.  Out of the 555 summary judgment motions brought on validity issues by either the patent challenger or the patent holder, 176 decided summary judgment motions involved the issue of indefiniteness, a dramatic increase from the 1998 study.  And the authors observed a less substantial, but still noticeable, increase in summary judgment decisions based on patentable subject matter (26), a category that has likely continued to experience growth.  For context, there were 149 decided summary judgment motions on obviousness and 154 on anticipation.

Many arrows in the challenger’s quiver: In terms of the success rates on motions for summary judgment of invalidity, challengers tended to lose on individual issues: with the exception of patentable subject matter challenges, the percentage of successful summary judgment motions of invalidity was 20% or below for each individual issue (102, 103, indefiniteness, enablement, written description).  But, the overall rate of invalidation on summary judgment was 30% and the overall rate at which patent challengers successfully won on invalidity was 42%.  This is an example of what Lemley has called the “fractioning” of patent law; that is, the idea that a patentee must win every issue in a case while the accused infringer must prevail on only one issue; a particular challenge with patent law and its multiple grounds for invalidation.

Overall, patent challengers tend to win: Overall, patent holders tended not to win in cases that went to a definite merits resolution.  Overall, patentees won only about 26% of the time (164/636 definitive merits rulings).  In addition to invalidity, patent holders lost on frequently-brought motions for summary judgment of noninfringement 54% of the time (257/473) and infrequently obtained summary judgment on more rarely-brought motions for summary judgment of infringement (41/128).  Thus, although patentees had a fairly high success rate at trial (winning on 59% of patents when juries made the decision and 64% when the bench did), the 1-2 punch of summary judgment followed by trial meant that most patent cases that went to judicial resolution were resolved in favor of the patent challenger.

I’ve only covered some of the data presented in the paper and barely scratched the surface of the authors’ analysis.  If you’re interested in reading more, the article can be downloaded directly from the Texas Law Review’s website or via ssrn: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2442451 

The Role of Patents in the Emerging Market for Venture Lending

Patent, ,

by Dennis Crouch

A new article out from Yael Hochberg, Carlos Serrano, and Rosemarie Ham Ziedonis looks at how patents are increasingly being used as collateral for start-up ventures.  Generally, this area is being termed “venture lending.”  Article: Patent Collateral, Investor Commitment, and the Market for Venture Lending.

Conventional wisdom in the area has been that new ventures are typically too risky to allow for loans to finance research, development, and commercialization projects.  Bronwyn Hall and Josh Lerner (2010) and others have suggested that instead venture capital is the ‘more natural’ solution for financing entrepreneurship.  However, work by Alicia Robb & David Robinson and others have recently found that a substantial large percentage start-up companies also rely upon loans in order to finance their work.

Hochberg’s team looked to see the extent that patent rights are being used as collateral for these start-up companies.  A nice data feature here is that security interests in patents are normally recorded with the USPTO.  Using those records, the research team found that a substantial percentage (36%) of venture-backed startups in their study also relied upon loans for financing.  The sample here is fairly small (1,500 companies) and I suspect some potential selection bias, but still interesting results.

The authors also suggest that the market for patents is “thicker” and more liquid than many economists previously assumed.   That result is important because a more robust market for patents should mean that lenders are more willing to take patent rights as collateral.

If these intermediaries [such as Intellectual Ventures] increase the salability of patent assets, by increasing liquidity in the market, innovation-oriented companies could find it easier to borrow against their patents. This ex ante effect on innovation financing should be weighed, ideally with evidence from more companies and sectors, against the ex post distortions that may arise from patent trading and enforcement.

Although the article does not spell this out fully, one point that the authors are making here is that any study reporting on the cost/benefit of the patent system and transferability of patent rights should consider this financing benefit rather than simply the costs caused by enforcement.

The work here also builds upon Professor William Mann’s research that I previously highlighted here.

 

Right Round: Comparing US and European Software Patent Eligiblity

Patent, , ,

Guest Post by Michael Williams. Williams is a UK and European Patent Attorney and Partner at the London based Cleveland-IP firm.

In the book “Through tAlicehe Looking-Glass”, Alice compares her drawing room to the one reflected in the mirror.  She notes that everything is the same “only the things go the other way”.

In the recent Alice Corp[1] decision, the US Supreme Court set out a framework for assessing whether claims are patent eligible under 35 U.S.C. § 101.  In this article I shall compare this framework with that used by the European Patent Office, and consider the similarities.

The US Alice Approach

In a memorandum dated June 24, 2014, the USTPO has set out its Preliminary Examination Instructions to the Patent Examining Corps in view of the Alice Corp decision[2].   In the Instructions, a three stage framework is set out which is summarized below:

  1. Determine whether the claim is directed to one of the four statutory categories of invention, i.e., process, machine, manufacture, or composition of matter. If the claim does not fall within one of the categories, reject the claim as being directed to non-statutory subject matter (§ 101).
  2. If the claim does fall within a statutory category, determine whether the claim is directed to an abstract idea. If not, proceed with examination of the claim for compliance with other statutory requirements.
  3. If an abstract idea is present in the claims, determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. If there are no meaningful limitations in the claim, reject the claim as being directed to non-statutory subject matter.

The Examiner should then proceed to examine the claim for other patentability requirements, whether or not a rejection under § 101 has been raised.

I have illustrated the three-stage “Alice” approach in Figure 1.

Fig1

The EPO approach

The approach of the EPO to claims with potentially excluded subject matter is summarised below.

  1. Examine the claim to establish whether it relates to excluded subject matter as such. This is done by assessing whether the claim has a technical character.  If there is no technical character at all, the claim is rejected under Article 52 EPC for relating to excluded subject matter as such[3] .
  2. If the claim has technical character, it is examined for novelty and inventive step. In the case of inventive step, it is determined whether the invention involves an inventive step in a technical field.  If the claim lacks an inventive step in a technical field it is rejected under Article 56 EPC.

In the case of a claim with a mix of technical and non-technical features, the following steps are followed when assessing inventive step[4]:

  1. Identify the non-technical aspects of the claim,
  2. Select the closest prior art on the basis of the technical aspects,
  3. Identify the technical differences from the closest prior art,
  4. Determine whether or not the technical differences are obvious.

If there are no technical differences, or if the technical differences are obvious, the claim is rejected for lack of inventive step.

I have illustrated the overall approach in Figure 2.  In order to facilitate comparison, I have separated the approach into stages which correspond roughly with those of the USPTO approach.  I have also assumed that there are differences between the claimed invention and the prior art (otherwise there would be lack of novelty).

Fig2

Comparison of the two approaches

A comparison of the flow charts in Figures 1 and 2 shows a striking similarity between the first stages of each approach.  In each case, it is in effect determined whether the claim relates to no more than excluded, or ineligible, subject matter.  In both cases this acts as a filter to weed out claims which do not have any technical subject matter.

The second stages of each approach also bear comparison.  In the case of the EPO, it is determined whether or not the claim includes both technical and non-technical features.  In the case of the USPTO it is determined whether the claim is directed to a (non-technical) abstract idea.  However, since the claim must contain some technical subject matter (or it would have been weeded out at stage one), this is akin to determining whether there is a mix of technical and non-technical features. In both cases, the second stage flags up cases where there might still be a problem with excluded subject matter.

In the third stage of each approach we come to the nub of the matter.  It is here that borderline cases will stand or fall.  It is therefore worthwhile analysing this stage of each approach.

In the case of the EPO approach, the technical and non-technical features of the claim are first separated out.  The technical features which are not present in the prior art are then identified.  It is then determined whether or not those technical features are non-obvious.  In doing so, it is assumed that the non-technical features are already present in the prior art.  If the technical features which are not present in the prior art are obvious, the claim is rejected for lack of inventive step.

In the case of the USPTO approach, stage three involves determining whether there are any elements in the claim which amount to significantly more than the abstract idea itself.  This in effect requires two steps, as follows:

  1. Identify the elements which are not an abstract idea, and
  2. Determine whether those elements amount to significantly more than the abstract idea itself.

It is notable that step a is similar to the EPO approach of identifying the non-technical aspects of the claim.

With regard to step b, this begs the question: how much more is “significantly more”?  According to the Instructions there must be “meaningful limitations” in the claim, but how meaningful do they have to be?

We can assume that the elements which must be “significantly more” than the abstract idea are technical (since otherwise the claim would have been weeded out at stage one).  It is also the case that, in order to be “significantly more”, those technical elements must be meaningful.  If they must be meaningful, does this mean they must contain the inventive concept?

My guess is that, in practice, persuading the USPTO to allow claims of this type is probably going to involve arguing that the elements which are significantly more than the abstract idea are somehow tied in with the inventive concept.  Otherwise they would not be “meaningful”.  This then starts looking very much like arguing for non-obvious technical subject matter; in other words, an inventive step in a technical field.

There will of course be differences between the two approaches, not least due an imprecise alignment of the concepts of “abstract” and “non-technical”.  However it seems to me that both approaches are seeking to achieve something similar, namely, an assessment of whether the innovation itself lies in a non-excluded field.

Thus, to my mind, we are now in a situation where, in practice, the two approaches are considerably aligned, albeit “the other way round”.

Alice2Conclusion

As readers of the book will recall, when Alice actually goes through the looking glass, she finds it to be completely different from what she first saw.  I suspect that, as case law and practice develop, we will find that USPTO and EPO practice will differ.  However it is notable that, at least on the face of it, there are now considerable similarities.

= = = = =

[1] Alice Corporation Pty. Ltd. V CLS Bank International, et al

[2] http://www.uspto.gov/patents/announce/alice_pec_25jun2014.pdf

[3] Guidelines for Examination in the European Patent Office G-II, 2.

[4] Guidelines G-VII, 5.4

Integration vs Filtration: Federal Circuit Asked How to Determine Eligibility

Patent,

University of Utah and Myriad Genetics are back at the Federal Circuit after losing a motion for preliminary injunction against the genetic testing company Ambry Genetics.  The case still focuses primarily on BRCA genetic testing, although the asserted claims are different from those in the Supreme Court decision.

For instance, Utah has asserted claim 7 of its Patent No. 5,753,441 listed below.

7. A method for screening germline of a human subject for an alteration of a BRCA1 gene which comprises

comparing germline sequence of a BRCA1 gene … from a tissue sample from said subject … with germline sequences of wild-type BRCA1 gene…

wherein a difference in the sequence of the BRCA1 gene … of the subject from wild-type indicates an alteration in the BRCA1 gene in said subject, [and]

wherein a germline nucleic acid sequence is compared by hybridizing a BRCA1 gene probe which specifically hybridizes to a BRCA1 allele to genomic DNA isolated from said sample and detecting the presence of a hybridization product wherein a presence of said product indicates the presence of said allele in the subject.

Because Claim 7 is a dependent claim, I have rewritten it to include the limitations of independent claim 1 and also eliminated some language written in the alternative.  I have also eliminated some redundancy.

The advance embodied by the University of Utah’s BRCA patents all center around the researchers’ discovery of the genetic sequence and location of the naturally occurring BRCA1 and BRCA2 genes and that the mutations correlate with a high risk of cancer.  That discovery itself is not patentable because it is a law of nature, or alternatively, an abstract idea or perhaps even a product of nature.  The question then is whether the claim includes the necessary “something more” – an “inventive concept” that transforms the invention into one that is patent eligible in a way that ensures that fundamental building blocks of science and technology are not monopolized through the patent.  A problem for Myriad on this front is that the tools of hybridized screening were already known and were not themselves inventive concepts at the time.  However, clearly the invention as a whole is practical, transformative, and inventive.

On October 6, 2014, the Federal Circuit heard oral arguments on the case with a panel consisting of Chief Judge Prost, Judge Dyk, and Judge Clevenger.  Oral arguments focused largely on the question of integration versus filtration.  Namely, when applying the second step of the Alice/Mayo analysis, is it proper to consider the invention as a whole integrated invention or must the court first filter-out the excluded subject matter and then ask whether an inventive concept can be found in the remains. It will be interesting to see how the court resolves this important and tricky question.

Patenting Software in the US as compared with Europe

Patent, , ,

Guest post by Shubha Ghosh and Erika Ellyne

This post compares and contrasts the United States approach to patentable subject after last term’s Alice v CLS decision, with that in the European Union. The bottom line is that the EU may be now more favorable to software claims than the US.

In its 2014 Alice decision, the US Supreme Court makes clear that a two step test applies to determination of when an invention is patentable subject matter. First, the reviewer of the patent, whether patent examiner or judge, must determine if the patent covers an excluded area from patenting, such as an abstract idea or law of nature. If the patent covers an excluded area, the reviewer moves on to the second stage: whether there is an inventive concept that is an application of the abstract idea or law of nature. This two part test is a capstone to the Court’s prior decisions in Bilski v. Kappos (2010)(business method patents) and Prometheus v. Mayo (2012)(medical diagnostic and treatment patents).

By contrast, software is more easily patentable in Europe despite the existence of an express provision on the excludability of software. Article 52 of the EPC famously recites a list of ‘non-inventions’ that are excluded ‘as such’. The reading of this last condition has lead to a de minimis application of the provision. ‘Technical character’ is synonymous with invention in the EPO Board of Appeals’ (BoA) case law; any demonstration and degree of ‘technical character’ passes the patent eligibility threshold. The role of the technical feature is irrelevant; to the point that the mere use of technical means, such as a computer, renders a patent claim eligible (even the inclusion of the term ‘email ‘has ‘transformed’ a previously ineligible claim into an eligible one).

The European approach has been to adopt a formalistic rather than substantive approach; making patent eligibility a derisively low threshold. The US, on the other hand, has actively rejected this type of formalistic approach; neither adding the words ‘apply it’ to excluded subject matter nor the recitation of a computer can render the ineligible eligible. In Europe, the patent eligibility standard has become a question of drafting, a practice abhorred by patent Courts on both side of the Atlantic. In the end the standard is of little to no effect, looking at the context of its application no mixed claims (which recite a non invention along with other man made subject matter- where most questions arise) are ever rejected.

A technical application test can potentially help overcome the gaps/superficiality left open by the technical character test. The US approach suffers from its own ambiguities; the first branch of the US test, the determination of what is an ‘abstract idea’/subject matter is vague and in need of clarification/objectification. The European notion of ‘technical’, which is used in opposition to abstract in European case law as well, despite its numerous short comings could serve as a road map to a more developed test for abstraction. That is a subject for another day.

There are those that would counter that this is a determination for inventive step, that there is confusion here between eligibility and obviousness. It is true that in Europe, much of what is caught out under the US eligibly standards is further culled in the inventive step stage. However, in the inventive step assessment, much of inventive step is not about obviousness at all, but identification of the ‘invention’: the technical solution. The ‘problem solution’ approach usually proceeds first by the identification of the invention, the technical solution, to then derive the problem thereof. In this identification of the ‘technical solution’ a very controversial point is what extent ‘non technical features’, i.e. subject matter found under 52.2, can contribute to the technical effect/solution. At this stage, there is in fact a re-formulation of the invention; the main point of the tasks is a question of defining the invention not of ‘obviousness’ per se. The non-obvious determination is actually more a methodology than a veritable measure of ‘obviousness’ as such.

Shubha Ghosh is the Vilas Research Fellow & George Young Bascom Professor of Business Law at the University of Wisconsin School of Law where he is also the Associate Director of the Initiatives for Studies in Transformational Entrepreneurship (INSITE). Erika Ellyne is a law graduate and doctoral candidate at the Vrije Universiteit Brussel (Free University Brussels)

Patent Invalid for Unduly Preempting the Field of “Automatic Lip Synchronization For Computer-Generated 3D Animation Using a Rules-Based Morph Target Approach”

Patent, ,

by Dennis Crouch

McRO (Planet Blue) v. Activision Blizzard, et al. (C.D. Cal. 2014) Decision PDF

In his second major Section 101 decision in as many weeks, Judge Wu (C.D. Cal) has relied upon Alice Corp. (2014) to invalidate all of McRO’s asserted patent claims.  The case is quite important because it is one of the first major applications of Alice Corp. to invalidate non-business-method claims.  Here, the invention is directed toward a specific technological problem that had troubled the field of animation – automatically animating lip synchronization and facial expression of animated characters. See U.S. Patent Nos. 6,307,576 (“‘576 Patent”) and 6,611,278 (“‘278 Patent”).  The appeal will be interesting and may serve as one of the Federal Circuit’s first opportunities to draw a new line in the sand.

The problem addressed by the invention is that it has been historically quite difficult to match-up animation audio and video — so that the character’s mouth and face are moving to match the sound overlay.  Historically, this has been very expensive and time consuming to do well. What you might call the ‘gist’ of the invention is simply a data transformation — from an audio signal to a visual animation output.  The details are a bit more technical. According to claim 1 of the ‘278 patent, the invention operates by first creating a set of phoneme sequences keyed to a pre-recorded audio sequence. Then, those phenome sequences are used to create a set of morph-weight-set streams (based upon a set of factors provided by the animators).  Those morph-streams are then used as input sequences for the animated characters to provide both timing and movement of facial expressions, including emotion.   The inventions claim priority back to 1997.

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

obtaining a first set of rules that defines a morph weight set stream as a function of phoneme sequence and times associated with said phoneme sequence;

obtaining a plurality of sub-sequences of timed phonemes corresponding to a desired audio sequence for said three-dimensional characters;

generating an output morph weight set stream by applying said first set of rules to each sub-sequence of said plurality of sub-sequences of timed phonemes; and

applying said output morph weight set stream to an input sequence of animated characters to generate an output sequence of animated characters with lip and facial expression synchronized to said audio sequence.

In writing about this patent claim, Judge Wu noted that – in isolation – it appears tangible and specific rather than abstract.

They are tangible, each covering an approach to automated three-dimensional computer animation, which is a specific technological process. They do not claim a monopoly, as Defendants argue, on “the idea that the human mouth looks a certain way while speaking particular sounds,” “applied to the field of animation.” Further, the patents do not cover the prior art methods of computer assisted, but non-automated, lip synchronization for three-dimensional computer animation.

Further, the defendants raised a defense of non-infringement – explaining that their particular method of automated lip synchronization is not even covered by the patents. Thus, Judge Wu writes: “At first blush, it is therefore difficult to see how the claims might implicate the ‘basic underlying concern that these patents tie up too much future use of’ any abstract idea they apply.”

However, Judge Wu recognized that the Supreme Court’s analysis of Alice Corp was not done in a vacuum but rather made reference to what was already known in the the art and asked whether the claimed invention extended that knowledge with an inventive concept that goes beyond a mere abstract idea.  In Judge Wu’s words the Section 101 eligibility of “the claims must be evaluated in the context of the prior art.”

Judge Wu’s approach was to identify the point-of-novelty for the claimed invention and then consider whether that point-of-novelty was itself an abstract idea.  That approach was made easy because the patents admitted that many elements of the invention were already part of thee prior art.  However, the patents claimed the new elements as the use of rules that define morph sets as a function of the phonemes which the court sees an an abstract idea that cannot be patented because it would allow the patentee to “preempt the field of automatic lip synchronization for computer-generated 3D animation … using a rules-based morph target approach.” Thus, the claims are invalid.

Judge Wu does show some sympathy to the patentee here — indicating that it appears to be a nice and important invention – just one that is not patent eligible.

But a § 101 defect does not mean that the invention was in the prior art. The invention here may have been novel, but the claims are directed to an abstract idea. And the patent’s casual – and honest – description of the prior art was made at a time when, under the then-prevalent interpretation of the law, such admissions were unlikely to be harmful. One
unintended consequence of Alice, and perhaps of this and other decisions to come, is an incentive for patent applicants to say as little as possible about the prior art in their applications.

Although he does not cite the Supreme Court’s 1946 decision in Halliburton v. Walker, Judge Wu does offer closing remarks that hearken back to the principle that patent claims must be specific at the point-of-novelty.  He writes: “This case illustrates the danger that exists when the novel portions of an invention are claimed too broadly.”

There are many interesting aspects to the decision, but I wanted to post these initial thoughts before moving forward.

Software Business Method Patent Fails Again

Patent,

Open Text v. Alfresco Software, 13-CV-04843-JD, 2014 WL 4684429 (N.D. Cal. Sept. 19, 2014) Open Text SA v Alfresco Software Ltd

Citing Alice Corp. as the deciding factor, Judge Donato has invalidated a set of challenged claims in U.S. Patent Nos. 7,647,372 and 7,975,007 owned by Open Text. Here, Open Text has only asserted claim 38 of the ‘372 patent and claim 22 of the ‘007 patent — both claims are now adjudged invalid.  As you’ll see below, the claims are so poorly and ambiguously drafted as to make an invalidity determination likely on other grounds as well.

[T]he Court finds that the challenged claims are directed to a very simple abstract marketing idea that uses generic computer and Internet technology, and contain no additional inventive concept.

The two companies in the lawsuit compete in a growing market for enterprise-wide information management (EIM).  Claim 38 at issue is directed toward the software in the form of a “computer readable storage medium” containing a set of instructions.  Basically, we have a claimed computer program that creates a group of “participants” based upon whether someone interacted with a web site, then it designates a subset of participants and executes an “instruction” associated with an “action” performed “in conjunction” with each member of the subset. Seriously? The claim reads as follows (with its independent claim).

37. A computer readable storage medium for facilitating a network based dialogue, comprising instructions translatable for:

assembling a set of first corresponding participants, wherein assembling the first set of corresponding participants comprises executing a first instruction of a first program in conjunction with each of the first corresponding participants, wherein the first instruction is operable to determine the occurrence of a first specified event in conjunction with each of the first corresponding participants;

assembling a set of second corresponding participants, wherein each of the set of second corresponding participants is in the set of first corresponding participants; and

executing a second instruction in conjunction with each of the second set of corresponding participants, wherein the second instruction is associated with a first action to be performed in conjunction with each of the set of second corresponding participants.

38. The computer readable storage medium of claim 37, wherein the first specified event is an interaction with a web site.

Following Alice Corp., the district court first identified the abstract idea embodied by the claim.

[The claims] recite a very simple computer-driven method to engage in the commonplace and time-honored practice of interacting with customers to promote marketing and sales.” Claim 38 … claims a storage medium containing software that identifies whether each participant in a set of participants has interacted with a website, assembles a set of second participants that are a subset of the first group, and performs an second action with that subset. This describes the most basic and widely-understood principle of marketing: identify potential or current customers and engage with them to improve their customer experience. On its face, asking a customer about his or her experience and replying “Thank You” to those who respond positively and, “I’m sorry, what can we do better?” to those who respond negatively is an unpatentable abstract idea.

With that unpatentable abstract idea in mind, the court then considered (and rejected) the notion that the claim provides an “inventive concept” or “something more” that would positively transform its eligibility.

The additional steps must be more than “well-understood, routine, conventional activity” or just computerizing the abstract idea. . . .

The asserted claims … fail to transform the abstract idea into a patent-eligible invention. The asserted claims in both patents implement the basic marketing scheme on a generic computer system without any meaningful limitations. Open Text’s counsel conceded at the hearing that the patents could be implemented on a generic computer. Open Text argues that the asserted claims “contain limitations tying them to specific ways of using computers.” But as the Court in Alice Corp. and the Federal Circuit have concluded, “[a]t best, that narrowing is an attempt to limit the use of the abstract … idea to a particular technological environment, which has long been held insufficient to save a claim in this context.” buySAFE. For example, although claim 37 of the ‘372 patent—from which claim 38 depends ––––recites a “computer readable storage medium,” this adds nothing of substance to the basic, patent-ineligible marketing scheme. … Nor does claim 38’s requirement that participants be identified based on their interaction with a website compel a different result: simply identifying a criterion for selecting participants is a prime example of attempting to save a claim by limiting it to a particular technological environment.

Invalid.

Here, the court purposefully characterized the invention in the business method context with the unpatentable abstract idea being a longstanding principle of marketing.  What remains to be seen is how courts will react to software patents whose abstraction are not focused on old business ideas.