Tag Archives: Abstract Idea

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

February 27, 2015PatentAbstract Idea, anticipation, paid, Subject Matter EligibilityDennis Crouch

by Dennis Crouch

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

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

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

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

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

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

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

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

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

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

= = = = = =

Claim 32.

A data access terminal for retrieving data from a data supplier and providing the retrieved data to a data carrier, the terminal comprising:

a first interface for communicating with the data supplier;

a data carrier interface for interfacing with the data carrier;

a program store storing code; and

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

code to read payment data from the data carrier and to forward the payment data to a payment validation system;

code to receive payment validation data from the payment validation system;

code responsive to the payment validation data to retrieve data from the data supplier and to write the retrieved data into the data carrier;

code responsive to the payment validation data to receive at least one access rule from the data supplier and to write the at least one access rule into the data carrier, the at least one access rule specifying at least one condition for accessing the retrieved data written into the data carrier, the at least one condition being dependent upon the amount of payment associated with the payment data forwarded to the payment validation system; and

code to retrieve from the data supplier and output to a user-stored data identifier data and associated value data and use rule data for a data item available from the data supplier.

Status of USPTO’s Withdrawn Abstract Idea Patents

February 25, 2015PatentAbstract Idea, paid, Subject Matter EligibilityDennis Crouch

by Dennis Crouch

In the Summer of 2014, the U.S. Supreme Court decided the seminal case of Alice Corp v. CLS Bank that pushed further against the patenting of abstract ideas or their non-inventive applications. As part of its implementation procedures, the USPTO quickly began examining applications under the new standards and – as an immediate response – withdrew the allowance of a number of applications that had been determined to be patentable prior to the Alice decision. Through a FOIA request, Charles Duan and Tristan Gray-Le Coz of Public Knowledge were able to obtain a list of those several hundred withdrawn applications and reported their results on Patently-O in November 2014.

I wanted to follow up on those applications to how they have fared in the seven months since the USPTO’s July 2014 action. These cases are interesting because they were ready for issuance and the only extra issue is eligibility under Section 101. Thus, this setup offers a nice natural experiment to consider cases where Section 101 is of direct importance.

Using PAIR, I pulled up pendency information for each of these applications and the chart below shows the results:

Basically, 93% of the applications are still pending. Most of these have been initially rejected under Section 101 and now are on to a second-round final. 7% though are either patented or have received a notice of allowance. Only 1% of the applications have been abandoned. Because these applicants had – at one point – a genuine expectation of issuance that may be hard eliminate.

Of these issued patents, I think that the response filed in Application No. 13/076,216 is interesting. In that case, the applicant essentially argued that the USPTO had failed to provide evidence that the idea of data collection and analysis was an abstract idea and failed to provide evidence that the computer-implemented limitations failed to provide sufficient practical grounding in order to avoid the eligibility ax. The ‘216 application has matured into U.S. Patent No. 8,965,784.

Read the OA Response: 13076216
Read the Patent: 8965784

Over the next year, we should begin to get a good picture of how the USPTO will be working with the framework laid out by the courts.

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

February 9, 2015PatentAbstract Idea, Damages, Licenses, obviousness, paid, Subject Matter EligibilityDennis Crouch

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

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

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

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

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

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

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

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

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

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

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

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

Tidbits from SPEs at the Life Sciences Conference

January 14, 2015EthicsAbstract Idea, obviousness, paid, Subject Matter EligibilityDavid

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

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

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

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

The training materials are on the PTO web page.

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

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

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

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

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

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

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

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

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

Sigh.

I’ve got to head off.

The Huge Assumption in 101 Jurisprudence

December 30, 2014EthicsAbstract Idea, paid, Subject Matter EligibilityDavid

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

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

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

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

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

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

Sigh.

The Interpretation-Construction Distinction in Patent Law

December 29, 2014PatentAbstract Idea, Claim Construction, paid, Subject Matter Eligibility, USPTO DirectorJason Rantanen

By Jason Rantanen

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

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

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

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

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

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

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

The Malleability of Patent Rights

December 23, 2014PatentAbstract Idea, Claim Construction, obviousness, paid, Subject Matter EligibilityJason Rantanen

By Jason Rantanen

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

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

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

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

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

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

December 17, 2014PatentAbstract Idea, Federal Circuit En Banc, Licenses, paid, Subject Matter EligibilityDennis Crouch

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

December 17, 2014PatentAbstract Idea, paid, Subject Matter Eligibility, USPTO DirectorDennis Crouch

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

December 15, 2014PatentAbstract Idea, paid, Subject Matter EligibilityDennis Crouch

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

December 14, 2014PatentAbstract Idea, Enablement, First to Invent, paid, Subject Matter EligibilityDennis Crouch

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

December 11, 2014PatentAbstract Idea, Affirmed Without Opinion, anticipation, Claim Construction, motivation to combine, obviousness, paid, Subject Matter EligibilityDennis Crouch

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.

The level of ordinary skill in the art;
The scope and content of the prior art;
The differences between the claimed invention and the prior art;
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

December 8, 2014PatentAbstract Idea, Affirmed Without Opinion, anticipation, Federal Circuit En Banc, paid, Subject Matter EligibilityDennis Crouch

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

November 14, 2014PatentAbstract Idea, anticipation, paid, Subject Matter EligibilityDennis Crouch

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.

(more…)

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

November 3, 2014Articles and Publications, JournalAbstract Idea, paid, Subject Matter EligibilityDennis Crouch

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.

Article: GrayLeCozDuan
Data: ApplicationList

More Engineers => More Patents

October 29, 2014PatentAbstract Idea, paid, Subject Matter EligibilityDennis Crouch

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.

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

October 28, 2014PatentAbstract Idea, anticipation, First to Invent, paid, Subject Matter EligibilityDennis Crouch

Card 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

October 27, 2014PatentAbstract Idea, Claim Construction, paid, Subject Matter Eligibility, VenueDennis Crouch

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:

The issue sought to be precluded from relitigation is identical to the issue decided in the earlier proceeding;
The issue was actually litigated in the former proceeding;
The determination on the issue in the prior action was necessary to the resulting judgment in that case; and
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

October 27, 2014PatentAbstract Idea, anticipation, paid, Subject Matter EligibilityDennis Crouch

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?

October 17, 2014PatentAbstract Idea, anticipation, paid, Subject Matter EligibilityJason Rantanen

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.