by Dennis Crouch

Smart Sys. Innovations v. Chicago Transit Authority (Fed. Cir. 2017)

In a split opinion, the Federal Circuit has affirmed the district court’s judgment on the pleadings – R. 12(c) – that the asserted claims of SSI’s four patents are invalid under Section 101 for claiming an abstract idea.  U.S. Patent Nos. 7,566,003, 7,568,617, 8,505,816, and 8,662,390. (Claim 14 of the ‘003 patent – covering a method for validating entry to a city bus or train – is reproduced below).

The baseline for eligibility analysis is the two-step Alice test:

A patent claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2) if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”

Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (quoting Alice).

The patents here are are directed to a method for collecting fares – without dedicated fare-cards, paper tickets, or tokens.  Instead, the system uses credit/debit cards.   After “stripping” the patent claims from their technical jargon and obtuse syntax, the District Court ruled that the patents “really only cover an abstract concept [of] paying for a subway or bus ride with a credit card.”

On appeal, the Federal Circuit affirmed – holding that these steps were – as a whole – directed toward an abstract idea:

The Asserted Claims are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes. Rather, the claims are directed to the collection, storage, and recognition of data. We have determined that claims directed to the collection, storage, and recognition of data are not [sic] directed to an abstract idea.

Note here the suggestion from the court that “a new type of bankcard, turnstile, or database” could be patent eligible.  Here, the limitation to the field of mass-transit did not help the patentee: “merely limiting the field of use . . . does not render the claims any less abstract.” Quoting Affinity Labs.  In thinking through the step one, the majority looked toward the Alice focus on whether the claims are “directed to” an abstract idea.  According to the court – that question is separate and distinct from the “thrust,” “heart,” or “focus” of the invention.

According to the majority, Alice Step 2 is also easily met – because the tech-focused aspects of the claims are simply directed to the use of a general purpose computer and thus “offer no inventive concept that transforms them into patent-eligible subject matter.”  In the process of reaching this result, the court distinguished both Diehr and DDR Holdings:

• Diehr does not apply when, as here, the claims at issue use generic computer components “in which to carry out the abstract idea.”
• DDR Holdings does not apply when, as here, the asserted claims do not “attempt to solve a challenge particular to the Internet.”

Finally, the majority considered several ‘other arguments’ regarding eligibility:

• No preemption: Although one purpose of the abstract-idea exception is to limit preemption, the test itself does not actually consider preemption.  Thus, once the abstract idea analysis is completed “preemption concerns are … moot” Ariosa.
• Transformation:  Although the machine-or-transformation test “can provide a useful clue to the second step of the Alice framework” it does not overwhelm the primary search for an ‘inventive concept.’ Quoting Ultramercial.

Thus, the claims were all affirmed to be invalid and thus not enforceable.

The majority opinion was penned by Judge Wallach and joined by Judge Reyna.  Judge Linn filed an opinion dissenting in part. Judge Linn argues that the “gist” analysis by the Federal Circuit is improper:

The majority commits the same error as the district court in engaging in a reductionist exercise of ignoring the limitations of the claims in question and, at least with respect to the ’003 and ’617 patents, in failing to appreciate that the abstract idea exception—if it is to be applied at all—must be applied narrowly, consistent with its genesis. . . . All three nonstatutory exceptions are intended to foreclose only those claims that preempt and thereby preclude or inhibit human ingenuity with regard to basic building blocks of scientific or technological activity. They are intended to be read narrowly.

As the Supreme Court has done in its 101 analysis, Judge Linn linked his work back to cases such as Le Roy, Mackay, and Funk Bros. The language of those cases focus on “fundamental truths” and “hitherto unknown phenomenon of nature.”  In Benson and Alice, the court also explained “Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.”

For Judge Linn, a method of charging a bank-card at a bus-turnstile does not fit into those expansive definitions.

Judge Linn’s opinion recognizes that his concern directly stems from the Supreme Court’s approach in Alice and Mayo.  He writes: “The problem with this test, however, is that it is indeterminate and often leads to arbitrary results.”  His solution is that the two part test should not be “applied in a legal vacuum divorced from its genesis” and the three exceptions should be treated consistently. Patents should not be struck down simply because they “seemingly fail the Supreme Court’s test.” Rather, the focus should be on whether the patents “attempt to appropriate a basic building block of scientific or technological work.”

The solution for Judge Linn: Focus on the language of the claims and each limitation when determining whether a claim is directed to an abstract idea – “a basic building block of scientific or technological activity” or instead to a “tangible application” that serves a “new and useful end.”

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Here is Claim 14 of the ‘003 patent:

A method for validating entry into a first transit system using a bankcard terminal, the method comprising:

downloading, from a processing system associated with a set of transit systems including the first transit system, a set of bankcard records comprising, for each bankcard record in the set, an identifier of a bankcard previously registered with the processing system, and wherein the set of bankcard records identifies bankcards from a plurality of issuers;

receiving, from a bankcard reader, bankcard data comprising data from a bankcard currently presented by a holder of the bankcard, wherein the bankcard comprises one of a credit card and a debit card;

determining an identifier based on at least part of the bankcard data from the currently presented bankcard;

determining whether the currently presented bankcard is contained in the set of bankcard records;

verifying the currently presented bankcard with a bankcard verification system, if the bankcard was not contained in the set of bankcard records; and

denying access, if the act of verifying the currently presented bankcard with the bankcard verification system results in a determination of an invalid bankcard.

Secured Mail v. Universal Wilde (Fed. Cir. 2017)

The district court dismissed this case for failure to state a claim upon which relief can be granted – R.12(b)(6) – after finding that the claims of all seven asserted patents were ineligible under 35 U.S.C. 101.  On appeal, the Federal Circuit has affirmed.  U.S. Patent Nos. 7,814,032, 7,818,268, and 8,073,787 (“Intelligent Mail Barcode”); Nos. 8,260,629 and 8,429,093 (“QR Code”); and Nos. 8,910,860 and 9,105,002 (“Personalized URL”).

The patents all involve an mailer (i.e. package or envelope) with an identifier on the outside such as a barcode, QR code, or URL.  Once delivered, information is communicated (via computers) to the recipient about the contents and the sender.

As Patently-O readers understand, abstract ideas themselves are not patentable. Likewise a patent directed to an abstract idea is also unpatentable, unless the claims include an additional inventive concept that goes beyond the unpatentable idea to “transform the nature of the claim into a patent-eligible invention.” Alice.

The Alice two-step inquiry first asks whether the claims are directed to an abstract idea.  Here, the courts agreed that the claims “are directed to the abstract idea of communicating information about a [mailer] by use of a marking.”  Under Step Two, the appellate panel found that the claims merely recited “well known and conventional ways to allow generic communication between a sender and recipient using generic computer technology.”  Invalid.

I have included claim 1 of the ‘002 patent below (issued post-Alice):

1. A method for providing electronic data to a recipient of a mail object, comprising:

using an output device to affix a single set of mail ID data to said mail object, said single set of mail ID data including at least recipient data, said recipient data comprising a personalized network address associated with said recipient of said mail object;

submitting said mail object to a mail carrier for delivery to said recipient of said mail object;

receiving said recipient data from a reception device of said recipient via a network; and

providing by at least one processor said electronic data to said reception device via said network in response to receiving said recipient data, said electronic data comprising a sender’s web page that identifies said recipient of said mail object and includes data corresponding to a content of said mail object;

wherein said electronic data is configured to be displayed to said recipient via a web browser on a display of said reception device.

Note – the patentee has at least one additional patent issued in the family (US 9,390,394). However, that new patent does not appear to include any new inventive elements that go beyond the prior family members.

Read it and weep: [Federal Circuit Opinion]

I’ll note here that I believe the force behind the patentee is patent attorney Todd Fitzsimmons who also runs his own LA County patent firm.

by Dennis Crouch

Intellectual Ventures v. Capital One (Fed. Cir. 2017)

In parallel decisions, the Federal Circuit has affirmed two lower court judgments that Intellectual Ventures patents are ineligible under 35 U.S.C. § 101. This post discusses the Capital One decision and leaves Erie for later.[1]

Collateral Estoppel Following Partial Summary Judgment: An initial issue is that of collateral estoppel.  In a parallel still-pending case, a SDNY district court found IV’s Patent No. 6,715,084 ineligible under Section 101.[2]  That decision was a partial summary judgment – not yet final judgment – since other patents are still at issue.  Still, the MD district court in Capital One found that the prior invalidity decision collaterally estopped IV from arguing validity in this case. On appeal, the Federal Circuit affirmed the preclusion – finding that, under 4^th Circuit law, a sufficiently complete partial-summary-judgment of invalidity is sufficient to preclude a patentee from asserting a patent in a parallel case.  This outcome contradicts the Federal Circuit’s prior decision in Vardon Golf (issue preclusion does not flow from partial summary judgment prior to final judgment).[3] However, the Federal Circuit distinguished that case by noting that Vardon Golf was based on 7^th Circuit law rather than 4^th Circuit law at issue here.

The two additional patents at issue in Capital One (U.S. Patent Nos. 7,984,081; and 6,546,002) cover the editing of XML data.  A representative claim (claim 21) of the ‘081 patent is directed to an “apparatus for manipulating XML documents” and includes a processor along with operational elements (software?).  The patent claims use of a hierarchy of data structures for creating a dynamic document. At the top of the hierarchy is a “management record type” made-up of “primary record types” that are, in turn made up of “data objects” designated by “data components” of an XML document.  A user interface allows modification and modifies (in an undefined way) the underlying XML document.[4]

Alice Step 1: Reviewing these elements, the Federal Circuit found that “the patent claims are, at their core, directed to the abstract idea of collecting, displaying, and manipulating data.”  IV had argued that the claims offered “a concrete solution” to the problem of dynamically managing multiple sets of XML documents.   That view, according to the court, limits the patent to the XML technological environment but does not make it any less abstract since XML documents were already well known and used in routine business transactions.

Further, the inventor’s naming of the data structures with unique names does not overcome the fact that the limitations are directed to generic data types and “merely encompass the abstract idea itself of organizing, displaying, and manipulating data of particular documents.”

Alice Step 2: In applying step two of Alice, the court looked for whether the claims included something “significantly more” than merely describing the abstract idea and applying well-understood, routine, conventional activity.”  In considering the claims at issue, the court found “no inventive concept” beyond the aforementioned abstract idea.

[T]he Claims recite both a generic computer element—a processor—and a series of generic computer “components” that merely restate their individual functions—i.e., organizing, mapping, identifying, defining, detecting, and modifying. That is to say, they merely describe the functions of the abstract idea itself, without particularity. This is simply not enough under step two.

Repeating its prior statement regarding the inventor’s coined-terms, the court wrote: “The mere fact that the inventor applied coined labels to conventional structures does not make the underlying concept inventive.”

Invalid.

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[1] Intellectual Ventures v. Erie Indemnity (Fed. Cir. 2017) affirming invalidity of U.S. Patent Nos. 6,510,434; 6,519,581; and 6,546,002 under 35 U.S.C. § 101 (eligibility).

[2] See Intellectual Ventures II, LLC v. JP Morgan Chase & Co., No. 13-cv-3777-AKH, 2015 WL 1941331, at *17 (S.D.N.Y. Apr. 28, 2015) (“JPMC”).

[3] Vardon Golf Co. v. Karsten Manufacturing Corp., 294 F.3d 1330 (Fed. Cir. 2002).

[4] Claim 21.

An apparatus for manipulating XML documents, comprising:

a processor;

a component that organizes data components of one or more XML documents into data objects;

a component that identifies a plurality of primary record types for the XML documents;

a component that maps the data components of each data object to one of the plurality of primary record types;

a component that organizes the instances of the plurality of primary record types into a hierarchy to form a management record type;

a component that defines a dynamic document for display of an instance of a management record type through a user interface; and

a component that detects modification of the data in the dynamic document via the user interface, and in response thereto modifies a data component in an XML document.

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