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26 May 2016

In re: TLI Communications LLC Patent Litigation, Federal Circuit 2016

TLI Communications hold U.S. Patent No. 6,038,295 relating to a method and system for taking, transmitting, and organizing digital images.

The patent relates generally to an apparatus for recording of a digital image, communicating the digital image from the recording device to a storage device, and to administering the digital image in the storage device. The specification notes that a “wide variety of data types” can be transmitted, including audio and image stills.  Moreover, cellular telephones may be utilized for image transmissions.   When a large number of digital images are recorded and are to be archived in a central computer unit, then the organization of the data base becomes a problem, according to the patent.  In particular, the problems of locating the data of an image data file increase as the number of images to be archived increases. The invention sought to solve this problem by providing for recording, administration and archiving of digital images simply, fast and in such way that the information therefore may be easily tracked. More specifically, the patent teaches manually or automatically assigning “classification data,” such as a date or timestamp, to digital images and sending those images to a server. The server then extracts the classification data and stores the digital images, taking into consideration the classification information.

Claim 17 is representative:
17. A method for recording and administering digital images, comprising the steps of:
     recording images using a digital pick up unit in a telephone unit,
     storing the images recorded by the digital pick up unit in a digital form as digital images,
     transmitting data including at least the digital images and classification information to a server, wherein said classification information is prescribable by a user of the telephone unit for allocation to the digital images,
     receiving the data by the server,
     extracting classification information which characterizes the digital images from the received data, and
     storing the digital images in the server, said step of storing taking into consideration the classification information.

The Federal Circuit noted that the Supreme Court has long held that 35 U.S.C. § 101 contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2116 (2013) (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012)). Under the now familiar two-part test described by the Supreme Court in Alice, we must first determine whether the claims at issue are directed to a patent-ineligible concept, such as an abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347, 2355 (2014). If so, we must then “consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id. (quoting Mayo, 132 S. Ct. at 1298, 1297).

The Federal Circuit noted that they recently clarified that a relevant inquiry at step one is “to ask whether the claims are directed to an improvement to computer functionality versus being directed
to an abstract idea.” See Enfish, LLC v. Microsoft Corp., No. 2015-2044, slip op. at *11 (Fed. Cir. May 12, 2016). They contrasted claims “directed to an improvement in the functioning of a computer” with claims “simply adding conventional computer components to well-known business practices,” or claims reciting “use of an abstract mathematical formula on any general purpose computer,” or “a purely conventional computer implementation of a mathematical formula,” or “generalized steps to be performed on a computer using conventional computer activity.”

The Federal Circuit observed that the specification does not describe a new telephone, a new server, or a new physical combination of the two. The specification fails to provide any technical details for
the tangible components, but instead predominately describes the system and methods in purely functional terms. For example, the telephone unit of the claims is described as having the standard features of a telephone unit, with the addition of a digital image pick up unit for recording images,” that “operates as a digital photo camera of the type which is known.  As a practice tip, it is probably a bad idea to point out in a specification that any of your components are known.  All inventions include some old components.  It is probably also a good idea to provide more hardware detail when you have hardware.

Though the Federal Circuit wasn't impressed with these claims, they gave hints as to claims that would be patentable under 35 U.S.C. § 101.  After noting that these claims are not directed to a solution to a technical problem, as was the case in Diamond v. Diehr, 450 U.S. 175 (1981), they noted that these claims also do not attempt to solve “a challenge particular to the Internet.” DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1256–57 (Fed. Cir. 2014).

The Federal Circuit concluded that the claims are simply directed to the abstract idea of classifying and storing digital images in an organized manner.

Turning to the second step in the Mayo/Alice analysis, the Federal Circuit found that the claims fail to recite any elements that individually or as an ordered combination transform the abstract idea of classifying and storing digital images in an organized manner into a patent-eligible application of that idea. It is well-settled that mere recitation of concrete, tangible components is insufficient to confer patent eligibility to an otherwise abstract idea. Rather, the components must involve more than performance of “‘well understood, routine, conventional activit[ies]’ previously known to the industry.” Alice, 134 S. Ct. at 2359 (quoting Mayo, 132 S.Ct. at 1294). The Federal Circuit agreed with the district court that the claims’ recitation of a “telephone unit,” a “server”, an “image analysis unit,” and a “control unit” failed to add an inventive concept sufficient to bring the abstract idea into the realm of patentability.


Enfish v Microsoft, Federal Circuit 2016

Enfish sued Microsoft for infringement of U.S. Patent 6,151,604 and U.S. Patent 6,163,775 related to a logical model for a computer database. A logical model is a model of data for a computer database explaining how the various elements of information are related to one another. A logical model generally results in the creation of particular tables of data, but it does not describe how the bits and bytes of those tables are arranged in physical memory devices. Contrary to conventional logical models, the patented logical model includes all data entities in a single table, with column definitions provided by rows in that same table. The patents describe this as a “self-referential” property of the database.

This self-referential property can be best understood in contrast with the more standard “relational” model.  With the relational model, each entity (i.e., each type of thing) that is modeled is provided in a separate table. For instance, a relational model for a corporate file repository might include the following tables:
document table,
person table,
company table.

The document table might contain information about documents stored on the file repository, the person table might contain information about authors of the documents, and the company table might contain information about the companies that employ the persons.

In contrast to the relational model, the patented self referential model has two features that are not found in the relational model: first the self-referential model can store all entity types in a single table, and second the self-referential model can define the table’s columns by rows in that same table.

Claim 17 of the ’604 patent recites:
A data storage and retrieval system for a computer memory, comprising:
     means for configuring said memory according to a logical table, said logical table including:
               a plurality of logical rows, each said logical row including an object identification number (OID) to identify each said logical row, each said logical row corresponding to a record of information;
               a plurality of logical columns intersecting said plurality of logical rows to define a plurality of logical cells, each said logical column including an OID to identify each said logical column; and
               means for indexing data stored in said table.

The Federal Circuit reviewed de novo the district court’s determination that the claims at issue do not claim patent-eligible subject matter.

Section 101 of the patent act provides that a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. § 101.  The Federal Circuit noted that they, as well as the Supreme Court, have long grappled with the exception that “[l]aws of nature, natural phenomena, and abstract ideas are not patentable.” Ass’n for Molecular Pathology v. Myriad Genetics, Inc., --- U.S. ----, 133 S. Ct. 2107, 2116 (2013) (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., --- U.S. ----, 132 S. Ct. 1289, 1293 (2012)).

The Federal Circuit noted that Supreme Court precedent instructs them to “first determine whether the claims at issue are directed to a patent-ineligible concept.” Alice Corp. Pty Ltd. v. CLS Bank Int’l, --- U.S. ----, 134 S. Ct. 2347, 2355 (2014). If this threshold determination is met, we move to the second step of the inquiry and “consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id. (quoting Mayo, 132 S. Ct. at 1298, 1297).

The Supreme Court has not established a definitive rule to determine what constitutes an “abstract idea” sufficient to satisfy the first step of the Mayo/Alice inquiry.

Rather, both the Federal Circuit and the Supreme Court have found it sufficient to compare claims at issue to those claims already found to be directed to an abstract idea in previous cases.

Refreshingly, the Federal Circuit in Enfish stated that: "We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two.  Indeed, some improvements in computer-related technology when appropriately claimed are undoubtedly not abstract, such as a chip architecture, an LED display, and the like. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis. Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis."

The Federal Circuit stated that, for that reason, the first step in the Alice inquiry in this case asks whether the focus of the claims is on the specific asserted improvement in computer capabilities (i.e., the self-referential table for a computer database) or, instead, on a process that qualifies as an “abstract idea” for which computers are invoked merely as a tool.

The Federal Circuit concluded that in this case, the plain focus of the claims is on an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.  Therefore, it was not necessary to proceed to step two of the Mayo analysis.

Accordingly, the Federal Circuit found in this case, that the claims at issue in this appeal are not directed to an abstract idea within the meaning of Alice. Rather, they are directed to a specific improvement to the way computers operate, embodied in the self-referential table.

The district court had concluded that the claims were directed to the abstract idea of “storing, organizing, and retrieving memory in a logical table” or, more simply, “the concept of organizing information using tabular formats.”

However, describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule. See Alice, 134 S. Ct. at 2354 (noting that “we tread carefully in construing this exclusionary principle [of laws of nature, natural phenomena, and abstract ideas] lest it swallow all of patent law”); cf. Diamond v. Diehr, 450 U.S. 175, 189 n.12 (1981) (cautioning that overgeneralizing claims, “if carried to its extreme, make[s] all inventions unpatentable because all inventions can be reduced to underlying principles of
nature which, once known, make their implementation obvious”).

Here, the claims are not simply directed to any form of storing tabular data, but instead are specifically directed to a self-referential table for a computer database. For claim 17, this is reflected in step three of the “means for configuring” algorithm described above.

Moreover, the Federal Circuit was not persuaded that the invention’s ability to run on a general-purpose computer dooms the claims. Unlike the claims at issue in Alice or, more recently in Versata Development Group v. SAP America, Inc., 793 F.3d 1306 (Fed. Cir. 2015),  the claims here are directed to an improvement in the functioning of a computer. In contrast, the claims at issue in Alice and Versata can readily be understood as simply adding conventional computer components to well-known business practices.

The Federal Circuit also noted that the fact that an improvement is not defined by reference to “physical” components does not doom the claims.  To hold otherwise risks resurrecting a bright-line machine-or-transformation test, cf. Bilski v. Kappos, 561 U.S. 593, 604 (2010) (“The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible ‘process.’”), or creating a categorical ban on software patents, cf. id. at 603.  Much of the advancement made in computer technology consists of improvements to software that, by their very nature, may not be defined by particular physical features but rather by logical structures and processes.   The Federal Circuit did not see in Bilski or Alice, or our cases, an exclusion to patenting this large field of technological progress.

The Federal Circuit went on to say that, in other words, they were not faced with a situation where general-purpose computer components are added post-hoc to a fundamental economic practice or mathematical equation. Rather, the claims are directed to a specific implementation of a solution to a problem in the software arts. Accordingly, the Federal Circuit found the claims at issue were not directed to an abstract idea.

Because the claims were not directed to an abstract idea under step one of the Alice/Mayo analysis, the Federal Circuit did not need to proceed to step two of that analysis.

The Federal Circuit concluded that the claims were patent-eligible under 35 USC 101.

02 February 2015

U.S. Patent and Trademark Office Examples of Abstract Idea Claims

Last week, the U.S. Patent and Trademark Office published examples of claims that are patent eligible and claims that are not patent eligible. The examples show how claims should be analyzed under the 2014 Interim Eligibility Guidance, discussed in a post below. All of the claims are analyzed for eligibility in accordance with their broadest reasonable interpretation.

Patent Eligible Claims

Example 1: Isolating and Removing Malicious Code from Electronic Messages

The invention relates to isolating and removing malicious code from email to prevent a computer from being compromised, for example by being infected with a computer virus. The specification explains the need for computer systems to scan electronic communications for malicious computer code and clean the electronic communication before it may initiate malicious acts. The disclosed invention operates by physically isolating a received electronic communication in a “quarantine” sector of the computer memory. A quarantine sector is a memory sector created by the computer’s operating system such that files stored in that sector are not permitted to act on files outside that sector.

Claims
1. A computer-implemented method for protecting a computer from an electronic communication containing malicious code, comprising executing on a processor the steps of:
     receiving an electronic communication containing malicious code in a computer with a memory having a boot sector, a quarantine sector and a non-quarantine sector;
     storing the communication in the quarantine sector of the memory of the computer, wherein the quarantine sector is isolated from the boot and the non-quarantine sector in the computer memory, where code in the quarantine sector is prevented from performing write actions on other memory sectors;
     extracting, via file parsing, the malicious code from the electronic communication to create a sanitized electronic communication, wherein the extracting comprises
          scanning the communication for an identified beginning malicious code marker, flagging each scanned byte between the beginning marker and a successive end malicious code marker,
          continuing scanning until no further beginning malicious code marker is found, and
          creating a new data file by sequentially copying all non-flagged data bytes into a new file that forms a sanitized communication file;
     transferring the sanitized electronic communication to the non-quarantine sector of the memory; and
     deleting all data remaining in the quarantine sector.

Claim 1 is patent eligible.
Step 1.  The claim recites a series of acts.  Thus the claim is directed to a process.
Step 2.  The claim is directed towards performing isolation and eradication of computer viruses, worms, and other malicious code, a concept inextricably tied to computer technology and distinct from the types of concepts found by the courts to be abstract.  

2. A non-transitory computer-readable medium for protecting a computer from an electronic communication containing malicious code, comprising instructions stored thereon, that when executed on a processor, perform the steps of:
     receiving an electronic communication containing malicious code in a computer with a memory having a boot sector, a quarantine sector and a non-quarantine sector;
     storing the communication in the quarantine sector of the memory of the computer, wherein the quarantine sector is isolated from the boot and the non-quarantine sector in the computer memory, where code in the quarantine sector is prevented from performing write actions on other memory sectors;
     extracting, via file parsing, the malicious code from the electronic communication to create a sanitized electronic communication, wherein the extracting comprises
          scanning the communication for an identified beginning malicious code marker,
          flagging each scanned byte between the beginning marker and a successive end malicious code marker,
          continuing scanning until no further beginning malicious code marker is found, and
          creating a new data file by sequentially copying all non-flagged data bytes into a new file that forms a sanitized communication file;
     transferring the sanitized electronic communication to the non-quarantine sector of the memory; and
     deleting all data remaining in the quarantine sector.

Claim 2 is patent eligible.
Step 1, Yes.  The claim recites a manufacture. 
Step 2A, No.  The claim is directed towards performing isolation and eradication of computer viruses, worms, and other malicious code, a concept inextricably tied to computer technology and distinct from the types of concepts found by the courts to be abstract.

Example 2:   E-Commerce Outsourcing System/Generating a Composite Web Page
See the post below for DDR Holdings, LLC v. Hotels.com

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.

Claim 19 is patent eligible.
Step 1, Yes.  The claim recites a system comprising a computer service and is a machine. 
Step 2A, No.  The claim does not “merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”

Example 3:  Digital Image Processing
See Research Corporation Technologies Inc. v. Microsoft Corp.

Claim 1.  A computer-implemented method for halftoning a gray scale image, comprising the steps of:
     generating, with a processor, a blue noise mask by encoding changes in pixel values across a plurality of blue noise filtered dot profiles at varying gray levels;
     storing the blue noise mask in a first memory location;
     receiving a gray scale image and storing the gray scale image in a second memory location;
     comparing, with a processor on a pixel-by-pixel basis, each pixel of the gray scale image to a threshold number in the corresponding position of the blue noise mask to produce a binary image array; and
     converting the binary image array to a halftoned image.

Claim 1 is patent eligible.
Step 1, Yes. Claim 1 is directed to a process.
Step 2A, Yes.  Mathematical relationships fall within the judicial exceptions, often labelled as “abstract ideas.”
Step 2B, Yes.  First, the claim recites using a processor to generate the blue noise mask. The claim also recites the steps of storing the blue noise mask in a first memory location and receiving a gray scale image and storing the gray scale image in a second memory location. Thus, the claim uses a processor and memory to perform these steps of calculating a mathematical operation and receiving and storing data. The addition of general purpose computer components alone to perform such steps is not sufficient to transform a judicial exception into a patentable invention. The computer components are recited at a high level of generality and perform the basic functions of a computer (in this case, performing a mathematical operation and receiving and storing data) that would be needed to apply the abstract idea via computer. Merely using generic computer components to perform the above identified basic computer functions to practice or apply the judicial exception does not constitute a meaningful limitation that would amount to significantly more than the judicial exception, even though such operations could be performed faster than without a computer.
The claim also recites the additional steps of comparing the blue noise mask to a gray scale image to transform the gray scale image to a binary image array and converting the binary image array into a halftoned image. These additional steps tie the mathematical operation (the blue noise mask) to the processor’s ability to process digital images. These steps add meaningful limitations to the abstract idea of generating the blue noise mask and therefore add significantly more to the abstract idea than mere computer implementation.

Example 4:  Global Positioning System
See SiRF Technology Inc. v. International Trade Commission, 601 F.3d 1319 (Fed. Cir. 2010)

Claim 1.  A system for calculating an absolute position of a GPS receiver and an absolute time of reception of satellite signals comprising:
     a mobile device comprising a GPS receiver, a display, a microprocessor and a wireless communication transceiver coupled to the GPS receiver, the mobile device programmed to receive PN codes sent by a plurality of GPS satellites, calculate pseudo-ranges to the plurality of GPS satellites by averaging the received PN codes, and transmit the pseudo-ranges, and
     a server comprising a central processing unit, a memory, a clock, and a server communication transceiver that receives pseudo-ranges from the wireless communication transceiver of the mobile device, the memory having location data stored therein for a plurality of wireless towers, and the central processing unit programmed to:
     estimate a position of the GPS receiver based on location data for a wireless tower from the memory and time data from the clock,
     calculate absolute time that the signals were sent from the GPS satellites using the pseudo-ranges from the mobile device and the position estimate,
     create a mathematical model to calculate absolute position of the GPS receiver based on the pseudo-ranges and calculated absolute time,
     calculate the absolute position of the GPS receiver using the mathematical model, and
     transmit the absolute position of the GPS receiver to the mobile device, via the server communication transceiver, for visual representation on the display.

Claim 1 is patent eligible.
Step 1, Yes. Claim 1 is directed to a mobile device, a machine.
Step 2A, Yes.   Because mathematical operations are recited in the claim, the claim is directed to a judicial exception.
Step 2B, Yes.  The claim recites using a central processing unit (CPU) for performing the mathematical operations of estimating position, calculating absolute time, and calculating absolute position using a mathematical model. The claim also recites using location data stored in a memory, and time data from a clock. These computer components are recited at a high level of generality and add no more to the claimed invention than the components that perform basic mathematical calculation functions routinely provided by a general purpose computer. Limiting performance of the mathematical calculations to a general purpose CPU, absent more, is not sufficient to transform the recited judicial exception into a patent-eligible invention.  However, the claim is further limited to a mobile device comprising a GPS receiver, microprocessor, wireless communication transceiver and a display that receives satellite data, calculates pseudo-ranges, wirelessly transmits the calculated pseudo-ranges to the server, receives location data from the server, and displays a visual representation of the received calculated absolute position from the server.  All of these features, especially when viewed in combination, amount to significantly more than the judicial exception.

Ineligible Claims

Example 5:  Digital Image ProcessingThe following claim was found ineligible by the Federal Circuit in Digitech Image Tech., LLC v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014).

Claim 10 is patent ineligible.
Claim 10. A method of generating a device profile that describes properties of a device in a digital image reproduction system for capturing, transforming or rendering an image, said method comprising:
     generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;
    generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and
     combining said first and second data into the device profile.

Claim 10 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a series of acts, a process.
Step 2A, Yes.   The gathering and combining merely employs mathematical relationships to manipulate existing information to generate additional information in the form of a ‘device profile,’ without limit to any use of the device profile.  This is similar to the basic concept of manipulating information using mathematical relationships.
Step 2B, No.  The claim does not include additional elements beyond the abstract idea of gathering and combining data.

Example 6:  The Game of Bingo
The following claim was found ineligible by the Federal Circuit in Planet Bingo, LLC v. VKGS LLC, 576 Fed. Appx. 1005 (Fed. Cir. 2014).

Claim 1. A system for managing a game of Bingo which comprises:
(a) a computer with a central processing unit (CPU) and with a memory and with a printer connected to the CPU;
(b) an input and output terminal connected to the CPU and memory of the computer; and
(c) a program in the computer enabling:
     (i) input of at least two sets of Bingo numbers which are preselected by a player to be played in at least one selected game of Bingo in a future period of time;
     (ii) storage of the sets of Bingo numbers which are preselected by the player as a group in the memory of the computer;
     (iii) assignment by the computer of a player identifier unique to the player for the group having the sets of Bingo numbers which are preselected by the player wherein the player identifier is assigned to the group for multiple sessions of Bingo;
     (iv) retrieval of the group using the player identifier;
     (v) selection from the group by the player of at least one of the sets of Bingo numbers preselected by the player and stored in the memory of the computer as the group for play in a selected game of Bingo in a specific session of Bingo wherein a number of sets of Bingo numbers selected for play in the selected game of Bingo is less than a total number of sets of Bingo numbers in the group;
     (vi) addition by the computer of a control number for each set of Bingo numbers selected for play in the selected game of Bingo;
     (vii) output of a receipt with the control number, the set of Bingo numbers which is preselected and selected by the player, a price for the set of Bingo numbers which is preselected, a date of the game of Bingo and optionally a computer identification number; and
     (viii) output for verification of a winning set of Bingo numbers by means of the control number which is input into the computer by a manager of the game of Bingo.

Claim 1 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a system, a machine.
Step 2A, Yes. Claim 1 describes managing the game of Bingo and therefore is directed to an abstract idea.
Step 2B, No. The recitation of the computer limitations amounts to mere instructions to implement the abstract idea on a computer. Taking the additional elements individually and in combination, the computer components at each step of the management process perform purely generic computer functions. As such, there is no inventive concept sufficient to transform the claimed subject matter into a patent-eligible application.

Example 7.  E-Commerce providing Transaction Performance Guaranty
The following claim was found ineligible by the Federal Circuit in buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014).

Claim 1. A method, comprising:
     receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;
     processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party,
     wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

Claim 1 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a series of steps, a process.
Step 2A, Yes. Claim 1 is directed to creation of a commercial arrangement involving contractual relations similar to the fundamental economic practices found by the courts to be abstract ideas (e.g., hedging in Bilski).
Step 2B, No. The claim amounts to no more than stating create a contract on a computer and send it over a network. These generic computing elements alone do not amount to significantly more than the judicial exception.

Example 8. Distribution of Products over the Internet
The following claim was found ineligible by the Federal Circuit in Ultramercial v. Hulu and WildTangent, 2014 U.S. App. LEXIS 21633 (Fed. Cir. 2014).

1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:
     a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;
     a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;
     a third step of providing the media product for sale at an Internet website;
     a fourth step of restricting general public access to said media product;
     a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;
     a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;
     a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;
     an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;
     a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;
     a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and
     an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

Claim 1 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a series of steps, a process.
Step 2A, Yes. Claim 1 is directed to the concept of using advertising as an exchange or currency. This concept is similar to the concepts involving human activity relating to commercial practices (e.g., hedging in Bilski) that have been found by the courts to be abstract ideas.
Step 2B, No. The accessing and updating of an activity log are used only for data gathering and, as such, only represent insignificant pre-solution activity. Similarly, requiring a consumer request and restricting public access is insignificant pre-solution activity because such activity is necessary and routine in implementing the concept of using advertising as an exchange or currency.  Furthermore, the Internet limitations do not add significantly more because they are simply an attempt to limit the abstract idea to a particular technological environment.

Post-Alice Decision on 35 U.S.C. 101, Content Extraction and Transmission v Wells Fargo, Federal Circuit, Dec. 2014

CET owns patents that generally recite a method of 1) extracting data from hard copy documents using an automated digitizing unit such as a scanner, 2) recognizing specific information from the extracted data, and 3) storing that information in a memory. This method can be performed by software on an automated teller machine (ATM) that recognizes information written on a scanned check, such as the check’s amount, and populates certain data.

One of the claims recites:
A method of processing information from a diversity of types of hard copy documents, said method comprising the steps of:
(a) receiving output representing a diversity of types of hard copy documents from an automated digitizing unit and storing information from said diversity of types of hard copy documents into a memory, said information not fixed from one document to the next, said receiving step not preceded by scanning, via said automated digitizing unit, of a separate document containing format requirements;
(b) recognizing portions of said hard copy documents corresponding to a first data field; and
(c) storing information from said portions of said hard copy documents corresponding to said first data field into memory locations for said first data field.

The Federal Circuit said that The Supreme Court’s two-step framework, described in Mayo and Alice Corp. Pty Ltd. v. CLS Bank Int’l (see summary in separate post) guided their analysis.

Using that analysis, the court is to first determine whether a claim is “directed to” a patent-ineligible abstract idea. If so, they are then to consider the elements of the claim—both individually and as an ordered combination— to assess whether the additional elements transform the nature of the claim into a patent-eligible application of the abstract idea. This is the search for an “inventive concept”—something sufficient to ensure that the claim amounts to “significantly more” than the abstract idea itself.

The Federal Circuit noted that The Supreme Court has not delimited the precise contours of the ‘abstract ideas’ category. We know, however, that although there is no categorical business-method exception, in view of the decision in Bilski v. Kappos.

Applying Mayo/Alice step one, the Federal Circuit agreed with the district court that the claims of the asserted patents are drawn to the abstract idea of 1) collecting data, 2) recognizing certain data within the collected data set, and 3) storing that recognized data in a memory. The concept of data collection, recognition, and storage is undisputedly well-known.

CET attempted to distinguish its claims from those found to be abstract in Alice and other cases by showing that its claims require not only a computer but also an additional machine—a scanner. CET argued that its claims are not drawn to an abstract idea because human minds are unable to process and recognize the stream of bits output by a scanner. However, the Federal Circuit did not accept that argument and noted that claims in Alice also required a computer that processed streams of bits, but nonetheless were found to be abstract.

For the second step of the analysis, the court must determine whether the limitations present in the claims represent a patent-eligible application of the abstract idea. \ For the role of a computer in a computer implemented invention to be deemed meaningful in the context of this analysis, it must involve more than performance of well-understood, routine, and conventional activities previously known to the industry.

Applying Mayo/Alice step two, the Federal Circuit agreed with the district court that the asserted patents contain no limitations— either individually or as an ordered combination— that transform the claims into a patent-eligible application. CET conceded at oral argument that the use of a scanner or other digitizing device to extract data from a document was well-known at the time of filing, as was the ability of computers to translate the shapes on a physical page into typeface characters.

According to the Federal Circuit, CET’s claims merely recite the use of this existing scanning and processing technology to recognize and store data from specific data fields such as amounts, addresses, and dates. See id. There is no “inventive concept” in CET’s use of a generic scanner and computer to perform well-understood, routine, and conventional activities commonly used in industry. At most, CET’s claims attempt to limit the abstract idea of recognizing and storing information from hard copy documents using a scanner and a computer to a particular technological environment. Such a limitation has been held insufficient to save a claim in this context.

CET argued that the failure of PNC or the district court to individually address every one of its claims is inconsistent with the statutory presumption of validity that requires proving the invalidity of each claim by clear and convincing evidence.

The Federal Circuit did not accept that argument. They said that the district court correctly determined that addressing each claim of the asserted patents was unnecessary. After conducting its own analysis, the district court determined that PNC is correct that claim 1 of the ’855 patent and claim 1 of the ’416 patent are representative, because all the claims are “substantially similar and linked to the same abstract idea.”

CET contended that the district court erred by declaring its claims patent-ineligible under § 101 at the pleading stage without first construing the claims or allowing the parties to conduct fact discovery and submit opinions from experts supporting their claim construction positions. The Federal Circuit did not accept this argument. They stated that although the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter, claim construction is not an inviolable prerequisite to a validity determination under § 101.

The Federal Circuit affirmed the district court’s grant of PNC’s motion to dismiss on the ground that the claims of CET’s asserted patents are invalid as patent ineligible under § 101.

15 December 2014

December 16, 2014 Interim Guidelines on Subject Matter Eligibility

The United States Patent and Trademark Office has prepared interim guidance (2014 Interim Guidance on Patent Subject Matter Eligibility, called “Interim Eligibility Guidance”) for use by USPTO personnel in determining subject matter eligibility under 35 U.S.C. 101 in view of recent decisions by the U.S. Supreme Court (Supreme Court) such as Alice, Myriad, and Mayo.

The guidelines provide the following flowchart:

(Step 1) Is the claim to a process, machine, manufacture or composition of matter?
If so, proceed to Step 2A. If not, the claim is not eligible subject matter under 35 USC 101.

(Step 2A) [Part 1 Mayo test] Is the claim directed to a law of nature, a natural phenomenon, or an abstract idea (judicially recognized exceptions)?. If so, proceed to Step 2B. If not, the claim qualifies as eligible subject matter under 35 USC 101.

(Step 2B) [Part 2 Mayo test] Does the claim recite additional elements that amount to significantly more than the judicial exception? If so, the claim qualifies as eligible subject matter. If not, the claim is not eligible subject matter.

Two–part Analysis for Judicial Exceptions
A. Flowchart Step 2A (Part 1 Mayo Test) - Determine whether the claim is directed to a law of nature, a natural phenomenon, or an abstract idea (judicial exceptions).

A claim is directed to a judicial exception when a law of nature, a natural phenomenon, or an abstract idea is recited (i.e., set forth or described) in the claim. Such a claim requires closer scrutiny for eligibility because of the risk that it will “tie up” the excepted subject matter and pre-empt others from using the law of nature, natural phenomenon, or abstract idea. Courts tread carefully in scrutinizing such claims because at some level all inventions embody, use, reflect, rest upon, or apply a law of nature, natural phenomenon, or abstract idea. To properly interpret the claim, it is important to understand what the applicant has invented and is seeking to patent.

For claims that may recite a judicial exception, but are directed to inventions that clearly do not seek to tie up the judicial exception, see below regarding a streamlined eligibility analysis.

It should be noted that there are no bright lines between the types of exceptions because many of these concepts can fall under several exceptions. For example, mathematical formulas are considered to be an exception as they express a scientific truth, but have been labelled by the courts as both abstract ideas and laws of nature. Likewise, “products of nature” are considered to be an exception because they tie up the use of naturally occurring things, but have been labelled as both laws of nature and natural phenomena. Thus, it is sufficient for this analysis to identify that the claimed concept aligns with at least one judicial exception.

Laws of nature and natural phenomena, as identified by the courts, include naturally occurring principles/substances and substances that do not have markedly different characteristics compared to what occurs in nature. The types of concepts courts have found to be laws of nature and natural phenomena are shown by these cases, which are intended to be illustrative and not limiting:
• an isolated DNA (see the Myriad case);
• a correlation that is the consequence of how a certain compound is metabolized by the body (Mayo);
• electromagnetism to transmit signals (Morse); and
• the chemical principle underlying the union between fatty elements and water (Tilghman).

Abstract ideas have been identified by the courts by way of example, including fundamental economic practices, certain methods of organizing human activities, an idea ‘of itself,’ and mathematical relationships/formulas. The types of concepts courts have found to be abstract ideas are shown by these cases, which are intended to be illustrative and not limiting:
• mitigating settlement risk (Alice);
• hedging (Bilski);
• creating a contractual relationship (buySAFE);
• using advertising as an exchange or currency (Ultramercial);
• processing information through a clearinghouse (Dealertrack);
• comparing new and stored information and using rules to identify options (SmartGene);
• using categories to organize, store and transmit information (Cyberfone);
• organizing information through mathematical correlations (Digitech);
• managing a game of bingo (Planet Bingo);
• the Arrhenius equation for calculating the cure time of rubber (Diehr);
• a formula for updating alarm limits (Flook);
• a mathematical formula relating to standing wave phenomena (Mackay Radio); and
• a mathematical procedure for converting one form of numerical representation to another (Benson)

Nature-based Products
a. Determine Whether The Markedly Different Characteristics Analysis Is Needed To Evaluate a Nature-Based Product Limitation Recited in a Claim
Nature-based products, as used herein, include both eligible and ineligible products and merely refer to the types of products subject to the markedly different characteristics analysis used to identify “product of nature” exceptions. Courts have held that naturally occurring products and some man-made products that are essentially no different from a naturally occurring product are “products of nature” that fall under the laws of nature or natural phenomena exception. To determine whether a claim that includes a nature-based product limitation recites a “product of nature” exception, use the markedly different characteristics analysis to evaluate the nature-based product limitation. A claim that recites a nature-based product limitation that does not exhibit markedly different characteristics from its naturally occurring counterpart in its natural state is directed to a “product of nature” exception (Step 2A: YES).

Care should be taken not to overly extend the markedly different characteristics analysis to products that when viewed as a whole are not nature-based.

A nature-based product can be claimed by itself (e.g., “a Lactobacillus bacterium”) or as one or more limitations of a claim (e.g., “a probiotic composition comprising a mixture of Lactobacillus and milk in a container”). The markedly different characteristics analysis should be applied only to the nature-based product limitations in the claim to determine whether the nature-based products are “product of nature” exceptions. When the naturebased product is produced by combining multiple components, the markedly different characteristics analysis should be applied to the resultant nature-based combination, rather than its component parts. In the example above, the mixture of Lactobacillus and milk should be analyzed for markedly different characteristics, rather than the Lactobacillus separately and the milk separately. The container would not be subject to the markedly different characteristics analysis as it is not a nature-based product, but would be evaluated in Step 2B if it is determined that the mixture of Lactobacillus and milk does not have markedly different characteristics from any naturally occurring counterpart and thus is a “product of nature” exception.

For a product-by-process claim, the analysis turns on whether the nature-based product in the claim has markedly different characteristics from its naturally occurring counterpart. (See MPEP 2113 for product-by-process claims.)

A process claim is not subject to the markedly different analysis for nature-based products used in the process, except in the limited situation where a process claim is drafted in such a way26 that there is no difference in substance from a product claim (e.g., “a method of providing an apple.”).

The markedly different characteristics analysis compares the nature-based product limitation to its naturally occurring counterpart in its natural state. When there is no naturally occurring counterpart to the nature-based product, the comparison should be made to the closest naturally occurring counterpart. In the case of a nature-based combination, the closest counterpart may be the individual nature-based components that form the combination, i.e., the characteristics of the claimed nature-based combination are compared to the characteristics of the components in their natural state.

Markedly different characteristics can be expressed as the product’s structure, function, and/or other properties,28 and will be evaluated based on what is recited in the claim on a case-by-case basis. As seen by the examples that are being released in conjunction with this Interim Eligibility Guidance, even a small change can result in markedly different characteristics from the product’s naturally occurring counterpart. In accordance with this analysis, a product that is purified or isolated, for example, will be eligible when there is a resultant change in characteristics sufficient to show a marked difference from the product’s naturally occurring counterpart. If the claim recites a nature-based product limitation that does not exhibit markedly different characteristics, the claim is directed to a “product of nature” exception (a law of nature or naturally occurring phenomenon), and the claim will require further analysis to determine eligibility based on whether additional elements add significantly more to the exception.

Non-limiting examples of the types of characteristics considered by the courts when determining whether there is a marked difference include:
• Biological or pharmacological functions or activities;
• Chemical and physical properties;
• Phenotype, including functional and structural characteristics; and
• Structure and form, whether chemical, genetic or physical.

If the claim includes a nature-based product that has markedly different characteristics, the claim does not recite a “product of nature” exception and is eligible (Step 2A: NO) unless the claim recites another exception (such as a law of nature or abstract idea, or a different natural phenomenon). If the claim includes a product having no markedly different characteristics from the product’s naturally occurring counterpart in its natural state, the claim is directed to an exception (Step 2A: YES), and the eligibility analysis must proceed to Step 2B to determine if any additional elements in the claim add significantly more to the exception. For claims that are to a single nature-based product, once a markedly different characteristic in that product is shown, no further analysis would be necessary for eligibility because no “product of nature” exception is recited (i.e., Step 2B is not necessary because the answer to Step 2A is NO). This is a change from prior guidance because the inquiry as to whether the claim amounts to significantly more than a “product of nature” exception is not relevant to claims that do not recite an exception. Thus, a claim can be found eligible based solely on a showing that the naturebased product in the claim has markedly different characteristics and thus is not a “product of nature” exception, when no other exception is recited in the claim.

If a rejection under 35 U.S.C. 101 is ultimately made, the rejection should identify the exception as it is recited (i.e., set forth or described) in the claim, and explain why it is an exception providing reasons why the product does not have markedly different characteristics from its naturally occurring counterpart in its natural state.

Flowchart Step 2B (Part 2 Mayo test) - Determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exception.
A claim directed to a judicial exception must be analyzed to determine whether the elements of the claim, considered both individually and as an ordered combination, are sufficient to ensure that the claim as a whole amounts to significantly more than the exception itself – this has been termed a search for an “inventive concept.” To be patent-eligible, a claim that is directed to a judicial exception must include additional features to ensure that the claim describes a process or product that applies the exception in a meaningful way, such that it is more than a drafting effort designed to monopolize the exception. It is important to consider the claim as whole. Individual elements viewed on their own may not appear to add significantly more to the claim, but when combined may amount to significantly more than the exception. Every claim must be examined individually, based on the particular elements recited therein, and should not be judged to automatically stand or fall with similar claims in an application.

The Supreme Court has identified a number of considerations for determining whether a claim with additional elements amounts to significantly more than the judicial exception itself. The following are examples of these considerations, which are not intended to be exclusive or limiting. Limitations that may be enough to qualify as “significantly more” when recited in a claim with a judicial exception include:
• Improvements to another technology or technical field;
• Improvements to the functioning of the computer itself;
• Applying the judicial exception with, or by use of, a particular machine;
• Effecting a transformation or reduction of a particular article to a different state or thing;
• Adding a specific limitation other than what is well-understood, routine and conventional in the field, or adding unconventional steps that confine the claim to a particular useful application; or
• Other meaningful limitations beyond generally linking the use of the judicial exception to a particular technological environment.

Limitations that were found not to be enough to qualify as “significantly more” when recited in a claim with a judicial exception include:
• Adding the words “apply it” (or an equivalent) with the judicial exception, or mere instructions to implement an abstract idea on a computer;
• Simply appending well-understood, routine and conventional activities previously known to the industry, specified at a high level of generality, to the judicial exception, e.g., a claim to an abstract idea requiring no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry;
• Adding insignificant extrasolution activity to the judicial exception, e.g., mere data gathering in conjunction with a law of nature or abstract idea; or
• Generally linking the use of the judicial exception to a particular technological environment or field of use.

For a claim that is directed to a plurality of exceptions, conduct the eligibility analysis for one of the exceptions. If the claim recites an element or combination of elements that amount to significantly more than that exception, consider whether those additional elements also amount to significantly more for the other claimed exception(s), which ensures that the claim does not have a pre-emptive effect with respect to any of the recited exceptions. Additional elements that satisfy Step 2B for one exception will likely satisfy Step 2B for all exceptions in a claim. On the other hand, if the claim fails under Step 2B for one exception, the claim is ineligible, and no further eligibility analysis is needed.

The Interim Guidelines provide for a Streamlined Eligibility Analysis as follows.
For purposes of efficiency in examination, a streamlined eligibility analysis can be used for a claim that may or may not recite a judicial exception but, when viewed as a whole, clearly does not seek to tie up any judicial exception such that others cannot practice it. Such claims do not need to proceed through the full analysis herein as their eligibility will be self-evident. However, if there is doubt as to whether the applicant is effectively seeking coverage for a judicial exception itself, the full analysis should be conducted to determine whether the claim recites significantly more than the judicial exception.

For instance, a claim directed to a complex manufactured industrial product or process that recites meaningful limitations along with a judicial exception may sufficiently limit its practical application so that a full eligibility analysis is not needed. As an example, a robotic arm assembly having a control system that operates using certain mathematical relationships is clearly not an attempt to tie up use of the mathematical relationships and would not require a full analysis to determine eligibility. Also, a claim that recites a nature-based product, but clearly does not attempt to tie up the nature-based product, does not require a markedly different characteristics analysis to identify a “product of nature” exception. As an example, a claim directed to an artificial hip prosthesis coated with a naturally occurring mineral is not an attempt to tie up the mineral. Similarly, claimed products that merely include ancillary nature-based components, such as a claim that is directed to a cellphone with an electrical contact made of gold or a plastic chair with wood trim, would not require analysis of the nature-based component to identify a “product of nature” exception because such claims do not attempt to improperly tie up the nature-based product.

Regardless of whether a rejection under 35 U.S.C. 101 is made, a complete examination should be made for every claim under each of the other patentability requirements: 35 U.S.C. 102, 103, 112, and 101 (utility, inventorship and double patenting) and nonstatutory double patenting.

The guidelines also provide sample analyses based upon earlier Supreme Court decisions.

The December 16, 2014 Interim Guidance can be found here:
https://www.federalregister.gov/articles/2014/12/16/2014-29414/2014-interim-guidance-on-patent-subject-matter-eligibility

09 December 2014

Post-Alice Decision on 35 U.S.C. 101, Software Patent Held Statutory, DDR Holdings, LLC v. Hotels.com, L.P. , Federal Circuit 2014

This is an important recent case in the history of software patents.

Defendants National Leisure Group, Inc. and World Travel Holdings, Inc. (collectively "NLG" hereafter) appealed from a judgment of the U.S. District Court for the Eastern District of Texas in which a judgment was entered in favor of DDR.  A jury found that defendants infringed U.S. Patent Nos. 6,993,572 and 7,818,399, that the claims were valid, and awarded $750,000 in damages.  On appeal to the Federal Circuit, the asserted claims of the '572 patent were held to be anticipated and vacated the award of damages and prejudgment interest.

On the other hand, the Federal Circuit found that the '399 patent included patent-eligible subject matter under 35 U.S.C. 101, and that the claims were valid and infringed.  The '399 patent relates to the problem of retaining website visitors.  Claim 19 was representative and recites:

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.

Claim 19 of the ’399 patent requires that a “data store” hold “visually perceptible elements” (or “‘look and feel’ elements”) that “visually . . . correspond” to a host web page. The host web page must include a link associated with a “buying opportunity” with a merchant. Once a visitor activates this link, the claimed system generates and transmits to the website visitor’s web browser a composite web page that includes product information of the merchant and the “look and feel” of the host website (i.e., “the plurality of visually perceptible elements visually corresponding to the [host web] page”).

Claim 19 further requires that the data store must store “look and feel” descriptions for multiple hosts and that each link must be associated with a particular merchant’s product catalog.

Claim 19 also requires that the merchant, system operator, and host website be “third parties with respect to one another.” When a website visitor activates a link associated with a merchant’s product catalog, the claimed system identifies the host web page and then transmits a composite web page using the proper “look and feel” elements of the host website in the data store and the product information from the associated merchant.

The Federal Circuit noted that in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1294 (2012), the Supreme Court set forth an analytical framework under §101 to distinguish patents that claim patent-ineligible laws of nature, natural phenomena, and abstract ideas—or add too little to such underlying ineligible subject matter—from those that claim patent-eligible applications of those concepts.  First, given the nature of the invention in this case, the Federal Circuit must determine whether the claims at issue are directed to a patent-ineligible abstract idea of the type described in Alice Corp. v. CLS Bank Int’l (see below).  If so, the Federal Circuit should then consider the elements of each claim—both individually and as an ordered combination—to determine whether the additional elements transform the nature of the claim into a patent-eligible application of that abstract idea.  This second step is the search for an “inventive concept,” or some element or combination of elements sufficient to ensure that the claim in practice amounts to “significantly more” than a patent on an ineligible concept.

The Federal Circuit recognized that distinguishing between claims that recite a patent-eligible invention and claims that add too little to a patent-ineligible abstract concept can be difficult, as the line separating the two is not always clear. At one time, a computer-implemented invention was considered patent-eligible so long as it produced a “useful, concrete and tangible result.” This was the test of State St. Bank & Trust Co. v. Signature Fin. Grp., Inc. (Fed. Cir. 1998) (finding a machine that transformed data by a series of mathematical calculations to a final share price to be patent-eligible); see also In re Alappat (Fed. Cir. 1994) (en banc).  This understanding rested, in large part, on the view that such inventions crossed the eligibility threshold by virtue of being in the technological realm, the historical arena for patented inventions. See, e.g. , In re Bilski (Fed. Cir. 2008) (en banc) (concluding that a patent-eligible process must either be “tied to a particular machine or apparatus” or transformed into a different state or thing, i.e., the “machine-or-transformation test”).

While the Supreme Court in Bilski v. Kappos noted that the machine-or-transformation test is a “useful and important clue” for determining patent eligibility, 130 S. Ct. 3218, 3227 (2010), it is clear today that not all machine implementations are created equal.  For example, in Mayo, the Supreme Court emphasized that satisfying the machine-or-transformation test, by itself, is not sufficient to render a claim patent-eligible, as not all transformations or machine implementations infuse an otherwise ineligible claim with an “inventive concept.” “[S]imply implementing a mathematical principle on a physical machine, namely a computer, [i]s not a patentable application of that principle.”) (describing Gottschalk v. Benson, 409 U.S. 63, 64 (1972)).  And after Alice, there can remain no doubt: recitation of generic computer limitations does not make an otherwise ineligible claim patent-eligible.  The bare fact that a computer exists in the physical rather than purely conceptual realm “is beside the point.”

Against this background, the Federal Circuit turned to the ’399 patent’s asserted claims. They began their §101 analysis at Mayo/Alice step one: determining whether the computer-implemented claims at issue here are “directed to” a patent-ineligible abstract idea.  Here, they noted that the ’399 patent’s asserted claims do not recite a mathematical algorithm. Nor do they 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.

The Federal Circuit noted that, indeed, identifying the precise nature of the abstract idea is not as straightforward as in Alice or some other recent abstract idea cases.  NLG’s own varying formulations of the underlying abstract idea illustrate this difficulty. NLG characterizes the allegedly abstract idea in numerous ways, including “making two web pages look the same,” “syndicated commerce on the computer using the Internet,” and “making two e- commerce web pages look alike by using licensed trademarks, logos, color schemes and layouts.”  The dissent characterizes DDR’s patents as describing the entrepreneurial goal “that an online merchant’s sales can be increased if two web pages have the same ‘look and feel.’”

The Federal Circuit stated that under any of these characterizations of the abstract idea, the ’399 patent’s claims satisfy Mayo/Alice step two.

As an initial matter, it is true that the claims here are similar to the claims in the cases discussed above in the sense that the claims involve both a computer and the Internet. But these claims stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.  Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.

In particular, the ’399 patent’s claims address the problem of retaining website visitors that, if adhering to the routine, conventional functioning of Internet hyper-link protocol, would be instantly transported away from a host’s website after “clicking” on an advertisement and activating a hyperlink. For example, asserted claim 19 recites a system that, among other things, 1) stores “visually perceptible elements” corresponding to numerous host websites in a database, with each of the host web-sites displaying at least one link associated with a product or service of a third-party merchant, 2) on activation of this link by a website visitor, automatically identifies the host, and 3) instructs an Internet web server of an “out-source provider” to construct and serve to the visitor a new, hybrid web page that merges content associated with the products of the third-party merchant with the stored “visually perceptible elements” from the identified host website.

The dissent argued that the "store within a store" concept, such as a warehouse store that contains a kiosk for selling a third-party partner's cruise vacation packages, is a pre-Internet analog of the '399 patent's asserted claims.  While that concept may have been well-known by the relevant timeframe, that practice did not have to account for the ephemeral nature of an Internet location or the near-instantaneous transport between these locations, which introduces a problem that does not arise in the brick and mortar context.

The Federal Circuit cautioned that not all claims purporting to address Internet-centric challenges are eligible for patent.  The claims in Ultramercial merely recited the abstract idea of "offering media content in exchange for viewing an advertisement" along with "routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet." 

The '399 patent's claims 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.  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 sequence of events ordinarily triggered by the click of a hyperlink.  Instead of the computer network operating in its normal, expected manner by sending the website visitor to the third-party website that appears to be connected with the clicked advertisement, the claimed system generates and directs the visitor to the above-described hybrid web page.  The claims recite an invention that is not merely the routine or conventional use of the Internet.

This case is helpful in that it is a post-Alice decision that finds software claims to be statutory subject matter.  The key seems to be in not using the Internet or a computer to perform a business practice known from the pre-Internet world.

28 November 2014

Post-Alice Decision on 35 U.S.C. 101, Ultramercial Inc. v. Hulu LLC, Federal Circuit 2014


Ultramercial sued Hulu, YouTube, and WildTangent in 2009 for infringement of a patent related to distributing copyrighted material over the Internet to a consumer at no cost in exchange for viewing an advertisement, with the advertiser paying for the copyrighted material.

WildTangent file a motion to dismiss, alleging that the claims were not statutory under 35 U.S.C. § 101.  The district court granted the motion.  The Federal Circuit reversed.  The Supreme Court vacated the decision and remanded for consideration in view of its decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc.   A unanimous panel of the Federal Circuit again held the claims to be statutory.  WildTangent petitioned for Supreme Court review.  The Supreme Court again vacated the Federal Circuit’s decision and remanded for consideration in view of its more recent decision in Alice v. CLS Bank.  Judge Rader, a voice of reason, had since resigned and Judge Mayer was appointed to take his place. 

Claim 1 of the patent recites:

A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:
    a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;
    a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;
    a third step of providing the media product for sale at an Internet website;
    a fourth step of restricting general public access to said media product;
    a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;
    a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;
    a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;
    an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;
    a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;
    a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and
    an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

According to Alice, the two prong circular logic of Mayo is to be used to determine if claims are directed to statutory subject matter.  The first prong is to determine whether the claims are directed to a patent-ineligible law of nature, natural phenomenon, or abstract idea.   If so, the second prong is to determine whether any additional claim elements transform the claim into a patent-eligible application that amounts to significantly more than the ineligible concept itself.  No definition has been provided by the Supreme Court as to when an idea is abstract.  Similarly, no definition has been provided as to what amounts to “significantly more.” 

In this case, the court conceptualized the claim as relating distributing copyrighted material over the Internet to a consumer at no cost in exchange for viewing an advertisement, with the advertiser paying for the copyrighted material.  The court ignored details of the claim in considering the first prong.

According to the Federal Circuit, claim 1 provided an "ordered combination of steps reciting an abstraction -- an idea, having no particular concrete or tangible form."  In addition, "[t]he process of receiving copyrighted media, selecting an ad, offering the media in exchange for watching the selected ad, displaying the ad, allowing the consumer access to the media, and receiving payment from the sponsor of the ad all describe an abstract idea, devoid of a concrete or tangible application."  While the Court did state that "certain additional limitations, such as consulting an activity log, add a degree of particularity," these limitations were insufficient to provide significantly more.

Further, even though some steps of the claim "were not previously employed in this art [that] is not enough -- standing alone -- to confer patent eligibility upon the claims at issue."

This decision puts patent applicants in a difficult position.  Adding novel subject matter to a claim is not sufficient to render a claim statutory. 

 "Adding routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet does not transform an otherwise abstract idea into patent-eligible subject matter."  Even though the claim recited use of the Internet, which is arguably a concrete, tangible system, the Court reiterated its reasoning from CyberSource Corp. v. Retail Decisions, Inc., stating that "use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under § 101."

Further, the Federal Circuit held that Ultramercial's claims failed both prongs of the machine-or-transformation test.  The only machine recited in the claims was the Internet, which is a "ubiquitous information-transmitting medium, not a novel machine."  As for any sort of transformation elicited by the many steps of claim 1, the Court wrote that "manipulations of public or private legal obligations or relationships, business risks, or other such abstractions" are not transformations "because they are not physical objects or substances, and they are not representative of physical objects or substances."

Consequently, all of Ultramercial's claims were invalid.  The point of Alice seemed to be to allow courts to avoid a complicated novelty analysis if the only hardware in claims was a computer.  The reasoning seemed to be that adding a computer to a conventional process was insufficient to make the claim statutory.  However, in this case there was novelty in the claim that was ignored.

Adapting to this case would seem to require passing the machine or transformation test using more machines than are included in the Internet.

26 October 2014

Post-Alice Decision on 35 U.S.C. 101, buySAFE v. Google, 2014

In buySAFE v. Google, decided by the Federal Circuit on September 3, 2014, claims were held to be invalid as non-statutory in view of 35 U.S.C. 101.  The Federal Circuit affirmed the district court's grant of the defendant's motion to dismiss.

U.S. Patent No. 7,644,019, owned by buySAFE, Inc., claims methods and machine-readable media encoded to  perform steps for guaranteeing a party’s performance of  its online transaction.

A representative method claim is claim 1, which recites:

A method, comprising:
     receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;
     processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party, wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

The Federal Circuit noted that laws of nature, natural phenomena, and abstract ideas, no matter how groundbreaking, innovative, or even brilliant,  are outside what the statute means by “new and useful process, machine, manufacture, or composition of matter,” 35 U.S.C. § 101. See Alice, 134 S. Ct. at 2357; Myriad, 133 S. Ct. at 2116, 2117.

The Federal Circuit then stated that defining the excluded categories, the Supreme Court has ruled that the exclusion applies if a claim involves a natural law or phenomenon or abstract idea, even if the particular natural law or phenomenon or abstract idea at issue is narrow. Mayo, 132 S. Ct. at 1303. Mayo explained the point with reference to both natural laws and one kind of abstract idea, namely, mathematical concepts.
A claim that directly reads on matter in the three identified categories is outside section 101. But the provision also excludes the subject matter of certain claims that by their terms read on a human-made physical thing (“machine, manufacture, or composition of matter”) or a human-controlled series of physical acts (“process”) rather than laws of nature, natural phenomena, and abstract ideas. Such a claim falls outside section 101 if (a) it is “directed to” matter in one of the three excluded categories and (b) “the additional elements” do not supply an “inventive concept” in the physical realm of things and acts—a “new and useful application” of the ineligible matter in the physical realm—that ensures that the patent is on something “significantly more than” the ineligible matter itself, according to the Federal Circuit, in interpreting Alice.

According to the Federal Circuit, the relevant Supreme Court cases are those which find an abstract idea in certain arrangements involving contractual relations, which are intangible entities. Bilski v. Kappos, 561 U.S. 593 (2010), involved a method of entering into contracts to hedge risk in commodity prices, and Alice involved methods and systems for “exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk,” Alice, 134 S. Ct. at 2356. More narrowly, the Court in both cases relied on the fact that the contractual relations at issue constituted “a fundamental economic practice long prevalent in our system of commerce.” Bilski, 561 U.S. at 611; see Alice, 134 S. Ct. at 2356, 2357.

The Federal Circuit went on to say that in simultaneously rejecting a general business method exception to patent eligibility and finding the hedging claims invalid, moreover, Bilski makes clear that the recognition that the formation or manipulation of economic relations may involve an abstract idea does not amount to creation of a business-method exception. The required section 101 inquiry has a second step beyond identification of an abstract idea. If enough extra is included in a claim, it passes muster under section 101 even if it amounts to a “business method.”

The Supreme Court in Alice made clear that a claim directed to an abstract idea does not move into section 101 eligibility territory by “merely requiring generic computer implementation.”

The claims in this case, according to the Federal Circuit, do not push or even test the boundaries of the Supreme Court precedents under section 101. The claims are squarely about creating a contractual relationship—a “transaction performance guaranty”—that is beyond question of ancient lineage.

The Federal Circuit concluded that the claims thus are directed to an abstract idea.

The claims’ invocation of computers adds no inventive concept. The computer functionality is generic—indeed, quite limited: a computer receives a request for a guarantee and transmits an offer of guarantee in return. There is no further detail. That a computer receives and sends the information over a network—with no further specification— is not even arguably inventive. The computers in Alice were receiving and sending information over networks connecting the intermediary to the other institutions involved, and the Court found the claimed role of the computers insufficient.

And it likewise cannot be enough that the transactions being guaranteed are themselves online transactions. At best, that narrowing is an “attempt[] to limit the use” of the abstract guarantee idea “to a particular technological environment,” which has long been held insufficient to save a claim in this context.

According to the Federal Circuit, it is a straightforward matter to conclude that the claims in this case are invalid.

One thing disturbing about this case is the phrase "is not even arguably inventive" that the Federal Circuit used when describing the computer functionality.  If the Federal Circuit requires inventiveness in the hardware, all software patents are invalid.  I don't think this is where we are headed, though.  They also used the term "functionality" which implies that method steps are part of the consideration.

Post-Alice Decision on 35 U.S.C. 101, Planet Bingo v. VKGS, 2014

In Planet Bingo v. VKGS, decided by the Federal Circuit on August 26, 2014, claims were held to be invalid as non-statutory in view of 35 U.S.C. 101.  The Federal Circuit affirmed the district court's decision.

Planet Bingo, LLC, owns two patents for computer-aided management of bingo games. After Planet Bingo filed an infringement action against VKGS, the district court granted summary judgment of invalidity, concluding that the patents do not claim patentable subject matter under 35 U.S.C. § 101.

The Federal Circuit stated that because a straight-forward application of the Supreme Court’s recent holding in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014), led them to the same result, they affirmed.

Generally, the claims recite storing a player’s preferred sets of bingo numbers; retrieving one such set upon demand, and playing that set; while simultaneously tracking the player’s sets, tracking player payments, and verifying winning numbers.

Following a Markman order, VKGS filed a motion for summary judgment that the asserted claims are directed to a patent-ineligible concept. Applying the majority opinion’s approach in CLS Bank International v. Alice Corp., the district court determined that “each method claim encompasses the abstract idea of managing/playing the game of Bingo.”

The Federal Circuit agreed with the district court that there was no meaningful distinction between the method and system claims or between the independent and dependent claims. According to the Federal Circuit, the system claims recite the same basic process as the method claims, and the dependent claims recite only slight variations of the independent claims.

The Federal Circuit stated that the claims here are similar to the claims at issue in Bilski v. Kappos, 130 S. Ct. 3218 (2010), and Alice, 134 S. Ct. 2347, which the Supreme Court held were directed to “abstract ideas.” For example, the claims here recite methods and systems for “managing a game of Bingo.” This is similar to the kind of “organizing human activity” at issue in Alice, 134 S. Ct. at 2356. And, although the ’646 and ’045 patents are not drawn to the same subject matter at issue in Bilski and Alice, these claims are directed to the abstract idea of “solv[ing a] tampering problem and also minimiz[ing] other security risks” during bingo ticket purchases. This is similar to the abstract ideas of “risk hedging” during “consumer transactions,” Bilski, 130 S. Ct. at 3231, and “mitigating settlement risk” in “financial transactions,” Alice, 134 S. Ct. at 2356–57, that the Supreme Court found ineligible. Thus, the Federal Circuit held that the subject matter claimed in the ’646 and ’045 patents were directed to an abstract idea.

Abstract ideas may still be patent-eligible if they contain an “‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.”

Apart from managing a game of bingo, the claims at issue also require “a computer with a central processing unit,” “a memory,” “an input and output terminal,” “a printer,” in some cases “a video screen,” and “a program . . . enabling” the steps of managing a game of bingo.  These elements, in turn, select, store, and retrieve two sets of numbers, assign a player identifier and a control number, and then compare a winning set of bingo numbers with a selected set of bingo numbers.

“[I]f a patent’s recitation of a computer amounts to a mere instruction to ‘implemen[t]’ an abstract idea ‘on . . . a computer,’ . . . that addition cannot impart patent eligibility.” Alice, 134 S. Ct. at 2358 (quoting Mayo, 132 S. Ct. at 1301).  According to the Federal Circuit, in this case the claims recite a generic computer implementation of the covered abstract idea.