Intellectual Ventures I LLC v. Symantec Corp., Trend Micro Incorporated, Federal Circuit 2016 (Software Patents)

It is bad enough that the Supreme Court doesn’t know what it is doing when it comes to software patents. In Alice v CLS, they considered a financial patent that could have easily been invalidated on the grounds of obviousness, and instead invalidated it based on subject matter (35 U.S.C. 101). They didn’t say that financial methods cannot be patented. They did not say that all software patents are invalid. They used a vague framework from a biotech decision. The courts now use an unclear test that involves considering whether the subject matter of the claim is “too abstract” and, if so, whether the claims add “significantly more”.  Neither of these concepts were well defined.   I suppose they were hoping for judicial efficiency in having courts decide that some patents were of subject matter types that aren’t worthy of claim construction or obviousness analyses.

We can forgive the Supreme Court. They are usually dealing with completely different types of cases. They have been waiting for congress to legislate since Gottschalk v. Benson in 1972.

The Federal Circuit, on the other hand, our court of appeals for patent cases, is supposed to have specialized knowledge of patent law. They were formed to bring consistency to the law, an improvement over the inconsistent decisions that were being issued from the various circuit courts of appeal, who were more experienced with criminal law than patent law.

But the Federal Circuit just can’t make up its mind on when software should or should not be patentable. After the recent decision in McRo, which seemed to be taking us towards a “technical effect,” European-style test, that also considers preemption and non-obviousness (as I had predicted when I wrote my summary of Alice v CLS), we get Intellectual Ventures v Symantec. The main opinion, by Judge Dyk, isn’t entirely unreasonable, but just wait until you read Judge Mayer’s concurrence (summarized below, after the discussion of the opinion).

Intellectual Ventures I LLC (“IV”) sued Symantec Corp. and Trend Micro for infringement of various claims of U.S. Patent Nos. 6,460,050, 6,073,142, and 5,987,610. The district court held the asserted claims of the ’050 patent and the ’142 patent to be ineligible under § 101, and the asserted claim of the ’610 patent to be eligible. The Federal Circuit didn’t find any asserted claims to be patent-eligible.

Claim 9 is representative of the ‘050 patent:

9. A method for identifying characteristics of data files, comprising:

  • receiving, on a processing system, file content identifiers for data files from a plurality of file content identifier generator agents, each agent provided on a source system and creating file content IDs using a mathematical algorithm, via a network;
  • determining, on the processing system, whether each received content identifier matches a characteristic of other identifiers; and
  • outputting, to at least one of the source systems responsive to a request from said source system, an indication of the characteristic of the data file based on said step of determining.

The Federal Circuit agreed with the lower court that filtering files/e-mail—is an abstract idea.  Looking a bit at the obviousness question, and conflating 103 and 101 like the Supreme Court did in Alice v CLS, the Federal Circuit stated that it was long-prevalent practice for people receiving paper mail to look at an envelope and discard certain letters, without opening them, from sources from which they did not wish to receive mail based on characteristics of the mail.  The list of relevant characteristics could be kept in a person’s head.  Characterizing e-mail based on a known list of identifiers is no less abstract. The patent merely applies a well-known idea using generic computers “to the particular technological environment of the Internet.”

The Federal Circuit then proceeded to the Mayo/Alice step two to determine whether the claims contain an “inventive concept” that renders them patent-eligible.

The Federal Circuit noted that Indeed, “[t]he ‘novelty’ of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within the § 101 categories of possibly patentable subject matter”,  quoting Diamond v. Diehr, 450 U.S. 175, 188–89 (1981).

They also cite the Mayo Supreme Court decision for a rejection of the Government’s invitation to substitute §§ 102, 103, and 112 inquiries for the better established inquiry under § 101.  Better established?  Really?

The Federal Circuit notes that the steps of the asserted claims of the ’050 patent do not “improve the functioning of the computer itself.”  This gives us a big hint on how to draft software patent applications in the future.  Look for ways that the software is improving the computer.  Perhaps less memory is being used.

IV argued that the ’050 patent “shrink[s] the protection gap and moot[s] the volume problem.”  According to IV, the protection gap is “the period of time between identification of a computer
virus by an anti-malware provider and distribution of that knowledge to its users.”  The volume problem is the “exponential growth in malware and spam,” increasing the amount of antivirus signatures to be downloaded.  However, the asserted claims do not contain any limitations that address the protection gap or volume problem, e.g., by requiring automatic updates to the
antivirus or antispam software or the ability to deal with a large volume of such software.   So a practice pointer is to be sure to add limitations to the claims that solve a technological problem.

Claim 1 is representative of how the ’142 patent screens e-mail, and recites:

1. A post office for receiving and redistributing email messages on a computer network, the post
office comprising:

  • a receipt mechanism that receives an e-mail message from a sender, the e-mail message having at least one specified recipient;
  • a database of business rules, each business rule specifying an action for controlling the delivery of an e-mail message as a function of an attribute of the e-mail message;
  • a rule engine coupled to receive an e-mail message from the receipt mechanism and coupled to the database to selectively apply the business rules to the e-mail message to determine from selected ones of the business rules a set of actions to be applied to the e-mail message; and
  • a distribution mechanism coupled to receive the set of actions from the rule engine and apply at least one action thereof to the e-mail message to control delivery of the e-mail message and which in response to the rule engine applying an action of deferring delivery of the e-mail message, the distribution engine automatically combines the email message with a new distribution list specifying at least one destination post office for receiving the e-mail message for review by an administrator associated with the destination post office, and a rule history specifying the business rules that were determined to be applicable to the e-mail message by at least one rule engine, and automatically delivers the e-mail message to a first destination post office on the distribution list instead of a specified recipient of the e-mail message.

The district court held that the asserted claims of the ’142 software patent are directed to human practicable concepts, which could be implemented in, for example, a brick-and-mortar post office. The Federal Circuit agreed, and found the district court’s analogy to a corporate mailroom to also be useful.

IV itself informed the district court, in its technology tutorial, that in the typical environment, the post office resides on a mail server, where the company’s emails are received, processed, and routed to recipients.  IV stupidly added that, conceptually, this post office is not much different than a United States Postal Service office that processes letters and packages, except that the process is all computer implemented and done electronically in a matter of seconds.

Again conflating 103 and 101 issues, the Federal Circuit found the concept to be well-known and abstract.

Proceeding to step 2, the Federal Circuit considered whether each step does no more than require a generic computer to perform generic computer functions as in Alice. They found that here, that is the case.

Claim 7 was is the only asserted claim of the ’610 patent.  The district court held eligible claim 7 of the ’610 patent.
Claim 7 depends from claim 1, which provides:

1. A virus screening method comprising the steps
of:

  • routing a call between a calling party and a called party of a telephone network;
  • receiving, within the telephone network, computer data from a first party selected from the group consisting of the calling party and the called party;
  • detecting, within the telephone network, a virus in the computer data; and
  • in response to detecting the virus, inhibiting communication of at least a portion of the computer data from the telephone network to a second party selected from the group consisting of the calling party and the called party.

Claim 7 recites:

7. The virus screening method of claim 1 further comprising the step of determining that virus screening is to be applied to the call based upon at least one of an identification code of the calling party and an identification code of the called party.

Unlike the asserted claims of the ’050 and ’142 patents, claim 7 involves an idea that originated in the computer era—computer virus screening.

But the idea of virus screening was well known at the time the application was filed.  Here again, 103 analysis creeps in to the 101 analysis.  A sensible court would skip the 101 analysis altogether and just use obviousness analysis as the real test.  But the Federal Circuit is stuck with the mess that the Supreme Court has created.

The Federal Circuit noted that virus screening is well-known and constitutes an abstract idea. At step two of Mayo/Alice, the Federal Circuit found no other aspect of the claim that is anything but conventional. They stated that just as performance of an abstract idea on the Internet is abstract, so too the performance of an abstract concept in the environment of the telephone network is abstract.

Nor does the asserted claim improve or change the way a computer functions. Claim 7 recites no more than generic computers that use generic virus screening technology.

Judge Meyer wrote separately to make his two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.

He wrote that the Constitution protects the right to receive information and ideas. . . . This right to receive information and ideas, regardless of their social worth, is fundamental to our free society, quoting the Supreme Court decision in Stanley v. Georgia. According to Judge Meyer, patents, which function as government-sanctioned monopolies, invade core First Amendment rights when they are allowed to obstruct the essential channels of scientific, economic, and political discourse.

According to Judge Mayer, although the claims at issue here disclose no new technology, they have the potential to disrupt, or even derail, large swaths of online communication. Suppression of free speech is no less pernicious because it occurs in the digital, rather than the physical, realm. “[W]hatever the challenges of applying the Constitution to ever-advancing technology, the basic principles of freedom of speech and the press, like the First Amendment’s command, do not vary when a new and different medium for communication appears.” Brown v. Entm’t Merchs. Ass’n.

According to Judge Meyer, like all congressional powers, the power to issue patents and copyrights is circumscribed by the First Amendment. Just as the idea/expression dichotomy and the fair use defense serve to keep copyright protection from abridging free speech rights, restrictions on subject matter eligibility can be used to keep patent protection within constitutional bounds. Section 101 creates a “patent-free zone” and places within it the indispensable instruments of
social, economic, and scientific endeavor. Section 101, if properly applied, can preserve the Internet’s open architecture and weed out those patents that chill political expression and impermissibly obstruct the marketplace of ideas.

According to Judge Meyer, most of the First Amendment concerns associated with patent protection could be avoided if the Federal Circuit were willing to acknowledge that Alice sounded the death knell for software patents.

The problem with Judge Meyer’s analysis is that you can’t have a marketplace without property rights.  You would have cheap overseas versions of software that developers spent good money to develop.  Software is one of the few industries in which the U.S. is a net exporter.  Copyright is only effective for protecting against outright copies, not for protecting inventive concepts within software.

Yes, the Internet is an open framework as Judge Meyer notes.  However, it started as ARPANET funded by the Department of Defense.  Why would a private company put R&D money into a new technology and then give it away?  Do we really want the government developing our software?  That might be how things end up if the venture capital firms decide that they will not recoup their investments and if they stop investing in software startups.  When you take away the profit motive for startups, you are left with government or consolidation by large multinationals that happily move jobs overseas.  Well, maybe having the government develop software wouldn’t be all that bad.  It couldn’t be worse than Windows 8.

Hopefully Judge Meyer will not be involved in writing too many software patent decisions.

McRo, Inc., dba Planet Blue v. Bandai Namco Games America, post-Alice decision finding software invention patentable, Federal Circuit 2016 (Software Patents)

This was an appeal from a grant of judgment on the pleadings that the asserted claims of two software patents, U.S. Patent Nos. 6,307,576 (‘‘the ’576 patent’’) and 6,611,278 (‘‘the ’278 patent’’) were invalid.

The software patents relate to automating part of a preexisting 3-D animation method. A prior art method uses multiple 3-D models of a character’s face to depict various facial expressions made during speech. To animate the character as it speaks, the method morphs the character’s expression between the models. The “neutral model” is the 3-D representation of the resting, neutral facial expression of an animated character. The other models of the character’s face are known as “morph targets,” and each one represents that face as it pronounces a phoneme, i.e., makes a certain sound. This visual representation of the character’s face making a sound is also called a “viseme.” Animation of the character and lip synchronization preexisting the invention was generally accomplished by a human animator with the assistance of a computer.

Animators used a ‘keyframe’ approach, where the artist set the appropriate morph weights at certain important times (‘keyframes’)” instead of at every frame. Animators knew what phoneme a character pronounced at a given time from a “time aligned phonetic transcription” (“timed transcript”). This listed the “occurrence in time” of each phoneme the character pronounced.

The patents automate a 3-D animator’s tasks, specifically, determining when to set keyframes and setting those keyframes. This automation is accomplished through rules that are applied to the timed transcript to determine the morph weight outputs. The patents describe many exemplary rule sets that go beyond simply matching single phonemes from the timed transcript with the appropriate morph target. Instead, these rule sets aim to produce more realistic speech by taking into consideration the differences in mouth positions for similar phonemes based on context.

Claim 1 of the ’576 software patent is representative:

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

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

The Federal Circuit noted, as an initial matter, that claim construction is helpful to resolve the question of patentability under §101. (Malhotra Law Firm PLLC does not see how a §101 can be performed without claim analysis).  Specifically, the parties’ dispute about whether the “first set of rules” must evaluate sequential phonemes or can evaluate individual phonemes is resolved by the claim language. The Federal Circuit agreed with McRO that the claims are limited to rules that evaluate sub-sequences consisting of multiple sequential phonemes. This limitation is apparent on the face of the claims.

The defendants did not dispute that processes that automate tasks that humans are capable of performing are patent eligible if properly claimed; instead, they argued that the claims are abstract because they do not claim specific rules.

The Federal Circuit noted that the claimed rules here, however, are limited to rules with certain common characteristics, i.e., a genus, and observed that claims to the genus of an invention, rather than a particular species, have long been acknowledged as patentable. See, for example, the Supreme Court’s decision in Diamond v. Chakrabarty. Patent law has evolved to place additional requirements on patentees seeking to claim a genus; however, these limits have not been in relation to the abstract idea exception to §101. Rather they have principally been in terms of whether the patentee has satisfied the tradeoff of broad disclosure for broad claim scope implicit in 35 U.S.C. §112. E.g., Carnegie Mellon Univ. v. Hoffmann-La Roche Inc., 541 F.3d 1115, 1122 (Fed. Cir. 2008).

According to the Federal Circuit, the preemption concern arises when the claims are not directed to a specific invention and instead improperly monopolize “the basic tools of scientific and technological work.” Alice, 134 S. Ct. at 2354 (quoting Myriad, 133 S.Ct. at 2116). The abstract idea exception has been applied to prevent patenting of claims that abstractly cover results where “it matters not by what process or machinery the result is accomplished.” Morse, 56 U.S. at 113; see also Mayo, 132 S. Ct. at 1301. “A patent is not good for an effect, or the result of a certain process” because such patents “would prohibit all other persons from making the same thing by any means whatsoever.” Le Roy v. Tatham, 55 U.S. 156, 175 (1853).

A patent may issue “for the means or method of producing a certain result, or effect, and not for the result or effect produced.” Diehr, 450 U.S. 175, 182 n.7. The Federal Circuit then looked to their recent Enfish decision and stated that they, therefore, look to whether the claims in these patents focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery. Enfish,
LLC v. Microsoft Corp.; see also Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., No. 2015-1570, 2016 WL 3606624, at *4 (Fed. Cir. July 5, 2016).

Claim 1 of the ’576 patent is focused on a specific asserted improvement in computer animation, i.e., the automatic use of rules of a particular type.  The Federal Circuit disagreed with Defendants’ arguments that the claims simply use a computer as a tool to automate conventional activity. While the rules are embodied in computer software that is processed by general-purpose computers, Defendants provided no evidence that the process previously used by animators is the same as the process required by the claims.

It is the incorporation of the claimed rules, not the use of the computer, that “improved [the] existing technological process” by allowing the automation of further tasks.  Alice.

This was unlike Flook, Bilski, and Alice, where the claimed computer-automated process and the prior method were carried out in the same way. Flook, 437 U.S. at 585–86;  Bilski, 561 U.S. at 611; Alice, 134 S. Ct. at 2356.

Further, the automation goes beyond merely “organizing [existing] information into a new form” or carrying out a fundamental economic practice.  Digitech, 758 F.3d at 1351; see also Alice, 134 S. Ct. at 2356. The claimed process uses a combined order of specific rules that renders information into a specific format that is then used and applied to create desired results: a sequence of synchronized, animated characters. While the result may not be tangible, there is nothing that requires a method “be tied to a machine or transform an article” to be patentable. Bilski, 561 U.S. at 603 (discussing 35 U.S.C. § 100(b)).  The concern underlying the exceptions to § 101 is not tangibility, but preemption. Mayo, 132 S. Ct. at 1301.

Even so, the Federal Circuit has recognized that “the absence of complete preemption does not demonstrate patent eligibility.” Ariosa Diagnostics, Inc. v. Sequenom, Inc., 788 F.3d 1371, 1379 (Fed. Cir. 2015). The narrower concern here is whether the claimed genus of rules preempts all techniques for automating 3-D animation that rely on rules.  Claim 1 requires that the rules be rendered in a specific way: as a relationship between sub-sequences of phonemes, timing, and the weight to which each phoneme is expressed visually at a particular timing (as represented by the morph weight set). The specific structure of the claimed rules would prevent broad preemption of all rules-based means of automating lip synchronization, unless the limits of the rules themselves are broad enough to cover all possible approaches. There was no showing that any rules-based lip-synchronization process must use rules with the specifically claimed characteristics.

The only information cited to the court about the relationship between speech and face shape points to the conclusion that there are many other possible approaches to automating lip synchronization using rules.

The Federal Circuit concluded that, when looked at a whole, claim 1 is directed to a patentable, technological improvement over the existing, manual 3-D animation techniques. The claim uses the limited rules in a process specifically designed to achieve an improved technological result in conventional industry practice. Alice, 134 S. Ct. at 2358 (citing Diehr, 450 U.S. at 177). Claim 1 of the ’576 patent, therefore, is not directed to an abstract idea.

Because the Federal Circuit found that claim 1 is not directed to ineligible subject matter, the Federal Circuit did not reach Alice step two. Enfish, 822 F.3d at 1339.

BASCOM Global Internet Services v AT&T Mobility, post-Alice decision finding software invention patentable, Federal Circuit 2016 (Software Patents)

This was an appeal against a district court decision that the claims of U.S. Patent No. 5,987,606 are invalid as a matter of law under 35 U.S.C. § 101.

The patent relates to preventing the problem of employees from accessing non-work related web sites, such as entertainment web sites, at work. The patent describes its invention as combining the advantages of the then-known filtering tools while avoiding the drawbacks. The claimed filtering system avoids being modified or thwarted by a computer literate end-user, and avoids being installed on and dependent on individual end-user hardware and operating systems or tied to a single local area network or a local server platform by installing the filter at the ISP server.

Individuals are able to customize how requests for Internet content from their own computers are filtered instead of having a universal set of filtering rules applied to everyone’s requests.

The claimed invention is able to provide individually customizable filtering at a remote ISP server by taking advantage of the technical capability of certain communication networks (e.g., using TCP/IP). In these networks, the ISP is able to associate an individual user with a specific request to access a website (or other Internet content), and can distinguish that user’s requests from other users’ requests. One way that the ISP is able to make this association is by requiring each user to first complete a log-in process with the ISP server.

After a user has logged in, the ISP server can associate the user with a request to access a specific website. Because the filtering tool on the ISP server contains each user’s customized filtering mechanism, the filtering tool working in combination with the ISP server can apply a specific user’s filtering mechanism to the websites requested by that user.

The ISP server receives a request to access a website, associates the request with a particular user, and identifies the requested website. The filtering tool then applies the filtering mechanism associated with the particular user to the requested website to determine whether the user associated with that request is allowed access to the website.  The filtering tool returns either the content of the website to the user, or a message to the user indicating that the request was denied.

The patent describes its filtering system as a novel advance over prior art computer filters, in that no one had previously provided customized filters at a remote server.

Claim 1 is representative:

1. A content filtering system for filtering content retrieved from an Internet computer network by individual controlled access network accounts, said filtering system comprising

  • a local client computer generating network access requests for said individual controlled access network accounts;
  • at least one filtering scheme;
  • a plurality of sets of logical filtering elements; and
  • a remote ISP server coupled to said client computer and said Internet computer network, said ISP server associating each said network account to at least one filtering scheme and at least one set of filtering elements, said ISP server further receiving said network access requests from said client computer and executing said associated filtering scheme utilizing said associated set of logical filtering elements.

In the district court, in a motion to dismiss, AT&T analogized the idea of filtering content to a parent or librarian forbidding children from reading certain books, and argued that performing the filtering on the Internet does not make the idea non abstract. Finally, AT&T pointed to each individual limitation of the claims and argued that none of the limitations transforms the abstract idea of filtering content into patent-eligible subject matter because they do no more than recite routine and conventional activities performed by generic computer components.

BASCOM responded by arguing that the claims of the patent are not directed to an abstract idea because they address a problem arising in the realm of computer networks, and provide a solution entirely rooted in computer technology, similar to the claims at issue in DDR Holdings, LLC v. Hotels.com. BASCOM characterized the recent Supreme Court and Federal Circuit decisions invalidating claims under §101 as focusing on claims that are directed to a longstanding fundamental practice that exists independent of computer technology. BASCOM asserted that its claims are different because filtering Internet content was not longstanding or fundamental at the time of the invention and is not independent of the Internet. Finally, BASCOM argued that, even if the lower court found that the claims are directed to an abstract idea, the inventive concept is found in the ordered combination of the limitations: a “special ISP server that receives requests for Internet content, which the ISP server then associates with a particular user and a particular filtering scheme and elements.”

The Federal Circuit started its analysis by agreeing with the district court that filtering content is an abstract idea because it is a longstanding, well-known method of organizing human behavior, similar to concepts previously found to be abstract.

BASCOM argued that the claims are directed to something narrower: the specific implementation of filtering content set forth in the claim limitations. Specifically, BASCOM asserted that claim 1 is directed to the more specific problem of providing Internet-content filtering in a manner that can be customized for the person attempting to access such content while avoiding the need for (potentially millions of) local servers or computers to perform such filtering and while being less susceptible to circumvention by the user.

The Federal Circuit recognized that they sometimes incorporate claim limitations into their articulation of the idea to which a claim is directed (e.g., as they did in Enfish).  This case, however, unlike Enfish, presented a “close call” about how to characterize what the claims are directed to.

The Federal Circuit therefore deferred their consideration of the specific claim limitations narrowing effect for step two.

According to the Federal Circuit, step two involves the search for an “inventive concept.” The “inventive concept” may arise in one or more of the individual claim limitations or in the
ordered combination of the limitations.

An inventive concept that transforms the abstract idea into a patent-eligible invention must be significantly more than the abstract idea itself, and cannot simply be an instruction to implement or apply the abstract idea on a computer.

The Federal Circuit agreed with the District Court that the limitations of the claims, taken individually, recite generic computer, network and Internet components, none of which is inventive by itself.

In this patent, the claims do not merely recite the abstract idea of filtering content along with the requirement to perform it on the Internet, or to perform it on a set of generic computer components. Such claims would not contain an inventive concept according to the Federal Circuit. Nor do the claims preempt all ways of filtering content on the Internet; rather, they recite a specific, discrete implementation of the abstract idea of filtering content. Filtering content on the Internet was already a known concept, and the patent describes how its particular arrangement of elements is a technical improvement over prior art ways of filtering such content.

By taking a prior art filter solution (one-size-fits-all filter at the ISP server) and making it more dynamic and efficient (providing individualized filtering at the ISP server), the claimed invention represents a software-based invention that improves the performance of the computer system itself, according to the Federal Circuit.

The Federal Circuit concluded that, while the claims of the patent are directed to the abstract idea of filtering content, BASCOM adequately alleged that the claims pass step two of
Alice’s two-part framework. BASCOM has alleged that an inventive concept can be found in the ordered combination of claim limitations that transform the abstract idea of filtering
content into a particular, practical application of that abstract idea. The Federal Circuit found nothing that refutes those allegations as a matter of law or justifies dismissal under a motion
under Rule 12(b)(6). The Federal Circuit therefore vacated the district court’s order granting AT&T’s motion to dismiss.

In re: TLI Communications LLC Patent Litigation, Federal Circuit 2016 (Software Patents)

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. 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. 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, they noted that these claims also do not attempt to solve “a challenge particular to the Internet.” DDR Holdings, LLC v. Hotels.com.

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 (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 (Software Patents)

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. 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 (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 (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 (“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.

U.S. Patent and Trademark Office Examples of Abstract Idea Claims (Software Patents)

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 Software Patent Decision, 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 in Alice Corp. Pty Ltd. v. CLS Bank Int’l 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.

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.
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.

Thus, a scanner; i.e., some computer hardware beyond a computer is not enough to convert a patent-ineligible software claim to a patent-eligible claim after Alice.

December 16, 2014 Interim Guidelines on Subject Matter Eligibility of Software Patents

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

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.

Post-Alice Decision on Software Patents, 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 filed 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.