Category: Software Patents

Posted on

Method of Monetizing Copyrighted Content on the Internet Again Found Patent-eligible

Ultramercial v. Hulu and Wildtangent, Dkt No. 2010-1544 (Fed Cir. June 21, 2013)Fig1_USPAT7346545.

Ultramercial sued Hulu, YouTube, and Wildtangent Inc. alleging each infringed U.S. Patent 7,346,545. Hulu and YouTube were dismissed from the case. The trial court granted WildTangent’s motion to dismiss WildTangent from the case on the basis that the ’545 patent did not claim patent-eligible subject matter.

In the first round at the Federal Circuit, the court reversed finding the claimed method of monetizing copyrighted content on the Internet was a patent-eligible process. Then WildTangent appealed to U.S. Supreme Court and the Court vacated the Federal Circuit’s decision discussed below and remanded the case to the Federal Circuit to consider in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012). On remand from the Supreme Court, the Federal Circuit again found that the claimed method of monetizing copyrighted content on the Internet was a patent-eligible process.

The method steps of claim 1 of the ‘545 patent are recited in my original post on this case.

Chief Judge Rader, J. O’Malley and J. Lourie comprised the panel in this case. All agreed that the ‘545 patent recited patent eligible subject matter. But J. Lourie wrote a concurring opinion suggesting that the analysis in this case should track that provided in the plurality opinion that he joined in CLS Bank International v. Alice Corp., __ F.3d __,  (Fed. Cir. May 10, 2013) (Lourie, Dyk, Prost, Reyna, & Wallach, JJ.,plurality opinion). It is quite surprising to suggest that the reasoning of a plurality opinion should be followed as binding precedent. C.J. Rader and J. O’Malley were supportive of a broad view of patent eligible subject matter in the CLS Bank case, whereas J. Lourie took a more narrow view–which is reflected in the opinions in this case.

Meaningful Limitations. The majority noted that assessing whether a claim was impermissably directed to an abstract idea involves a two step inquiry. The first is whether the claim involves an intangible abstract idea. And second, if so, then whether “meaningful limitations in the claim make it clear that the claim is not to the abstract idea itself, but to a non-routine and specific application of that idea.” When meaningful limitations narrow the scope of the claim so that the claims do not preempt all uses of the abstract concept, then the claim is less likely to be considered impermissably claiming an abstract idea. This is true because the application of an abstract idea can be patent eligible.

The majority noted that “with a claim tied to a computer in a specific way, such that the computer plays a meaningful role in
the performance of the claimed invention, it is as a matter of fact not likely to preempt virtually all uses of an underlying abstract idea, leaving the invention patent eligible.” It also noted that inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they are not patent eligible. The court also noted that “unlike the Copyright Act which divides ideas from expression, the Patent Act covers and protects new and useful technical advance, including applied ideas.”

Wrenching the Meaning of Abstract. After reciting the 10 claims limitations from claim 8 of the ‘545 patent, the court concluded that “it wrenches meaning from the word [abstract] to label the claimed invention abstract.” The claim did not “cover the use of advertising as currency disassociated with any specific application of that activity.” The district court erred in stripping away the limitations and focusing on the asserted core of the invention. One of the claim steps included “providing said media product for sale on an Internet website” required a computer and the internet.

No Preemption of all Advertising. The court noted that the claims at issue here presented no risk of preempting all forms of advertising, let alone advertising on the internet.  Further the claims were not directed to purely mental steps because, in part, the claims require a controlled interaction with a customer over the Internet website.

Overly Detailed Claims Not Required. The court noted that the claims did not specify any particular mechanism–such as FTP, email, streaming–for delivering media content to the customer. Yet the court found this did not render the claimed subject matter impermissibly abstract.

Comment. Judges from both sides of the CLS Bank case agreed that the claims in this case were not impermissibly abstract. This is the correct result. When a computer and the internet are integral components to the claimed process, the process does not preempt all uses of the underlying idea, and the process cannot be performed mentally or on paper, the claim is generally not abstract.

Here it appears that the subject matter–serving advertisements over the internet–is an inherently technology based invention. In other words, it is not something that could be carried out in one’s mind or on paper. In contrast, the claim steps in CLS Bank were capable of being performed on paper, if not directly as mental steps. Therefore, claims directed to processes that are carried out with a computer, but could also be performed in ones mind or on paper, will have a harder time overcoming the abstractness challenges with the five member plurality in CLS Bank.

This case shows that inherently technology based inventions still have a reasonable chance of being claimed in a way that will be found patent eligible with members of the Federal Circuit that are more hostile to software patents. Nonetheless the outcome of patent eligibility challenges related to software based patents are still quite uncertain and dependent on the panel of judges that are assigned to a given case at the Federal Circuit.

 

 

 

 

Posted on

CLS Bank v. Alice on Software Patentability: Can System Claims With Integral Tangible Components be Abstract?

CLS Bank v. Alice Corp., Dkt. No. 2011-1301 (Fed. Cir. May 10, 2013) (en banc).

Previously I noted that the USPTO told its Patent Examining Corps that the Federal Circuit’s decision in CLS Bank v. Alice, Dkt. No. 2011-1301 (Fed. Cir. May 10, 2013) resulted in “no change in examination procedure for evaluating subject matter eligibility.” In this post I will summarize the various opinions in CLS Bank.

The district court held that certain claims of Alice’s U.S. Patents 5,970,479 (the “’479 patent”), 6,912,510 (the “’510 patent”), 7,149,720 (the “’720 patent”), and 7,725,375 (the “’375 patent”) are invalid under 35 U.S.C. § 101 as being directed to patent in-eligible subject matter.

Result without Agreement on Reasons. On May 10, 2013 the Federal Circuit issued its en banc opinion in CLS Bank v. Alice, Dkt. No. 201. The court’s main per curiam opinion provided, in total:

Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.

 

The court was sharply divided across six separate concurring and dissenting opinions. A majority of the judges could not agree on the reason for the result. Therefore as noted by Judge Newman, the en banc review was hoped to provide certainty regarding the bounds of patentable subject matter by providing an objective standard, but this failed as a majority of the court could not agree on such a standard. As Newman stated regarding the CLS Bank opinion. “…we have propounded at least three incompatible standards, devoid of consensus, serving simply to add to the unreliability and cost of the system of patents as an inventive for innovation.” Newman Op. at 1-2. Therefore the result of future appeals in the area of software subject matter will depend on the random selection of the panel of judges hearing the particular appeal, unless the case is resolved by the Supreme Court or by a later en banc case at the Federal Circuit.

Summary By Opinion

  • Judges Lourie, Prost, Reyna, and Wallach. Judge Lourie would have invalidated Alice’s methods, computer-readable media, and systems claims as claiming patent ineligible subject matter.
  • Chief Judge Rader and Moore would invalidate Alice’s methods and computer-readable media claims, but upheld the system claims.
  • Judges Linn and O’Malley would have upheld all the claims as patent eligible.
  • Judge Newman would have upheld all the claims as patent eligible.

Summary by Claim Type

  • Method Claims:
    • Valid: Linn, O’Malley, and Newman
    • Invalid: Lourie, Dyk, Prost, Reyna, Wallach, Rader, and Moore
  • Computer-Readable Media Claims
    • Valid: Linn, O’Malley, and Newman
    • Invalid: Lourie, Dyk, Prost, Reyna, Wallach, Rader, and Moore
  • System Claims
    • Valid: Rader, Moore, Linn, O’Malley, and Newman
    • Invalid: Lourie, Dyk, Prost, Reyna, and Wallach

J. Lourie: All  Claims Not Patent-Eligible

Method claims. Claim 33 of the ‘479 patent was a representative method claim:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

J. Lourie, joined by J. Prost, Reyna, and Wallach,  found this claim describes the concept of reducing settlement risk by facilitating a trade through a third party, which is an abstract idea. Then the issue was whether the claim adds “significantly more” to the abstract idea. J. Lourie found that none of the limitations in the claim added anything of substance to the claim beyond the abstract idea.

J. Lourie found that the computer limitation (the parties agreed that claim 33 required a computer) was nothing more than an “insignficant post solution activity.” J. Lourie stated that “At its most basic, a computer is just a calculator capable of performing mental steps faster than a human could.”  J. Lourie continued, “Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent ability.”

Computer-Readable Medium Claims. Claim 39 is a representative computer-readable medium claim, partly reproduced below:

39. A computer program product comprising a computer readable storage medium having computer readable program code embodied in the medium for use by a party to exchange an obligation between a first party and a second party, the computer program product comprising:

program code for causing a computer to send a transaction from said first party relating to an exchange obligation arising from a currency exchange transaction between said first party and said second party; and

program code for causing a computer to allow viewing of information relating to processing, by a supervisory institution…

By looking passed “drafting formalities” J. Lourie found that claim 39 was not truly drawn to a specific computer readable medium, rather than the underling method of reducing settlement risk using a third party intermediary. Therefore, J. Lourie would find the medium claims ineligible.

System Claims. Claim 1 of the ‘720 patent is a representative of the contested system claims, partly reproduced below:

1. A data processing system to enable the exchange of an obligation between parties, the system comprising:

a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and

a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit records…

J. Lourie asserted that the computer-based limitations recited in the system claims cannot support any meaningful distinction from the computer-based limitations that failed to supply an “inventive concept” to the related method claims. J. Lourie asserted that the system claims recited a handful of computer components in generic, functional terms that would encompass any device capable of performing the same ubiquitous calculations, storage, and connectivity functions required by the method claims.

J. Lourie stated that “No question should have arisen concerning the eligibility of claim to basic computer hardware under 101 when such devices were first invented.” The judge further stated, “But we are living and judging now . . . and have before us not the patent eligibility of specific types of computer or computer components, but computers that have routinely been adapted by software consisting of abstract ideas, and claimed as such, to do all sorts of tasks that formerly were performed by humans.”  Further the judge stated, “Abstract methods do not become patent-eligible machines by being clothed in computer language.”

Rader Opinion: System Claims Not Abstract

The opinion by C.J. Rader, J. Linn, Moore, O’Malley (the “Rader Opinion”), noted that “any claim can be stripped down, simplified, generalized, or paragraphed to remove all of its concrete limitations, until at its core, something that could be characterized as an abstract is revealed.” “Such an approach would ‘if carried to its extreme, make all inventions unpatentable because all inventions can be reduced to underlying principles of nature  which, once known, make their implementations obvious. ” Further, “A court cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims.”

The Rader Opinion concluded that “where the claim is tied to a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention, and the claim does not preempt virtually all uses of the underlying abstract idea, the claim is patent eligible.” The Rader Opinion found the system claims patent eligible noting that there were four separate structural components in the system claims: a computer, a first party device, a data storage unit, and a communications controller. The specification provided tat the core of the system hardware is a collection of data processing units” so that the structural and functional limitations were not mere conventional post-solution activities. The Rader Opinion concluded that labeling the claimed system an abstract concept “wrenches all meaning from those words, and turns a narrow exception into one which may swallow the expansive rule.

The Part VI of Rader Opinion joined by only J. Moore, found that the method and medium claims were not patent eligible.

J. Moore: The Death of Technology Patents Under J. Lourie’s View

J. Lourie’s view has broad negative implications for protecting software and technological inventions. As noted in Judge Moore’s opinion,  “If all of these claims, including the system claims are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents.” Moore noted that if all the claims at issue in CLS Bank were invalid then “so too are the 320,799 patents which were granted from 1998-2011 in the technology area ‘Electrical Computers, Digital Processing Systems, Information Security, Error/Fault Handling.'” In J. Moore’s view “if the reasoning of Judge Lourie’s opinion were adopted it would decimate the electronics and software industries.” Moore Op. at 2, note 1.

J. Moore noted that in In re Alappat, 33 F. 3d 1526, the court held patent-eligible a claim that would read on a general purpose computer programmed to carry out the operations recited in the claims. On page 8 and 9 of the slip opinion, J. Moore correctly noted that the distinction between hardware and software is not helpful as programs written in software could also be hard-programed in hardware. J. Moore stated software effectively “rewires a computer, making it a special purpose device capable of performing operations it was not previously able to perform.”

J.Moore noted that if the system claims in this case did not clear the 101 hurdle, “then the abstract idea exception will be insurmountable bar for innovators of software financial systems and business methods, as well as for those in the telecommunications field.” J. Moore stated:

“Every software patent makes a computer perform different functions–that is the purpose of software. Each Software program creates a special purpose machine, a machine which did not previously exists (assuming the software is novel). The machine ceases to be a general purpose computer when it is running the software. It does not, however, by virtue of the software it is running, become an abstract idea.”

J.Moore provided that the heavy lifting for considering the inventiveness of such systems claims directed at a computer running specific software is not abstractness under section 101 but rather is the novelty (newness) requirement of section 102 and the non-obviousness requirement of section 103. Section 102 and 103 can handle knocking out patents directed to inventions that merely take a known or abstract idea and put it on a computer.

 J. Linn’s Opinion: All Claims Patent Eligible under the District Court’s Construction

J. Linn and O’Malley (the Linn opinion) would have found all the method, medium, and system claims patent eligible. The J. Linn opinion noted that because of the procedural stage of the case, the parties and the trial court agreed that the claims should be construed in Alice’s favor and that the method and medium claims required a computer. Therefore the Linn Opinion would have found all the claims as construed by the district court to be patent eligible.

Further the Linn Opinion acknowledged the concerns expressed by Amici Curiae: Google, Dell, Facebook, Intuit, Rackspace, Red Hat, Zynga and Internet retailers regarding the proliferation and aggressive enforcement of low quality software patents.  However, J. Linn noted that Congress could make changes in the law, but broadening what is a narrow exception to the statutory definition of patent eligible should not be the vehicle to address the concerns through the courts.

J. Newman: Section 101 is a Course Filter – All Claims Patent Eligible

J. Newman would have found all claims patent eligible. Newman’s opinion set forth three principles: (1) section 101 is an inclusive statement of patent-eligible subject matter, (2) the form of the claim does not determine section 101 eligibility, and (3) experimental use of patented information is not barred.  Newman stated that there is no need for an all purpose definition of “abstractness” or “preemption” as was “heroically” attempted in the various opinions. Newman wants a very broad section 101 interpretation that would let the other provisions of the patent act do the work in determining patentability such as novelty, utility, prior art, obviousness, description enablement.

Conclusions

C.J. Rader, J. Linn, and J. Moore’s views are the best approach to section 101 patent eligible subject matter regarding system claims. When a claim includes computer or electronic elements that are more than mere post solution activities, those are specific tangible items that cannot reasonably be said to be “abstract.” As for J. Lourie’s opinion providing the view to get to the  gist of the claim, that is a slippery slope and there is no principled way to distinguish when to ignore tangible components of a claim to get to the gist of the underlying claim and when those tangible components should not be ignored.  Every claim term should be considered.

Further, J. Linn is correct that the concerns regarding low quality patents are not best remedied a broad judicially created “abstractness” exception that interprets system claims with integral tangible components as abstract. The issues regarding technology patents should be handled by Congress or through other patent requirements regarding novelty (102) and non-obviousness (103).  As noted in several opinions, every claim can be reduced to an abstract concept by stripping away the details and components. However, if such an approach is taken, the exception could expand to swallow the patentability of all inventions.

 Practice Tip

In view of this decision, patent applications directed to software or were the invention utilizes software should include at least one set of system claims because, of all the claim types of Alice patents, the system claims garnered the most support from judges regarding patent eligibility.

 

Posted on

USPTO: No Change to Software Patent Eligibility Examination After CLS Bank

In a memo dated May 13, 2013, the USPTO told its Patent Examining Corps that the Federal Circuit’s decision in CLS Bank v. Alice, Dkt. No. 2011-1301 (Fed. Cir. May 10, 2013) resulted in “no change in examination procedure for evaluating subject matter eligibility.”

On May 10, 2013 the Federal Circuit issued its en banc opinion in CLS Bank v. Alice, Dkt. No. 201. The court’s main per curiam opinion provided, in total:

Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.

The court was sharply divided across six separate opinions.

The USPTO memo provided that several important themes emerged from the various separate opinions:

  •  There was agreement that the test for eligibility is not a rigid, bright line test and must be made by evaluating a claim as a whole, on a case-by-case basis, using a flexible approach.
  • Many of the judges explicitly noted that the test for eligibility is a separate and distinct inquiry from other patentability concerns, particularly novelty and obviousness.
  • It was generally agreed that when evaluating the claim as a whole the claim must be analyzed to determine whether the additional limitations add significantly more, or in other words add meaningful limits, to the abstract idea or law of nature.

The memo concludes by stating that the USPTO will continue to study the decision in CLS Bank and will consider whether further detailed guidance is needed on patent subject matter eligibility under 35 USC 101.

Software patents claims through system claims should still be patentable under the CLS Bank decision because the court was equally divided. An equally divided court provides no majority position with respect to the system claims at issue.

 

 

Posted on

Real Estate Software Patent: User Action Steps Prevent Direct Infringement

US5032989Fig3Move, Inc. v. Real Estate Alliance Ltd., Dkt. No. 2012-1342 (Fed. Cir. March 4, 2013)

Move sought declaratory judgement of non-infringement of two of Real’s patents, U.S. 5,032,989 and U.S. 4,870,576. Real counterclaimed  that Move’s “Search by Map” and “Search by Zip Code” website functions infringed the patents. The district court issued summary judgement of non-infringement.

Claim 1 of the ‘989 patent was at issue on appeal and was directed to a method for locating real estate properties using a zoom enabled map on a computer. Claim 1 provided:

1. A method using a computer for locating available real estate properties comprising the steps of:

(a) creating a database of the available real estate properties;
(b) displaying a map of a desired geographic area;
(c) selecting a first area having boundaries within the geographic area;
(d) zooming in on the first area of the displayed map to about the boundaries of the first area to display a higher level of detail than the displayed map;
(e) displaying the first zoomed area;
(f) selecting a second area having boundaries within the first zoomed area;
(g) displaying the second area and a plurality of points within the second area, each point representing the appropriate geographic location of an available real estate property; and
(h) identifying available real estate properties within the database which are located within the second area.

Direct Infringement. In a prior appeal the Federal circuit determined that “selecting an area” as recited in steps (c) and (f) of claim 1 meant that “the user or a computer chooses an area having boundaries, not when the computer updates certain display variables to reflect the selected area.”

The Move system allowed the user to select a predefined area, such as a city, and the system would then zoom into the map according to the predefined boundaries of the area. The court found that the system did not “select an area having boundaries” by showing the predefined area after a user selected the area. Rather the computer just retrieved the map associated with the user’s choice. Therefore Move did not directly carry out the (c) and (f) steps of the claim.

Since Move did not directly carry out all of the steps, it must have direct or control over the performance of the missing steps by another party to be liable for direct infringement. The court found that it did not exert the required direction or control over its users to be liable for direct infringement.

Indirect infringement. The Federal Circuit found that the district court did not conduct the required analysis as to whether Move could be liable for inducing infringement by inducing its users to perform the claimed steps that Move did not itself perform.

Claim Language Suggestions. To allow for direct infringement, the claims could have been worded differently. Assuming the following was supported by the specification and permissible by the prior art, step (c) could have provided “receiving from a user a selection of a first area having boundaries within the geographic area” and step (f) could have provided “receiving from a user a selection of a second area having boundaries within the first zoomed area.” Such language might provide a better case for direct infringement.

[gview file=”http://www.waltmire.com/blog/wp-content/uploads/2013/03/FedCir_Move_v_Real_2012-1342.pdf”]

Posted on

Gambling Machine Patents: Claims Requiring Player Action Raise Indirect Infringement Issues

USPatent7056215Aristocrat Tech. Australia v. Int’l Game Tech., Dtk No. 2010-1426 (Fed. Cir. 2013).

Aristocrat sued IGT alleging that IGT’s gambling game devices infringed U.S. Patent No. 7,056,215 (“the ’215 patent”) and U.S. Patent No. 7,108,603 (“the ’603 patent”). The district court granted summary judgment of non-infringement. This case presented an issue of direct vs. indirect infringement because certain claim language was interpreted to require a user/player to perform a step. In order for a party to be liable for direct infringement, “that party must commit all the acts necessary to infringe the patent, either personally or vicariously.” Therefore, in this case, if a player/user was required to perform a step, then IGT would not be liable for direct infringement.

Claim construction. Claim 1 of the ‘215 patent provided system included the following disputed claim language: (1) “awarding said one progressive prize” and (2) “making a wager”.

The Federal Circuit found that “awarding said one progressive prize” required the conferring of rights from the operator of the game to the player and not simply displaying the amount of the prize won. Therefore the actions by IGT’s employees in testing the game were not an infringing activity because during the testing of gaming machines legal entitlement to a prize is never conferred upon IGT employees.

The court also found that “making a wager” meant “betting, which is an act performed by the player” not simply processing a bet by the device.

Direct Infringement. The court found that under the properly construed claims no single actor performed all the steps of the claim. Further the court found that the acts of the user/player could not be imputed to the casino. The court stated “One party’s direction or control over another in a principal-agent relationship or like contractual relation-ship operates as an exception to this general rule, but absent that agency relationship or joint enterprise, we have declined to find one party vicariously liable for another’s actions.” The court found that IGT had no relationship with the player so as to impute the actions of the player to IGT. As a result, the court found no direct infringement.

Indirect infringement. The court reversed and remanded on the issue of indirect infringement, allowing the plaintiff to press its indirect infringement claims. The court stated, “[a] party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.”

[gview file=”http://www.waltmire.com/blog/wp-content/uploads/2013/03/FedCirAristocrat_v_InternationalGame10-1426.pdf”]

Posted on

Federal Circuit to Consider When A Computer-Implemented Invention Is Patentable

CLS Bank International v. Alice Corporation, No. 2011-1301 (Fed. Cir. 2012) (Order granting en banc rehearing).

The Federal Circuit Court of Appeals has granted an en banc rehearing in the CLS Bank case. As I previously discussed, the majority of a panel found CLS patents directed to using an intermediary in a financial transaction were valid and enforceable. The majority asserted that “when-after taking all the claim recitations into consideration-it is not manifestly evident that the claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under  § 101.” The dissent criticized the majority’s manifestly evident test.

The result in CLS Bank appeared to be in conflict with a prior panel’s decision in Bankcorp v. Sun Life, where a method of managing stable value protected life insurance policy was found not patent eligible.

The Federal Circuit will now rehear CLS Bank en banc, considering the following two questions:

1. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

2. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?

Posted on

New Manifestly Evident Test Maintains Broad View of Patent Eligible Subject Matter

CLS Bank International v. Alice Corporation, Dkt No. 2011-1301 (Fed Cir. July 9, 2012) [11-1301 Opinion]. 

CLS sued Alice for declaratory judgement that  U.S. Patent No. 5,970,479, 6,912,510, 7,149,720, and 7,725,375 owned by Alice were invalid, unenforceable, or otherwise not infringed. The district court held that each of Alice’ s patents were invalid under section 101 for failure to claim patent eligible subject matter. The Federal Circuit reversed maintaining a broad view of patentable subject matter.

Representative Claim 33 of the ‘497 patent provides: A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these [sic] transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing one of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

Manifestly Evident Test.The Federal Circuit found that the district court took too narrow a view of patent eligible subject matter . The Federal Circuit introduced a new manifestly evident test which provides, “when–after taking all the claim recitations into consideration–t is not manifestly evident that the claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under  § 101.” The court continued, “It would undermine the intent of Congress to extend a judicially-crafted exception to the unqualified statutory eligibility criteria of § 101 beyond that which is ‘implicitly’ excluded as a ‘fundamental truth’ that is ‘free to all mend and reserved exclusively to none.’ ” (citing Bilski v. Kappos, 130 S. Ct. 3218 (2010)).  The court further stated that “Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching the idea to a specific application, it is inappropriate to hold the claim is directed to patent ineligible ‘abstract idea’ under 35 U.S.C. § 101.”

The Federal Circuit found that the claims of the ‘720 and the ‘375 Patents each had explicit machine limitations. ’720 Patent col.65 ll.42- 48 (“A data processing system . . . comprising a data  storage unit . . . ; and a computer . . . .”); ’375 Patent col.68 ll.5-7 (“A computer program product comprising a computer readable storage medium having computer readable program code embodied in the medium . . . .”). The court found these machine limitations could not be ignored and they were not “insignificant post solution activity.”

Electronic Adjustment Implicates a Machine. Regarding the method claims of the ‘510 patent, the Federal Circuit found that they each provided an “electronic adjustment” limitation, which implicated a machine under the machine-or-transformation test.  The court noted that the CLS agreed that the electronic adjustment required a computer, which was consistent with the patent specification.

Shadow Credit Record Implicates a Machine. Regarding the method claim of the ‘479 patent recited above, the court noted that the claims did not have the “electronic adjustment” limitation, but the claims did contain a “shadow credit record” and a “shadow debit record”, which when read in light of the specification, required a computer implementation. As a result the “shadow credit record” and “shadow debit record” where sufficient to implicate a machine under the machine under the machine-or-transformation test.

The court acknowledged that the mere fact of a computer implementation alone does not resolve the patent eligibility question. The court stated that it was not computer implementation, but the claims as a whole that make the invention patentable.

Dissent. Judge Prost criticized the majority’s manifestly evident test. The dissent asserted that the claims were merely directed to the basic idea of using an intermediary in a financial transaction, which the dissent noted existed since the Early Roman Empire. The dissent asserted that the representative claim 33 of the ‘479 patent involves four simple steps: (a) creating a debit and credit account for each party, (b) checking  the account balances in the morning, (c) adjusting the account balances through the day, and (d) paying the parties at the end of the day if both parties have performed. The dissent dismissed any patentable significance being attached to “shadow records.” The dissent asserted that shadow records are simply used to define an account that is used to ptrack a party’s payments and that any financial intermediation would do this.

The Dissent further noted that the invention is focused on the financial transaction and not the computer implementation. The dissent noted that the ‘disclosure of the invention” section of  the ‘720 Patent almost exclusively discusses the concept of risk minimization in financial transactions. There are no statements that the computer implementation is an advancement in the art and instead provides that the object of the invention can be “achieved by a computing/telecommunications infrastructure that is capable of being accessed worldwide by any enterprise/individual having access to a computer and a telephone network.” The dissent asserts that the rest of the specification is devoid of any teaching for how one implements computer systems.

Focus on Whether Inventive Aspects are Abstract. The Dissent asserts that “we must look beyond the non-inventive aspects of the claims and ask whether the remaining portion is and abstract idea.”

Posted on

Yahoo Sues Facebook Alleging Infringement of 10 Patents

Yahoo! Inc. v. Facebook Inc., Dkt. 12-cv-01212 (N.D. Cal. March 12, 2012). [Complaint]

Yahoo filed suit against Facebook on March 12, 2012 alleging infringement of 10 patents. The patents fall into five categories (1)  online advertising, (2) user privacy, (3) customized content for users, (4) social networking, and (5) user to user communications through messaging.

The patents corresponding to each category include (1) U.S. Patent No. 6,907,556; 7,100,111; 7,373,599; 7,668,861 (2) 7,3736,590; 7,599,935 (3) 7,373,509;  5,983,227 (4) 7,747,648 and (5) 7,406,501.

The complaint alleges that Facebook copied technology developed by Yahoo. The complaint quotes Mark Zuckerberg as saying “The thing that’s been really surprising about the evolution of Facebook is–I think then and I think now–that if we didn’t do this someone else would have done it . . . Getting there first is not what it’s all about.” In other words, Yahoo asserts that Facebook admits that it copies the technology of others, because they were not first to develop the technology.

Posted on

MySpace and Craigslist Invalidate Patents on Database with User Creatable and Categorizable Entries

MySpace, Inc. v. Graphon Corp., Dkt. No. 2011-1149 (Fed. Cir. March 2, 2012).

MySpace and Craigslist sued Graphon for declaratory judgement of non-infringement of U.S. Patent Nos. 6,324,538, 6,850,940, 7,028,034, and 7,269,591 (patents in suit). Graphon counterclaimed for patent infringement. The district court found the claims at issue in the patents in suit were invalid as either anticipated or obvious based upon a system called the Mother of all Bulletin Boards (MBB) and the Federal Circuit agreed.

User Manipulable Database Entries. The patents in suit were directed to a method and apparatus that allowed a user to create, modify, and search for a database record over a computer network. The inventors of the patents in suit claimed the prior systems, like Yahoo! directory, provided that the search engine operator rather than the users would categorize website listings. Under this system of categorization, the categorizer would miscategorize entries without user input. The inventors attempted to overcome this problem by allowing users to create and edit one or more database entries with their own text and graphics and then to create for each entry searchable categories that best matched the information in each entry.

Prior Art. Before the earliest priority date of the patents in suit, the Mother of all Bulletin Boards (MBB) was developed at the University of Colorado. The MBB allows the creation of an Internet catalogue that grew through user input without intervention from an administrator. The data in the MBB system was stored hierarchically as apposed to relationally (e.g. a relational database).

“Database” Includes Hierachical and Relational. The Federal Circuit found that the disputed claim term “database” included both hierachical and relational databases in the patents in suit. Therefore, the MBB’s use of a hieracrchical system met the claim term “database” and therefore resulted in the invalidity of the subject claims of the patents in suit. The court noted that the term “database” is generally understood to include different types of data organization systems, including hierarchical and relational systems. The court rejected Graphon’s argument that the written description and the prosecution history of the patents in suit indicate that the term database should be limited to relational database. If the term was so limited, the MBB would likely not invalid the patents in suit. The court found that the written description described features contained in multiple types of databases and therefore the term database could not be limited to relational databases.

Written Description & Reading in Limitations. The court explain that two principles on claim construction were complementary rather than competing. The first principle is that the written description is the best source for understanding the technical meaning of a claim. The second principle is that limitation from the written description cannot be read into the claims absent a clear intention by the patentee. The court explained that there are two limiting factors during claim construction–what was invented and what was claimed. A patentee can claim less than was invented, but never more than was invented. The court directed that we look to the entire patent to determine what was invented. Yet to determine what was claimed, the precise words of a claim are to be reviewed and the written description is used as an aid in understanding those words.

Address Patentable Subject Matter First? The dissent argued that before considering whether the patents in suit were invalid as obvious or anticipated, the court had a duty in the first case to determine whether the patents claimed patentable subject matter under section 101, even if the issue was not raised by the parties or the trial court. The majority rejected this approach. The majority noted the difficulty that courts had in defining the bounds of patentable subject matter. The majority stated that validity determinations under section 102, 103, 112 (anticipation, obviousness, and enablement) are the best approach to resolving most cases. These approaches avoid the search for universal truths that may be necessary when searching the bounds patentable subject matter under section 101. However, the court did not say that section 101 could never be raised first in a patent suit. Yet in first looking to sections 102, 103, and 112, the court said that questions of patent validity could be concluded in many cases without wading into the “murky morass that is section 101 jurisprudence.”

Posted on

“For” Interpreted as Must Perform v. Capable of Performing

Typhoon Touch v. Dell Inc., et al., Dkt. No. 2009-1589 (Fed. Cir. Nov. 4, 2011).

Typhoon sued Dell, Lenovo, San Due Ventures, Toshiba, Fujitsu, Panasonic, Apple, and HTC alleging infringement of US Pat. Nos. 5,379,057 and 5,675,362, each patent directed to a portable computer with touch screen. The appeals court reviewed the district courts finding of non-infringement and invalidity.

Claim 12 of the ‘057 patent is a representative claim, with terms in dispute emphasized:

A portable, keyboardless, computer comprising:

an input/output device for displaying inquiries on a touch-sensitive screen, said screen configured for entry of responses to said inquiries;

a memory for storing at least one data collection application configured to determine contents and formats of said inquiries displayed on said screen;

a processor coupled to said memory and said in-put/output device for executing said data collection application; and

an application generator for generating said data collection application and for creating different functional libraries relating to said contents and said formats displayed on said screen, said applica-tion generator further comprising means for cross-referencing responses to said inquiries with possible responses from one of said libraries; and

a run-time utility operating in conjunction with said processor to execute said application and said libraries to facilitate data collection operations.

Must Perform v. Capable of Performing. Typhoon argued that the district court erred in construing the claim term “a memory for storing at least one data collection application configured to determine contents and formats of said inquiries displayed on said screen.” The district court found that the memory must perform the recited function.  Typhoon argued the district court was wrong and that an infringing device need only be capable of performing the recited function.  In other words, as long as the memory is capable  of being configured to (e.g. programmed to) store the data collection application, even if the memory is not so configured, the element is satisfied.

The Federal Circuit reviewed prior cases and noted that  “capable of” did not mean “might be later modified to perform that function.” It said that infringement may not be based on “a finding that an accused product is merely capable of being modified in a manner that infringes the claims of a patent.” Further the specification supported the district court’s construction.

Algorithm Adequately Disclosed. The district court found the term means for cross-referencing responses to said inquiries with possible responses from one of said libraries” was indefinite because the specification failed to adequately provide an algorithm for carrying out the means element.  The court noted that “a means-plus-function term is impermissibly indefinite under §112 ¶ 2 when the specification “simply describes the function to be performed, not the algorithm by which it is performed.”

The court provided that an algorithm in computer systems encompasses “in essence a series of instructions for the computer to follow” whether in mathematical formula, or a word description of the procedure, or shown in a flow chart. The court also observed that “[t]he preferred definition of ‘algorithm’ in the computer art is: ‘A fixed step-by-step procedure for accom-plishing a given result; usually a simplified procedure for solving a complex problem, also a full statement of a finite number of steps.’”

The court review the specification of the patents at issue and found that the following excerpt of the specifcation sufficiently disclosed an algorithm:

Cross-Referencing imports that, for each answer field, the entered response can be related to a library to determine if the response in the answer field is existent in the library. In other words, the answer information is cross-referenced against that specific library. If it is available in that library, then, corresponding to that library entry, an action is executed. For instance, the associated action can involve an overlay window that alerts the user of the fact of the match with the library entry, or dis-plays the contents of an information field stored in association with that entry in the memory.

The court affirmed on the issue of non-infringement and reversed on the issue of invalidity.