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Beyond the Looking Glass: Patent-Eligible Subject Matter After Alice and Mayo

By Erik Wright and Austen Zuege

From Intellectual Property Today, Vol. 21, No. 11 (November 2014)

In recent cases such as Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014), the Supreme Court has reiterated that abstract ideas, laws of nature, and natural phenomena cannot be patented. Inventions directed to any of these three categories must include sufficient extra material to form the basis of a patent. The Court has provided some guidance as to what kinds of claim language can satisfy this requirement, but has thus far declined to define the principal categories of patent-ineligible subject matter in a way that can be applied prospectively. Instead, the Court seems satisfied that “they know it when they see it.”

In the absence of prospective rules, the courts are slowly accumulating an ad hoc list of examples of what they consider patent-ineligible subject matter. Most of these examples pertain to computer- and software-implemented technologies, and are decided by analogy to cases relating to those technologies. Troublingly, some judicial opinions have seemed to conflate the issue of patentable subject matter with the separate statutory issues of novelty and non-obviousness.

In the absence of a clear, prospective definition from the Supreme Court, the Federal Circuit has returned to an emphasis on physical or tangible results, characterizing data manipulation techniques as unpatentable abstract ideas. Recent Federal Circuit decisions in BuySAFE, Digitech, Planet Bingo, and I/P Engine have given broad software patent claims harsh treatment, and the Patent Trial and Appeal Board (PTAB) has followed suit. The BuySAFE opinion and a concurrence in I/P Engine do the most to try to make sense of this still unsettled area of patent law. We provide a summary of recent cases, as well as key precedents.

Mayo v. Prometheus

Mayo Collaborative Services v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2014), addressed the patent-eligibility of diagnostic methods and drug therapies for treating gastro-intestinal disorders. Mayo found that these claims were directed primarily toward a law of nature, Id. at 1294-96, and then asked whether other limitations in the claims provided an “‘inventive concept’ sufficient to ensure that the patent in practice amount[ed] to significantly more than a patent upon the natural law itself.” Id. at 1294. The Court asked whether claims were sufficiently limited to avoid preempting further innovation or exploration in the technical field. Id. at 1301. Building upon Flook and Diehr, the Court explained that neither postsolution nor presolution activity (e.g. collecting or reporting data) could save patentability if such activity was unrelated to the core “inventive concept.” Id. at 1303-04.

Alice v. CLS Bank

In May of 2013 the Federal Circuit issued an en banc decision in CLS Bank Int’l v. Alice Corp. 717 F.3d 1269 (Fed. Cir. 2013) (per curiam).   Alice concerned several patents with claims directed to business methods, systems, and a “Beauregard” style apparatus for computer-implemented escrow services. In a 7-3 decision with no majority opinion, the Federal Circuit held that Alice’s method and Beauregard apparatus claims were directed towards patent ineligible subject matter. The Circuit was evenly split as to whether Alice’s system claims were patentable.

In June of 2014 the Supreme Court unanimously held that all of Alice’s claims were ineligible for patenting.[1] According to the Court, analysis of patent-eligible subject matter questions involves a two-part test implicit in Mayo, and later elaborated on by the Federal Circuit. The first step in this test is determining “whether the claims at issue are directed to a patent-ineligible concept. If so, the court then asks whether the claims’ elements … transform the nature of the claim into a patent-eligible application.”[2] The Court provided no new guidance as to what constitutes an abstract idea or patent-ineligible concept, however, falling back on analogy to Bilski.[3] Contrary to the analysis of the Federal Circuit, and to its own precedent in Diehr and Flook, the Court appeared to rely on the fact that risk hedging, although not a “preexisting, fundamental truth,” was still a “fundamental economic practice” sufficiently well-known to establish it as a mere abstract idea. Alice at 2357. In Alice, as in Bilski, the Court seems to conflate issues of patent-eligible subject matter with what were previously considered separate questions of novelty and non-obviousness.[4] The Court ignored much of Mayo’s extensive discussion of “preemption,” and (again) sidestepped any sort of categorical holding on when commercial and social relationships in economic “processes” could ever be patent-eligible.

In the Federal Circuit

Shortly after Alice the Federal Circuit decided Digitech.[5] The claims in Digitech recited a method and a “device profile” used for image capture, transformation and reproduction, which the Circuit characterized as directed exclusively towards data manipulation and transformation. Citing Mayo and Alice, mere data manipulation was found categorically unpatentable as an “ethereal, non-physical” abstract idea. Id. at 1350. “Without additional limitations, a process that employs mathematical algorithms to manipulate existing information to generate additional information is not patent eligible.” Id. at 1351. The patent owner’s argument that the “device profile” was a tag or other embodiment of hardware or software was rejected as not reflecting the actual claim language. Id. Under the pre-emption analysis of Mayo, Judge Edmond explained that the claims at issue were “so abstract and sweeping as to cover any and all uses of a device profile,” an abstract idea. Id. Following this rule, any algorithmic data manipulation without physical transformations would appear to constitute an unpatentable abstract idea. Mere presolution or postsolution steps such as collecting data and reporting results via a conventional apparatus remain insufficient to satisfy the second prong of the Mayo/Alice test.

Although the majority and dissenting opinions of IP Engine v. AOL[6] did not address patentable subject matter, Senior Judge Mayer wrote a concurrence specifically to address patent eligibility of claims directed to a method for filtering Internet search results.[7] Judge Mayer provocatively argued that Alice “for all intents and purposes, recited a ‘technological arts’ test for patent eligibility.” Id. at *9. He interprets Mayo and Alice to say that:

“[s]ection 101 mandates not only that claims disclose an advance in science and technology—as opposed to an innovation in a non-technological discipline such as business, law, sports, sociology, or psychology—but also that this advance be both significant and well-defined. *** [I]f claims are drawn to the application of principles outside of the scientific realm—such as principles related to commercial or social interactions—no amount of specificity can save them from patent ineligibility. *** In the more difficult cases—where it is uncertain whether claims are sufficiently ‘technological’ to warrant patent protection—subject matter eligibility will often turn on whether the claims describe a narrow inventive application of a scientific principle, or instead simply recite steps that are necessarily part of the principle itself. *** At its core, section 101 prohibits claims which are ‘overly broad[]’ . . . in proportion to the technological dividends they yield. Id. at *10.

Mayer sees this as a Constitutional limit of patent eligibility. Id. at *11. While his statements go far beyond the literal language of Alice and Mayo,[8] they nonetheless seem to explain the actual results of those and other recent cases, and pick up the question of the “preemption” raised in Mayo but not analyzed in Alice. Judge Mayer found that the I/P Engine claims represented “merely an Internet iteration of the basic concept of combining content and collaborative data,” as a person might do manually by consulting a guidebook and asking friends for suggestions while planning a visit to London. Id.

Planet Bingo[9] dealt with claims to a computer system for managing bingo games, and in particular storing bingo numbers for multiple game sessions. The Federal Circuit found the claims ineligible for patenting. Returning to a familiar pre-Bilski “machine-or-transformation” analysis, the Federal Circuit asked, hypothetically, whether the method could have been performed solely using “mental steps.” Under this analysis, the mere recitation of a computer added no meaningful limitation to the claims. The patent owner’s argument that humans could not manage the “thousands, if not millions” of numbers involved were rejected as not being commensurate with the explicit language of the claims, which only required “two sets of Bingo numbers”. Id. at *2–3. In an faint echo of a technological arts test (but with little explicit analysis), the Federal Circuit determined that the solution of a “tampering problem” and “other security risks” constituted unpatentable abstract ideas that failed to add “significantly more”, drawing analogies to Bilski and Alice.

The Federal Circuit also recently issued the precedential opinion BuySAFE, Inc. v. Google, Inc.[10] BuySAFE dealt with method and Beauregard claims toward providing a performance guarantee for an “online commercial transaction” via a “computer network”. Id. at 1351-52. In keeping with Digitech, BuySAFE noted that this “inventive concept” must exist “in the physical realm”—data manipulation is not sufficient. Id. at 1353. The claims were held to be “squarely about creating a contractual relationship” that was “beyond question of ancient lineage” and the “invocation of computers add[ed] no inventive concept.” Id. at 1355. The mere fact “that a computer receives and sends the information over a network—with no further specification—is not even arguably inventive.” Id. However, citing Bilski, the opinion adds the caveat that “[i]f enough extra is included in a claim, it passes muster under section 101 even if it amounts to a ‘business method.’” Id. at 1354. An example of a “business method” that recites an “inventive concept” sufficient to establish patent eligibility has yet to pass before the Supreme Court, and none of the post-Alice Federal Circuit (or PTAB) decisions have found one either. Quoting Alice, the BuySAFE opinion further discusses a need to “effect an improvement in any other technology or technical field[.]” Id. (emphasis added). Whether other Federal Circuit judges will join Judge Mayer in establishing an explicit post-Alice “technological arts” test therefore remains to be seen. If any sort of consensus view is emerging on the Federal Circuit, it may be less due to insights provided by Alice and more a result of the changing makeup of the court and the chance makeup of the panels hearing recent cases.

At the Patent Trial and Appeal Board

In Bancorp v. Retirement Capital[11] a review under the Transitional Program for Covered Business Method Patents of U.S. Pat. No. 6,625,582 found claims unpatentable as directed to an abstract idea. The patent related to a “computerized method” for converting future social security payments into immediate disbursements. Id., at *2–3. By way of analogy to the claims in Bilski and Alice, the PTAB panel found that “the concept of advancing funds based on future retirement payments is an economic practice long prevalent in our system of commerce and squarely within the realm of abstract ideas.” Id. at *6–7. The PTAB determined that a preamble recitation of “a computerized method” did not meaningfully limit the claims, and that claims reciting payments “deposited into accounts” did not require a computer, since they “could be performed as a series of verbal transactions exchanging physical money or via pen and paper.” Id. at *7. Similarly, the PTAB held that a means-plus-function limitation requiring “electronic transfer” only used a computer in a generalized fashion. Id. at *6. Here, the Specification worked against the patent owner, because it referred only to “known computer capabilities” and “the well-known technique of electronic funds transfer.”

By failing to present the claimed steps as representing new computer programming or hardware rather than known, general purpose computer equipment and techniques, the patent failed to meaningfully limit the abstract idea it invoked, rendering it patent-ineligible. “Neither the claims nor the specification provide[d] complex technological implementations or modifications of” the technologies involved, and the patent “recite[d] no specific technological mechanism for achieving its result.”[12] This analysis suggests that if complex programming is not described somewhere in a patent application for a software-related invention, there is a substantial risk of fatal patent eligibility concerns. The PTAB panel mentioned in passing the question of preemption by “encompass[ing] the full scope of an abstract idea” but did not rule on that question or even assign it to any particular step of the overall eligibility analysis. Id. at 20.

What’s Next?

Recent district court decisions have offered new analyses of a wider range of claimed technologies. For instance, a very articulate order in McRO, Inc. v. Activision Publ’n, Inc., CV-14-336 (C.D. Cal. Sept., 22, 2014), struck down claims for lip-synching of animation as patent ineligible because a generic recitation of “rules” at the point of novelty merely required automation of known, manual processes, and was therefore preemptive. Although the claimed point of novelty went beyond the prior art, that “extra” recitation was still found to be an unpatentable abstract idea. Another district court case, Tuxis Techs., LLC v., Inc., No. 13-1771 (D. Del., Sept. 3, 2014) employed, at least in part, a different analysis than post-Alice Federal Circuit or PTAB decisions. Although the court credits this analysis to Alice (when Mayo seems closer), it directly assessed whether the claims were “preemptive” by looking to a list of hypothetically non-infringing processes enumerated by the patent owner. Cases like these will be worth watching if appealed.

[1] Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014).

[2] Id. at 2355, citing Mayo, 132 S.Ct. at 1296–97.

[3] Bilski v. Kappos, 561 U.S. 593 (2010), determined that claims to a business method for risk hedging were directed to an unpatentable abstract idea, but rejected the Federal Circuit’s exclusive use of the “machine or transformation” test in favor of a vaguer and highly discretionary inquiry based in part based characterizing the underlying principles of the claims as being old and well-known.

[4] Diamond v. Diehr and Parker v. Flook, for instance, state that the issue of subject matter patent eligibility is distinct from and unrelated to novelty and obviousness inquiries. Diehr, 450 U.S. at 188; Flook, 437 U.S. at 588.

[5] Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014) (concerning U.S. Pat. No. 6,128,415).

[6] IP Engine, Inc. v. AOL Inc., 2014 WL 3973501 (Fed. Cir., Aug. 15, 2014) (non-precedential).

[7] The claimed filtering system used both content based filtering (e.g. extracting features such as text from an information item) and collaborative filtering (e.g. assessing relevance based on feedback from other users).

[8] But compare MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250 (Fed. Cir. 2012) (Mayer, J., dissenting).

[9] Planet Bingo, LLC v. VKGS LLC, 2014 WL 4195188 (Fed. Cir., Aug. 26, 2014) (non-precedential).

[10] BuySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014).

[11] U.S. Bancorp v. Retirement Capital Access Mgmt. Co., 2013 WL 8538864, CBM2013-00014 (PTAB, Aug. 22, 2014).

[12] Id., but contrast Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, 1342,1353 (Fed. Cir. 2013).

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