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SoCal IP Institute :: September 15, 2014 :: Section 101 Patentable Subject Matter Bloodbath

Our weekly SoCal IP Institute meeting on Monday, September 25, 2014 will be a discussion of several recent cases and trends related to 35 U.S.C. Section 101 patentable subject matter.  Over the past few weeks, several financial services and software-related patents have been found unpatentable under Section 101.  A good summary article may be found here.  We will discuss a few representative cases.  Brief synopses of the cases we will discuss appear below.

Tuxis Technologies, LLC v. Amazon.com, Inc., No. 13-1771-RGA (D. Del. September 3, 2014) (available here). Amazon’s motion to dismiss for failure to state a claim on a patent on a method of “upselling” to a consumer using a computer system was found not to present patentable subject matter.  As a result, the case was dismissed on the pleadings.  The court found that the patent failed to meet the Alice criteria of providing some “inventive concept” beyond the abstract idea, in this case, of “upselling.”  The court did not find it here.

Eclipse IP LLC v. McKinley Equipment Corp., No. 14-154  (C.D. Cal. September 4, 2014) (available here). The court characterized this patent as directed to “asking someone if they are available to perform a task and then either waiting for them to complete 26 it or contacting the next person.”  The court further stated “[t]he claim recites that the method is performed ‘in connection with a computer-based notification system,’ which Eclipse argues saves the claims because ‘every asserted claim of the ‘681 patent requires a specially programmed computer system and a specially-equipped PCD to implement the invention and to achieve its benefits.'”  The two other patents relate to asking whether individuals are able to go to locations (deliver goods or pick up individuals) and, if not, seeking others to go to locations.  The court here found that these claims similarly do not provide any “inventive concept” as required by Alice. The court granted McKinley’s motion to dismiss.

Every Penny Counts, Inc. v. Wells Fargo Bank, N.A., No. 11-cv-2826 (M.D. Fl. September 11, 2014) (available here). Here, the two asserted patents “claim, respectively, a method of and a system of automated saving or automated charitable giving.” For example, the dollars and cents amount of a bank customer’s credit card purchase is “rounded up” to the next whole dollar. The difference between the dollars and cents amount of the purchase and the next whole  dollar, to which the amount is “rounded up,” is withdrawn from the customer’s bank account and deposited into a recipient account for personal saving or charitable giving.  The court describes the method as follows:

The ’849 patent’s “representative” method, Alice, 134 S. Ct. at 2359, comprises (1) electronically receiving data, including the transaction amounts,6 (2) modifying the transaction amounts in accord with a formula, (3) depositing the differences between the modified and unmodified transaction amounts into one or more recipient accounts, and (4) adjusting each account balance accordingly. The function performed by the computer at each step of the method is “purely conventional.”

In sum, the ’849 patent, a method patent, is invalid under Section 101 because the patent claims an abstract idea that is implemented by “well-understood, routine, conventional activities previously known to the industry.”

Thus, Wells Fargo’s motion for summary judgment was granted.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, September 15, 2014 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

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SoCal IP Institute :: July 28, 2014 :: Subject Matter Eligibility Post-Alice and Stays in view of CBM Reviews

Our weekly SoCal IP Institute meeting on Monday, July 28, 2014 will be a discussion of two Federal Circuit cases.  The first pertains to subject matter eligibility.  The second pertains to the grant of a stay during the pendency of a later-filed covered business method patents review. Brief synopses of the cases appear below.

Digitech Image Tech., LLC. v. Electronics for Imaging, Inc. et al, No. 2013-1600 etc. (Fed. Cir. July 11, 2014) (available here).  The plaintiff asserted a patent related to an “improved device profile” for the color and spatial profile of devices such as digital image processors, such as digital cameras.  On motion of several defendants, the district court found that the patent’s “improved device profile” amounted to data that was not within the categories of statutory subject matter under Section 101.

The Federal Circuit, here, agreed with the district court finding that the device profile claims were directed to data, which is not one of the identified categories and, further, that the method claims are directed to an “abstract idea” and, therefore are not eligible for patent protection.

VirtualAgility Inc. v. Salesforce.com, Inc. et al., No. 2014-1232 (Fed. Cir. July 10, 2014) (available here).  VirtualAgility sued several defendants in January of 2013. In May of 2013, some of those defendants sought review under the new AIA CBM patent review process.  Specifically, the defendants asserted that the patent was invalid under Sections 101, 102, and 103.  Shortly thereafter, the defendants sought a stay in the case.  The district court denied the motion in January of 2014, with claim construction then due to be completed in April.

The Federal Circuit entered a stay pending interlocutory appeal (available under the AIA for refusals to grant stays).  Under a very careful review of the four factors set forth in the statute, the Federal Circuit found that the district court incorrectly evaluated two of the factors and, therefore, three of the four weighed in favor of granting a stay.  Accordingly, the district court was reversed and the stay was granted pending completion of the CBM review.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, July 28, 2014 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

SoCal IP Institute :: August 26, 2013 :: Common Law Rights of Publicity and Machine Readable Storage Medium

Our weekly SoCal IP Institute meeting on Monday, August 26, 2013 will be a discussion of a recent Central District of California decision regarding common law rights of publicity and a precedential case involving the patentability of “machine readable storage medium.” Brief synopses of the cases appear below.

Hebrew University of Jerusalem v. General Motors, Case No. 10-CV-03790 AHM (JCx) (C.D. Cal. Oct. 15, 2012) (available here).  Plaintiff Hebrew University of Jerusalem brought suit for the unauthorized use of Albert Einstein’s image in a General Motors advertisement.

General Motors argued that Mr. Einstein’s image was not protected by California law, but New Jersey law and that any right of publicity, to the extent one existed and to the extent that HUJ was entitled to the right, had ended.  Judge Matz of the Central District, applying New Jersey law, without any clear New Jersey precedent, determined that a 50-year post-mortum right of publicity is more than adequate to accomplish the policy goals of the law.  Accordingly, because Mr. Einstein died almost 60 years before HUJ brought suit, the case was dismissed.

Ex Parte Mewherter et al., Appeal No. 2012-007692 (P.T.A.B. May 8, 2013) (available here). The primary issue on appeal in this patent related to a computer-based system for converting a series of slide show images into raster images was whether “machine readable storage medium” was statutory subject matter.  Specifically, does the term “machine readable storage medium” encompass waveforms, signals and other so-called “transitory” media.  The Board, here, agreed that it does and endorsed the addition of the “non-transitory” language often requested by examiners as resolving the issue.  The Board also affirmed a written description rejection of claims 1-5 for the failure of the specification to support the claimed limitations.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, August 26, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

SoCal IP Institute :: July 8, 2013 :: Jury instruction regarding Indirect infringement and PTO’s reexam determination affecting litigation

Our weekly SoCal IP Institute meeting on Monday, July 8, 2013 will be a discussion of a Federal Circuit decision regarding jury instructions relating to indirect infringement and another Federal Circuit decision regarding a PTO’s reexamination proceeding affecting litigation. Brief synopses of the cases appear below.

Commil USA, LLC v. Cisco Systems, Inc., (Fed. Cir. 6/25/2013) (available here). The district court held that Cisco directly and indirectly infringed certain claims of Commil’s patents. On appeal, the Federal Circuit vacated in part and remanded the case holding that the district court gave the jury a legally erroneous instruction with respect to indirect infringement.

Fresenius USA, Inc. v. Baxter International, Inc., (Fed. Cir. 7/2/2013) (available here). Baxter asserted that Fresenius infringed Baxter’s patent relating to the use of a dialysis machine with an integrated touch screen interface. The district court overturned the jury’s determination that Baxter’s patent was invalid. On appeal, the Federal Circuit vacated and remanded the district court’s finding that the patent was valid and infringed because the claims of the patent were canceled by the PTO during reexam.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, July 8, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

SoCal IP Institute :: June 17, 2013 :: Gene Patent Eligibility and Federal Circuit Appeals Jurisdiction

Our weekly SoCal IP Institute meeting on Monday, June 17, 2013 will be a discussion of the recent Myriad case and a Federal Circuit decision on the court’s jurisdictional scope on appeal. Brief synopses of the cases appear below.

Assoc. for Molecular Pathology v. Myriad Genetics, Inc., Case No. 12-398 (U.S.  June 13, 2013) (available here).  In this case, the Supreme Court determined that patent claims directed to genes that occur naturally are not patentable subject matter under 35 U.S.C. 101.  However, the Court was careful to point out that, in this case cDNA was not a product of nature and, thus is patent eligible.

Robert Bosch, LLC v. Pylon Mfg. Crop. (Fed. Cir. 2011-1363, 1364 June 14, 2013) (available here).  The Federal Circuit took this case sua sponte and en banc to answer two questions. First, does 28 U.S.C. § 1292(c)(2) confer juris- diction on the Federal Circuit to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred? Second, does 28 U.S.C. § 1292(c)(2) confer jurisdiction on the Federal Circuit to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided? The court answered both questions in the affirmative and returned the case to the panel for disposition on the merits.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, June 17, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

SoCal IP Institute :: May 13, 2013 :: CLS Bank Int’l. v. Alice Corp – Patent Eligibility of Software Under 35 U.S.C. § 101

Our weekly SoCal IP Institute meeting on Monday, May 13, 2013 will be a discussion of Section 101 patent eligibility in the recent CLS Bank Int’l. v. Alice Corp. en banc decision.  A brief synopsis of the case appears below.

CLS Bank Int’l. v. Alice Corp., Case No. 2011-1301 (Fed. Cir. May 10, 2013) (en banc) (available here).

We previously discussed CLS Bank Int’l. v. Alice Corp. here and here.  The Conejo Valley Bar Association’s Amicus brief, signed by some SoCal IP Law Group attorneys, is available here.

CLS sued Alice for a declaratory judgment of noninfringement of four patents (1, 2, 3, 4) generally directed to exchanging risk of financial derivatives.  The elements of each patent, expressed in various claim forms, may be automated and implemented using a computer.  Alice appealed the grant of a summary judgment at the district court that certain claims of the Alice patents were invalid.   A three judge Federal Circuit Panel reversed, holding the method, computer-readable media and system claims all patent eligible under 35 U.S.C. §101.  CLS sought rehearing en banc, and that request was granted.

This case is a plurality decision with seven judges (of ten total) agreeing as to the invalidity of some claims, but no more than five judges agreeing as to the basis for that outcome.  Specifically, a seven judge plurality of the court affirmed the district court’s decision with respect to the method and computer-readable medium claims finding that those claims recite patent-ineligible subject matter under 35 U.S.C. § 101.  The decision on the system claims is split five / five, falling back to the district court’s determination of patent ineligibility even though eight judges found that method and system claims should rise and fall together.  As a result of the split, the outcome is decided, but nothing in any opinion is precedent. The various opinions are the result of the en banc rehearing ordered in response to CLS’ request.

The majority opinion summarizes the current state of 101 jurisprudence as follows:

While simple enough to state, the patent-eligibility test has proven quite difficult to apply. . . . What is needed is a consistent, cohesive, and accessible approach to the § 101 analysis—a framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts.

The majority opinion, written by Lourie and joined by Dyk, Prost, Reyna and Wallach, reviewed Supreme Court precedent and summarized the resulting case law as directing the court in several ways. First, the claim must not be abstract so that it, “subsume[s] the full scope of a fundamental concept.”  If so, the court must look for “meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.”  Second, the application must not be overly formalistic.  If they were, the majority cautioned, subject-matter eligibility may depend only on the draftsman’s art or the skill of the individual or individuals preparing the claims. Finally, the majority indicated that the precedent urges a “flexible, claim-by-claim approach.”

The majority set forth a “systematic determination” based upon this approach.  First, one must determine “whether the claimed invention fits within one of the four statutory classes set forth in § 101 and, if so, whether any of the exceptions (abstract idea, law of nature, etc.) applies.  When § 101 questions arise, the court should determine what fundamental concept appears to be “wrapped up in the claim, so that the subsequent steps can proceed on a consistent footing.”  The court summarized this step:

In short, one cannot meaningfully evaluate whether a claim preempts an abstract idea until the idea supposedly at risk of preemption has been unambiguously identified.

At this stage, a claim construction may be useful in determining the preempted idea.  Once the idea is “nailed down,” “the balance of the claim can be evaluated to determine whether it contains additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.”  These limitations may be called the “inventive concept,” but are directed more to a distinction over an abstract idea or law of nature than to their actual content as containing the invention for purposes of §§ 102 and 103.  The inventive concept must be more than a trivial (“routine” or “conventional”) appendix to the otherwise abstract idea.  The majority also noted that courts need not consider § 101 first and that all patents maintain a presumption of validity, including § 101 validity.

Following this procedure with respect to the Alice claims, the majority here found that none of the recited steps of the claimed process moved the claimed hedging risk for transactions between two parties using a intermediary “shadow account” to ensure that both parties have sufficient funds to complete a transaction beyond mere abstract idea.  The use of the computer to do so did not add “significantly more” to this abstract idea.  Specifically, the computer-implemented recitations were viewed as almost illusory, the requirement of a supervisory institution, the court found, amounted to nothing more than a traditional escrow service and, finally, the end-of-day instructions were required to cause the method to work.

The majority opinion found similarly with respect to computer-readable medium claims and system claims.  In particular, the majority found that both claims should be considered effectively identical for purposes of § 101 eligibility.  In addition, for the the system claims, the inclusion of “a computer,” “a data storage unit,” and “a communications controller” were irrelevant because all computers include such systems.  Because two other judges agreed with the outcome of the majority, but not with the methodology, all asserted claims were found invalid under § 101.

A concurring-in-part and dissenting-in-part opinion was filed by Judges Rader, Linn, Moore and O’Malley.  This opinion quibbled with the methodology arguing for a “meaningful limitation” on the method claims and to a “specific way” of doing something on a computer or a “specific computer” for doing something in system claims.  Judges Linn, Moore and O’Malley would reverse the district court with regard to the system claims (thus making those claims patent eligible).  Judges Rader and Moore would affirm that the method and media claims were patent ineligible.

A separate dissenting-in-part opinion by Judges Moore, Linn and O’Malley set forth their reasoning for finding the method claims patent eligible.  Linn and O’Malley filed a dissent explaining that method and system claims need not rise and fall together and that the other opinions fail because they are divorced from the record of the case regarding the claims.

A separate opinion, concurring-in-part and dissenting-in-part filed by Judge Newman agreed with the majority view that the method and system claims rise and fall together, but would find that all the claims are patent eligible.  Judge Newman succinctly summarized the plurality:

In deciding to rehear the patent dispute between CLS Bank and Alice Corporation, the en banc court undertook to remedy distortions flowing from inconsistent precedent on section 101. This remedial effort has failed.

Finally, Judge Rader also filed some “additional reflections” suggesting that all lawyers and judges should, perhaps consider:

When all else fails, consult the statute!

He suggests that all of this inventive discussion is far from the real issue at hand and that, generally speaking, a return to a simpler view of the statute would perhaps be the best path to follow in order to bring some clarity to these issues.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, May 13, 2013 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Smith by 9 am Monday morning.

SoCal IP Institute :: March 28, 2011 :: The Scope of Analogous Prior Art and Abstract Ideas

We will be discussing two recent, relevant opinions in our weekly SoCal IP Institute meeting on Monday, March 28, 2011.  The first case is the Federal Circuit’s first exposition on “analogous art” in an obviousness determination since KSR.  The second case is a district court determination that the software-based methods directed to financial transactions claimed in four patents were “abstract” and therefore, not directed to statutory subject matter under 35 U.S.C. § 101.  A brief synopsis of the two cases is presented below.

Innovention Toys, LLC v. MGA Entertainment, Inc. et al., 2010-1290 (Fed. Cir. March 21, 2011) (attached).  Innovention Toys sued MGA, Wal-Mart and Toys “R” Us for infringement of a patent on a “laser chess” game.  The district court granted summary judgment of infringement and of nonobviousness.  In so doing, the district court excluded two articles on an Atari and Amiga “laser chess” video games originally available in the late 1980s as not analogous art.  The district court also found, based upon MGA’s failure to present evidence of the level of ordinary skill in the art, that the level of ordinary skill in the art was that of a layperson.

On review, the Federal Circuit affirmed the finding of literal infringement.  However, the obviousness determination was vacated and remanded for further consideration.  In particular, the court questioned the district court’s finding that the laser chess articles were not analogous art given that they discussed a very similar game and the unique elements not present in anther prior art reference.  In view of this, the court reasoned that a no reasonable jury could find that the two laser chess articles were not analogous art.  The Federal Circuit also concluded that the district court’s determination that the skill of a layperson was that of one of ordinary skill in the art was incorrect.

The district court’s opinion was affirmed in part, vacated in part and remanded for further consideration of the laser chess articles and the level of skill in the art.

CLS International v. Alice Corp. Pty. Ltd., CV 07-974 (D.D.C. Mar. 9, 2011) (attached).  CLS sued Alice for a declaratory judgment of noninfringement of four patents (1, 2, 3, 4) generally directed to exchanging risk of financial derivatives.  The elements of each patent may be automated and implemented using a computer.  CLS moved for summary judgment that the patents could not be patent-eligible subject matter under 35 U.S.C. § 101.  After briefing, rebriefing in view of the Bilski decision and oral argument, the court concluded that the claims of these patents could not be patent-eligible subject matter and, therefore, found each patent invalid.

The district court discussed the Diamond, Flook and Deihr cases at length and concluded with a short discussion of Bilski and Reaserch Corp. culminating in an acknowledgement that the Federal Circuit has not defined “abstract” beyond “the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

The district court then set forth a very detailed opinion stating that the method claims of the patents failed to perform a transformation or claim a machine as envisioned by the “machine-or-transformation” test.  Alice argued that these claims require a computer performing the recited steps and were therefore proper subject matter.  The district court disagreed finding that “nominal recitation of a general-purpose computer in a method claim does not tie the claim to a particular machine or apparatus or save the claim from being found unpatentable under § 101.”  The district court asserted that a computer must be for a “particular” purpose before it can be statutory subject matter, citing to various district court opinions, and found that this computer was not.  The district court also found that these same claims covered an abstract idea because it would preempt the use of mental processes associated with the methods disclosed.

With regard to the computer system and product claims, the district court found that they were also directed to an abstract idea primarily because they would preempt the application of the abstract concept claimed by the patents.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, March 28, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.