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Tag Archives: 35 U.S.C. 101

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 :: 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 :: July 30, 2012 :: Monetary Attorney Sanctions and Patentable Subject Matter

We will be discussing two Federal Circuit cases during our weekly SoCal IP Institute meeting on Monday, July 30, 2012. Brief synopses are presented below.

Rates Tech., Inc. v. Mediatrix Telecom, Inc., Case No. 2011-1384 (Fed. Cir. July 26, 2012) (attached).

In a patent infringement suit related to systems for converting existing telephone systems to voice-over-IP systems, the district court dismissed the case and imposed monetary sanctions against the plaintiff and the plaintiff’s counsel for failing to comply with the court’s repeated orders to respond to defendant’s interrogatory.

The plaintiff’s counsel did not appeal the dismissal of the case.  Rather, the plaintiff’s counsel argued that he should not be sanctioned for failing to provide information that he did not have.  The Federal Circuit pointed out that the magistrate judge had determined that the plaintiff and plaintiff’s counsel did have the information sufficient to respond to the interrogatories and that to the extent he lacked information it was because he “failed to take the most basic steps needed to fulfill the plaintiff’s discovery obligations.  Monetary sanctions in the amount of $86,965.81 affirmed.

Bancorp Serv., L.L.C. v. Sun Life Assurance Co. of Canada, Case No. 2011-1467 (Fed. Cir. July 26, 2012) (attached).

This case is a patent infringement suit involving two patents disclosing systems and methods for administering and tracking the value of life insurance policies in separate accounts.  The district court held that the patents failed to meet the “machine-or-transformation” test and found that the recited computer components were not necessary for carrying out the patented process.  “[A]lthough it would be inefficient to do so, the steps for tracking, reconciling and administering a life insurance policy with a stable value component can be completed manually.”

The Federal Circuit affirmed, stating that a computer-implemented abstract process is ineligible for patent protection under 35 U.S.C. § 101 where the computer does not play a significant part in the performance of the claimed invention.  The computer increased efficiency but was not necessary to perform the process.  The Court distinguished this case from its recent CLS Bank v. Alice Corp. case stating that the computer limitations in CLS Bank played a “significant part” in the claimed method.  In this case, however, the computer was just a facilitator to using an abstract concept.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, July 30, 2012 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 Attalla by 9 am Monday morning.

SoCal IP Institute :: July 16, 2012 :: Patentable Subject Matter and Assignments

We will be discussing two Federal Circuit cases during our weekly SoCal IP Institute meeting on Monday, July 16, 2012. Brief synopses are presented below.

CLS Bank Int’l v. Alice Corp. Pty. Ltd., Case No. 2011-1301 (Fed. Cir. July 9, 2012) (attached).

Alice sued CLS for infringement of four patents claiming methods, systems and computer programs for “a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate ‘settlement risk’.  Settlement risk is the risk that only one party’s obligation will be paid, leaving the other party without its principal.”  Slip Op. at 2. The district court granted summary judgment of invalidity based on a failure to claim patent eligible subject matter.

On appeal, the Federal Circuit reversed the district court, looking at notable precedent, such as the machine or transformation test and computer-specific opinions, which the majority summarized into the rule that “a claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not.”  Slip Op. at 18.  The Federal Circuit identified a new rule that minimizes the need to make such a determination and strongly favors a conclusion of patentable subject matter when claims involve anything that might not be characterized as an abstract idea.  Applying this rule, the Federal Circuit concluded that Alice’s claims were directed to patent eligible subject matter. The Court emphasized the need to consider the claim as a whole rather than to generalize the invention as the district court did.

Preston v. Marathon Oil Co., Case No. 2011-1013, 2011-1026 (Fed. Cir. July 10, 2012) (attached).

Marathon hired Preston to work in Marathon’s coal bed methane well operation. After beginning work, Preston signed an Employee Agreement containing an IP assignment clause. Later, Preston developed a baffle system to improve machinery used to extract methane gas from water-saturated coal in a coal bed methane gas well. Marathon installed the system on wells. After Preston’s employment ended, both Marathon and Preston pursued patents. The district court declared Marathon the owner of the patents pursuant to the employment agreement and that Preston breached the agreement for failing to assign his rights. The Federal Circuit affirmed that Preston assigned his rights in two inventions to Marathon pursuant to his employment agreement, but vacated in part as to the judgment that plaintiff is in breach of that agreement because that assignment was automatic.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, July 16, 2012 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 Attalla by 9 am Monday morning.

SoCal IP Institute :: September 12, 2011 :: Insurance Coverage for Intellectual Property Claims and Section 101 Patentable Subject Matter

Obviously, we didn’t meet on Labor Day. So, now we will be discussing one California appellate case involving the availability of insurance coverage for intellectual property claims and a Federal Circuit case discussing patentable subject matter. We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, September 12, 2011. Brief synopses are presented below.

Aroa Marketing, Inc. v. Hartford Ins. Co., Case No. B228051 (Cal. App. Div. 4 August 23, 2011) (attached). Hartford had issued a commercial general liability insurance policy to Aroa for the policy period September 9, 2006 to November 1, 2007. The policy covered “personal and advertising injury” arising out of Aroa’s business. “Personal and advertising injury” was defined to include, “oral or written or electronic publication of material that violates a person’s right of privacy,” but specifically excluded, “personal and advertising injury” arising out of, “any violation of any intellectual property rights, such as copyright, patent, trademark, trade name, trade secret, service mark, or other destination of origin or authenticity.”

Aroa hired actress Tara Radcliffe to take part in an exercise video that, it was said, would be used in promotions at the Consumer Electronics Show (CES). Aroa later used the video (including her likeness) to sell other products and at locations other than CES. She requested they compensate her for that use and they refused. She sued for various claims stemming from the use of her likeness and the parties eventually settled. Aroa sought indemnity from its insurer, Hartford who refused. Eventually, Aroa brought suit against Hartford in an effort to enforce the terms of the insurance policy. The trial court granted Hartford’s demurrer on the complaint without leave to amend.

Aroa argued that the suit was a violation of a California “right of privacy” covered by the policy. Hartford disagreed. The appellate court agreed with Aroa. However, the policy’s specific exclusion of “intellectual property” related claims included expansive language including “such as” and “any intellectual property rights.” This was sufficient to remove right of publicity-related claims from the coverage provided by the policy. The court concluded that the decision to grant the demurre without leave to amend was proper because under no circumstances could Aroa succeed.

CyberSource Corp. v. Retail Decisions, Inc., Case No. 2009-1358 (Fed. Cir. August 16, 2011 (attached). CyberSource is the owner of a U.S. Pat. No. 6,029,154 which claims a “method and system for detecting fraud in credit card transactions between [a] consumer and a merchant over the Internet.” In particular, the claims seek to detect fraud by determining whether the current internet address matches one of a number of prior internet addresses from which legitimate purchases have originated.

CyberSource brought suit against Retail Decisions in 2004. Retail Decisions immediately requested a reexamination of the patent. The district court resumed proceedings after the reexamination ended in 2008. After the Federal Circuit’s In re Bilski decision, Retail Decisions was granted summary judgment under 35 U.S.C. Section 101. 545 F.3d 943 (Fed. Cir. 2008). The district court found that claims 2 and 3 of the patent were invalid. The Federal Circuit stayed the appeal until the Supreme Court’s Bilski v. Kappos decision was handed down. 129 S. Ct. 2735 (June 1, 2009).

The at issue claim 3 reads:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:
a) obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;
b) constructing a map of credit card numbers based upon the other trans-actions and;
c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Claim 2 recites “computer readable media” for performing those same steps. On appeal, the Federal Circuit agreed that the steps recited by claim 3 could not meet the machine-or-transformation test. In addition, the Federal Circuit found that claim 3 was merely a “mental process.” The inclusion of “the Internet” did not take the claim out of the realm of purely mental steps and, therefore, it was not patent-eligible subject matter. The court also noted that no specific algorithm was disclosed in either the claims or the specification.

Asserted claim 2 was a so-called “Beauregard claim” drawn to a “computer readable medium containing program instructions for a computer to perform” a particular process. The court disregarded CyberSource’s argument that this claim defines an article of “manufacture,” and was thus clearly-patentable subject matter under Section 101. Instead, the Federal Circuit looked to the “underlying invention for patent-eligibility purposes” and found that it was a method claim directed to purely mental processes. The court suggested that if a specific algorithm were disclosed that was beyond practical application by a human mind, then claim 2 (and presumably claim 3) might define patentable subject matter. This was not the case in claim 2. The district court’s invalidity decision was, therefore, affirmed.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, September 12, 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.

SoCal IP Institute :: September 12, 2011 :: Insurance Coverage for Intellectual Property Claims and Section 101 Patentable Subject Matter

We will be discussing one California appellate case involving the availability of insurance coverage for intellectual property claims and a Federal Circuit case discussing patentable subject matter.  We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, September 12, 2011.  Brief synopses are presented below.

Aroa Marketing, Inc. v. Hartford Ins. Co., Case No. B228051 (Cal. App. Div. 4 August 23, 2011) (attached). Hartford had issued a commercial general liability insurance policy to Aroa for the policy period September 9, 2006 to November 1, 2007. The policy covered “personal and advertising injury” arising out of Aroa’s business. “Personal and advertising injury” was defined to include, “oral or written or electronic publication of material that violates a person’s right of privacy,” but specifically excluded, “personal and advertising injury” arising out of, “any violation of any intellectual property rights, such as copyright, patent, trademark, trade name, trade secret, service mark, or other destination of origin or authenticity.”

Aroa hired actress Tara Radcliffe to take part in an exercise video that, it was said, would be used in promotions at the Consumer Electronics Show (CES).  Aroa later used the video (including her likeness) to sell other products and at locations other than CES.  She requested they compensate her for that use and they refused.  She sued for various claims stemming from the use of her likeness and the parties eventually settled.  Aroa sought indemnity from its insurer, Hartford who refused.  Eventually, Aroa brought suit against Hartford in an effort to enforce the terms of the insurance policy.  The trial court granted Hartford’s demurrer on the complaint without leave to amend.

Aroa argued that the suit was a violation of a California “right of privacy” covered by the policy.  Hartford disagreed.  The appellate court agreed with Aroa.  However, the policy’s specific exclusion of “intellectual property” related claims included expansive language including “such as” and “any intellectual property rights.” This was sufficient to remove right of publicity-related claims from the coverage provided by the policy.  The court concluded that the decision to grant the demurre without leave to amend was proper because under no circumstances could Aroa succeed.

CyberSource Corp. v. Retail Decisions, Inc., Case No. 2009-1358 (Fed. Cir. August 16, 2011 (attached).  CyberSource is the owner of a U.S. Pat. No. 6,029,154 which claims a “method and system for detecting fraud in credit card transactions between [a] consumer and a merchant over the Internet.”  In particular, the claims seek to detect fraud by determining whether the current internet address matches one of a number of prior internet addresses from which legitimate purchases have originated.

CyberSource brought suit against Retail Decisions in 2004.  Retail Decisions immediately requested a reexamination of the patent.  The district court resumed proceedings after the reexamination ended in 2008.  After the Federal Circuit’s In re Bilski decision, Retail Decisions was granted summary judgment under 35 U.S.C. Section 101. 545 F.3d 943 (Fed. Cir. 2008).  The district court found that claims 2 and 3 of the patent were invalid.  The Federal Circuit stayed the appeal until the Supreme Court’s Bilski v. Kappos decision was handed down. 129 S. Ct. 2735 (June 1, 2009).

The at issue claim 3 reads:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:
a) obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;
b) constructing a map of credit card numbers based upon the other trans-actions and;
c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

Claim 2 recites “computer readable media” for performing those same steps.  On appeal, the Federal Circuit agreed that the steps recited by claim 3 could not meet the machine-or-transformation test.  In addition, the Federal Circuit found that claim 3 was merely a “mental process.”  The inclusion of “the Internet” did not take the claim out of the realm of purely mental steps and, therefore, it was not patent-eligible subject matter.  The court also noted that no specific algorithm was disclosed in either the claims or the specification.

Asserted claim 2 was a so-called “Beauregard claim” drawn to a “computer readable medium containing program instructions for a computer to perform” a particular process.  The court disregarded CyberSource’s argument that this claim defines an article of “manufacture,” and was thus clearly-patentable subject matter under Section 101.  Instead, the Federal Circuit looked to the “underlying invention for patent-eligibility purposes” and found that it was a method claim directed to purely mental processes.  The court suggested that if a specific algorithm were disclosed that was beyond practical application by a human mind, then claim 2 (and presumably claim 3) might define patentable subject matter.  This was not the case in claim 2.  The district court’s invalidity decision was, therefore, affirmed.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, September 12, 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.