Post-Alice Decision on Software Patents, Ultramercial Inc. v. Hulu LLC, Federal Circuit 2014

Ultramercial sued Hulu, YouTube, and WildTangent in 2009 for infringement of a patent related to distributing copyrighted material over the Internet to a consumer at no cost in exchange for viewing an advertisement, with the advertiser paying for the copyrighted material.

WildTangent filed a motion to dismiss, alleging that the claims were not statutory under 35 U.S.C. § 101.  The district court granted the motion.  The Federal Circuit reversed.  The Supreme Court vacated the decision and
remanded for consideration in view of its decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc.  A unanimous panel of the Federal Circuit again held the claims to be statutory.  WildTangent petitioned for Supreme Court review.  The Supreme Court again vacated the Federal Circuit’s decision and remanded for consideration in view of its more recent decision in Alice v. CLS Bank.  Judge Rader, a voice of reason, had since resigned and Judge Mayer was appointed to take his place.

Claim 1 of the patent recites:

A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

  • a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;
  • a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;
  • a third step of providing the media product for sale at an Internet website;
  • a fourth step of restricting general public access to said media product;
  • a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;
  • a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;
  • a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;
  • an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;
  • a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;
  • a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and
  • an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

According to Alice, the two prong circular logic of Mayo is to be used to determine if claims are directed to statutory subject matter.  The first prong is to determine whether the claims are directed to a patent-ineligible law of nature, natural phenomenon, or abstract idea.   If so, the second prong is to determine whether any additional claim elements transform the claim into a patent-eligible application that amounts to significantly more than the ineligible concept itself.  No definition has been provided by the Supreme Court as to when an idea is abstract.  Similarly, no definition has been provided as to what amounts to “significantly more.”

In this case, the court conceptualized the claim as relating distributing copyrighted material over the Internet to a consumer at no cost in exchange for viewing an advertisement, with the advertiser paying for the copyrighted material.  The court ignored details of the claim in considering the first prong.

According to the Federal Circuit, claim 1 provided an “ordered combination of steps reciting an abstraction — an idea, having no particular concrete or tangible form.”  In addition, “[t]he process of receiving copyrighted media, selecting an ad, offering the media in exchange for watching the selected ad, displaying the ad, allowing the consumer access to the media, and receiving payment from the sponsor of the ad all describe an
abstract idea, devoid of a concrete or tangible application.”  While the Court did state that “certain additional limitations, such as consulting an activity log, add a degree of particularity,” these limitations were insufficient to provide significantly more.

Further, even though some steps of the claim “were not previously employed in this art [that] is not enough — standing alone — to confer patent eligibility upon the claims at issue.”

This decision puts patent applicants in a difficult position.  Adding novel subject matter to a claim is not sufficient to render a claim statutory.

“Adding routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet does not transform an otherwise abstract idea into patent-eligible subject matter.”  Even though the claim recited use of the Internet, which is arguably a concrete, tangible system, the Court reiterated its reasoning from CyberSource Corp. v. Retail Decisions, Inc., stating that “use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under § 101.”

Further, the Federal Circuit held that Ultramercial’s claims failed both prongs of the machine-or-transformation test.  The only machine recited in the claims was the Internet, which is a “ubiquitous information-transmitting medium, not a novel machine.”  As for any sort of transformation elicited by the many steps of claim 1, the Court wrote that “manipulations of public or private legal obligations or relationships, business risks, or other such abstractions” are not transformations “because they are not physical objects or substances, and they are not representative of physical objects or substances.”

Consequently, all of Ultramercial’s claims were invalid.  The point of Alice seemed to be to allow courts to avoid a complicated novelty analysis if the only hardware in claims was a computer.  The reasoning seemed to be that adding a computer to a conventional process was insufficient to make the claim statutory.  However, in this case there was novelty in the claim that was ignored.

Adapting to this case would seem to require passing the machine or transformation test using more machines than are included in the Internet.

Post-Alice Decision on Software Patents, buySAFE v. Google, 2014

In buySAFE v. Google, decided by the Federal Circuit on September 3, 2014, claims were held to be invalid as non-statutory in view of 35 U.S.C. 101.  The Federal Circuit affirmed the district court’s grant of the defendant’s motion to dismiss.

U.S. Patent No. 7,644,019, owned by buySAFE, Inc., claims methods and machine-readable media encoded to  perform steps for guaranteeing a party’s performance of  its online transaction.

A representative method claim is claim 1, which recites:

A method, comprising:
     receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;
     processing, by at least one computer application program running on the safe transaction service
provider computer, the request by underwriting the first party in order to provide the transaction
performance guaranty service to the first party, wherein the computer of the safe transaction
service provider offers, via a computer network, the transaction performance guaranty service that
binds a transaction performance guaranty to the online commercial transaction involving the first
party to guarantee the performance of the first party following closing of the online commercial transaction.
The Federal Circuit noted that laws of nature, natural phenomena, and abstract ideas, no matter how
groundbreaking, innovative, or even brilliant,  are outside what the statute means by “new and useful process, machine, manufacture, or composition of matter,” 35 U.S.C. § 101. See Alice, 134 S. Ct.
at 2357; Myriad, 133 S. Ct. at 2116, 2117.

The Federal Circuit then stated that defining the excluded categories, the Supreme Court has ruled that the exclusion applies if a claim involves a natural law or phenomenon or abstract idea, even if the particular natural law or phenomenon or abstract idea at issue is narrow. Mayo, 132 S. Ct. at 1303. Mayo explained the point with reference to both natural laws and one kind of abstract idea, namely,
mathematical concepts.

A claim that directly reads on matter in the three identified categories is outside section 101. But the provision also excludes the subject matter of certain claims that by their terms read on a human-made physical thing (“machine, manufacture, or composition of matter”) or a human-controlled
series of physical acts (“process”) rather than laws of nature, natural phenomena, and abstract ideas. Such a claim falls outside section 101 if (a) it is “directed to” matter in one of the three excluded categories and (b) “the additional elements” do not supply an “inventive concept” in the physical realm of things and acts—a “new and useful application” of the ineligible matter in the physical
realm—that ensures that the patent is on something “significantly more than” the ineligible matter itself, according to the Federal Circuit, in interpreting Alice.

According to the Federal Circuit, the relevant Supreme Court cases are those which find an abstract idea in certain arrangements involving contractual relations, which are intangible entities. Bilski v. Kappos, 561 U.S. 593 (2010), involved a method of entering into contracts to hedge risk in commodity prices, and Alice involved methods and systems for “exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk,” Alice, 134 S. Ct. at 2356. More narrowly, the Court in both cases relied on the fact that the contractual relations at issue constituted “a fundamental economic practice long prevalent in our system of commerce.” Bilski, 561 U.S. at 611; see Alice, 134 S. Ct. at 2356, 2357.

The Federal Circuit went on to say that in simultaneously rejecting a general business method exception to patent eligibility and finding the hedging claims invalid, moreover, Bilski makes clear that the recognition that the formation or manipulation of economic relations may involve an abstract idea does not amount to creation of a business-method exception. The required section 101 inquiry has a second step beyond identification of an abstract idea. If enough extra is included in a claim, it passes muster under section 101 even if it amounts to a “business method.”

The Supreme Court in Alice made clear that a claim directed to an abstract idea does not move into section 101 eligibility territory by “merely requiring generic computer implementation.”

The claims in this case, according to the Federal Circuit, do not push or even test the boundaries of the Supreme Court precedents under section 101. The claims are squarely about creating a contractual relationship—a “transaction performance guaranty”—that is beyond question of ancient lineage.

The Federal Circuit concluded that the claims thus are directed to an abstract idea.

The claims’ invocation of computers adds no inventive concept. The computer functionality is generic—indeed, quite limited: a computer receives a request for a guarantee and transmits an offer of guarantee in return. There is no further detail. That a computer receives and sends the information over a network—with no further specification— is not even arguably inventive. The computers in
Alice were receiving and sending information over networks connecting the intermediary to the other institutions involved, and the Court found the claimed role of the computers insufficient.

And it likewise cannot be enough that the transactions being guaranteed are themselves online
transactions. At best, that narrowing is an “attempt[] to limit the use” of the abstract guarantee idea “to a particular technological environment,” which has long been held insufficient to save a claim in this context.

According to the Federal Circuit, it is a straightforward matter to conclude that the claims in this case are invalid.

One thing disturbing about this case is the phrase “is not even arguably inventive” that the Federal Circuit used when describing the computer functionality.  If the Federal Circuit requires inventiveness in the hardware, all software patents are invalid.  I don’t think this is where we are headed, though.  They also used the term “functionality” which implies that method steps are part of the consideration.

Post-Alice Decision on Software Patents, Planet Bingo v. VKGS, 2014

In Planet Bingo v. VKGS, decided by the Federal Circuit on August 26, 2014, claims were held to be invalid as non-statutory in view of 35 U.S.C. 101.  The Federal Circuit affirmed the district court’s decision.

Planet Bingo, LLC, owns two patents for computer-aided management of bingo games. After Planet Bingo filed an infringement action against VKGS, the district court granted summary judgment of invalidity, concluding that the patents do not claim patentable subject matter under 35 U.S.C. § 101.

The Federal Circuit stated that because a straight-forward application of the Supreme Court’s recent holding in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014), led them to the same result, they affirmed.

Generally, the claims recite storing a player’s preferred sets of bingo numbers; retrieving one such set upon demand, and playing that set; while simultaneously tracking the player’s sets, tracking player payments, and verifying winning numbers.

Following a Markman order, VKGS filed a motion for summary judgment that the asserted claims are directed to a patent-ineligible concept. Applying the majority opinion’s approach in CLS Bank International v. Alice Corp., the district court determined that “each method claim encompasses the abstract idea of managing/playing the game of Bingo.”

The Federal Circuit agreed with the district court that there was no meaningful distinction between the method and system claims or between the independent and dependent claims. According to the Federal Circuit, the system claims recite the same basic process as the method claims, and the dependent claims recite only slight variations of the independent claims.

The Federal Circuit stated that the claims here are similar to the claims at issue in Bilski v. Kappos, 130 S. Ct. 3218 (2010), and Alice, 134 S. Ct. 2347, which the Supreme Court held were directed to “abstract ideas.” For example, the claims here recite methods and systems for “managing a game of Bingo.” This is similar to the kind of “organizing human activity” at issue in Alice, 134 S. Ct. at 2356. And, although the ’646 and ’045 patents are not drawn to the same subject matter at issue in Bilski and Alice, these claims are directed to the abstract idea of “solv[ing a] tampering problem and also minimiz[ing] other security risks” during bingo ticket purchases. This is similar to the abstract ideas of “risk hedging” during “consumer transactions,” Bilski, 130 S. Ct. at 3231, and “mitigating settlement risk” in “financial transactions,” Alice, 134 S. Ct. at 2356–57, that the Supreme Court found ineligible. Thus, the Federal Circuit held that the subject matter claimed in the ’646 and ’045 patents were directed to an abstract idea.

Abstract ideas may still be patent-eligible if they contain an “‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.”

Apart from managing a game of bingo, the claims at issue also require “a computer with a central processing unit,” “a memory,” “an input and output terminal,” “a printer,” in some cases “a video screen,” and “a program . . . enabling” the steps of managing a game of bingo.  These elements, in turn, select, store, and retrieve two sets of numbers, assign a player identifier and a control number, and then compare a winning set of bingo numbers with a selected set of bingo numbers.

“[I]f a patent’s recitation of a computer amounts to a mere instruction to ‘implemen[t]’ an abstract idea ‘on . . . a computer,’ . . . that addition cannot impart patent eligibility.” Alice, 134 S. Ct. at 2358 (quoting Mayo, 132 S. Ct. at 1301).  According to the Federal Circuit, in this case the claims recite a generic computer implementation of the covered abstract idea.

Post-Alice Decision on Software Patents, I/P Engine v. AOL, 2014

In I/P Engine v. AOL, 35 U.S.C. 101 was not addressed by the majority but a concurring opinion would have held the claims non-statutory in view of 35 U.S.C. 101.  The claims were held invalid as obvious.

I/P Engine, Inc. brought an action against AOL Inc., Google Inc., IAC Search & Media, Inc., Gannett Company, Inc., and Target Corporation alleging infringement of U.S. Patent Nos. 6,314,420 and 6,775,664. A jury returned a verdict finding that all asserted claims were infringed and not anticipated.

The ’420 and ’664 patents both claim priority to the same parent patent, U.S. Patent No. 5,867,799. They relate to a method for filtering Internet search results that utilizes both content-based and collaborative filtering.  Content-based filtering is a technique for determining relevance by extracting features such as text from an information item. By contrast, collaborative filtering assesses relevance based on feedback from other users—it looks to what items “other users with similar interests or needs found to be relevant.”

Apparatus claim 10 of the ’420 patent recites:

A search engine system comprising: a system for scanning a network to make a demand search for informons relevant to a query from an individual user; a content-based filter system for receiving the informons from the scanning system and for filtering the informons on the basis of applicable content profile data for relevance to the query; and a feedback system for receiving collaborative feedback data from system users relative to informons considered by such users; the filter system combining pertaining feedback data from the feedback system with the content profile data in filtering each informon for relevance to the query.

Apparatus claim 1 of the ’664 patent provides:

A search system comprising: a scanning system for searching for information relevant to a query associated with a first user in a plurality of users; a feedback system for receiving information found to be relevant to the query by other users; and a content-based filter system for combining the information from the feedback system with the information from the scanning system and for filtering the combined information for relevance to at least one of the query and the first user.

Claim 26 of the ’664 patent is similar to claim 1, but cast as a method claim:

A method for obtaining information relevant to a first user comprising: searching for information relevant to a query associated with a first user in a plurality of users; receiving information found to be relevant to the query by other users; combining the information found to be relevant to the query by other users with the searched information; and content-based filtering the combined information for relevance to at least one of the query and the first user.

The Google Defendants argued that I/P Engine’s claimed invention is obvious as a matter of law because it simply combines content-based and collaborative filtering, two information filtering methods that were well-known in the art.  The Federal Circuit agreed and stated that no reasonable jury could conclude otherwise.

Just Mayer concurred, stating because the claims asserted by I/P Engine disclose no new technology, but instead simply recite the use of a generic computer to implement a well-known and widely-practiced technique for organizing information, they fall outside the ambit of 35 U.S.C. § 101.  And if this determination had been made in the first instance as directed by the Supreme Court, litigation, and nearly two weeks of trial and imposition on citizen jurors, could have been avoided.

Post-CLS case on 35 U.S.C. 101, Accenture Global Services, GMBH and Accenture LLP v. Guidewire Software, Inc., Federal Circuit 2013

Accenture Global Services, GmbH and Accenture, LLP (“Accenture”) appealed from the grant of summary judgment by the United States District Court for the District of Delaware holding that all claims of U.S. Patent 7,013,284 are invalid under 35 U.S.C. § 101.

The ‘284 software patent describes a computer program for handling insurance-related tasks.

The software patent discloses various software components, including a “data component that stores, retrieves and manipulates data” and a client component that “transmits and receives data to/from the data component.” The client component also includes a business component that “serves as a data cache and includes logic for manipulating the data.”  There is also a controller component to handle program events and an adapter component to interface with a data repository.

The specification contains detailed descriptions of the various software components, including many of the functions those components utilize and how those components interact.

Claim 1 is a claim to a software system for generating tasks to be performed in an insurance organization and recites:
       A system for generating tasks to be performed in an insurance organization, the system comprising:
       an insurance transaction database for storing information related to an insurance transaction, the insurance transaction database comprising a claim folder containing the information related to the insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format;
       a task library database for storing rules for determining tasks to be completed upon an occurrence of an event;
       a client component in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and
       a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant;
       wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.

 Claim 8 claims a software method for generating tasks to be performed in an insurance organization and recites:
       An automated method for generating tasks to be performed in an insurance organization, the method comprising: 

       transmitting information related to an insurance transaction;
       determining characteristics of the information related to the insurance transaction; 

       applying the characteristics of the information related to the insurance transaction to rules to determine a task to be completed, wherein an event processor interacts with an insurance transaction database containing information related to an insurance transaction decomposed into a plurality of levels from the group comprising a policy level, a claim level, a participant level and a line level, wherein the plurality of levels reflects a policy, the information related to the insurance transaction, claimants and an insured person in a structured format; 

       transmitting the determined task to a task assistant accessible by an assigned claim handler, wherein said client component displays the determined task; 

       allowing an authorized user to edit and perform the determined task and to update the information related to the insurance transaction in accordance with the determined task;

       storing the updated information related to the insurance transaction; and

       generating a historical record of the completed task.

The Federal Circuit found many similarities between the apparatus claim and method claim and noted that both claim 1 and claim 8 disclose aspects of “generating tasks to be performed in an insurance organization.”  They also noted that claim 1 and claim 8 further include many of the same software components.  

The Federal Circuit stated that they recently evaluated 35 U.S.C. § 101 and its application to computer software in CLS Bank Int’l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc). The plurality opinion in CLS Bank identified a two-step process, derived from the Supreme Court’s decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., ___ U.S. ___, 132 S. Ct. 1289 (2012), for analyzing patent eligibility under § 101. First, the court must identify “whether the claimed invention fits within one of the four statutory classes set out in § 101.”  Second, one must assess whether any of the judicially recognized exceptions to subject-matter eligibility apply, including whether the claims are to patent-ineligible abstract ideas.

In the case of abstractness of a software patent, the court must determine whether the claim poses “any risk of preempting an abstract idea.”  To do so the court must first “identify and define whatever fundamental concept appears wrapped up in the claim.”  Then, proceeding with the preemption analysis, the balance of the claim is evaluated to determine whether “additional substantive limitations . . . narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.”

The Federal Circuit then stated that although CLS Bank issued as a plurality opinion, in that case a majority of the court held that system claims that closely track method claims and are grounded by the same meaningful limitations will generally rise and fall together.  

The district court in this case held that the method claims of the ’284 software patent are invalid under § 101. That judgment was not appealed by Accenture.  That may have been a big mistake.

The Federal Circuit stated that because the ’284 software patent’s method claims were found to be patent ineligible, they should first compare the substantive limitations of the method claim and the system claim to see if the system claim offers a “meaningful limitation” to the abstract method claim, which has already been adjudicated to be patent-ineligible.  CLS Bank, 717 F.3d at 1291.

Under this analysis, the court compares the two claims to determine what limitations overlap, then identify the system claim’s additional
limitations. Essentially, the court must determine whether the system claim offers meaningful limitations “beyond generally linking ‘the use of the [method] to a particular technological environment.’” Id. (quoting Bilski, 130 S. Ct. at 3230).  

The court went on to say that the ’284 software patent’s system claim 1 includes virtually the same limitations and many of the same software components as the patent-ineligible method claims. Both claims are for “generating tasks to be performed in an insurance organization.”

Accenture only points to system claim 1’s inclusion of an insurance claim folder, a task library database, a server component, and a task engine in attempting to show that the system claim is meaningfully different from the ’284 patent’s method claims. However, according to the Federal Circuit, these software components are all present in the method claims, albeit without a specific reference to those components by name.

The Federal Circuit stated that even the specification of the ’284 patent makes little distinction between the system and method claims.

According to the Federal Circuit, because the system claim and method claim contain only “minor differences in terminology [but] require performance of the same basic process,” they should rise or fall together.

Accenture reasonably argued that system claim 1 of the software patent remains patent-eligible even after CLS Bank. It contended that the claim is patent-eligible because the ’284 patent implements the general idea of generating tasks for insurance claim processing, but narrows it through its recitation of a combination of computer components including an insurance transaction database, a task library database, a client component, and a server component, which includes an event processor, a task engine, and a task assistant. Accenture further argued that the complexity and detail of the specification demonstrate that the patent is an advance in computer software and not simply a claim to an abstract idea. Additionally, Accenture pointed to the recently-issued decision in Ultramercial as support for the patent-eligibility of system claim 1.

Guidewire responded that system claim 1 of the software patent sets forth the same steps and recites all the same elements as method claim 8 and requires no specific hardware or any particular algorithm.

The Federal Circuit finally concluded that the system claims of the ’284 software patent were patent-ineligible both because Accenture was unable to point to any substantial limitations that separate them from the similar, patent-ineligible method claim and
because, under the two-part test of CLS Bank, the system claim does not, on its own, provide substantial limitations to the claim’s patent-ineligible abstract idea.  

Judge Rader dissented.  I agree with his dissent.  He noted that prior to granting en banc review in CLS Bank, the Federal Circuit commented: “no one understands what makes an idea abstract.”  After CLS Bank, nothing has changed.  Opinions spend page after page revisiting cases and those of the Supreme Court, and still we continue to disagree vigorously over what is or is not patentable subject matter.

Indeed, deciding what makes an idea “abstract” is “reminiscent of the oenologists trying to describe a new wine.”

I couldn’t agree more.

In re Taner, 1982

Taner was decided after the Supreme Court’s decision in Diamond.

Taner’s claims were directed to a method of seismic exploration which simulated the response of subsurface earth formations to cylindrical or plane waves. An algorithm was directly recited in the claims.

In Taner, the CCPA distinguished between claims that are directed to “merely presenting and solving a mathematical algorithm,” which are not statutory subject matter, and claims that are drawn “to a process of converting one physical thing into another physical thing,” which are statutory subject matter.

The Court held that the claimed process involved taking one kind of “signal” and converting it into another kind of signal and that, thus, the claims set forth a process and were statutory within § 101.