U.S. Patent and Trademark Office Examples of Abstract Idea Claims (Software Patents)

The U.S. Patent and Trademark Office published examples of claims that are patent eligible and claims that are not patent eligible. The examples show how claims should be analyzed under the 2014 Interim Eligibility Guidance, discussed in a post below. All of the claims are analyzed for eligibility in accordance with their broadest reasonable interpretation.

Patent Eligible Claims

Example 1: Isolating and Removing Malicious Code from Electronic Messages

The invention relates to isolating and removing malicious code from email to prevent a computer from being compromised, for example by being infected with a computer virus. The specification explains the need for computer systems to scan electronic communications for malicious computer code and clean the electronic communication before it may initiate malicious acts. The disclosed invention operates by physically isolating a received electronic communication in a “quarantine” sector of the computer memory. A quarantine sector is a memory sector created by the computer’s operating system such that files stored in that sector are not permitted to act on files outside that sector.

Claims
1. A computer-implemented method for protecting a computer from an electronic communication containing malicious code, comprising executing on a processor the steps of:
receiving an electronic communication containing malicious code in a computer with a memory having a boot sector, a quarantine sector and a non-quarantine sector;
storing the communication in the quarantine sector of the memory of the computer, wherein the quarantine sector is isolated from the boot and the non-quarantine sector in the computer memory, where code in the quarantine sector is prevented from performing write actions on other memory sectors;
extracting, via file parsing, the malicious code from the electronic communication to create a sanitized electronic communication, wherein the extracting comprises
scanning the communication for an identified beginning malicious code marker,
flagging each scanned byte between the beginning marker and a successive end malicious code marker,
continuing scanning until no further beginning malicious code marker is found, and
creating a new data file by sequentially copying all non-flagged data bytes into a new file that forms a sanitized communication file;
transferring the sanitized electronic communication to the non-quarantine sector of the memory; and
deleting all data remaining in the quarantine sector.

Claim 1 is patent eligible.
Step 1. The claim recites a series of acts. Thus the claim is directed to a process.
Step 2. The claim is directed towards performing isolation and eradication of computer viruses, worms, and other malicious code, a concept inextricably tied to computer technology and distinct from the types of concepts found by the courts to be abstract.

2. A non-transitory computer-readable medium for protecting a computer from an electronic communication containing malicious code, comprising instructions stored thereon, that when executed on a processor, perform the steps of:
receiving an electronic communication containing malicious code in a computer with a memory having a boot sector, a quarantine sector and a non-quarantine sector;
storing the communication in the quarantine sector of the memory of the computer, wherein the quarantine sector is isolated from the boot and the non-quarantine sector in the computer memory, where code in the quarantine sector is prevented from performing write actions on other memory sectors;
extracting, via file parsing, the malicious code from the electronic communication to create a sanitized electronic communication, wherein the extracting comprises
scanning the communication for an identified beginning malicious code marker,
flagging each scanned byte between the beginning marker and a successive end malicious code marker,
continuing scanning until no further beginning malicious code marker is found, and
creating a new data file by sequentially copying all non-flagged data bytes into a new file that forms a sanitized communication file;
transferring the sanitized electronic communication to the non-quarantine sector of the memory; and
deleting all data remaining in the quarantine sector.

Claim 2 is patent eligible.
Step 1, Yes. The claim recites a manufacture.
Step
2A, No. The claim is directed towards performing isolation and eradication
of computer viruses, worms, and other malicious code, a concept
inextricably tied to computer technology and distinct from the types of
concepts found by the courts to be abstract.

Example 2: E-Commerce Outsourcing System/Generating a Composite Web Page
See the post below for DDR Holdings, LLC v. Hotels.com

Claim 19. A system useful in an outsource provider serving web pages offering
commercial opportunities, the system comprising:
(a) a computer store containing data, for each of a plurality of first web pages,
defining a plurality of visually perceptible elements, which visually perceptible
elements correspond to the plurality of first web pages;
(i) wherein each of the first web pages belongs to one of a plurality of web page owners;
(ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and
(iii) wherein the selected merchant, the outsource provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other;
(b) a computer server at the outsource provider, which computer server is coupled
to the computer store and programmed to:
(i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages;
(ii) automatically identify as the source page the one of the first web pages on which the link has been activated;
(iii) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and
(iv) using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page.

Claim 19 is patent eligible.
Step 1, Yes. The claim recites a system comprising a computer service and is a machine.
Step
2A, No. The claim does not “merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”

Example 3: Digital Image Processing
See Research Corporation Technologies Inc. v. Microsoft Corp.

Claim 1. A computer-implemented method for halftoning a gray scale image, comprising the steps of:
generating, with a processor, a blue noise mask by encoding changes in pixel values across a plurality of blue noise filtered dot profiles at varying gray levels;
storing the blue noise mask in a first memory location;
receiving a gray scale image and storing the gray scale image in a second memory location;
comparing, with a processor on a pixel-by-pixel basis, each pixel of the gray scale image to a threshold number in the corresponding position of the blue noise mask to produce a binary image array; and
converting the binary image array to a halftoned image.

Claim 1 is patent eligible.
Step 1, Yes. Claim 1 is directed to a process.
Step 2A, Yes. Mathematical relationships fall within the judicial exceptions, often labelled as “abstract ideas.”
Step 2B, Yes. First, the claim recites using a processor to generate the blue noise mask. The claim also recites the steps of storing the blue noise mask in a first memory location and receiving a gray scale image and storing the gray scale image in a second memory location. Thus, the claim uses a processor and memory to perform these steps of calculating a mathematical operation and receiving and storing data. The addition of general purpose computer components alone to perform such steps is not sufficient to transform a judicial exception into a patentable invention. The computer components are recited at a high level of generality and perform the basic functions of a computer (in this case, performing a mathematical operation and receiving and storing data) that would be needed to apply the abstract idea via computer. Merely using generic computer components to perform the above identified basic computer functions to practice or apply the judicial exception does not constitute a meaningful limitation that would amount to significantly more than the judicial exception, even though such operations could be performed faster than without a computer.
The claim also recites the additional steps of comparing the blue noise mask to a gray scale image to transform the gray scale image to a binary image array and converting the binary image array into a halftoned image. These additional steps tie the mathematical operation (the blue noise mask) to the processor’s ability to process digital images. These steps add meaningful limitations to the abstract idea of generating the blue noise mask and therefore add significantly more to the abstract idea than mere computer implementation.

Example 4: Global Positioning System
See SiRF Technology Inc. v. International Trade Commission, 601 F.3d 1319 (Fed. Cir. 2010)

Claim 1. A system for calculating an absolute position of a GPS receiver and an absolute time of reception of satellite signals comprising:
a mobile device comprising a GPS receiver, a display, a microprocessor and a wireless communication transceiver coupled to the GPS receiver, the mobile device programmed to receive PN codes sent by a plurality of GPS satellites, calculate pseudo-ranges to the plurality of GPS satellites by averaging the received PN codes, and transmit the pseudo-ranges, and
a server comprising a central processing unit, a memory, a clock, and a server communication transceiver that receives pseudo-ranges from the wireless communication transceiver of the mobile device, the memory having location data stored therein for a plurality of wireless towers, and the central processing unit programmed to:
estimate a position of the GPS receiver based on location data for a wireless tower from the memory and time data from the clock,
calculate absolute time that the signals were sent from the GPS satellites using the pseudo-ranges from the mobile device and the position estimate,
create a mathematical model to calculate absolute position of the GPS receiver based on the pseudo-ranges and calculated absolute time,
calculate the absolute position of the GPS receiver using the mathematical model, and
transmit the absolute position of the GPS receiver to the mobile device, via the server communication transceiver, for visual representation on the display.

Claim 1 is patent eligible.
Step 1, Yes. Claim 1 is directed to a mobile device, a machine.
Step 2A, Yes. Because mathematical operations are recited in the claim, the claim is directed to a judicial exception.
Step 2B, Yes. The claim recites using a central processing unit (CPU) for performing the mathematical operations of estimating position, calculating absolute time, and calculating absolute position using a mathematical model. The claim also recites using location data stored in a memory, and time data from a clock. These computer components are recited at a high level of generality and add no more to the claimed invention than the components that perform basic mathematical calculation functions routinely provided by a general purpose computer. Limiting performance of the mathematical calculations to a general purpose CPU, absent more, is not sufficient to transform the recited judicial exception into a patent-eligible invention. However, the claim is further limited to a mobile device comprising a GPS receiver, microprocessor, wireless communication transceiver and a display that receives satellite data, calculates pseudo-ranges, wirelessly transmits the calculated pseudo-ranges to the server, receives location data from the server, and displays a visual representation of the received calculated absolute position from the server. All of these features, especially when viewed in combination, amount to significantly more than the judicial exception.

Ineligible Claims

Example 5: Digital Image ProcessingThe following claim was found ineligible by the Federal Circuit in Digitech Image Tech., LLC v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014).

Claim 10 is patent ineligible.
Claim 10. A method of generating a device profile that describes properties of a device in a digital image reproduction system for capturing, transforming or rendering an image, said method comprising:
generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;
generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and
combining said first and second data into the device profile.

Claim 10 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a series of acts, a process.
Step 2A, Yes. The gathering and combining merely employs mathematical relationships to manipulate existing information to generate additional information in the form of a ‘device profile,’ without limit to any use of the device profile. This is similar to the basic concept of manipulating information using mathematical relationships.
Step 2B, No. The claim does not include additional elements beyond the abstract idea of gathering and combining data.

Example 6: The Game of Bingo
The following claim was found ineligible by the Federal Circuit in Planet Bingo, LLC v. VKGS LLC, 576 Fed. Appx. 1005 (Fed. Cir. 2014).

Claim 1. A system for managing a game of Bingo which comprises:
(a) a computer with a central processing unit (CPU) and with a memory and with a printer connected to the CPU;
(b) an input and output terminal connected to the CPU and memory of the computer; and
(c) a program in the computer enabling:
(i) input of at least two sets of Bingo numbers which are preselected by a player to be played in at least one selected game of Bingo in a future period of time;
(ii) storage of the sets of Bingo numbers which are preselected by the player as a group in the memory of the computer;
(iii) assignment by the computer of a player identifier unique to the player for the group having the sets of Bingo numbers which are preselected by the player wherein the player identifier is assigned to the group for multiple sessions of Bingo;
(iv) retrieval of the group using the player identifier;
(v) selection from the group by the player of at least one of the sets of Bingo numbers preselected by the player and stored in the memory of the computer as the group for play in a selected game of Bingo in a specific session of Bingo wherein a number of sets of Bingo numbers selected for play in the selected game of Bingo is less than a total number of sets of Bingo numbers in the group;
(vi) addition by the computer of a control number for each set of Bingo numbers selected for play in the selected game of Bingo;
(vii) output of a receipt with the control number, the set of Bingo numbers which is preselected and selected by the player, a price for the set of Bingo numbers which is preselected, a date of the game of Bingo and optionally a computer identification number; and
(viii) output for verification of a winning set of Bingo numbers by means of the control number which is input into the computer by a manager of the game of Bingo.

Claim 1 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a system, a machine.
Step 2A, Yes. Claim 1 describes managing the game of Bingo and therefore is directed to an abstract idea.
Step 2B, No. The recitation of the computer limitations amounts to mere instructions to implement the abstract idea on a computer. Taking the additional elements individually and in combination, the computer components at each step of the management process perform purely generic computer functions. As such, there is no inventive concept sufficient to transform the claimed subject matter into a patent-eligible application.

Example 7. E-Commerce providing Transaction Performance Guaranty
The following claim was found ineligible by the Federal Circuit in buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014).

Claim 1. 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.

Claim 1 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a series of steps, a process.
Step 2A, Yes. Claim 1 is directed to creation of a commercial arrangement involving contractual relations similar to the fundamental economic practices found by the courts to be abstract ideas (e.g., hedging in Bilski).
Step
2B, No. The claim amounts to no more than stating create a contract on a computer and send it over a network. These generic computing elements alone do not amount to significantly more than the judicial exception.

Example 8. Distribution of Products over the Internet
The following claim was found ineligible by the Federal Circuit in Ultramercial v. Hulu and WildTangent, 2014 U.S. App. LEXIS 21633 (Fed. Cir. 2014).

1. 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.

Claim 1 is patent ineligible.
Step 1, Yes. Claim 1 is directed to a series of steps, a process.
Step
2A, Yes. Claim 1 is directed to the concept of using advertising as an exchange or currency. This concept is similar to the concepts involving human activity relating to commercial practices (e.g., hedging in Bilski) that have been found by the courts to be abstract ideas.
Step
2B, No. The accessing and updating of an activity log are used only for data gathering and, as such, only represent insignificant pre-solution activity. Similarly, requiring a consumer request and restricting public access is insignificant pre-solution activity because such activity is necessary and routine in implementing the concept of using advertising as an exchange or currency. Furthermore, the Internet limitations do not add significantly more because they are simply an attempt to limit the abstract idea to a particular technological environment.

Post-Alice Software Patent Decision, Content Extraction and Transmission v Wells Fargo, Federal Circuit, Dec. 2014

CET owns patents that generally recite a method of 1) extracting data from hard copy documents using an automated digitizing unit such as a scanner, 2) recognizing specific information from the extracted data, and 3) storing that information in a memory. This method can be performed by software on an automated teller machine (ATM) that recognizes information written on a scanned check, such as the check’s amount, and populates certain data.

One of the claims recites:
A method of processing information from a diversity of types of hard copy documents, said method
comprising the steps of:
(a) receiving output representing a diversity of types of hard copy documents from an automated digitizing unit and storing information from said diversity of types of hard copy documents into a memory, said
information not fixed from one document to the next, said receiving step not preceded by scanning, via said automated digitizing unit, of a separate document containing format requirements;
(b) recognizing portions of said hard copy documents corresponding to a first data field; and
(c) storing information from said portions of said hard copy documents corresponding to said first data field into memory locations for said first data field.

The Federal Circuit said that The Supreme Court’s two-step framework, described
in Mayo, and in Alice Corp. Pty Ltd. v. CLS Bank Int’l guided their analysis.

Using that analysis, the court is to first determine whether a claim is “directed to” a patent-ineligible
abstract idea. If so, they are then to consider the elements of the claim—both individually and as an ordered combination—to assess whether the additional elements transform the nature of the claim into a patent-eligible application of the abstract idea. This is the search for an “inventive concept”—something sufficient to ensure that the claim amounts to “significantly more” than the abstract idea itself.

The Federal Circuit noted that The Supreme Court has not delimited the precise contours of the ‘abstract ideas’ category.

Applying Mayo/Alice step one, the Federal Circuit agreed with the district court that the claims of the asserted patents are drawn to the abstract idea of 1) collecting data, 2) recognizing certain data within the collected data set, and 3) storing that recognized data in a memory. The concept of data collection, recognition, and storage is undisputedly well-known.

CET attempted to distinguish its claims from those found to be abstract in Alice and other cases by showing
that its claims require not only a computer but also an additional machine—a scanner. CET argued that its claims are not drawn to an abstract idea because human minds are unable to process and recognize the stream of bits output by a scanner. However, the Federal Circuit did not accept that argument and noted that claims in Alice also required a computer that processed streams of bits, but nonetheless were found to be abstract.

For the second step of the analysis, the court must determine whether the limitations present in the claims represent a patent-eligible application of the abstract idea. For the role of a computer in a computer implemented invention to be deemed meaningful in the context of this analysis, it must involve more than performance of well-understood, routine, and conventional activities previously known to the industry.

Applying Mayo/Alice step two, the Federal Circuit agreed with the district court that the asserted patents contain no limitations—either individually or as an ordered combination—that transform the claims into a patent-eligible application. CET conceded at oral argument that the use of a scanner or other digitizing device to extract data from a document was well-known at the time of filing, as was the ability of computers to translate the shapes on a physical page into typeface characters.

According to the Federal Circuit, CET’s claims merely recite the use of this existing scanning and processing technology to recognize and store data from specific data fields such as amounts, addresses, and dates.
There is no “inventive concept” in CET’s use of a generic scanner and computer to perform well-understood,
routine, and conventional activities commonly used in industry. At most, CET’s claims attempt to limit the abstract idea of recognizing and storing information from hard copy documents using a scanner and a computer to a particular technological environment. Such a limitation has been held insufficient to save a claim in this context.

CET argued that the failure of PNC or the district court to individually address every one of its claims is inconsistent with the statutory presumption of validity that requires proving the invalidity of each claim by clear and convincing evidence.

The Federal Circuit did not accept that argument. They said that the district court correctly determined that addressing each claim of the asserted patents was unnecessary. After conducting its own analysis, the district court determined that PNC is correct that claim 1 of the ’855 patent and claim 1 of the ’416 patent are representative, because all the claims are “substantially similar and linked to the same abstract idea.”

CET contended that the district court erred by declaring its claims patent-ineligible under § 101 at the
pleading stage without first construing the claims or allowing the parties to conduct fact discovery and submit
opinions from experts supporting their claim construction positions. The Federal Circuit did not accept this argument. They stated that although the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter, claim construction is not an inviolable prerequisite to a validity determination under § 101.

The Federal Circuit affirmed the district court’s grant of PNC’s motion to dismiss on the ground that the
claims of CET’s asserted patents are invalid as patent ineligible under § 101.

Thus, a scanner; i.e., some computer hardware beyond a computer is not enough to convert a patent-ineligible software claim to a patent-eligible claim after Alice.

December 16, 2014 Interim Guidelines on Subject Matter Eligibility of Software Patents

The United States Patent and Trademark Office has prepared interim guidance (2014 Interim Guidance on Patent Subject Matter Eligibility, called “Interim Eligibility Guidance”) for use by USPTO personnel in determining subject matter eligibility under 35 U.S.C. 101 in view of recent decisions by the U.S. Supreme Court (Supreme Court) such as Alice, Myriad, and Mayo.

The guidelines provide the following flowchart:

(Step 1) Is the claim to a process, machine, manufacture or composition of matter?
If so, proceed to Step 2A. If not, the claim is not eligible subject matter under 35 USC 101.

(Step 2A) [Part 1 Mayo test] Is the claim directed to a law of nature, a natural phenomenon, or an abstract idea (judicially recognized exceptions)?. If so, proceed to Step 2B. If not, the claim qualifies as eligible subject matter under 35 USC 101.

(Step 2B) [Part 2 Mayo test] Does the claim recite additional elements that amount to significantly more than the judicial exception? If so, the claim qualifies as eligible subject matter. If not, the claim is not eligible subject matter.

Two–part Analysis for Judicial Exceptions
A. Flowchart Step 2A (Part 1 Mayo Test) – Determine whether the claim is
directed to a law of nature, a natural phenomenon, or an abstract idea (judicial
exceptions).

A claim is directed to a judicial exception when a law of nature, a natural phenomenon,
or an abstract idea is recited (i.e., set forth or described) in the claim. Such a claim
requires closer scrutiny for eligibility because of the risk that it will “tie up” the excepted
subject matter and pre-empt others from using the law of nature, natural phenomenon, or
abstract idea. Courts tread carefully in scrutinizing such claims because at some level all
inventions embody, use, reflect, rest upon, or apply a law of nature, natural phenomenon,
or abstract idea. To properly interpret the claim, it is important to understand what the
applicant has invented and is seeking to patent.

For claims that may recite a judicial exception, but are directed to inventions that clearly
do not seek to tie up the judicial exception, see below regarding a streamlined
eligibility analysis.

It should be noted that there are no bright lines between the types of exceptions
because many of these concepts can fall under several exceptions. For example,
mathematical formulas are considered to be an exception as they express a scientific
truth, but have been labelled by the courts as both abstract ideas and laws of nature.
Likewise, “products of nature” are considered to be an exception because they tie up the
use of naturally occurring things, but have been labelled as both laws of nature and
natural phenomena. Thus, it is sufficient for this analysis to identify that the claimed
concept aligns with at least one judicial exception.

Laws of nature and natural phenomena, as identified by the courts, include naturally
occurring principles/substances and substances that do not have markedly different
characteristics compared to what occurs in nature. The types of concepts
courts have found to be laws of nature and natural phenomena are shown by these cases,
which are intended to be illustrative and not limiting:
• an isolated DNA (see the Myriad case);
• a correlation that is the consequence of how a certain compound is metabolized
by the body (Mayo);
• electromagnetism to transmit signals (Morse); and
• the chemical principle underlying the union between fatty elements and water
(Tilghman).

Abstract ideas have been identified by the courts by way of example, including
fundamental economic practices, certain methods of organizing human activities, an idea
‘of itself,’ and mathematical relationships/formulas. The types of concepts courts have
found to be abstract ideas are shown by these cases, which are intended to be illustrative
and not limiting:
• mitigating settlement risk (Alice);
• hedging (Bilski);
• creating a contractual relationship (buySAFE);
• using advertising as an exchange or currency (Ultramercial);
• processing information through a clearinghouse (Dealertrack);
• comparing new and stored information and using rules to identify options
(SmartGene);
• using categories to organize, store and transmit information (Cyberfone);
• organizing information through mathematical correlations (Digitech);
• managing a game of bingo (Planet Bingo);
• the Arrhenius equation for calculating the cure time of rubber (Diehr);
• a formula for updating alarm limits (Flook);
• a mathematical formula relating to standing wave phenomena (Mackay Radio); and
• a mathematical procedure for converting one form of numerical representation to
another (Benson)

Nature-based Products
a. Determine Whether The Markedly Different Characteristics Analysis Is
Needed To Evaluate a Nature-Based Product Limitation Recited in a Claim

Nature-based products, as used herein, include both eligible and ineligible products and
merely refer to the types of products subject to the markedly different characteristics
analysis used to identify “product of nature” exceptions. Courts have held that naturally
occurring products and some man-made products that are essentially no different from a
naturally occurring product are “products of nature” that fall under the laws of nature or
natural phenomena exception. To determine whether a claim that includes a nature-based
product limitation recites a “product of nature” exception, use the markedly different
characteristics analysis to evaluate the nature-based product limitation. A claim that recites a nature-based product limitation that does not
exhibit markedly different characteristics from its naturally occurring counterpart in its
natural state is directed to a “product of nature” exception (Step 2A: YES).

Care should be taken not to overly extend the markedly different characteristics analysis
to products that when viewed as a whole are not nature-based.

A nature-based product can be claimed by itself (e.g., “a Lactobacillus bacterium”) or as
one or more limitations of a claim (e.g., “a probiotic composition comprising a mixture of
Lactobacillus and milk in a container”). The markedly different characteristics analysis
should be applied only to the nature-based product limitations in the claim to determine
whether the nature-based products are “product of nature” exceptions. When the naturebased
product is produced by combining multiple components, the markedly different
characteristics analysis should be applied to the resultant nature-based combination,
rather than its component parts. In the example above, the mixture of Lactobacillus and
milk should be analyzed for markedly different characteristics, rather than the
Lactobacillus separately and the milk separately. The container would not be subject to
the markedly different characteristics analysis as it is not a nature-based product, but
would be evaluated in Step 2B if it is determined that the mixture of Lactobacillus and
milk does not have markedly different characteristics from any naturally occurring
counterpart and thus is a “product of nature” exception.

For a product-by-process claim, the analysis turns on whether the nature-based product in
the claim has markedly different characteristics from its naturally occurring counterpart.
(See MPEP 2113 for product-by-process claims.)

A process claim is not subject to the markedly different analysis for nature-based
products used in the process, except in the limited situation where a process claim is
drafted in such a way26 that there is no difference in substance from a product claim (e.g.,
“a method of providing an apple.”).

The markedly different characteristics analysis compares the nature-based product
limitation to its naturally occurring counterpart in its natural state. When there is no
naturally occurring counterpart to the nature-based product, the comparison should be
made to the closest naturally occurring counterpart. In the case of a nature-based
combination, the closest counterpart may be the individual nature-based components that
form the combination, i.e., the characteristics of the claimed nature-based combination
are compared to the characteristics of the components in their natural state.

Markedly different characteristics can be expressed as the product’s structure, function,
and/or other properties,28 and will be evaluated based on what is recited in the claim on a
case-by-case basis. As seen by the examples that are being released in conjunction with
this Interim Eligibility Guidance, even a small change can result in markedly different
characteristics from the product’s naturally occurring counterpart. In accordance with
this analysis, a product that is purified or isolated, for example, will be eligible when
there is a resultant change in characteristics sufficient to show a marked difference from
the product’s naturally occurring counterpart. If the claim recites a nature-based product
limitation that does not exhibit markedly different characteristics, the claim is directed to
a “product of nature” exception (a law of nature or naturally occurring phenomenon), and
the claim will require further analysis to determine eligibility based on whether additional
elements add significantly more to the exception.

Non-limiting examples of the types of characteristics considered by the courts when
determining whether there is a marked difference include:

• Biological or pharmacological functions or activities;
• Chemical and physical properties;
• Phenotype, including functional and structural characteristics; and
• Structure and form, whether chemical, genetic or physical.

If the claim includes a nature-based product that has markedly different characteristics,
the claim does not recite a “product of nature” exception and is eligible (Step 2A: NO)
unless the claim recites another exception (such as a law of nature or abstract idea, or a
different natural phenomenon). If the claim includes a product having no markedly
different characteristics from the product’s naturally occurring counterpart in its natural
state, the claim is directed to an exception (Step 2A: YES), and the eligibility analysis
must proceed to Step 2B to determine if any additional elements in the claim add
significantly more to the exception. For claims that are to a single nature-based product,
once a markedly different characteristic in that product is shown, no further analysis
would be necessary for eligibility because no “product of nature” exception is recited
(i.e., Step 2B is not necessary because the answer to Step 2A is NO). This is a change
from prior guidance because the inquiry as to whether the claim amounts to significantly
more than a “product of nature” exception is not relevant to claims that do not recite an
exception. Thus, a claim can be found eligible based solely on a showing that the naturebased
product in the claim has markedly different characteristics and thus is not a
“product of nature” exception, when no other exception is recited in the claim.

If a rejection under 35 U.S.C. 101 is ultimately made, the rejection should identify the
exception as it is recited (i.e., set forth or described) in the claim, and explain why it is an
exception providing reasons why the product does not have markedly different
characteristics from its naturally occurring counterpart in its natural state.

Flowchart Step 2B (Part 2 Mayo test) – Determine whether any element, or
combination of elements, in the claim is sufficient to ensure that the claim
amounts to significantly more than the judicial exception.

A claim directed to a judicial exception must be analyzed to determine whether the
elements of the claim, considered both individually and as an ordered combination, are
sufficient to ensure that the claim as a whole amounts to significantly more than the
exception itself – this has been termed a search for an “inventive concept.” To be
patent-eligible, a claim that is directed to a judicial exception must include additional
features to ensure that the claim describes a process or product that applies the exception
in a meaningful way, such that it is more than a drafting effort designed to monopolize
the exception. It is important to consider the claim as whole. Individual elements viewed
on their own may not appear to add significantly more to the claim, but when combined
may amount to significantly more than the exception. Every claim must be examined
individually, based on the particular elements recited therein, and should not be judged to
automatically stand or fall with similar claims in an application.

The Supreme Court has identified a number of considerations for determining whether a
claim with additional elements amounts to significantly more than the judicial exception
itself. The following are examples of these considerations, which are not intended to be
exclusive or limiting. Limitations that may be enough to qualify as “significantly more”
when recited in a claim with a judicial exception include:
• Improvements to another technology or technical field;
• Improvements to the functioning of the computer itself;
• Applying the judicial exception with, or by use of, a particular machine;
• Effecting a transformation or reduction of a particular article to a different state or
thing;
• Adding a specific limitation other than what is well-understood, routine and
conventional in the field, or adding unconventional steps that confine the claim to
a particular useful application; or
• Other meaningful limitations beyond generally linking the use of the judicial
exception to a particular technological environment.

Limitations that were found not to be enough to qualify as “significantly more” when
recited in a claim with a judicial exception include:
• Adding the words “apply it” (or an equivalent) with the judicial exception, or
mere instructions to implement an abstract idea on a computer;
• Simply appending well-understood, routine and conventional activities previously
known to the industry, specified at a high level of generality, to the judicial
exception, e.g., a claim to an abstract idea requiring no more than a generic
computer to perform generic computer functions that are well-understood, routine
and conventional activities previously known to the industry;
• Adding insignificant extrasolution activity to the judicial exception, e.g., mere
data gathering in conjunction with a law of nature or abstract idea; or
• Generally linking the use of the judicial exception to a particular technological
environment or field of use.

For a claim that is directed to a plurality of exceptions, conduct the eligibility analysis for
one of the exceptions. If the claim recites an element or combination of elements that
amount to significantly more than that exception, consider whether those additional
elements also amount to significantly more for the other claimed exception(s), which
ensures that the claim does not have a pre-emptive effect with respect to any of the
recited exceptions. Additional elements that satisfy Step 2B for one exception will likely
satisfy Step 2B for all exceptions in a claim. On the other hand, if the claim fails under
Step 2B for one exception, the claim is ineligible, and no further eligibility analysis is
needed.

The Interim Guidelines provide for a Streamlined Eligibility Analysis as follows.
For purposes of efficiency in examination, a streamlined eligibility analysis can be used
for a claim that may or may not recite a judicial exception but, when viewed as a whole,
clearly does not seek to tie up any judicial exception such that others cannot practice it.
Such claims do not need to proceed through the full analysis herein as their eligibility
will be self-evident. However, if there is doubt as to whether the applicant is effectively
seeking coverage for a judicial exception itself, the full analysis should be conducted to
determine whether the claim recites significantly more than the judicial exception.

For instance, a claim directed to a complex manufactured industrial product or process
that recites meaningful limitations along with a judicial exception may sufficiently limit
its practical application so that a full eligibility analysis is not needed. As an example, a
robotic arm assembly having a control system that operates using certain mathematical
relationships is clearly not an attempt to tie up use of the mathematical relationships and
would not require a full analysis to determine eligibility. Also, a claim that recites a
nature-based product, but clearly does not attempt to tie up the nature-based product,
does not require a markedly different characteristics analysis to identify a “product of
nature” exception. As an example, a claim directed to an artificial hip prosthesis coated
with a naturally occurring mineral is not an attempt to tie up the mineral. Similarly,
claimed products that merely include ancillary nature-based components, such as a claim that is directed to a cellphone with an electrical contact made of gold or a plastic chair
with wood trim, would not require analysis of the nature-based component to identify a
“product of nature” exception because such claims do not attempt to improperly tie up the
nature-based product.

Regardless of whether a rejection under 35 U.S.C. 101 is made, a complete examination
should be made for every claim under each of the other patentability requirements: 35 U.S.C. 102, 103, 112, and 101 (utility, inventorship and double patenting) and nonstatutory
double patenting.

The guidelines also provide sample analyses based upon earlier Supreme Court decisions.

The December 16, 2014 Interim Guidance can be found here:
https://www.federalregister.gov/articles/2014/12/16/2014-29414/2014-interim-guidance-on-patent-subject-matter-eligibility

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.

Alice Corp. v CLS Bank International, U.S. Supreme Court 2014

This is the most recent Supreme Court decision on software patents. In this case, the U.S. Supreme Court has made it harder to obtain software patents by siding with CLS Bank.

The software patents concern “the management of risk relating to specified, yet unknown, future events.” In particular, the patents relate to a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate “counter party” or “settlement” risk. Settlement risk refers to the risk to each party in an exchange that only one of the two parties will actually pay its obligation, leaving the paying party without its principal or the benefit of the counter-party’s performance. Alice’s patents address that risk by relying on a trusted third party to ensure the exchange of either both parties’ obligations or neither obligation. For example, when two parties agree to perform a trade, in certain contexts there may be a delay between the time that the parties enter a contractual agreement obligating themselves to the trade and the time of settlement when the agreed trade is actually executed. Ordinarily, the parties would consummate the trade by paying or exchanging their mutual obligations after the intervening period, but in some cases one party might become unable to pay during that time and fail to notify the other before settlement. As disclosed in Alice’s patents, a trusted third party can be used to verify each party’s ability to perform before actually exchanging either of the parties’ agreed-upon obligations.

The software patent claims recited methods of exchanging obligations between parties, data processing systems, and computer- readable media containing a program code for directing an exchange of obligations.

A representative method claim of this software patent is as follows:
33. A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:
(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;
(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;
(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and
(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

A representative apparatus claim of this software patent is as follows:
1. A data processing system to enable the exchange of an obligation between parties, the system comprising:
a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and
a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit record in order to effect an exchange obligation arising from said trans action, allowing only those transactions that do not result in a value of said shadow debit record being less than a value of said shadow credit record; and (c) generate an instruction to said exchange institution at the end of a period of time to adjust said credit record and/or said debit record in accordance with the adjustment of said shadow credit record and/or said shadow debit record, wherein said instruction being an irrevocable, time invariant obligation placed on said exchange institution.

The district court granted summary judgment in favor of CLS, holding each of the asserted claims of Alice’s software patents invalid under §101.

In the Federal Circuit decision, a ten-member en banc panel released seven different decisions. None of the opinions garnered majority support. Seven of the ten judges agreed that the method and computer-readable medium claims lack subject matter eligibility. Eight of the ten concluded that the software patent claims should rise and fall together regardless of their claim type.

The Supreme Court used its earlier decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. as a framework. Using this framework, the Court must first determine whether the claims at issue are directed to a patent-ineligible concept. If so, the Court then asks whether the claim’s elements, considered both individually and “as an ordered combination,” “transform the nature of the claim” into a patent-eligible application.

The court stated that the software patent claims at issue are directed to a patent-ineligible concept: the abstract idea of intermediated settlement. Turning to the second step of Mayo’s framework, the court stated that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention. The court stated that simply appending conventional steps, specified at a high level of generality,” to a method already “well known in the art” is not enough to supply the “inventive concept” needed to make this transformation.

Referring to Mayo, the Court than stated that wholly generic computer implementation is not generally the sort of additional feature that provides any practical assurance that the process is more than a drafting effort designed to monopolize the abstract idea itself.

Still applying a Mayo analysis to this software patent, the court noted that, taking the claim elements separately, the function performed by the computer at each step—creating and maintaining “shadow” accounts, obtaining data,adjusting account balances, and issuing automated instructions—is purely conventional. Considered “as an ordered combination,” these computer components add nothing that is not already present when the steps are considered separately.

In summary, a software patent in which conventional steps are computerized is not statutory. Unfortunately, the Supreme Court conflated 35 U.S.C 101 and 35 U.S.C. 103 analyses. They should have addressed these two issues separately.

The court also mentioned its previous software patent decision, Bilski v. Kappos, 561 U. S. 593 (2010). The claims at issue in Bilski described a method for hedging against the financial risk of price fluctuations.
All members of the Court agreed that the patent in Bilski claimed an “abstract idea.” Specifically, the claims described “the basic concept of hedging, or protecting against risk.” The Court explained that “‘hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.’” “The concept of hedging” as recited by the claims in suit was in therefore a patent-ineligible “abstract idea, just like the algorithms at issue in Benson and Flook.” The court stated that it follows from prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea.

The court has walked away from sensible software patent precedent in Diamond v. Diehr. In that case, the court said that the novelty of any element or steps is not relevant to a 101 analysis. If you have a computer in the claim, that removes it from the possibility of reading on mental steps, so the claim should be statutory. This court is quite unclear about what makes a claim too abstract.

My belief is that we are moving to a European style patentability analysis for software inventions. This is unfortunate because software per se (without a hardware invention) is valuable and one of the primary fields in which the U.S. dominates and excels. Expect to see more 101 rejections from the U.S. Patent and Trademark Office. It will be easier for an examiner to automatically issue a form rejection under 35 USC 101 whenever a patent application mentions the word “software” than to search for relevant prior art.

The decision can be found here:
http://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf

CLS Bank v. Alice Corp., Federal Circuit 2013

The Federal Circuit reviewed an appeal by Alice Corp. of a district court (U.S. District Court for District of Columbia) holding that Alice’s asserted
method claims, computer readable media claims, and systems claims were not directed to eligible subject matter under 35 U.S.C. §101.

The ten-member en banc panel released seven different decisions. None of the opinions garnered majority support. Seven of the ten judges agreed that the method and computer-readable medium claims lack subject matter eligibility. Eight of the ten concluded that the software patent claims should rise and fall together regardless of their claim type.

The software patents concern “the management of risk relating to specified, yet unknown, future events.” In particular, the patents relate to a computerized trading platform used for conducting
financial transactions in which a third party settles obligations between a first and a second party so as to eliminate “counter party” or “settlement” risk. Settlement risk refers to the risk to each party in an exchange that only one of the two
parties will actually pay its obligation, leaving the paying party without its principal or the benefit of the counter-party’s performance. Alice’s patents address that risk by
relying on a trusted third party to ensure the exchange of either both parties’ obligations or neither obligation. For example, when two parties agree to perform a
trade, in certain contexts there may be a delay between the time that the parties enter
a contractual agreement obligating themselves to the trade and the time of settlement when the agreed trade is actually executed. Ordinarily, the parties would consummate the trade by paying or exchanging their mutual obligations after the intervening period, but in some cases one party might become unable to pay during that time and fail to notify the other
before settlement. As disclosed in Alice’s patents, a trusted third party can be used to verify each party’s ability to perform before actually exchanging either of the parties’ agreed-upon obligations.

The claims before the court recited methods of exchanging obligations
between parties, data processing systems, and computer-
readable media containing a program code for directing
an exchange of obligations.

A representative method claim is as follows:
        33. A method of exchanging obligations as between parties, each party holding a credit record
and a debit record with an exchange institution,
the credit records and debit records for exchange
of predetermined obligations, the method comprising the steps of:
          (a) creating a shadow credit record and a shadow
debit record for each stakeholder party to be
held independently by a supervisory institution from the exchange institutions;
          (b) obtaining from each exchange institution a start-of-day balance for each shadow credit
record and shadow debit record;
          (c) for every transaction resulting in an exchange
obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only
these transactions that do not result in the
value of the shadow debit record being less
than the value of the shadow credit record at
any time, each said adjustment taking place
in chronological order; and
          (d) at the end-of-day, the supervisory institution
instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties
in accordance with the adjustments of the said
permitted transactions, the credits and debits
being irrevocable, time invariant obligations
placed on the exchange institutions.

A representative apparatus claim is as follows:
          1. A data processing system to enable the exchange of
an obligation between parties, the system comprising:
          a data storage unit
having stored therein information about a shadow credit record and
shadow debit record for a party, independent
from a credit record and debit record maintained by an exchange institution; and
          a computer, coupled to said data storage unit, that
is configured to (a) receive a transaction;
(b)
electronically adjust said shadow credit
record and/or said shadow debit record in order to effect an exchange obligation arising
from said trans
action, allowing only those
transactions that do not result in a value of
said shadow debit record being less than a
value of said shadow credit record; and
(c)
generate an instruction to said exchange
institution at the end of a period of time to adjust said credit record and/or said debit record
in accordance with the adjustment of said
shadow credit record and/or said shadow debit
record, wherein said instruction being an irrevocable, time invariant obligation placed on
said exchange institution.

The district court granted summary judgment in favor of CLS, holding each of the asserted claims of Alice’s software patents invalid under §101.

The district court concluded that Alice’s method claims “are directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk.”

Further, the district court held the asserted system claims similarly ineligible, as those claims “would preempt the use of the abstract concept of employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk on any computer, which is, as a practical matter, how these processes are likely to be
applied.”

The asserted media claims failed on the same ground as “directed to the same abstract concept
despite the fact they nominally recite a different category of invention.” The invalidation of the system claims and media claims are disconcerting. One would think that systems and media pass the “machine or transformation” test that was accepted by the Supreme Court as an indication of patent eligibility.

The leading five-member opinion written by Judge Lourie noted that the patent statute sets forth four broadly stated categories of patent-eligible subject matter: processes, machines,
manufactures, and compositions of matter. As the Supreme Court has explained, Congress intended that the statutory categories would be broad and inclusive to best serve the patent system’s constitutional objective of encouraging innovation.
See Diamond v. Chakrabarty, 447 U.S. 303, 308-09 (1980).

While the categories of patent-eligible subject matter recited in §101 are broad, their scope is limited by three important judicially created exceptions.
“[L]aws of nature, natural phenomena, and abstract ideas” are excluded from patent eligibility,
because such fundamental discoveries represent “the basic tools of
scientific and technological work,” Gottschalk v. Benson,
409 U.S. 63, 67 (1972). Thus, even inventions that fit within one or more of the statutory categories are not patent eligible if drawn to a law of nature, a natural phenomenon, or an abstract idea. The underlying concern is that patents covering such elemental concepts would
reach too far and claim too much, on balance obstructing rather than catalyzing innovation. But danger also lies in applying the judicial exceptions too aggressively because “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”
Mayo Collaborative Servs. v. Prometheus
Labs., Inc., 132 S. Ct. 1289, 1293 (2012). Taken too far, the exceptions could swallow patent law entirely.

The opinion continued on to say that, accordingly, the basic steps in a patent-eligibility
analysis can be summarized as follows. We must first ask whether the claimed invention is a process, machine, manufacture, or composition of matter. If not, the claim is ineligible under §101. If the invention falls within one of the statutory categories, we must then determine
whether any of the three judicial exceptions nonetheless bars such a claim is the claim drawn to a patent ineligible law of nature, natural phenomenon, or abstract
idea? If so, the claim is not patent eligible. Only claims that pass both inquiries satisfy §101. While simple enough to state, the patent-eligibility test has proven quite difficult to apply.

The opinion discussed several Supreme Court cases and noted that several common themes that run through the Supreme Court’s decisions that should frame the analysis in this and other §101 cases.

First and foremost is an abiding concern that patents
should not be allowed to preempt the fundamental tools of
discovery.

Next, the cases repeatedly caution against overly formalistic approaches to subject-matter eligibility that invite manipulation by patent applicants such as
claim drafting strategies that attempt to circumvent the
basic exceptions to §101 using, for example, highly stylized language, hollow field-of-use limitations, or the recitation of token post-solution activity should not be
credited.

Finally, the cases urge a flexible, claim-by-claim approach to subject-matter eligibility that avoids rigid line drawing. Bright-line rules may be simple to apply, but they are often impractical and counterproductive when applied to §101. Such rules risk becoming outdated in
the face of continual advances in technology.

In this software patent, claim 33 plainly recites a process. The issue presented then becomes whether that process amounts to no more than a patent-ineligible abstract idea. As described,
the first step in that analysis requires identifying the
abstract idea represented in the claim. The methods
claimed here draw on the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary (here, the supervisory institution) empowered to verify that both parties can fulfill their obligations before allowing the exchange—i.e., a form of escrow. CLS describes that concept as “fundamental and ancient,”
but
the latter is not determinative of the question of abstractness. Even venerable concepts, such as risk hedging in
commodity transactions, were once unfamiliar, just like the concepts inventors are
unlocking at the leading edges of technology today. But
whether long in use or just recognized, abstract ideas
remain abstract. The concept of reducing settlement risk
by facilitating a trade through third-party intermediation
is an abstract idea because it is a “disembodied” concept, a basic building block of human ingenuity, untethered from any real-world application. Standing alone,
that abstract idea is not patent-eligible subject matter.

The analysis therefore turns to whether the balance of
the claim of the software patent adds “significantly more.” Apart from the idea
of third-party intermediation, the claim’s substantive
limitations require creating shadow records, using a
computer to adjust and maintain those shadow records,
and reconciling shadow records and corresponding exchange institution accounts through end-of-day transactions. None of those limitations adds anything of
substance to the claim.

The opinion states that the requirement for computer implementation
could scarcely be introduced with less specificity; the
claim lacks
any
express language to define the computer’s
participation. In a claimed method comprising an abstract idea, generic computer automation of one or more
steps evinces little human contribution. There is no
specific or limiting recitation of essential, or improved computer technology, and no reason to view the computer limitation as anything but “insignificant post-solution activity” relative to the abstract idea.
Furthermore, simply appending generic computer functionality to lend speed or efficiency to the performance of an otherwise abstract
concept does not meaningfully limit claim scope for purposes of patent eligibility. That is particularly apparent in this case. Because of the efficiency and
ubiquity of computers, essentially all practical, real-world
applications of the abstract idea implicated here would
rely, at some level, on basic computer functions
—
for
example, to quickly and reliably calculate balances or
exchange data among financial institutions. At its most
basic, a computer is just a calculator capable of performing mental steps faster than a human could. Unless the
claims require a computer to perform operations that are
not merely accelerated calculations, a computer does not
itself confer patent eligibility. In short, the requirement
for computer participation in these claims fails to supply
an “inventive concept” that represents a nontrivial, non-conventional human contribution or materially narrows
the claims relative to the abstract idea they embrace.

Considering the computer readable storage medium claims of the software patent, the opinion noted that although the claim’s preamble appears to invoke a physical object, the claim term “computer readable storage
medium” is stated in broad and functional terms
—
incidental to the claim
—
and every substantive limitation
presented in the body of the claim pertains to the method steps of the
program code “embodied in the medium.” Therefore,
the claim is not “truly drawn to a specific computer readable medium, rather than to the underlying method” of
reducing settlement risk using a third
–
party intermediary. Despite their
Beauregard
format, Alice’s “computer readable medium claims” are thus
equivalent to the methods they recite for §
101 purposes.

Considering the software patent’s apparatus claims, the opinion states that the representative apparatus claim recites a computerized system configured to carry out a series of steps that mirror Alice’s
method claims
—
maintaining shadow records, allowing
only those transactions supported by adequate
value in
the shadow records, adjusting the shadow records pursuant to such transactions, and later instructing exchange institutions to execute the allowed transactions. Indeed,
Alice’s method and system claims use similar and often
identical language to
describe those actions. The
system claims are different, however, in that they also
recite tangible devices as system components, including at
least “a computer” and “a data storage unit.” Other
claims specify additional components, such as a “first
party device” and a “communications controller.”

Similar to the computer
readable medium claims, the system claims are formally
drawn to physical objects and therefore raise a question
whether they deserve to be evaluated differently under
the abstract ideas exception from the accompanying
method claims discussed above. Careful analysis shows
that they do not.
The computer-based limitations recited in the
system
claims here cannot support any meaningful distinction
from the computer-based limitations that failed to supply
an “inventive concept” to the related method claims.

The
shadow record and transaction limitations in Alice’s
method claims require “a computer,” evidently capable of calculation, storage,
and data exchange. The system claims are little different.
They set forth the same steps for performing third-party
intermediation and provide for computer implementation
at an incrementally reduced, though still striking level of
generality. Instead of wholly implied computer limitations, the system claims recite a handful of computer
components in generic, functional terms that would
encompass any device capable of performing the same
ubiquitous calculation, storage, and connectivity functions
required by the method claims. Though the
system claims associate certain computer components
with some of the method steps, none of the recited hardware offers a meaningful limitation beyond generally
linking “the use of the [method] to a particular technological environment,” that is, implementation via computers.

For all practical purposes,
every
general-purpose computer will include “a computer,” “a data
storage unit,” and “a communications controller” that
would be capable of performing the same generalized
functions required of the claimed systems to carry out the
otherwise abstract methods recited therein.

Therefore, as with the asserted method claims, such
limitations are not actually limiting in the sense required
under §
101; they provide no significant “inventive concept.” The system claims are instead akin to stating the
abstract idea of third
–
party
intermediation and adding
the words: “apply it” on a computer. That is not sufficient for patent eligibility, and
the system claims before us fail to define patent
–
eligible
subject matter under §
101, just as do the method and
computer-readable medium claims.

The opinion notes that one of the separate opinions (one with which Malhotra Law Firm, PLLC agrees) in this case takes aim at this opinion, asserting that the system claims here are simply claims to a
patent-eligible machine, a tangible item one can put
on
one’s desk. Machines are unquestionably eligible for patenting, states the opinion, although the system claims
here clearly track the method claims that the separate
opinion concedes are not patent eligible.
That conclusion is surely correct as an abstract proposition. A particular computer system, composed of wires,
plastic, and silicon, is no doubt a tangible machine. But
that is not the question. The question we must consider is
whether a
patent claim
that ostensibly describes such a
system on its
face represents something more than an
abstract idea in legal substance. Claims to computers
were, and still are, eligible for patent. No question should
have arisen concerning the eligibility of claims to basic
computer hardware under §
101 when such devices were
first invented. But we are living and judging now
(or at
least as of the patents’ priority dates), and have before us
not the patent eligibility of specific types of computers or
computer components, but computers that
have
routinely
been
adapted by software consisting of abstract ideas, and
claimed as such, to do all sorts of tasks that formerly were
performed by humans. And the Supreme Court has told
us that, while avoiding confusion between §
101 and
§§
102 and 103, merely adding existing computer technology to abstract ideas
—
mental steps
—
does not as a matter
of substance convert an abstract idea into a machine.

Malhotra Law Firm, PLLC (patentsusa.com) takes the position that apparatus claims reciting computer components clearly pass the machine-or-transformation test.

That is what we face when we have a series of claims
to abstract methods and computers fitted to carry out
those methods. We are not here faced with a computer
per
se
. Such are surely patent
–
eligible machines. We are
faced with abstract methods coupled with computers
adapted to perform those methods. And that is the fallacy
of relying on
Alappat
, as the concurrence in part does.
Not only has the world of technology changed, but the
legal world has changed. The Supreme Court has spoken
since
Alappat
on the question of patent eligibility, and we
must take note of that change. Abstract methods do not become patent-eligible machines
by being clothed in
computer language.

In view of this decision, Malhotra Law Firm, PLLC recommends reciting hardware as possible in patent claims, and integrating that hardware into the software method as much as possible. There has been much lobbying against patenting of financial methods so it is possible that other software methods will be received more favorably. This decision seems to be contrary to the machine-or-transformation test accepted by the Supreme Court in Bilski as one possible test, at least in my opinion. Perhaps the Supreme Court will shed more light on the matter some day. Until then, we have muddy guidance from our Federal Circuit. They caution against bright line tests and with this decision have certainly not provided any bright lines. After 20 years we still do not have any clear guidance on what sort of software should be patent-eligible.

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