SIMIO, LLC V FLEXSIM SOFTWARE PRODUCTS, INC, FEDERAL CIRCUIT 2020 (SOFTWARE PATENTS)

According to the Federal Circuit, simply applying the already-widespread practice of using graphics instead of programming to the environment of object-oriented simulations is no more than an abstract idea.

Simio, LLC sued FlexSim in District Court for infringing U.S. Patent No. 8,156,468. The district court found the patent to be ineligible for patenting under 35 U.S.C. § 101. Simio appealed.

The patent also describes a trend that emerged in the 1980s and 1990s: using graphics to simplify building simulations. The patent’s purported invention concerns making object-oriented simulation easier and more accessible by letting users build simulations with graphics instead of programming.

Claim 1 is the only independent claim and recites:

A computer-based system for developing simulation models on a physical computing device, the system comprising:

  • one or more graphical processes;
  • one or more base objects created from the one or more graphical processes,
  • wherein a new object is created from a base object of the one or more base objects by a user by assigning the one or more graphical processes to the base object of the one or more base objects;
  • wherein the new object is implemented in a 3-tier structure comprising:
    • an object definition, wherein the object definition includes a behavior,
    • one or more object instances related to the object definition, and
    • one or more object realizations related to the one or more object instances;
  • wherein the behavior of the object definition is shared by the one or more object instances and the one or more object realizations; and
  • an executable process to add a new behavior directly to an object instance of the one or more object instances without changing the object definition and the added new behavior is executed only for that one instance of the object.

The district court applied the two-step framework set forth in Alice Corp. Pty. Ltd. v. CLS Bank International, and held the asserted claims ineligible.

At step one of Alice’s two-step framework, the courts are to determine whether the claim at issue is directed to an abstract idea. If so, we move to step two, where we “examine the elements of the claim to determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.

The patent showcases its key advance: using graphics instead of programming to create object-oriented simulations.  Objects are built using the concepts of object-orientation. Unlike other object-oriented simulation systems, however, the process of building an object in the present invention is simple and completely graphical. There is no need to write programming code to create new objects.

Using graphical processes to simplify simulation building has been done since the 1980s and 1990s.

According to the Federal Circuit, simply applying the already-widespread practice of using graphics instead of programming to the environment of object-oriented simulations is no more than an abstract idea.

Simio argued that the claim “improves on the functionality of prior simulation systems through the use of graphical or process modeling flowcharts with no programming code required.” But, according to the Federal Circuit this argument did not explain how the computer’s functionality is improved beyond the inherent improvement of the experience of a user who cannot use programming.

Simio also argued that claim 1 improves a computer’s functionality “by employing a new way of customized simulation modeling with improved processing speed.” FlexSim responded, however, that this allegedly improved “processing speed” is not that of the computer; rather, it concerns only a user’s ability to build simulation models faster by using graphics instead of programming.  The Federal Circuit agreed with FlexSim and rejected Simio’s argument because claiming the improved speed or efficiency inherent with applying the abstract idea on a computer is insufficient to render the claims patent eligible as an improvement to computer functionality.

The Federal Circuit also stated that that the nature of the claim here, read in light of the specification, confirmed that it was not directed to an actual technological improvement.

It is important, for patentability of software, to improve the hardware or at least the operation of the computer, as opposed to making things more efficient for the user.

UNILOC V LG ELECTRONICS, FEDERAL CIRCUIT 2020 (SOFTWARE PATENTS)

Uniloc sued LG Electronics in the United States District Court for the Northern District of California, alleging infringement of U.S. Patent No. 6,993,049. LG moved to dismiss Uniloc’s Complaint, arguing the claims of the ’049 patent are ineligible under 35 U.S.C. §101. The lower court granted LG’s motion, determining that the asserted claims are directed to an abstract idea and do not recite an inventive concept.

The ’049 patent is directed to a communication system comprising a primary station (e.g., a base station) and at least one secondary station (e.g., a computer mouse or keyboard). In conventional systems, such as Bluetooth networks, two devices that share a common communication channel form ad hoc networks known as “piconets.” Joining a piconet requires the completion of two sets of procedures, namely an “inquiry” procedure and a “page” procedure. The inquiry procedure allows a primary station to identify secondary stations and it allows secondary stations to issue a request to join the piconet.

The page procedure in turn allows a primary station to invite secondary stations to join the piconet.   Together, it can take several tens of seconds to complete the inquiry and page procedures so that a device joins a piconet and is able to transfer user input to the primary station. Once a piconet is formed, the primary station “polls” secondary stations to determine whether they have data to share over the communication channel. Because many secondary stations are battery-operated, secondary stations may enter a “park” mode and cease active communications with the primary station to conserve power.  A secondary station in parked mode remains synchronized with the primary station, but it must be polled before it can leave park mode and actively communicate with the primary station.

In conventional systems, primary stations alternate between sending inquiry messages to identify new secondary stations and polling secondary stations already connected to the piconet, including parked devices,to determine whether they have information to transmit. Therefore, under the conventional polling process, a secondary station could experience delays of tens of seconds both in initially joining a piconet and in transmitting data after entering park mode.

The specification explains that the invention improves conventional communication systems by including a data field for polling as part of the inquiry message, thereby allowing primary stations to send inquiry messages and conduct polling simultaneously.

Claim 2 of the ’049 patent, which is representative, recites:

A primary station for use in a communications system comprising at least one secondary station, wherein means are provided

  • for broadcasting a series of inquiry mes-sages, each in the form of a plurality of predetermined data fields arranged ac-cording to a first communications protocol, and
  • for adding to each inquiry message prior to transmission an additional data field for polling at least one secondary station.

The Federal Circuit held that the claims at issue are directed to a patent-eligible improvement to computer functionality, namely the reduction of latency experienced by parked secondary stations in communication systems.

The Federal Circuit stated that, like the claims in DDR Holdings v Hotels.com, the claimed invention changes the normal operation of the communication system itself to “overcome a problem specifically arising in the realm of computer networks.”

BOZEMAN FINANCIAL LLC V FEDERAL RESERVE BANK, FEDERAL CIRCUIT 2020 (SOFTWARE PATENTS)

Bozeman Financial LLC appealed from a decision of the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board holding all of the claims of U.S. Patent Nos. 6,754,640 and 8,768,840 ineligible under 35 U.S.C. §101.

Claim 1 of the ’840 patent is representative:

1. A computer implemented method for detecting fraud in financial transactions during a payment clearing process, said method comprising:

  • receiving through one of a payer bank and a third party, a first record of an electronic financial transaction from at least one of the following group: a payer, a point-of-sale terminal, an online account and a portable electronic device;
  • storing in a database accessible by each party to said payment clearing process of said electronic financial transaction, said first record of said electronic financial transaction, said first record comprising more than one parameter;
  • receiving at said database at least a second record of said electronic financial transaction from one or more of a payee bank and any other party to said payment clearing process as said transaction moves along said payment clearing process, wherein said second record comprises at least one parameter which is the same as said more than one parameter of said first record;
  • each of said first and second records received at said database comprise at least two of the same said more than one parameters;
  • determining by a computer when there is a match between at least two of said parameters of said second record of said first financial transaction received at said database and the same parameters of said first record of said financial transaction stored in said database, and wherein any party to said payment clearing process is capable of verifying said parameters at each point along said financial transaction payment clearing process;sending a notification to said payee bank participant with authorization to process said electronic financial transaction when said parameters match;
  • and sending a notification to said payee bank participant to not process said electronic financial transaction when said parameters do not match.

The Board determined that the ’640 patent’s claims are directed to the abstract idea of “collecting, displaying, and analyzing information to reconcile check information against a ledger.” The Board determined that the ’840 patent claims are directed to the abstract idea of “collecting and analyzing information for financial transaction fraud or error detection.”  The Board found that the claims do not contain an inventive concept to render them eligible under §101.

The Federal Circuit applied the two-step framework set forth in Alice to determine patent-eligibility under §101.

Considering Alice Step 1, the Federal Circuit stated that verifying financial documents to reduce transactional fraud is a fundamental business practice that, without more, is not eligible for patent protection.

The Federal Circuit stated that their recent decision in Solutran, Inc. v. Elavon, Inc. held claims like the claims of the ’840 patent ineligible. 931 F.3d 1161 (Fed. Cir. 2019). In Solutran, the claims recited a method for electronic check processing.

Bozeman argued that the claimed method is a physical process that improves handling and processing of checks, not an abstract idea. It argued that because the process involves tangible steps, it cannot be an abstract idea, even if the claims additionally involve or include otherwise abstract concepts.

The Federal Circuit dismissed this argument.  As they explained in Solutran, “the physicality of the paper checks being processed and transported is not by itself enough to exempt the claims from being directed to an abstract idea.”

Considering Alice Step 2, the Federal Circuit stated that he technological components recited in claim 1 of the ’840 patent were conventional, off-the-shelf computer components.  Nothing in the claims, understood in light of the specification, appears to require anything more than off-the-shelf, conventional computer, storage, network, and display technology for collecting the data related to financial transactions, and displaying the data to the users.

The Federal Circuit did not consider that a programmed computer becomes a new machine.  They also did not find that the claims met the machine-or-transformation test.

One must wonder if the outcome could have been different if the Federal Reserve Banks were not involved.  The Federal Reserve Banks do not believe in patents covering financial methods.  On the other hand, there are plenty of issued patents covering Bitcoin and blockchain.

Finjan Inc., v. Blue Coat Systems, Inc., Federal Circuit 2018 (Software Patents)

Finjan brought suit against Blue Coat for infringement of software patents directed to identifying and protecting against malware.  One of the software patents is directed to a method of providing computer security by scanning a downloadable and attaching the results of that scan to the downloadable itself in the form of a “security profile.”

Claim 1 of the patent reads:

1. A method comprising:

  • receiving by an inspector a Downloadable;
  • generating by the inspector a first Downloadable security profile that identifies suspicious code in the received Downloadable; and
  • linking by the inspector the first Downloadable security profile to the Downloadable before a web server makes the Downloadable available to web clients.

The parties agreed that “Downloadable” should be construed to mean “an executable application program, which is downloaded from a source computer and run on the destination computer.” Additionally, the district court construed “Downloadable security profile that identifies suspicious code in the received Downloadable” to mean “a profile that identifies code in the received Downloadable that performs hostile or potentially hostile operations.”

The Federal Circuit noted that they had previously determined in Intellectual Ventures I LLC v. Symantec Corp. that, by itself, virus screening is well-known and constitutes an abstract idea. They also found that performing the virus scan on an intermediary computer—so as to ensure that files are scanned before they can reach a user’s computer— is a “perfectly conventional” approach and is also abstract.   However, they felt that, here, the claimed method does a
good deal more.

The method of claim 1 scans a downloadable and attaches the virus scan results to the downloadable in the form of a newly generated file:  a “security profile that identifies suspicious code in the received Downloadable.”

The district court’s claim construction decision emphasized that this “identify suspicious code” limitation can only be satisfied if the security profile includes “details about the suspicious code in the received downloadable, such as . . . ‘all potentially hostile or suspicious code operations that may be attempted by the Downloadable.’”  The security profile must include the information about potentially hostile operations produced by a “behavior-based” virus scan. This operation is distinguished from traditional, “code-matching” virus scans that are limited to recognizing the presence of previously-identified viruses, typically by comparing the code in a downloadable to a database of known suspicious code. The question, then, is whether this behavior-based virus scan constitutes an improvement in computer functionality. The Federal Circuit believes that it does.

The “behavior-based” approach to virus scanning was pioneered by Finjan and is disclosed in the software patent’s specification.  Traditional “code-matching” systems simply look for the presence of known viruses.

“Behavior-based” scans can analyze a downloadable’s code and determine whether it performs potentially dangerous or unwanted operations—such as renaming or deleting files. Because security profiles communicate the granular information about potentially suspicious code made available by behavior-based scans, they can be used to protect against previously unknown viruses as well as “obfuscated code”—known viruses that have been cosmetically modified to avoid detection by code-matching virus scans.

The security profile approach also enables more flexible and nuanced virus filtering. After an inspector generates a security profile for a downloadable, a user’s computer can determine whether to access that downloadable by reviewing its security profile according to the rules in whatever “security policy” is associated with the user. Administrators can easily tailor access by applying different security policies to different users or types of users. And having the security profile include information about particular potential threats enables administrators to craft security policies with highly granular rules and to alter those security policies in response to evolving threats.

The Federal Circuit’s cases confirm that software inventions can make “non-abstract improvements to computer technology” and be deemed patent-eligible subject matter at step 1 of the Alice software patent inquiry. In Enfish, for example, the Federal Circuit determined that claims related to a database architecture that used a new, self-referential logical table were non-abstract because they focused on “an improvement to computer functionality itself, not on economic or other tasks for which a computer is used in its ordinary capacity.”

The self referential database found patent eligible in Enfish did more than allow computers to perform familiar tasks with greater speed and efficiency; it actually permitted users to
launch and construct databases in a new way. While deployment of a traditional relational database involved extensive modeling and configuration of the various database, Enfish’s self-referential database could be launched with no or only minimal column definitions and configured and adapted “on-the-fly.”

Similarly, according to the Federal Circuit, the software patent method of claim 1 employs a new kind of file that enables a computer security system to do things it could not do before. The security profile approach allows access to be tailored for different users and ensures that threats are identified before a file reaches a user’s computer. The fact that the security profile identifies suspicious code allows the system to accumulate and utilize newly available, behavior-based information about potential threats. According to the Federal Circuit, the asserted claims are therefore directed to a non-abstract improvement in computer functionality, rather than the abstract idea of computer security at large.

Patent eligibility determinations seem to vary greatly based on the judges on the Federal Circuit panel hearing the case.  In this case, the novelty of the method seemed to influence the patent-eligibility determination.  If novelty is a main consideration, why even bother with the Alice 35 U.S.C. 101 analysis when reviewing software patents?  While the claim was short, many claim terms were construed as requiring very specific steps.  That may have helped with the patent-eligibility determination.

Visual Memory LLC v. NVIDIA Corp., Federal Circuit 2017 (Software Patents)

This case concerned an appeal from a district court case which held that Visual Memory’s U.S. Patent No. 5.953,740 was drawn to patent-ineligible subject matter.

The patent teaches that computer systems frequently use a three-tiered memory hierarchy to enhance performance. The three tiers include: 1) a low-cost, low speed memory, such as a magnetic disk, for bulk storage of data; 2) a medium-speed memory that serves as the main memory; and 3) an expensive, high-speed memory that acts as a processor cache memory. Because the cache memory is the most expensive, it is typically smaller than the main memory and cannot always store all the data required by the processor. The memory hierarchy alleviates the limitations imposed by the cache’s size because it allows code and non-code data to be transferred from the main memory to the cache during operation to ensure that the currently executing program has quick access to the required data. Replacement algorithms determine which data should be transferred from the main memory to the cache and which data in the cache should be replaced. As a result, the code and non-code data to be executed by the processor are continually grouped into the cache, thereby facilitating rapid access for the currently executing program. These prior art memory systems lacked versatility because they were designed and optimized based on the specific type of processor selected for use in that system. Designing a different memory system for every processor type is expensive.

The patent purports to overcome these deficiencies by creating a memory system with programmable operational characteristics that can be tailored for use with multiple different processors without the accompanying reduction in performance. It discloses a main memory and three separate caches: an internal cache, a pre-fetch cache, and a write buffer cache.

The three caches possess programmable operational characteristics that are programmable based on the type of processor connected to the memory system. When the system is turned on, information about the type of processor is used to self-configure the programmable operational characteristics. For example, depending on the type of processor, the internal cache can store both code and noncode data, or it can store only code data. Similarly, write buffer cache 20 can be programmed to buffer data “solely from a bus master other than the system processor,” or to buffer data writes by any bus master including the system processor. By separating the functionality for the caches and defining those functions based on the type of processor, the patented system can allegedly achieve or exceed the performance of a system utilizing a cache many times larger than the cumulative size of the subject caches. Using a programmable operational characteristic based on the processor type can also improve the main memory.

Claim 1 recites:
1. A computer memory system connectable to a processor and having one or more programmable operational characteristics, said characteristics being defined through configuration by said computer based on the type of said processor, wherein said system is connectable to said processor by a bus, said system comprising:
a main memory connected to said bus; and
a cache connected to said bus; wherein a programmable operational characteristic
of said system determines a type of data stored by said cache.

Under step one of the Alice test, the district court had concluded that the claims were directed to the “abstract idea of categorical data storage,” which humans have practiced for many years. The court’s step-two analysis found no inventive concept because the claimed computer components—a main memory, cache, bus, and processor—were generic and conventional.

The Federal Circuit noted that two recent cases inform their evaluation of whether the claims are directed to an abstract idea: Enfish and Thales (described in other posts in this blog). In Enfish, the Federal Circuit held claims reciting a self-referential table for a computer database were patent-eligible under Alice step one because the claims were directed to an improvement in the
computer’s functionality. In Thales, the Federal Circuit determined that claims reciting a unique configuration of inertial sensors and the use of a mathematical equation for calculating the location and orientation of an object relative to a moving platform were patent-eligible under Alice step one.

The Federal Circuit’s review of the claims at hand demonstrated that they are directed to an improved computer memory system, not to the abstract idea of categorical data storage. None of the claims recite all types and all forms of categorical data storage.

As with Enfish’s self-referential table and the motion tracking system in Thales, the claims here are directed to a technological improvement: an enhanced computer memory system. Therefore, the claims are patent-eligible.

The dissent contended that the claimed programmable operational characteristic is nothing more than a black box, and that the patent lacks any details about how the invention’s purpose] is achieved. The majority noted some flaws with this conclusion. First, the patent included a microfiche appendix having 263 frames of computer code. The dissent argued that this code would not teach one of ordinary skill in the art the innovative programming effort. The majority stated that such an assumption is improper when reviewing a motion to dismiss for failure to state a claim. Second, whether a patent specification teaches an ordinarily skilled artisan how to implement the claimed invention presents an enablement issue under 35 U.S.C. § 112, not an eligibility issue under § 101. Third, the dissent assumed that the “innovative” effort in the patent lies in the programming required for a computer to configure a programmable operational characteristic of a cache memory. This assumption is inconsistent with the patent specification itself. The specification makes clear that the inventors viewed their innovation as the creation of “a memory system which is efficiently operable with different types of host processors, and the patent discloses how to implement such a memory system.

Thales Visionix Inc. v. United States, Federal Circuit 2017 (Software Patents)

Thales Visionix Inc. appealed from a Claims Court judgment that most claims of its U.S. Patent No. 6,474,159 were directed to patent-ineligible subject matter.

The patent discloses an inertial tracking system for tracking the motion of an object relative to a moving reference frame. Inertial sensors, such as accelerometers and gyroscopes, measure the specific forces associated with changes in a sensor’s position and orientation relative to a known starting position. Such sensors are used in a wide variety of applications, including aircraft navigation and virtual reality simulations. When mounted on a moving object, inertial sensors can calculate the position, orientation, and velocity of the object in 3-dimensional space, based on a specified starting point, without the need for any other external information. Because small errors in the measurement of acceleration and angular velocity translate to large errors in position over time, inertial systems generally include at least one other type of sensor, such as an optical or magnetic sensor, to intermittently correct these errors that compound over time.

The patent disclosure recognized that conventional solutions for tracking inertial motion of an object on a moving platform were flawed because both object and platform-based inertial sensors measured motion relative to earth, and the error-correcting sensors on the tracked object measured position relative to the moving platform. Attempting to fuse this data produced inconsistent position information when the moving platform accelerated or turned.

The inertial sensors disclosed in the patent do not use the conventional approach of measuring inertial changes with respect to the earth. Instead, the platform (e.g., vehicle) inertial sensors directly measure the gravitational field in the platform frame. Object (e.g., helmet) inertial sensors then calculate position information relative to the frame of the moving platform. By changing the reference frame, one can track the position and orientation of the object within the moving platform without input from a vehicle attitude reference system or calculating orientation or position of the moving platform itself.

Claims 1 and 22, the only independent claims, recite:
1. A system for tracking the motion of an object
relative to a moving reference frame, comprising:
a first inertial sensor mounted on the tracked object;
a second inertial sensor mounted on the moving reference frame; and
an element adapted to receive signals from said first and second inertial sensors and configured to determine an orientation of the object relative to the moving reference frame based on the signals received from the first and second inertial sensors.

22. A method comprising determining an orientation of an object relative to a moving reference frame based on signals from two inertial sensors mounted respectively on the object and on the moving reference frame.

The alleged infringing products were helmet mounted display systems (HMDS) in F-35 Joint Strike Fighters. Thales Visionix sued the government and Elbit Systems of America, the government subcontractor that produced the helmets, jointed the case.

The Federal Circuit began its analysis at Alice step one: “whether the claims at issue are directed to a patent-ineligible concept.” While the two steps of the Alice framework are related, the Supreme Court’s formulation makes clear that the first-stage filter is a meaningful one, sometimes ending the § 101 inquiry.

The Federal Circuit noted, citing to Enfish, that the Supreme Court has not established a definitive rule to determine what constitutes an ‘abstract idea’” for the purposes of step one. The Federal Circuit has held claims ineligible as directed to an abstract idea when they merely collect electronic information, display information, or embody mental processes that could be performed by humans. At the same time, according to Alice, “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” The Federal Circuit must therefore ensure at step one that they articulate what the claims are directed to with enough specificity to ensure the step one inquiry is meaningful.

The Federal Circuit compared the claims in this case to the claims in Diamond v. Diehr . In Diamond v. Diehr, the Supreme Court confirmed the eligibility of patent claims despite the inclusion of a mathematical formula in a claimed method for molding raw, uncured rubber into cured rubber products. The claimed method used the well known Arrhenius equation to calculate the optimal cure time using, among other variables, the internal temperature of the mold. The invention in Diamond v. Diehr improved upon prior art molding methods by constantly measuring the actual temperature inside the mold, recalculating the ideal cure time, and automatically opening the press when the ideal cure time equaled the actual time elapsed.

The Supreme Court recognized that a mathematical formula like the Arrhenius equation is not itself patent-eligible subject matter, even if limited to a particular technological environment or accompanied by insignificant post-solution activity. Nonetheless, the Supreme Court held that the claims in Diehr covered patent-eligible subject matter because they described a process of curing rubber beginning with the loading of the mold and ending with the opening of the press and the production of a synthetic rubber product that has been perfectly cured—a result previously unknown in the art. It explained that claims are patent eligible under § 101 “when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect.” In terms of the modern day Alice test, the Diehr claims were directed to an improvement in the rubber curing process, not a mathematical formula.

The Federal Circuit stated that, for the purpose of evaluating patent eligibility, the ’159 patent claims are nearly indistinguishable from the claims in Diehr.

While the claims utilize mathematical equations to determine the orientation of the object relative to the moving reference frame, the equations—dictated by the placement of the inertial sensors and application of laws of physicsserve only to tabulate the position and orientation information in this configuration. This arrangement is analogous to the claims in Diehr.

Just as the claims in Diehr reduced the likelihood that the rubber molding process would result in “overcuring” or “undercuring,” the claims here result in a system that reduces errors in an inertial system that tracks an object on a moving platform.

The ’159 patent claims provide a method that eliminates many “complications” inherent in previous solutions for determining position and orientation of an object on a moving platform. Because the motion of a moving platform like a plane is more dynamic and unpredictable than the earth’s rotation, a traditional system (which measured inertial data with respect to the earth) had difficulty accurately calculating inertial data of an object on a moving platform.

Though the unconventional utilization of inertial sensors as specified by the ’159 patent “may seem somewhat strange” to those within the field, this combination of sensor placement and calculation based on a different reference frame mitigates errors by eliminating inertial calculations with respect to the earth. The resulting system works with any type of moving platform and is simpler to install than conventional systems. The system is also beneficially self-contained: it requires no external information about the orientation or position of the platform.

The Federal Circuit held that the patent claims at issue are not directed to an abstract idea. The claims specify a particular configuration of inertial sensors and a particular method of using the raw data from the sensors in order to more accurately calculate the position and orientation of an object on a moving platform. The mathematical equations are a consequence of the arrangement of the sensors and the unconventional choice of reference frame in order to calculate position and orientation. Far from claiming the equations themselves, the claims seek to protect only the application of physics to the unconventional configuration of sensors as disclosed. As such, the claims are not directed to an abstract idea and thus the claims survive Alice step one.

Because the claims are not directed to an abstract idea, the Federal Circuit did not proceed to step two.

It is possible that the fact that the patent drafter’s indication that the arrangement of the sensors “may seem somewhat strange” helped sway the court.

Trading Technologies International Inc., v. CQG, Inc., Federal Circuit 2017 (non-precedential) (software patents)

This decision should be very interesting to software developers who want software patents on unique graphical user interfaces. The decision is non-precedential, but can be cited to the U.S. Patent and Trademark Office when the facts in a patent application uniquely match those in this case. Up until this case, and after Alice, the Federal Circuit had consistently found the claims to user interfaces patent-ineligible, reasoning that generically claimed user interfaces that merely present information that had been collected and analyzed are ineligible.

Trading Technologies International, Inc. charged CQG with infringement of U.S. Patent Nos. 6,772,132 and 6,766,304.  CQG appealed the decision of the district court that the patents recite patent-eligible subject matter.

The software patents describe and claim a method and system for the electronic trading of stocks, bonds, futures, options and similar products. The software patents explain problems that arise when a trader attempts to enter an order at a particular price, but misses the price because the market moved before the order was entered and executed. It also sometimes occurred that trades were executed at different prices than intended, due to rapid market movement. The software patents describe a trading system in which a graphical user interface displays the market depth of a commodity traded in a market, including a dynamic display for a plurality of bids and for a plurality of asks in the market for the commodity and a static display of prices corresponding to the plurality of bids and asks. Bid and asked prices are displayed dynamically along the static display, and the system pairs orders with the static display of prices and prevents order entry at a changed price.

Claim 1 of the ‘304 software patent is representative:

1. A method for displaying market information relating to and facilitating trading of a commodity being traded in an electronic exchange having an inside market with a highest bid price and a lowest ask price on a graphical user interface, the method comprising;

  • dynamically displaying a first indicator in one of a plurality of locations in a bid display region, each location in the bid display region corresponding to a price level along a common static price axis, the first indicator representing quantity associated with at least one order to buy the commodity at the highest bid price currently available in the market;
  • dynamically displaying a second indicator in one of a plurality of locations in an ask display region, each location in the ask display region corresponding to a price level along the common static price axis, the second indicator representing quantity associated with at least one order to sell the commodity at the lowest ask price currently available in the market;
  • displaying the bid and ask display regions in relation to fixed price levels positioned along the common static price axis such that when the inside market changes, the price levels along the common static price axis do not move and at least one of the first and second indicators moves in the bid or ask display regions relative to the common static price axis;
  • displaying an order entry region comprising a plurality of locations for receiving commands to send trade orders, each location corresponding to a price level along the common static price axis; and
  • in response to a selection of a particular location of the order entry region by a single action of a user input device, setting a plurality of parameters for a trade order relating to the commodity and sending the trade order to the electronic exchange.

Alice Corporation Pty. Ltd. v. CLS Bank International, provides the framework for patent-eligibility of business methods and software patents. A software patent’s claim falls outside § 101 where (1) it is “directed to” a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2), if so, the particular elements of the claim, considered “both individually and ‘as an ordered combination,’” do not add enough to “‘transform the nature of the claim’ into a patent-eligible application.”

The district court first applied Step 1 of this framework. The district court held that, rather than reciting a mathematical algorithm, a fundamental economic or longstanding commercial practice, or a challenge in business, the challenged software patents solve problems of prior graphical user interface devices . . . in the context of computerized trading relating to speed, accuracy and usability.

The district court found that these patents are directed to improvements in existing graphical user interface devices that have no “pre-electronic trading analog,” and recite more than “‘setting, displaying, and selecting’ data or information that is visible on the [graphical user interface] device.” Id.

The district court explained that the challenged patents do not simply claim displaying information on a graphical user interface. The claims require a specific, structured graphical user interface paired with a prescribed functionality directly related to the graphical user interface’s structure that is addressed to and resolves a specifically identified problem in the prior state of the art. The district court concluded that the patented subject matter meets the eligibility standards of Alice Step 1.

The Federal Circuit agreed with this conclusion, for all of the reasons articulated by the district court.

The district court alternatively continued the analysis under Alice Step 2, and determined that the challenged claims recite an “inventive concept.”

The court identified the static price index as an inventive concept that allows traders to more efficiently and accurately place trades using this electronic trading system. The court distinguished this system from the routine or conventional use of computers or the Internet, and concluded that the specific structure and concordant functionality of the graphical user interface are removed from abstract ideas, as compared to conventional computer implementations of known procedures. Thus the district court held that the criteria of Alice Step 2 were also met.

The Federal Circuit stated that the district court’s rulings are in accord with precedent for software patents. Precedent has recognized that specific technologic modifications to solve a problem or improve the functioning of a known system generally produce patent-eligible subject matter. In DDR Holdings, LLC v. Hotels.com, the Federal Circuit upheld the patent eligibility of software patent claims necessarily rooted in computer technology that overcome a problem specifically arising in the realm of computer networks. Similarly, claimed processes using a combined order of specific rules” that improved on existing technological processes were deemed patent-eligible in McRO, Inc. v. Bandai Namco Games America Inc.. Claims that were directed to a specific improvement to the way computers operate, embodied in a self-referential table, were deemed eligible in Enfish, LLC v. Microsoft Corp. These software patent cases are described below in this blog.

The Federal Circuit pointed out that, for some computer-implemented methods, software may be essential to conduct the contemplated improvements, as indicated by Enfish. “Much of the advancement made in computer technology consists of improvements to software that, by their very nature, may not be defined by particular physical features but rather by logical structures and processes.”). Abstraction is avoided or overcome when a proposed new application or computer-implemented function is not simply the generalized use of a computer as a tool to conduct a known or obvious process, but instead is an improvement to the capability of the system as a whole.

The Federal Circuit reiterated the Court’s recognition that “at some level, all inventions . . . embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” per Alice. This threshold level of eligibility is often usefully explored by way of the substantive statutory criteria of patentability, for an invention that is new, useful and unobvious is more readily distinguished from the generalized knowledge that characterizes ineligible subject matter. This analysis is facilitated by the Court’s guidance in Alice whereby the claims are viewed in accordance with “the general rule that patent claims ‘must be considered as a whole’.”

This decision should be considered when attempting to patent software that includes a graphical user interface.

Intellectual Ventures I LLC v. Symantec Corp., Trend Micro Incorporated, Federal Circuit 2016 (Software Patents)

It is bad enough that the Supreme Court doesn’t know what it is doing when it comes to software patents. In Alice v CLS, they considered a financial patent that could have easily been invalidated on the grounds of obviousness, and instead invalidated it based on subject matter (35 U.S.C. 101). They didn’t say that financial methods cannot be patented. They did not say that all software patents are invalid. They used a vague framework from a biotech decision. The courts now use an unclear test that involves considering whether the subject matter of the claim is “too abstract” and, if so, whether the claims add “significantly more”.  Neither of these concepts were well defined.   I suppose they were hoping for judicial efficiency in having courts decide that some patents were of subject matter types that aren’t worthy of claim construction or obviousness analyses.

We can forgive the Supreme Court. They are usually dealing with completely different types of cases. They have been waiting for congress to legislate since Gottschalk v. Benson in 1972.

The Federal Circuit, on the other hand, our court of appeals for patent cases, is supposed to have specialized knowledge of patent law. They were formed to bring consistency to the law, an improvement over the inconsistent decisions that were being issued from the various circuit courts of appeal, who were more experienced with criminal law than patent law.

But the Federal Circuit just can’t make up its mind on when software should or should not be patentable. After the recent decision in McRo, which seemed to be taking us towards a “technical effect,” European-style test, that also considers preemption and non-obviousness (as I had predicted when I wrote my summary of Alice v CLS), we get Intellectual Ventures v Symantec. The main opinion, by Judge Dyk, isn’t entirely unreasonable, but just wait until you read Judge Mayer’s concurrence (summarized below, after the discussion of the opinion).

Intellectual Ventures I LLC (“IV”) sued Symantec Corp. and Trend Micro for infringement of various claims of U.S. Patent Nos. 6,460,050, 6,073,142, and 5,987,610. The district court held the asserted claims of the ’050 patent and the ’142 patent to be ineligible under § 101, and the asserted claim of the ’610 patent to be eligible. The Federal Circuit didn’t find any asserted claims to be patent-eligible.

Claim 9 is representative of the ‘050 patent:

9. A method for identifying characteristics of data files, comprising:

  • receiving, on a processing system, file content identifiers for data files from a plurality of file content identifier generator agents, each agent provided on a source system and creating file content IDs using a mathematical algorithm, via a network;
  • determining, on the processing system, whether each received content identifier matches a characteristic of other identifiers; and
  • outputting, to at least one of the source systems responsive to a request from said source system, an indication of the characteristic of the data file based on said step of determining.

The Federal Circuit agreed with the lower court that filtering files/e-mail—is an abstract idea.  Looking a bit at the obviousness question, and conflating 103 and 101 like the Supreme Court did in Alice v CLS, the Federal Circuit stated that it was long-prevalent practice for people receiving paper mail to look at an envelope and discard certain letters, without opening them, from sources from which they did not wish to receive mail based on characteristics of the mail.  The list of relevant characteristics could be kept in a person’s head.  Characterizing e-mail based on a known list of identifiers is no less abstract. The patent merely applies a well-known idea using generic computers “to the particular technological environment of the Internet.”

The Federal Circuit then proceeded to the Mayo/Alice step two to determine whether the claims contain an “inventive concept” that renders them patent-eligible.

The Federal Circuit noted that Indeed, “[t]he ‘novelty’ of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within the § 101 categories of possibly patentable subject matter”,  quoting Diamond v. Diehr, 450 U.S. 175, 188–89 (1981).

They also cite the Mayo Supreme Court decision for a rejection of the Government’s invitation to substitute §§ 102, 103, and 112 inquiries for the better established inquiry under § 101.  Better established?  Really?

The Federal Circuit notes that the steps of the asserted claims of the ’050 patent do not “improve the functioning of the computer itself.”  This gives us a big hint on how to draft software patent applications in the future.  Look for ways that the software is improving the computer.  Perhaps less memory is being used.

IV argued that the ’050 patent “shrink[s] the protection gap and moot[s] the volume problem.”  According to IV, the protection gap is “the period of time between identification of a computer
virus by an anti-malware provider and distribution of that knowledge to its users.”  The volume problem is the “exponential growth in malware and spam,” increasing the amount of antivirus signatures to be downloaded.  However, the asserted claims do not contain any limitations that address the protection gap or volume problem, e.g., by requiring automatic updates to the
antivirus or antispam software or the ability to deal with a large volume of such software.   So a practice pointer is to be sure to add limitations to the claims that solve a technological problem.

Claim 1 is representative of how the ’142 patent screens e-mail, and recites:

1. A post office for receiving and redistributing email messages on a computer network, the post
office comprising:

  • a receipt mechanism that receives an e-mail message from a sender, the e-mail message having at least one specified recipient;
  • a database of business rules, each business rule specifying an action for controlling the delivery of an e-mail message as a function of an attribute of the e-mail message;
  • a rule engine coupled to receive an e-mail message from the receipt mechanism and coupled to the database to selectively apply the business rules to the e-mail message to determine from selected ones of the business rules a set of actions to be applied to the e-mail message; and
  • a distribution mechanism coupled to receive the set of actions from the rule engine and apply at least one action thereof to the e-mail message to control delivery of the e-mail message and which in response to the rule engine applying an action of deferring delivery of the e-mail message, the distribution engine automatically combines the email message with a new distribution list specifying at least one destination post office for receiving the e-mail message for review by an administrator associated with the destination post office, and a rule history specifying the business rules that were determined to be applicable to the e-mail message by at least one rule engine, and automatically delivers the e-mail message to a first destination post office on the distribution list instead of a specified recipient of the e-mail message.

The district court held that the asserted claims of the ’142 software patent are directed to human practicable concepts, which could be implemented in, for example, a brick-and-mortar post office. The Federal Circuit agreed, and found the district court’s analogy to a corporate mailroom to also be useful.

IV itself informed the district court, in its technology tutorial, that in the typical environment, the post office resides on a mail server, where the company’s emails are received, processed, and routed to recipients.  IV stupidly added that, conceptually, this post office is not much different than a United States Postal Service office that processes letters and packages, except that the process is all computer implemented and done electronically in a matter of seconds.

Again conflating 103 and 101 issues, the Federal Circuit found the concept to be well-known and abstract.

Proceeding to step 2, the Federal Circuit considered whether each step does no more than require a generic computer to perform generic computer functions as in Alice. They found that here, that is the case.

Claim 7 was is the only asserted claim of the ’610 patent.  The district court held eligible claim 7 of the ’610 patent.
Claim 7 depends from claim 1, which provides:

1. A virus screening method comprising the steps
of:

  • routing a call between a calling party and a called party of a telephone network;
  • receiving, within the telephone network, computer data from a first party selected from the group consisting of the calling party and the called party;
  • detecting, within the telephone network, a virus in the computer data; and
  • in response to detecting the virus, inhibiting communication of at least a portion of the computer data from the telephone network to a second party selected from the group consisting of the calling party and the called party.

Claim 7 recites:

7. The virus screening method of claim 1 further comprising the step of determining that virus screening is to be applied to the call based upon at least one of an identification code of the calling party and an identification code of the called party.

Unlike the asserted claims of the ’050 and ’142 patents, claim 7 involves an idea that originated in the computer era—computer virus screening.

But the idea of virus screening was well known at the time the application was filed.  Here again, 103 analysis creeps in to the 101 analysis.  A sensible court would skip the 101 analysis altogether and just use obviousness analysis as the real test.  But the Federal Circuit is stuck with the mess that the Supreme Court has created.

The Federal Circuit noted that virus screening is well-known and constitutes an abstract idea. At step two of Mayo/Alice, the Federal Circuit found no other aspect of the claim that is anything but conventional. They stated that just as performance of an abstract idea on the Internet is abstract, so too the performance of an abstract concept in the environment of the telephone network is abstract.

Nor does the asserted claim improve or change the way a computer functions. Claim 7 recites no more than generic computers that use generic virus screening technology.

Judge Meyer wrote separately to make his two points: (1) patents constricting the essential channels of online communication run afoul of the First Amendment; and (2) claims directed to software implemented on a generic computer are categorically not eligible for patent.

He wrote that the Constitution protects the right to receive information and ideas. . . . This right to receive information and ideas, regardless of their social worth, is fundamental to our free society, quoting the Supreme Court decision in Stanley v. Georgia. According to Judge Meyer, patents, which function as government-sanctioned monopolies, invade core First Amendment rights when they are allowed to obstruct the essential channels of scientific, economic, and political discourse.

According to Judge Mayer, although the claims at issue here disclose no new technology, they have the potential to disrupt, or even derail, large swaths of online communication. Suppression of free speech is no less pernicious because it occurs in the digital, rather than the physical, realm. “[W]hatever the challenges of applying the Constitution to ever-advancing technology, the basic principles of freedom of speech and the press, like the First Amendment’s command, do not vary when a new and different medium for communication appears.” Brown v. Entm’t Merchs. Ass’n.

According to Judge Meyer, like all congressional powers, the power to issue patents and copyrights is circumscribed by the First Amendment. Just as the idea/expression dichotomy and the fair use defense serve to keep copyright protection from abridging free speech rights, restrictions on subject matter eligibility can be used to keep patent protection within constitutional bounds. Section 101 creates a “patent-free zone” and places within it the indispensable instruments of
social, economic, and scientific endeavor. Section 101, if properly applied, can preserve the Internet’s open architecture and weed out those patents that chill political expression and impermissibly obstruct the marketplace of ideas.

According to Judge Meyer, most of the First Amendment concerns associated with patent protection could be avoided if the Federal Circuit were willing to acknowledge that Alice sounded the death knell for software patents.

The problem with Judge Meyer’s analysis is that you can’t have a marketplace without property rights.  You would have cheap overseas versions of software that developers spent good money to develop.  Software is one of the few industries in which the U.S. is a net exporter.  Copyright is only effective for protecting against outright copies, not for protecting inventive concepts within software.

Yes, the Internet is an open framework as Judge Meyer notes.  However, it started as ARPANET funded by the Department of Defense.  Why would a private company put R&D money into a new technology and then give it away?  Do we really want the government developing our software?  That might be how things end up if the venture capital firms decide that they will not recoup their investments and if they stop investing in software startups.  When you take away the profit motive for startups, you are left with government or consolidation by large multinationals that happily move jobs overseas.  Well, maybe having the government develop software wouldn’t be all that bad.  It couldn’t be worse than Windows 8.

Hopefully Judge Meyer will not be involved in writing too many software patent decisions.

USPTO Issues post-Alice Software Patent Examination Guidelines

The USPTO has issued preliminary guidelines for examination of software patent applications, and other patent applications, after the Supreme Court’s decision in Alice v. CLS Bank.  The Alice Supreme Court decision is discussed in another post.

The guidelines start by summarizing the Alice decision as follows:

The Court determined that Alice Corp.’s claims to methods were ineligible because “the claims at issue amount to ‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.” Alice Corp.’s claims to computer systems and computer-readable storage media were held ineligible for substantially the same reasons, e.g., that the generically-recited computers in the claims add nothing of substance to the underlying abstract idea. Notably, Alice Corp. neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for eligibility of software or business methods.

The guidelines go on to state that The Supreme Court made clear in Alice Corp. that it applies the framework set forth in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. _ (2012) (Mayo), to analyze all claims directed to laws of nature, natural phenomena, and abstract ideas for subject matter eligibility under 35 U.S.c. § 101. The Mayo framework is currently being used by the USPTO to examine claims involving laws of nature, but had not been used for claims involving abstract ideas. Therefore, the new examination guidelines differ from prior USPTO guidance in two ways:
1) The Mayo analysis should be used for all types of judicial exceptions, whereas prior USPTO guidance applied a different (i.e., Bilski) analysis to claims with abstract ideas than to claims with laws of nature (Mayo guidance in MPEP 2106.01).
2) Alice Corp. also establishes that the same analysis should be used for all categories of claims (e.g., product and process claims), whereas prior guidance applied a different analysis to product claims involving abstract ideas (relying on tangibility) than to process claims (Bilski guidance).

For purposes of the preliminary guidelines, only claims that involve abstract ideas are
addressed, since the USPTO’s current guidance for claims that involve laws of nature/natural phenomena already uses the Mayo framework.

The examination guidelines state that, following Alice Corp., Examiners are now to analyze all claims (product and process) having an abstract idea using the following two-part analysis set forth in Mayo :
Part 1: Determine whether the claim is directed to an abstract idea.
Part 2: If an abstract idea is present in the claim, determine whether
any element, or combination of elements, in the claim is sufficient to
ensure that the claim amounts to significantly more than the abstract
idea itself.

As emphasized in Alice Corp., abstract ideas are excluded from eligibility based on a concern
that monopolization of the basic tools of scientific and technological work might impede
innovation more than it would promote it. At the same time, the courts have tread carefully in
construing this exclusion because, at some level, all inventions embody, use, reflect, rest upon
or apply abstract ideas and the other exceptions. Thus, an invention is not rendered ineligible
simply because it involves an abstract concept. In fact, inventions that integrate the building
blocks of human ingenuity into something more by applying the abstract idea in a meaningful
way are eligible.

The guidelines provide examples of abstract ideas, referenced in Alice Corp.:
-Fundamental economic practices ;
-Certain methods of organizing human activities;
-An idea of itself; and
-Mathematical relationships/formulas

Claims that include abstract ideas like these should be examined under Part 2 to determine whether the abstract idea has been applied in an eligible manner.

For Part 2, examiners are to determine whether there are there other limitations in the claim that show a patent-eligible application of the abstract idea, e.g., more than a mere instruction to apply the abstract idea.  They are to consider the claim as a whole by considering all claim elements, both individually and in combination.

The guidelines provide the following non-exclusive examples of limitations referenced in Alice Corp. that may be enough to qualify as “significantly more” when recited in a claim with an abstract idea:
-Improvements to another technology or technical fields;
-Improvements to the functioning of the computer itself; and
-Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

The guidelines provide the following non-exclusive examples of limitations referenced in Alice Corp. that are not enough to qualify as “significantly more” when recited in a claim with an abstract idea:
-Adding the words “apply it” (or an equivalent) with an abstract idea, or mere instructions to implement an abstract idea on a computer; and
-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.

If there are no meaningful limitations in the claim that transform the exception into a patent
eligible application such that the claim amounts to significantly more than the exception itself, the claim should be rejected under 35 U.S.C. § 101 as being directed to non-statutory subject
matter.

Interestingly, and contrary to my prediction in the Alice summary, after conducting the two-part analysis, examiners are instructed to proceed with examination of the claim, regardless of
whether a rejection under § 101 has been made, to determine patentability in accordance with
the other requirements of 35 U.S.C. § 101 (utility and double patenting), non-statutory double
patenting, and §§ 112, 102, and 103 (indefiniteness, novelty, and obviousness).

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