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Copyrightability and Fair Use of the Google Android Operating System – Oracle v Google

Friday, June 13th, 2014

In a lengthy decision covering historical computer copyright case law, the Court of Appeals for the Federal Circuit ruled on the copyright dispute over the Android smart phone operating system in Oracle America Inc. v. Google Inc., Fed. Cir. Case No. 2013-1021 (May 9, 2014) (available here).  The Court reversed the district court’s decision on the non-copyrightability of the Java code used by Google and remanded the matter for a new trial on the issue of fair use.

The copyright dispute involved 37 packages of computer source code. “The parties have often referred to these groups of computer programs, individually or collectively, as ‘application programming interfaces,’ or API packages, but it is their content, not their name, that matters.  Many software developers use the Java language, as well as Oracle’s API packages, to write applications (commonly referred to as ‘apps’) for desktop and laptop computers, tablets, smartphones, and other devices.”  opn. pg. 4.  Oracle alleged that Google’s Android mobile operating system infringed Oracle’s patents and copyrights.  The Federal Circuit handled the appeal due to the presence of a patent infringement claim but the appeal involved copyright infringement.  The Federal Circuit was therefore obliged to apply Ninth Circuit copyright law. The jury had found that Google did not infringe Oracle’s patents.

The parties agreed that the jury would decide infringement, fair use, and whether any copying was de minimis and the district judge would decide copyrightability and Google’s equitable defenses.  The jury found that Google infringed Oracle’s copyrights in the 37 Java packages and a specific computer routine called ‘rangeCheck,’ but returned a noninfringement verdict as to eight decompiled security files. The jury deadlocked on Google’s fair use defense.  After the trial, the district court granted Oracle’s motion for judgment as a matter of law (JMOL) and found that: (1) Google admitted to copying the eight files; and (2) no reasonable jury could find that the copying was de minimis.  Shortly thereafter, the district court issued its decision on copyrightability, finding that the replicated elements of the 37 API packages—including the declaring code and the structure, sequence, and organization—were not subject to copyright protection.

Oracle’s Java platform includes the Java development kit (JDK), javac compiler, tools and utilities, runtime programs, class libraries (API packages), and the Java virtual machine.  These packages, which are the application programming interfaces a issue in this appeal, allow programmers to use the prewritten code to build certain functions into their own programs, rather than write their own code to perform those functions from scratch. They are shortcuts.  Oracle offers three different licenses: a free, open source General Public License (users must contribute back innovations to the public), a specification license and a commercial license (for use of the entire code and to keep the code secret).  Oracle and Google could not agree on a license because Google wanted a ‘write once, run anywhere’ operating system. Google wanted other programmers to write apps for the Google Java-based smart phone.

“To achieve this ‘write once, run everywhere’ result, Google copied the declaring source code from the 37 Java API packages verbatim, inserting that code into parts of its Android software. In doing so, Google copied the elaborately organized taxonomy of all the names of methods, classes, interfaces, and packages — the ‘overall system of organized names—covering 37 packages, with over six hundred classes, with over six thousand methods.’” opn. pg. 10 – 11.

“Although [Google] acknowledged that the overall structure of Oracle’s API packages is creative, original, and resembles a taxonomy, the district court found that it is nevertheless a command structure, a system or method of operation — a long hierarchy of over six thousand commands to carry out pre-assigned functions — that is not entitled to copyright protection under Section 102(b) of the Copyright Act. In reaching this conclusion, the court emphasized that, [o]f the 166 Java packages, 129 were not violated in any way. And, of the 37 Java API packages at issue, ‘97 percent of the Android lines were new from Google and the remaining three percent were freely replicable under the merger and names doctrines. On these grounds, the court dismissed Oracle’s copyright claims, concluding that the particular elements replicated by Google were free for all to use under the Copyright Act.”  opn. pg. 14 (quotations and record citations omitted).

Per the Federal Circuit, “It is undisputed that Google copied 7,000 lines of declaring code and generally replicated the overall structure, sequence, and organization of Oracle’s 37 Java API packages.”  opn. pg. 15.

The Copyright Act provides protection to original works of authorship fixed in any tangible medium of expression, including literary works. 17 U.S.C. § 102(a). It is undisputed that computer programs —  defined in the Copyright Act as “a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result,” 17 U.S.C. § 101 — can be subject to copyright protection as literary works. See Atari Games Corp. v. Nintendo of Am., Inc., 975 F.2d 832, 838 (Fed. Cir. 1992).

Copyright protection extends only to the expression of an idea — not to the underlying idea itself. Mazer v. Stein, 347 U.S. 201, 217 (1954).  The idea/expression dichotomy traces back to the Supreme Court’s decision in Baker v. Selden, 101 U.S. 99, 101 (1879).

“It is well established that copyright protection can extend to both literal and non-literal elements of a computer program. … The non-literal components of a computer program include,
among other things, the program’s sequence, structure, and organization, as well as the program’s user interface.” opn. pg. 20.

“Although the parties agree that Oracle’s API packages meet the originality requirement under Section 102(a), they disagree as to the proper interpretation and application of Section 102(b). For its part, Google suggests that there is a two-step copyrightability analysis, wherein Section 102(a) grants copyright protection to original works, while Section 102(b) takes it away if the work has a functional component. To the contrary, however, Congress emphasized that Section 102(b) ‘in no way enlarges or contracts the scope of copyright protection’ and that its ‘purpose is to restate . . . that the basic dichotomy between expression and idea remains unchanged.’ Feist,
499 U.S. at 356″ opn. pg 22.

The Federal Circuit adopted the abstraction-filtration-comparison test.  “In the abstraction step, the court first breaks down the allegedly infringed program into its constituent structural parts. In the filtration step, the court sifts out all non-protectable material, including ideas and expression that is necessarily incidental to those ideas. In the final step, the court compares the remaining creative expression with the allegedly infringing program.”  opn. pg. 23 – 24 (quotes omitted).

“In all circuits, it is clear that the first step is part of the copyrightability analysis and that the third is an infringement question. It is at the second step of this analysis where the circuits are in less accord.”  opn pg. 24

“In the Ninth Circuit, while questions regarding originality are considered questions of copyrightability, concepts of merger and scenes a faire are affirmative defenses to claims of infringement. Ets-Hokin, 225 F.3d at 1082; Satava v. Lowry, 323 F.3d 805, 810 n.3 (9th Cir.
2003)” opn. pg. 25.

“Under the merger doctrine, a court will not protect a copyrighted work from infringement if the idea contained therein can be expressed in only one way. Satava v. Lowry, 323 F.3d 805, 812 n.5 (9th Cir. 2003).”

“First, we agree that merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them. See Satava, 323 F.3d at 812 n.5 (‘Under the merger doctrine, courts will not protect a copyrighted work from infringement if the idea underlying the copyrighted work can be expressed in only one way, lest there be a monopoly on the underlying idea.’). The evidence showed that Oracle had ‘unlimited options as to the selection and arrangement of the 7000 lines Google copied.’ Appellant Br. 50.”

“The scenes a faire doctrine, which is related to the merger doctrine, operates to bar certain otherwise creative expression from copyright protection. Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1444 (9th Cir. 1994). It provides that ‘expressive elements of a work of authorship are not entitled to protection against infringement if they are standard, stock, or common to a topic, or if they necessarily follow from a common theme or setting.’ Mitel, 124 F.3d at 1374. Under this doctrine, ‘when certain commonplace expressions are indispensable and naturally associated with the treatment of a given idea, those expressions are treated like ideas and therefore [are] not protected by copyright.’ Swirsky v. Carey, 376 F.3d 841, 850 (9th Cir. 2004). In the computer context, ‘the scene a faire doctrine denies protection to program elements that are dictated by external factors such as ‘the mechanical specifications of the computer on which a particular program is intended to run’ or ‘widely accepted programming practices within the computer industry.’‘ Softel, 118 F.3d at 963 (citation omitted).”  opn pg. 35.

“Like merger, the focus of the scenes a faire doctrine is on the circumstances presented to the creator, not the copier. See Mitel, 124 F.3d at 1375 (finding error to the extent the trial court discussed ‘whether external factors such as market forces and efficiency considerations justified Iqtel’s copying of the command codes’). The court’s analytical focus must be upon the external factors that dictated Sun’s selection of classes, methods, and code—not upon what Google encountered at the time it chose to copy those groupings and that code.”  opn. pg. 37.

“[T]he trial court was correct to conclude that the scenes a faire doctrine does not affect the copyrightability of either the declaring code in, or the SSO [sequence, organization and structure] of, the Java API packages at issue.”  opn pg. 37.

“The district court found that the SSO [sequence, organization and structure] of the Java API packages is creative and original, but nevertheless held that it is a ‘system or method of operation . . . and, therefore, cannot be copyrighted’ under 17 U.S.C. § 102(b). Copyrightability Decision, 872 F. Supp. 2d at 976-77. In reaching this conclusion, the district court seems to have relied upon language contained in a First Circuit decision: Lotus Development Corp. v. Borland International, Inc., 49 F.3d 807 (1st Cir. 1995), aff’d without opinion by equally divided court, 516 U.S. 233 (1996).  In Lotus, it was undisputed that the defendant copied the menu command hierarchy and interface from Lotus 1- 2-3, a computer spreadsheet program ‘that enables users to perform accounting functions electronically on a computer.’ 49 F.3d at 809. The menu command hierarchy referred to a series of commands—such as ‘Copy,’ ‘Print,’ and ‘Quit’—which were arranged into more than 50 menus and submenus.”  opn. pg. 37 – 38.

“More importantly, however, the Ninth Circuit has not adopted the court’s ‘method of operation’ reasoning in Lotus, and we conclude that it is inconsistent with binding precedent. Specifically, we find that Lotus is inconsistent with Ninth Circuit case law recognizing that the structure, sequence, and organization of a computer program is eligible for copyright protection where it
qualifies as an expression of an idea, rather than the idea itself.”  opn. pg. 39 – 40.

“While it does not appear that the Ninth Circuit has addressed the precise issue, we conclude that a set of commands to instruct a computer to carry out desired operations may contain expression that is eligible for copyright protection.”  opn. pg. 42-43.

“Given the court’s findings that the SSO is original and creative, and that the declaring code could have been written and organized in any number of ways and still have achieved the same functions, we conclude that Section 102(b) does not bar the packages from copyright protection just because they also perform functions.” opn. pg. 45.

As for Google’s arguments that it does not infringe because the Google code’s interoperability with other Java apps, those arguments are directed to Google’s fair use analysis.  Interoperability is ‘irrelevant’ to the copyrightability analysis.  opn. pg. 45.  The district court concluded that Google took only what was necessary to achieve interoperability, and relied primarily on two Ninth Circuit decisions: Sega Enterprises v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992), and Sony Computer Entertainment, Inc. v. Connectix, Corp., 203 F.3d 596 (9th Cir. 2000).  “As noted, both cases were focused on fair use, not copyrightability.  In Sega, for example, the only question was whether Accolade’s intermediate copying was fair use. The court never addressed the question of whether Sega’s software code, which had functional elements, also contained separable creative expression entitled to protection. Likewise, although the court in Sony determined that Sony’s computer program had functional elements, it never addressed whether it also had expressive elements. Sega and Sony are also factually distinguishable because the defendants in those cases made intermediate copies to understand the functional aspects of the copyrighted works and then created new products. See Sony, 203 F.3d at 606-07; Sega, 977 F.2d at 1522-23.”  opn. pg. 47.

The jury was hung on the issue of whether Google’s use of the code was fair use and the district court refused to order a new trial. “‘Section 107 requires a case-by-case determination whether a particular use is fair, and the statute notes four nonexclusive factors to be considered.’ Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 549 (1985). Those factors are: (1) ‘the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;’ (2) ‘the nature of the copyrighted work;’ (3) ‘the amount and substantiality of the portion used in relation to the copyrighted work as a whole;’ and (4) ‘the effect of the use upon the potential market for or value of the copyrighted work.’ 17 U.S.C. § 107. The Supreme Court has explained that all of the statutory factors ‘are to be explored, and the results weighed together, in light of the purpose[] of copyright,’ which is ‘[t]o promote the Progress of Science and useful Arts.’ Campbell, 510 U.S. at 578, 575 (internal citations omitted).”  opn. pg. 53 – 54.

A use is transformative if it adds something new, with a further purpose or different character, altering the first with new expression, meaning or message.  “A work is not transformative where the user ‘makes no alteration to the expressive content or message of the original work.” opn. pg. 57.

The Federal Circuit remanded the case back to the district court on the fair use question and requested a new trial. “First, although it is undisputed that Google’s use of the API packages is commercial, the parties disagree on whether its use is ‘transformative.’ Google argues that it is, because it wrote its own implementing code, created its own virtual machine, and incorporated the packages into a smartphone platform. For its part, Oracle maintains that Google’s use is not transformative because: (1) ‘[t]he same code in Android . . . enables programmers to invoke the same pre-programmed functions in exactly the same way;’ and (2) Google’s use of the declaring code and packages does not serve a different function from Java. Appellant Reply Br. 47. While Google overstates what activities can be deemed transformative under a correct application of the law, we cannot say that there are no material facts in dispute on the question of whether Google’s use is ‘transformative,’ even under a correct reading of the law. As such, we are unable to resolve this issue on appeal.”  opn. pg. 60.

Fractured Patent Appeals Court Casts Shadow Over Computer Software Patents

Thursday, June 20th, 2013

The Court of Appeals for the Federal Circuit (the Federal Circuit), in a highly fractured en banc decision, throws doubt on the validity of many computer software patents in its recent decision,  CLS Ba by nk International v. Alice Corporation, Case No. 2011-1301 (Fed. Cir. May 10, 2013) (available here).  Rather  than clarify the law as to whether computer program patents (with computer method claims, computer media claims and computer system claims) are patent eligible subject matter under the Patent Act, Section 101, 35 U.S. C. Sec. 101, the per curium opinion notes “While Chief Judge Rader is correct to note that no single opinion issued today commands a majority, seven of the ten members, a majority, of this en banc court have agreed that the method and computer-readable medium claims before us fail to recite patent-eligible subject matter. In addition, eight judges, a majority, have concluded that the particular method, medium, and system claims at issue in this case should rise or fall together in the§ 101 analysis.”

Procedurally, the trial court had earlier held that certain claims of Alice’s patents were invalid under 35 U.S.C. § 101 as being abstract ideas which are not patentable subject matter under the Patent Act.  The first Federal Circuit decision held that Alice’s patent claims were all patent eligible under § 101.  CLS Bank Int’s v. Alice Corp., 685 F.3d 1341 (Fed. Cir. 2012), vacated, 484 F. App’x 559 (Fed. Cir. 2012).  As noted, the Federal Circuit vacated its earlier ruling and, in this en banc case before all the appellate court judges, the Court affirmed “the district court’s judgment in its entirety and [held] that the method, computer-readable medium, and corresponding system claims … recite patent-ineligible subject matter under 35 U.S.C. § 101.”

Because the opinions from the highly divided Court span 135 pages, only the per curium opinion is reported herein. The Court’s opinion is extensively quoted since condensation may further confuse our readers.

“The 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.” (citing Diamond v. Diehr, 450 U.S. 175, 191 (1981) and  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, Diehr, 450 U.S. at 185, because such fundamental discoveries represent ‘the basic tools of scientific and technological work.’” (citing  Gottschalk v. Benson, 409 U.S. 63, 67 (1972)).

“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.”

Preemption

“For example, deciding whether or not a particular claim is abstract can feel subjective and unsystematic, and the debate often trends toward the metaphysical, littered with unhelpful analogies and generalizations. What is needed is a consistent, cohesive, and accessible approach to the § 101 analysis – a framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts. As set forth below, the Supreme Court’s foundational § 101 jurisprudence offers the guideposts to such a system, one that turns primarily on the practical likelihood of a claim preempting a fundamental concept.”

Once the abstract idea is identified, the Supreme court has “measured the scope of the claims [in the Benson case] against the scope of that overarching abstract idea. In practice, the claims [in for converting binary coded decimal (BCD) numerals into pure binary numerals] were ‘so abstract and sweeping as to cover both known and unknown uses of the BCD to pure binary conversion’ and would thus reach every application of the basic conversion algorithm, in contrast to earlier cases concerning patent-eligible process claims that had been cabined to discrete applications ‘sufficiently definite to confine the patent monopoly within rather definite bounds.’” (citing Gottschalk v. Benson, 409 U.S. at 68 – 69).

In Benson, the Supreme Court said: ”The mathematical formula involved here has no substantial practical application except in connection with a digital computer, which means that if the judgment below is affirmed, the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.”  Id. at 71 – 72.   However in that Benson case, the predecessor of the Federal Circuit, the CCPA, had approved those patent claims and “had interpreted both claims as requiring a computer and had upheld them on that basis.”  See In re Benson, 441 F.2d 682, 687-88 (CCPA 1971).

“Six years later [after Benson], in Parker v. Flook, 437 U.S. 584 (1978), the Supreme Court again considered the patent eligibility of a computerized process – in particular, a method for updating alarm limits for continuously monitored industrial process variables (e.g., temperature or pressure) according to a disclosed mathematical formula.”

“Although the claim would not wholly preempt’ the mathematical formula, id. at 589, the [Supreme] Court nonetheless held that the claimed process fell under the abstract ideas exception to patent eligibility. In its analysis, the Court viewed the formula as an abstract principle and stated that the case must ‘be considered as if the principle or mathematical formula were well known.’ Id. at 592. The Court then asked whether, to confer patent eligibility, the claim contained sufficient substance beyond the abstract mathematical formula itself-that is, ‘some other inventive concept in its application.’ Id. at 594; see also id. at 590 (‘A competent draftsman could attach some form of post-solution activity to almost any mathematical formula . . . .’). Concluding that the field-of-use, monitoring, adjusting, and computer limitations were trivial or ‘well known’ under such an analysis, the Court held that the claims were not patent eligible, …).”

In Diamond v. Diehr, 450 U.S. 175, 191 (1981), “[t]he claimed methods included steps for operating a rubber molding press that included constantly determining the temperature inside the mold, repetitively calculating the necessary cure time using a mathematical formula known as the Arrhenius equation, and opening the press whenever the elapsed cure time equaled the calculated necessary cure time.”

“[T]he [Supreme] Court distinguished Flook on the basis that the claim there provided no substantive details regarding the method’s actual performance— rather, ‘[a]ll that it provides is a formula for computing an updated alarm limit.’  See id. at 186–87 (quoting Flook, 437 U.S. at 586). In contrast, in Diehr, the claimed process incorporating the Arrhenius equation also called for steps including ‘constantly measuring the actual temperature inside the mold,’ a step that was said to be new in the art. See id. at 178 – 79.”

The Federal Circuit then discussed Bilski v. Kappos, 130 S. Ct. 3218 (2010).  “Applying Benson, Flook, and Diehr, the Supreme Court held that the claims [in Bilski] failed to recite a patent-eligible process because they covered the abstract idea of hedging against risk. ‘Allowing [the claims] would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.’ Id. at 3231.”

The Federal Circuit further considered Mayo v. Prometheus.  “Accordingly, the claims [in Mayo] recited the specific steps of administering the thiopurine drug and determining the resulting metabolite concentration in the patient’s blood, wherein a concentration above or below predefined thresholds indicated a need to adjust the drug dose. See id. at 1295 (claim 1).”  “The Supreme Court held that those claims failed the § 101 test for subject-matter eligibility. Therefore, the question was ‘whether the claims do significantly more than simply describe these natural relations’; did they ‘add enough’ to the natural law to render the claimed processes patent eligible? Id. at 1297. Examining the other limitations, the [Supreme] Court concluded that the ‘administering’ and ‘determining’ steps were insufficiently limiting or inventive to confer patent eligibility.”

“First and foremost is an abiding concern that patents should not be allowed to preempt the fundamental tools of discovery-those must remain ‘free to all … and reserved exclusively to none.’ Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948).” Preemption features prominently in the Supreme Court’s decisions of Mayo, 132 S. Ct. at 1301; Bilski, 130 S. Ct. at 3231; Diehr, 450 U.S. at 187; Benson, 409 U.S. at 72, O’Reilly v. Morse, 56 U.S. 62, 113 (1853) (rejecting a claim that would have broadly conferred “a monopoly” in the use of electromagnetism, ”however developed, for the purpose of printing at a distance”).

“To be clear, the proper focus is not preemption per se, for some measure of preemption is intrinsic in the statutory right granted with every patent to exclude competitors, for a limited time, from practicing the claimed invention. See 35 U.S.C. § 154. Rather, the animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add ‘significantly more’ to the basic principle, with the result that the claim covers significantly less. See Mayo 132 S. Ct. at 1294. Thus, broad claims do not necessarily raise § 101 preemption concerns, and seemingly narrower claims are not necessarily exempt. What matters is whether a claim threatens to subsume the full scope of a fundamental concept, and when those concerns arise, we must look for meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.” (Citing Mayo at 1302).

“Thus, 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 [Supreme Court’s] 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.”

“Accordingly, the Supreme Court has rejected calls for a categorical exclusion of so-called business method claims and has held that the formulaic ‘machine-or-transformation’ test cannot be the exclusive means for determining the patent eligibility of process claims. Bilski, 130 S. Ct. at 3227-29. What is needed is a flexible, pragmatic approach that can adapt and account for unanticipated technological advances while remaining true to the core principles underlying the fundamental exceptions to § 101.”

“A preliminary question in applying the exceptions to such claims is whether the claim raises § 101 abstractness concerns at all. Does the claim pose any risk of preempting an abstract idea? In most cases, the answer plainly will be no.”

“In short, one cannot meaningfully evaluate whether a claim preempts an abstract idea until the idea supposedly at risk of preemption has been unambiguously identified. Although not required, conducting a claim construction analysis before addressing § 101 may be especially helpful in this regard by facilitating a full understanding of what each claim entails.” (Citing Bancorp Servs., LLC v. Sun Life Assurance Co. of Can., 687 F.3d 1266, 1273 – 74 (Fed. Cir. 2012)).

The Section 101 Inventive Concept – Substantive Claim Limitations

“The requirement for substantive claim limitations beyond the mere recitation of a disembodied fundamental concept has ‘sometimes’ been referred to as an ‘inventive concept.’  See Mayo, 132 S. Ct. at 1294 (citing Flook, 437 U.S. at 594). We do not read the [Supreme] Court’s occasional use of that language in the § 101 context as imposing a requirement that such limitations must necessarily exhibit ‘inventiveness’ in the same sense as that term more commonly applies to two of the statutory requirements for patentability, i.e., novelty and nonobviousness. See 35 U.S.C. §§ 102, 103. The phrase ‘inventive concept’ originated with Flook, yet the Court began its discussion of § 101 in that case by stating that the question of patenteligible subject matter ‘does not involve the familiar issues of novelty and obviousness that routinely arise under §§ 102 and 103.’  437 U.S. at 588.”

“An ‘inventive concept’ in the§ 101 context refers to a genuine human contribution to the claimed subject matter.”  “In addition, that human contribution must represent more than a trivial appendix to the underlying abstract idea. The § 101 preemption analysis centers on the practical, real – world effects of the claim.  Limitations that represent a human contribution but are merely tangential, routine, well – understood, or conventional, or in practice fail to narrow the claim relative to the fundamental principle therein, cannot confer patent eligibility.”

“For example, the ‘administering’ and ‘determining’ steps in Mayo might have appeared to be concrete limitations representing true human contributions to the claimed methods … Yet the Court held that those steps failed to render the claims patent eligible because, as a practical matter, they were necessary to every practical use of what it found to be a natural law and therefore were not truly limiting. Mayo, 132 S. Ct. at 1298.”

“Also in Mayo, the [Supreme] Court instructed that the added steps, apart from the natural law itself, must amount to more than ‘well-understood, routine, conventional activity previously engaged in by researchers in the field.’ 132 S. Ct. at 1294. Similarly, token or trivial limitations, see Diehr, 450 U.S. at 191-92 (stating that ‘insignificant post-solution activity will not transform an unpatentable principle into a patentable process’), or vague limitations cast in ‘highly general language,’ Mayo, 132 S. Ct. at 1302, have failed to satisfy § 101. Finally, bare field-of-use limitations cannot rescue a claim from patent ineligibility where the claim as written still effectively preempts all uses of a fundamental concept within the stated field. Bilski, 130 S. Ct. at 3230 (discussing  Flook and Diehr). Whether a particular claim satisfies the § 101 standard will vary based on the balance of factors at play in each case, and the fact that there is no easy bright – line test simply emphasizes the need for the PTO and the courts to apply the flexible analysis above to the facts at hand.”

To recap, claim limitations which do not support Section 101 patent eligible subject matter are: (1) well-understood steps, routine or conventional steps which are used by researchers in the field; (2) token or trivial limitations; (3) insignificant post-solution activity; (4) vague limitations cast in highly general language; (5) “extravagant language to recite a basic function” (see “Alice Patents” section below); (6) generic computer functionality that lends speed or efficiency to the performance; and (7) bare field-of-use limitations.  These claim limitations effectively preempt all uses of a fundamental concept within the stated field.

Section 101 Inventive Concept Is Different Than Novelty and Nonobviousness

“Thus, the Supreme Court used the language ‘routine’ and ‘conventional’ in Mayo to indicate what qualities added to a natural law do not create patent-eligible subject matter. See Mayo, 132 S. Ct. at 1298. We do not therefore understand that language to be confused with novelty or nonobviousness analyses, which consider whether particular steps or physical components together constitute a new or nonobvious invention. Analyzing patent eligibility, in contrast, considers whether steps combined with a natural law or abstract idea are so insignificant, conventional, or routine as to yield a claim that effectively covers the natural law or abstract idea itself.”

Inventive Concept Is A Separate, Not A Threshold, Analysis And Issued Patents Are Presumed Valid

“Two other considerations are worth noting with respect to the § 101 analysis. First, some have argued that because § 101 is a ‘threshold test,’ Bilski, 130 S. Ct. at 3225, district courts must always consider subject-matter eligibility first among all possible bases for finding invalidity. That is not correct.”

“Second, it bears remembering that all issued patent claims receive a statutory presumption of validity. 35 U.S.C. § 282; Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238 (2011).”

The Alice Patents in Suit

The patent owner Alice Corp. argued that the following claim limitations for “shadow accounts” made the computer method claims, the computer readable medium claims (so-called ‘Beauregard claims,’ named for In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995)) and the apparatus or computer system claims eligible patent subject matter.

Computer Method Claims

Claim 33.  A method of exchanging obligations as between parties including: (1) creating a shadow credit record and a shadow debit record for each stakeholder party and (2) 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.

“Briefly, the claimed process requires the supervisory institution to create shadow records for each party that mirror the parties’ real-world accounts held at their respective ‘exchange institutions.’ At the end of each day, the supervisory institution irrevocably instructs the exchange institutions to carry out the permitted transactions.”

The Court found that the shadow accounts were “a form of escrow.  CLS describes that concept as ‘fundamental and ancient,’ but the latter is not determinative of the question of abstractness.  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, In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc).”

“First, 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, see SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1332 – 33 (Fed. Cir. 2010), or improved computer technology, see Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 865, 868 – 69 (Fed. Cir. 2010), and no reason to view the computer limitation as anything but ‘insignificant postsolution activity’ relative to the abstract idea, see Fort Props., Inc. v. Am. Master Lease LLC, 671 F.3d 1317, 1323 – 24 (Fed. Cir. 2012). 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.”

“With the term ‘shadow record,’ the claim uses extravagant language to recite a basic function required of any financial intermediary in an escrow arrangement.”

“Finally, providing end-of-day instructions to the exchange institutions to reconcile the parties’ real – world accounts with the day’s accumulated adjustments to their shadow records is a similarly trivial limitation that does not distinguish the claimed method. According to the claim, each permitted transaction during the day prompts corresponding shadow record adjustments, which the
exchange institutions must honor as ‘irrevocable’ payment obligations. E.g., ‘479 patent col. 65 11. 36-50. Whether the instructions are issued in real time, every two hours, or at the end of every day, there is no indication in the record that the precise moment chosen to execute those payments makes any significant difference in the ultimate application of the abstract idea.”

Computer-Readable Medium Claims

“As with the method claims, two other judges of this court, in addition to those joining this [per curium] opinion, similarly conclude that the computer-readable medium claims are not patent eligible.”

Computer System Apparatus Claims

The Federal Circuit noted the disjointed opinions of the Court on this topic and stated: “Before addressing these claims in particular, we again note that our colleagues on the court, other than those joining this opinion, have agreed that, at least in this case, the method, medium, and system claims should be considered together for purposes of § 101. Three other judges on this court – for a total of eight – have so concluded.”

A truncated version of Claim 1 of the Alice ‘720 patent stated: “1. A data processing system to enable the exchange of an obligation between parties … a data storage unit having stored therein information about a shadow credit record and shadow debit record … a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust; (c) generate an instruction.”  The claim then closely followed the method steps.

“Indeed, Alice’s method and system claims use similar and often identical language to describe those actions. Compare id.  Other claims specify additional components, such as a ‘first party device’ and a ‘communications controller.’ See, e.g., ‘375 patent col. 66 11. 65 – 66.”  “As illustrated by the obvious parallels between the method and system claims now before us, it is often a straightforward exercise to translate a method claim into system form, and vice versa. That much has long been recognized. See In re Johnston, 502 F.2d 765, 773 (CCPA 1974).”

“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.”

“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.”

“Despite minor differences in terminology, e.g., first and third ‘independent’ accounts instead of ‘shadow’ records, the asserted method and system claims require performance of the same basic process.”

“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.”

“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.”

Commentary: In conclusion, patent practitioners and the courts continue to “seek [a] framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts.”  CLS Bank v Alice Corp., Slip opn. P. 9.  Given the Court’s fractured positions, although this opinion gives practitioners additional guidelines, the Court’s stated goal of  predictability has not been achieved. The leap from “a form of escrow” (an abstract idea) to “shadow accounts” and end-of-day instructions for credits or debits which are “irrevocable, time invariant obligations placed on the exchange institutions” seems tenuous and not particularly predictable.  Also, critical comments regarding claim drafting strategies and the use of  highly stylized claim language ignores a patent practitioner’s obligation to draft patent claims as broad as possible to capture his or her client’s constitutional rights to reap the fruits of their invention.

Computer Patent Claims for Life Insurance Product Declared Invalid – Not Patentable Subject Matter

Thursday, August 30th, 2012

The Federal Circuit Court of Appeals has invalidated computer method patent claims, computer system claims and computer readable medium claims for a life insurance product. Bancorp Services, LLC v. SunLife Assurance Co. of Canada (U.S.), Case No. 2011-1467 (Fed Cir. July 26, 2012) (available here). Bancorp, the patentee, sued defendant Sun. The court said the claims were nothing more than abstract mathematical algorithms executed by a computer. Although complex, the algorithms could be done manually without the assistance of a computer.

The computer was not integral to the process as compared to a GPS position detector system, a computerized operation for opening a rubber mold, or a method for transforming half tone gray scale pixels for a better computer monitor display. Bancorp’s patent specifications disclosed systems and methods for administering and tracking the value of life insurance. The value of a separate account policy fluctuated with the market value of the underlying investment assets. The asserted patents disclosed a specific formula for determining the values required to manage a stable value protected life insurance policy. For example, the specification disclosed creating and initializing a fund by performing particular “calculations and comparisons” to determine an “initial unit value of the policy.” One of the patent claims is reproduced at the end of this commentary. The district court concluded that there was no meaningful distinction between the asserted “process,” “system,” and “media” claims, and that each would be analyzed as a process claim.

“To salvage an otherwise patent-ineligible process, a computer must be integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not. See SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1333 (Fed. Cir. 2010) (‘In order for the addition of a machine to impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations’).” Slip opn. p. 19-20.

The computer required by some of Bancorp’s claims was employed only for the computer’s most basic function, the performance of repetitive calculations, and as such the recitation of a computer did not impose meaningful limits on the scope of those claims. Bancorp sought to analogize its case to SiRF, contending that a computer “plays a significant part” in its claims because they require “precise and repetitive calculation.” The Court said that misses the point. It is the management of the life insurance policy that is “integral to each of [Bancorp’s] claims at issue,” not the computer machinery that may be used to accomplish it. See SiRF, 601 F.3d at 1332.

Bancorp also argued that its computer system was more akin to the one in Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 867 (Fed. Cir. 2010). The Court stated that Research Corp. was different from the present case in two critical respects. First, the claimed processes in Research Corp. plainly represented improvements to computer technologies in the marketplace. For example, as compared to the prior art, the “inventive mask produce[d] higher quality halftone images while using less processor power and memory space.” Id. at 865. No such technological advance was evident in the present invention. Rather, the claims merely employ computers to track, reconcile, and administer a life insurance policy with a stable value component—i.e., the computer simply performs more efficiently what could otherwise be accomplished manually. Bancorp, 771 F. Supp. 2d at 1065.

Second, the method in Research Corp., which required the manipulation of computer data structures (the pixels of a digital image and the mask) and the output of a modified computer data structure (the halftoned image), was dependent upon the computer components required to perform it.

Procedurally, Bancorp and Sun Life jointly stipulated to dismiss their case due to collateral estoppel arising from the district court’s invalidity ruling in Hartford. Bancorp’s’792 patent was the subject of two prior appeals to the Court. See Metro. Life Ins. Co. v. Bancorp Servs., L.L.C., 527 F.3d 1330 (Fed. Cir. 2008) (vacating summary judgment of noninfringement); Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., 359 F.3d 1367 (Fed. Cir. 2004) (reversing summary judgment of invalidity for indefiniteness). The parties agreed that if the district court’s Hartford ruling was reversed on appeal then their case would be reinstated. The district court then entered a judgment of conditional dismissal.

The Federal Circuit Court found no error in the district court’s failure to construe the patent claims prior to entering its decision. In Ultramercial, LLC v. Hulu, LLC, the Court stated that “[t]his court has never set forth a bright line rule requiring district courts to construe claims before determining subject matter eligibility.” The Court did state that it is ordinarily desirable—and often necessary— to resolve claim construction disputes prior to a § 101 analysis, for the determination of patent eligibility requires a full understanding of the basic character of the claimed subject matter.” 657 F.3d 1323, 1325 (Fed. Cir. 2011), vacated sub nom. Wild- Tangent, Inc. v. Ultramercial, LLC, No. 11-962, 2012 WL 369157 (U.S. May 21, 2012)(no bright line requiring construing claims before section 101 analysis).

However in this appeal, the Court concluded that the asserted system claims required “one or more computers,” as Bancorp asserted and as Sun conceded. The plain language of the system claims required particular computing devices, such as a “generator,” a “calculator,” and “digital storage.” Regarding the computer-readable medium claims, the specification explained that the term refers generally to a “high density removable storage means,” such as a “compact disc.” The district court’s failure to construe the claims, did not preclude the Court from making that legal determination on appeal. See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1455 (Fed. Cir. 1998) (en banc) (concluding that claim construction is a pure issue of law). Just as a district court may construe the claims in a way that neither party advocates, Exxon Chemical Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553, 1555 (Fed. Cir. 1995) (“[T]he trial judge has an independent obligation to determine the meaning of the claims, notwithstanding the views asserted by the adversary parties.”), the appellate court may depart from the district court’s decision and adopt a new construction on appeal, Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1323–24 (Fed. Cir. 2008) (adopting “a new claim construction on appeal.”

As for the literal fact that the computer system claims are facially different than the computer method claims, the Court held that the district court correctly treated the asserted system and computer readable medium claims as being no different from the asserted method claims for patent eligibility purposes. Under Cybersource and CLS, a machine, system, medium, or the like may in some cases be equivalent to an abstract mental process for purposes of patent ineligibility. In CyberSource Corp. v. Retail Decisions, Inc. the Court did not just look to the type of claim but also “to the underlying invention for patent-eligibility purposes.” 654 F.3d 1366, 1374 (Fed. Cir. 2011). In CLS Bank International v. Alice Corp., the Court held that the format of the various method, system, and media claims asserted in that case “d[id] not change the patent eligibility analysis under § 101.” No. 2011-1301, 2012 WL 2708400, at *10 (Fed. Cir. July 9, 2012).

Bancorp owns the ’792 and ’037 patents, both entitled “System for Managing a Stable Value Protected Investment Plan.” The patents share a specification and the priority date of September 1996. The ’792 patent has been the subject of two prior appeals to this court. See Metro. Life Ins. Co. v. Bancorp Servs., L.L.C., 527 F.3d 1330 (Fed. Cir. 2008) (vacating summary judgment of noninfringement); Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., 359 F.3d 1367 (Fed. Cir. 2004) (reversing summary judgment of invalidity for indefiniteness). An example of the claim follows.

“9.A method for managing a life insurance policy on behalf of a policy holder, the method comprising the steps of: [a] generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities; [b] calculating fee units for members of a management group which manage the life insurance policy; [c] calculating surrender value protected investment credits for the life insurance policy; [d] determining an investment value and a value of the underlying securities for the current day; [e] calculating a policy value and a policy unit value for the current day; [f] storing the policy unit value for the current day; and [g] one of the steps of: removing the fee units for members of the management group which manage the life insurance policy, and accumulating fee units on behalf of the management group.” USPN ‘792, clm 9 (alpha designators added).

Commentary: The ruling in the Bancorp case will place many financial patents at risk. The courts are carefully scrutinizing all computer patent claims and the boundaries of patentable subject matter are being re-drawn with considerable speed. See Dealertrack, Inc. v. Huber, Case No. 2009-1566 (Fed. Cir. Jan. 20, 2012).

Computer Trading Platform with Trusted Third Party is Valid Patentable Subject

Monday, August 20th, 2012

The Federal Circuit Court of Appeals has held that Alice’s patents that cover a computerized trading platform for exchanging obligations wherein a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk,” define patentable subject matter under 35 U.S.C. § 101.  CLS Bank International v. Alice Corp. Pty. Ltd, Case No. 2011-1301 (Fed. Cir. July 9, 2012) (available  here).  The dissenting opinion by Judge Prost objected stating that the majority’s opinion uses a subjective “manifestly evident” standard which is nothing more than an escape hatch rather than a yardstick.  The majority concluded that the system, method, and media claims at issue are not drawn to mere “abstract ideas” but rather are directed to practical applications of invention falling within the categories of patent eligible subject matter defined by 35 U.S.C. § 101.

“The asserted claims appear to cover the practical application of a business concept in a specific way, which requires computer implemented steps of exchanging obligations maintained at an exchange institution by creating electronically maintained shadow credit and shadow debit records, and particularly recite that such shadow credit and debit records be held independently of the exchange institution by a supervisory institution; that start-of-the-day balances be obtained from the exchange institution; that adjustments be made to the credit records based on only certain specified allowed transactions under the ‘adjusting’ limitation; that such adjustments be made in chronological order; that at the end of the day, instructions be given to the exchange institution to reflect the adjustments made on the basis of the permitted transactions; and that such adjustments affect irrevocable, time invariant obligations placed on the exchange institution.”  Slip opn. p. 26 (“P. 26″).

CLS, who challenged Alice’s patent, agreed for purposes of the summary judgement, that all of Alice’s asserted claims require a computer system. See Phillips v. AWH Corp., 415 F.3d 1303, 1315-16 (Fed. Cir. 2005) (en banc).  Some claims in the ‘479 Patent did not contain the “electronic adjustment” limitation, but they did  contain the same “shadow credit record” and “shadow debit record” limitations as the ‘510 Patent claims. The specification of the ‘479 Patent, like the ‘510 Patent, supported an understanding that the shadow debit/credit record limitations require computer implementation.  The specification explained that the shadow debit/credit records are electronically stored in a system called “INVENTICO.”

The district court analyzed the method claims under the machine-or-transformation (MOT) test and interpreted the shadow credit and debit records require electronic implementation and a computer.  However, the district court found on summary judgment that the claims were drawn to mere abstract ideas.  The Appeals Court ruled otherwise, reversing the district court, but spilled much link on the issue of abstract ideas and preemption of such ideas.

“Notwithstanding these well intentioned efforts and the great volume of pages in the Federal Reporters treating the abstract ideas exception, the dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive. ‘’Put simply, the problem is that no one understands what makes an idea abstract.’  Mark A. Lemley et al., Life After Bilski, 63 Stan. L. Rev. 1315, 1316 (2011).” P. 14.  See also Donald S. Chisum, Weeds and Seeds in the Supreme Court’s Business Method Patent Decision: New Directions for Regulating Patent Scope, 15 Lewis & Clark L. Rev. 11, 14 (2011) (”Because of the vagueness of the concepts of an ‘idea’ and ‘abstract,’ … the Section 101 abstract idea preemption inquiry can lead to subjectively-derived, arbitrary and unpredictable results. This uncertainty does substantial harm to the effective operation of the patent system.”).

“Several decisions have looked to the notion of ‘preemption’ to further elucidate the ‘abstract idea’ exception. In Bilski, the Supreme Court explained that ‘[a]llowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.’ Bilski v. Kappos, 130 S.Ct. 3218, 3231.  Previously, in O’Reilly v. Morse, 56 U.S. 62 (1853), the Supreme Court held that a claim to electromagnetism was not eligible for patent protection because the patentee ‘claim[ed] the exclusive right to every improvement where the motive power is the electric or galvanic current, and the result is the marking or printing intelligible characters, signs, or letters at a distance.’ Id. at 112-13 (emphases added). The Morse Court reasoned that the claim would effectively ‘shut[] the door against inventions of other persons . . . in the properties and powers of electro-magnetism” because “it matters not by what process or machinery the result is accomplished.’ Id. at 113 (emphasis added). Again, in Gottshalk v. Benson, 409 U.S. 64 (1972), the Supreme Court emphasized the concept of ‘preemption,’ holding that a claim directed to a mathematical formula with ‘no substantial practical application except in connection with a digital computer’ was directed to an unpatentable abstract idea because ‘’the patent would wholly preempt the mathematical formula and in practical effect would be a patent on an algorithm itself.’ Id. at 71-72. In Parker v. Flook, 437 U.S. 584 (1978), the Court again emphasized the importance of claims not ‘preempting’ the ‘basic tools of scientific and technological work,’ and further held that mere field of use limitations-there, to the oil refining and petrochemical industries-or the addition of ‘’post-solution’ activity there, adjusting an ‘alarm limit’ according to a claimed mathematical calculation–could not ‘transform an unpatentable principle into a patentable process.’ Id. at 589.”  P. 14-15.

“Thus, the essential concern is not preemption, per se, but the extent to which preemption results in the foreclosure of innovation. Claims that are directed to no more than a fundamental truth and foreclose, rather than foster, future innovation are not directed to patent eligible subject matter under § 101. No one can claim the exclusive right to all future inventions. Morse, 56 U.S. at 112-13; Benson, 409 U.S. at 68.”  P. 16-17.

“[A] claim is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not.  But even with that appreciation, great uncertainty remains, and the core of that uncertainty is the meaning of the ‘abstract idea’ exception.  The claim limitations can be characterized as being integral to the method, as ‘play[ing] a significant part in permitting the method to be performed,’ and as not being token post solution activity. It is clear, moreover, that the limitations requiring specific ‘shadow’ records leave broad room for other methods of using intermediaries to help consummate exchanges, whether with the aid of a computer or otherwise, and, thus, do not appear to preempt much in the way of innovation.”  P. 27.

CLS Bank argued that all of Alice’s claims are directed to the unpatentable concept of ‘exchanging an obligation’ between parties (i.e., effectuating a legal obligation) after an intermediary ensures that there is ‘adequate value’ in independent accounts maintained for the parties to allow the exchange to go forward-in effect, a two-sided escrow arrangement.  See SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1333 (Fed. Cir. 2010); Gottshalk v. Benson, 409 U.S. 64 (1972), and Parker v. Flook, 437 U.S. 584 (1978)’ CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1375 (Fed. Cir. 2011); and Research Corp. v. Microsoft Corp., 627 F.3d 859, 868-69 (Fed. Cir. 2010).

The Dissent

The dissent took a very high level view of Alice’s invention.  “The basic idea behind the claimed invention is the use of an intermediary in a financial transaction. At its most basic form, in a transaction between parties ‘A’ and ‘B,’ a middle-man collects funds from ‘A’ but will not pass them to ‘B’ until ‘B’ has also performed.”  Dissent opn. p. 4.  The claims chart in the dissent’s opinion arguably greatly over-simplifies the claimed invention.

“The only hint appears where the majority points to the phrase ‘shadow records,’ as if that alone transmutes the abstract idea of the claims into patentable subject matter. Maj. Op. 27. But the claims use ‘shadow’ to simply define an account that is used to track a party’s payments (the account is a shadow of the party’s performance). That is not a limiting feature at all; any financial intermediation would in one way or another use a ‘shadow’ account.” Dissent p. 6; citing Dealertrack, Inc. v. Huber, 674 F.3d 1315, 1331-35 (Fed. Cir. 2012).

Commentary: This case highlights the difficulties in applying the machine or transformation (MOT) test and the abstract idea preemption test to computer methods and systems.  The dissent took a very broad, high level view of the patentee’s invention as noted by the highly truncated, simplified claim chart in its opinion.  The majority drilled down to the claim language and the specification found that the steps of the asserted claims appear to cover the practical application of a business concept in a specific way.  The computer implemented steps include: exchanging obligations, with an exchange institution; maintaining shadow credit and shadow debit records independently of the exchange institution; obtaining start-of-the-day balances; adjusting credit records based on specified allowed transactions; adjusting balances, in chronological order, at the end of the day; and providing instructions to the exchange institution to reflect the adjustments; wherein such adjustments affect irrevocable, time invariant obligations.  The claim limitations can be characterized as being integral to the computer, as “play[ing] a significant part in permitting the method to be performed,” and as not being token post solution activity. The court noted that the limitations requiring specific “shadow records” leave broad room for other methods of using intermediaries to help consummate exchanges, whether with the aid of a computer or otherwise, and, thus, do not appear to preempt much in the way of innovation. It is uncertain if the Supreme Court will review this Federal Circuit decision.

11 Step Computer Method Patent Defines Patent Eligible Subject Matter

Friday, May 18th, 2012

The Federal Circuit Court of Appeals (”Federal Circuit”) reversed the trial court’s decision that the process – a computer method claim – was not statutory subject matter under 35 U.S.C. § 101. Ultramercial, LLC v. Hulu, LLC, Case No. 2010-1544 (Fed. Cir. Sept. 15, 2011) (available here). The 11 step computer program method patent claim was held to be a machine under the “machine or transformation” (MOT) test. Earlier, the District Court had dismissed the patent owner’s case without formally construing the 11 elements in the method patent claim and this failure to properly construe the claim elements in a Markman ruling was a factor in the reversal.

“This court has never set forth a bright line rule requiring district courts to construe claims before determining subject matter eligibility. Indeed, because eligibility is a ‘coarse’ gauge of the suitability of broad subject matter categories for patent protection, Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 869 (Fed. Cir. 2010), claim construction may not always be necessary for a § 101 analysis. See, e.g., Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010) (finding subject matter ineligible for patent protection without claim construction).” Slip opn. p. 5.

The § 101 subject matter eligibility analysis is merely a threshold check. Claim patentability ultimately depends on “the statutory conditions the patent statute such as novelty, nonobviousness, and adequate disclosure.” See Ultramercial, p. 6; Classen Immunotherapies, Inc. v. Biogen IDEC, Nos. 2006-1634, 2006-1649, 2011 WL 3835409, at *6 (Fed. Cir. Aug. 31, 2011) (pointing out the difference between “the threshold inquiry of patent-eligibility, and the substantive conditions of patentability”).

Per the Federal Circuit, the claimed invention in this case was a method for monetizing and distributing copyrighted products over the Internet. “As a method, it satisfies § 100’s definition of ‘process’ and thus falls within a § 101 category of patent-eligible subject matter. Thus, this court focuses its inquiry on the abstractness of the subject matter claimed by the ’545 patent.” p. 9.

“‘[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.’ Research Corp., 627 F.3d at 869. The ’545 patent [in suit] seeks to remedy problems with prior art banner advertising, such as declining clickthrough rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product. By its terms, the claimed invention purports to improve existing technology in the marketplace. By its terms, the claimed invention invokes computers and applications of computer technology.” P. 9-10 (emphasis added).

The ’545 patent claims a particular method for monetizing copyrighted products, consisting of the following steps: (1) receiving media products from a copyright holder, (2) selecting an advertisement to be associated with each media product, (3) providing said media products for sale on an Internet website, (4) restricting general public access to the media products, (5) offering free access to said media products on the condition that the consumer view the advertising, (6) receiving a request from a consumer to view the advertising, (7) facilitating the display of advertising and any required interaction with the advertising, (8) allowing the consumer access to the associated media product after such display and interaction, if any, (9) recording this transaction in an activity log, and (10) receiving payment from the advertiser. ’545 patent col.8 ll.5-48. Many of these steps are likely to require intricate and complex computer programming. In addition, certain of these steps clearly require specific application to the Internet and a cyber-market environment.

In conclusion, the many claim elements, which constitute the claimed process restrictions of: viewing, restricting, limiting access, displaying and processing payments, satisfy the “machine” portion of the “machine or transformation” (MOT) test.

Computer Programs Which are Functional and Palpable Applications of Technology Are not Non-Patentable Abstract Ideas

Tuesday, December 21st, 2010

The Court of Appeals for the Federal Circuit which hears all patent appeals from the U.S. District Courts (the trial courts) recently ruled on whether Research Corporation Technologies’ (“RCT”) patented method of digital halftoning was patentable under 35 U.S.C. § 101 or whether the patent claims are not patentable subject matter as being “laws of nature, physical phenomena or abstract ideas.”  Research Corporation Technologies, Inc. v. Microsoft Corporation, Case No. 2010-1037 (Fed. Cir. December 8, 2010) (available here).  The Federal Circuit reversed the district court’s ruling which had earlier ruled that the patent claims defined non-patentable subject matter under Section 101 as being an abstract idea.

Since a determination of whether or not a patent claim defines non-patentable subject matter hinges on the words in the claim and the associated technology, a brief discussion of these topics is helpful.  Halftoning techniques allow computers to present many shades and color tones with a limited number of pixel colors.  One method of generating a digital halftoned image is called thresholding, which uses an array called a “mask” that is populated with predetermined threshold numbers.  The mask is laid over the image represented by pixel values.  The district court ruled that the following claim 1 in RCT’s ‘310 patent was an abstract idea:

1.  A method for the halftoning of gray scale images by utilizing a pixel-by-pixel comparison of the image against a blue noise mask in which the blue noise mask is comprised of: a random nondeterministic, non-white noise single valued function which is designed to produce visually pleasing dot profiles when thresholded at any level of said gray scale images.

Additionally, the district court held that claim 11 of RCT’s second patent, the ‘228 patent, was an abstract idea:

11. A method for the halftoning of color images, comprising the steps of: utilizing, in turn, a pixel by-pixel comparison of each of a plurality of color planes of said color image against a blue noise mask in which the blue noise mask is comprised of: a random non-deterministic, non-white noise single valued function which is designed to provide visually pleasing dot profiles when thresholded at any level of said color images, wherein a plurality of blue noise masks are separately utilized to perform said pixel-by-pixel comparison and in which at least one of said blue noise masks is independent and uncorrelated with the other blue noise masks.

After the district court ruled on various summary judgment motions, parties stipulated to the invalidity of the claims, filed a written stipulation dismissing the suit on the merits pursuant to the Federal Rules of Civil Procedure Rule 41(a)(1)(A)(ii), and the lower court subsequently granted the stipulation of dismissal.

The Federal Circuit reviews a grant of summary judgment without deference, Liebel-Flarsheim Co. v. Medrad, Inc., 481 F.3d 1371, 1377 (Fed. Cir. 2007), reviews questions about patent-eligible subject matter under 35 U.S.C. § 101 without deference, In re Ferguson, 558 F.3d 1359, 1363 (Fed. Cir. 2009), and reviews without deference whether a patent is entitled to an earlier priority date. Go Med. Indus. Pty, Ltd. v. Inmed Corp., 471 F.3d 1264, 1270 (Fed. Cir. 2006).  The priority date issue involved certain claims in other patents asserted by RCT against Microsoft with an analysis of RCT’s earlier patent and later-filed continuation-in-part (C-I-P) patents (not the subject of this blog article).

The Federal Circuit held that the district court erred in finding that the above-quoted claims of the ‘310 and ‘228 patent were non-patentable abstract ideas.  Section 101 of the Patent Statute defines patentable subject matter as follows:

“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title.”  35 U.S.C. § 101.

The importance of the word “any” in Section 101 was recently emphasized by the U.S. Supreme Court in  Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010).  In the RCT case, the Federal Circuit citing Bilski stated that “[t]he Supreme Court [has] recently reemphasized the significance of these broad statutory categories with the broadening double [reference to] ‘any’ exhortation” in Section 101.  See  Research Corp. Tech., Inc. v. Microsoft Corp., slip opn. 12.  The Supreme Court in Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980) held that “Congress plainly contemplated that the patent laws would be given wide scope.”

More importantly, the Federal Circuit found that the “section 101 patent-eligibility inquiry is only a threshold test.”  Research Corp., slip opn. 13.   The Federal Circuit then ruled that RCT’s invention in claims 1 and 11 present functional and palpable applications in the field of computer technology.

“In this case, the subject matter is a ‘process’ for rendering a halftone image. As a process, the subject matter qualifies under both the categorical language of section 101 and the process definition in section 100.”  Id. at 14.

“These inventions address ‘a need in the art for a method of and apparatus for the halftone rendering of gray scale images in which a digital data processor is utilized in a simple and precise manner to accomplish the halftone rendering’… Indeed, this court notes that inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act…. The Supreme Court has already made abundantly clear that inventions incorporating and relying upon even ‘a well known mathematical equation’ do not lose eligibility because ‘several steps of the process [use that] mathematical equation.’” Slip opn. 15, citing  Diehr, 450 U.S. at 185.

However, in a cautionary note to patent practitioners, the Federal Circuit highlighted the importance of “enablement” language in the patent claim and “particularly describing” the claimed invention as required by 35 U.S.C. § 112.

“In the context of the statute, this court notes that an invention which is not so manifestly abstract as to override the statutory language of section 101 may nonetheless lack sufficient concrete disclosure to warrant a patent. In section 112, the Patent Act provides powerful tools to weed out claims that may present a vague or indefinite disclosure of the invention. Thus, a patent that presents a process sufficient to pass the coarse eligibility filter [of § 101] may nonetheless be invalid as indefinite because the invention would ‘not provide sufficient particularity and clarity to inform skilled artisans of the bounds of the claim.’” slip opn. 16, citing Star Scientific., Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1371 (Fed. Cir. 2008).

In conclusion, the analytic tools to sort out “abstract ideas,” which are not patentable subject matter from “patent eligible” subject matter, are sometimes difficult to identify.

Interim USPTO Examination Instructions For Business Method Patents

Tuesday, September 28th, 2010

Interim USPTO Examination Instructions For Evaluating Subject Matter Eligibility Under 35 U.S.C. 101 in Light of the Supreme Court Bilski Decision.

The Patent and Trademark Office (“USPTO”) in August 2007 released examination instructions (“Guidelines”) (available here) for patent examiners to implement the U.S. Supreme Court’s decision in Bilski v. Kappos, 130 S. Ct. 3218, 177 L. Ed. 2d 792 (2010) (available here). The Guidelines state there are two criteria for determining subject matter eligibility under the Patent Statute 35 U.S.C. 101. The statute permits an applicant to obtain a patent on “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Id. The Guidelines state that the claimed invention (1) must be directed to one of the four statutory 101 categories, and (2) must not be wholly directed to subject matter encompassing a judicially recognized exception. The claimed invention is defined in the patent application claims at the end of the patent specification.

Many commentators recognize that the Bilski Supreme Court case did not provide any guidance to what is and what is not patentable under Section 101 (holding that the Bilski claims covered an abstract idea without explaining what are the parameters of an abstract idea). The Guidelines attempt to fill in the blanks on this issue. The Guidelines state that Section 101 is satisfied by a:

i. Process which is an act, or a series of acts or steps that are tied to a particular machine or apparatus or transform a particular article into a different state or thing.
ii. Machine which is a concrete thing, consisting of parts, or of certain devices and combination of devices. This includes every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result.
iii. Manufacture which is an article produced from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand labor or by machinery.
iv. Composition of matter which includes all compositions of two or more substances and all composite articles, whether they be the results of chemical union, or of mechanical mixture, or whether they be gases, fluids, powders or solids.

However, certain claims are not directed to one of the statutory 101 categories. Examples of such claims are:

i. Transitory forms of signal transmission (for example, a propagating electrical or electromagnetic signal per se).
ii. A naturally occurring organism.
iii. A human per se.
iv. A legal contractual agreement between two parties.
v. A game defined as a set of rules.
vi. A computer program per se.
vii. A company.

A claim that covers both statutory and non-statutory embodiments (under the broadest interpretation of the claimed invention when read in light of the specification) is not eligible for patent protection and should be rejected under Section 101. As for process claims, when a machine or article is inherently recited in the process claims, but not explicitly recited or required by the claimed method, and the record of the prosecution as a whole does not make clear that the method involves a particular machine or a particular article, “the examiner should identify the inherent machine on the record [and] the record should also be clear as to which step (or steps) invokes the machine or article.” This guidance effectively requires the patent applicant to identify on the record in an amendment or a response to an examiner’s Office Action rejection what is the “machine or transformation” present in the claimed process.

“When a judicially recognized exception is present in the claim, [the examiner should] determine if the claim recites structural limitations for it to qualify as a practical application of the judicial exception. A manmade tangible embodiment with a real world use is evidence of a practical application.” If the claim covers substantially all practical uses of the judicial exception, the patent claim preempts the topic and is not patentable under Section 101. Judicially recognized exceptions to Section 101 are: abstract ideas, mental processes, laws of nature and natural phenomena, and are sometimes further described as physical phenomena, scientific principles, systems that depend on human intelligence alone, disembodied concepts, and disembodied mathematical algorithms and formulas. Per the USPTO, “the exceptions reflect the courts’ view that the basic tools of scientific and technological work are not patentable.”

The USPTO also adopts the machine-or-transformation test (M or T test) proposed by the Federal Circuit Court of Appeals case in Bilski (available  here). “A process claim, to be statutory under § 101, must pass the machine-or-transformation test (M or T test), which ensures that the process is limited to a particular practical application.” To pass the M or T test, the claimed process must: “(1) be tied to a particular machine or apparatus (machine implemented); or (2) particularly transform a particular article to a different state or thing.” The Guidelines include flow charts to assist the patent examiners.

Copyright Protects Original Selection, Arrangement and Coordination of a Factual Database Compilation

Monday, September 20th, 2010

In Buc International Corp. v. International Yacht Council Limited, 489 F.3d 1129 (11th Cir. 2007)(available here), the 11th Circuit Court of Appeals ruled on the scope of copyright protection for a database comprised of yacht listings. Plaintiff BUC compiled a yacht listing service similar to the MLS real estate listing services for home sales. The BUC contract established a license providing that the user-licensee must “not use, sell, distribute, display, or otherwise transfer, any information obtained from the BUC Licensed System to others for any purpose.” Further, the contract provided for the protection of the factual compilation – specifically, the selection, order, and arrangement of information about yachts listed for sale. Defendant International Yacht Council (“IYC”) built a competing yacht listing database after BUC obtained copyright registration certificates.

Interestingly, BUC caught IYC by embedding markers in the BUC yacht listings and, after searching IYC’s site, BUC discovered that IYC’s yacht-MLS presented over 4,400 listings which replicated BUC’s listings.

After losing in the trial court, IYC presented two major points on appeal. First, IYC argued that the selection of data (“headings” or field identifier labels for yacht-boat features), the arrangement of such data and the coordination of the data was not original to BUC. Second, IYC argued that the jury instructions were erroneous in that BUC should be required to prove “identicality” of the two databases, rather than meet the less stringent standard of “substantial similarity” which is the common standard for copyright infringement. The 11th Circuit Court of Appeals disagreed with defendant IYC on both grounds.

In a footnote, the 11th Circuit outlined the various theories of copyright liability, direct, vicarious and contributory, as follows:

Direct copyright infringement arises upon violation of the exclusive rights of a copyright holder under 17 U.S.C. § 501. Even though the Copyright Act does not specifically provide for secondary liability, vicarious and contributory copyright infringement are well established principles derived from common law. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930–31, 125 S. Ct. 2764, 2776, 162 L. Ed. 2d 781 (2005). Contributory copyright infringement refers to the intentional inducement, causation or material contribution to another’s infringing conduct. Greenberg v. Nat’l Geographic Soc., 244 F.3d 1267, 1271 n.6 (11th Cir. 2001), abrogated on other grounds by, New York Times Co., Inc. v.
Tasini, 533 U.S. 483, 121 S. Ct. 2381, 150 L. Ed. 2d 500 (2001), as recognized by, Greenberg v. Nat’l Geographic Soc., 488 F.3d 1331 (11th Cir. 2007). Liability for vicarious copyright infringement arises “when the defendant profits directly from the infringement and has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement.” Grokster, 545 U.S. at 931 n.9.
Id. at 1138, Ftnt 19.

As for copyright coverage of databases, the 11th Circuit “held that a compiler’s selection, arrangement and coordination, if original, are the only protectable elements of a factual compilation.” Id. at 1141 (quoting BellSouth Adver. & Publ’g Corp. v. Donnelley Info. Publ’g, Inc., 999 F.2d 1436, 1440 (11th Cir. 1993)(en banc) and citing Feist, 499 U.S. at 348, 111 S. Ct. at 1289)). As for selection of data, the appeals court distinguished between “a creatively original selection of facts” and “the creative means used to discover those facts.” Bell South, 999 F. 2d at 1441. “While the former is protected as an original work of authorship, the latter, i.e., methods used to discover facts and/or collect data, are not. … [and] ‘an alphabetized list of business types, with individual businesses listed in alphabetical order under the applicable headings,’ … [is] not an original coordination and arrangement of facts.” BUC, 489 F. 3d at 1141, quoting Bell South, 999 F. 2d at 1442.

After reviewing the trial evidence, the 11th Circuit found that prior to BUC’s yacht-MLS, there was no standard headers or field identifiers for MLS yacht listings. Also, IYC was not foreclosed from using industry terms like “galley” or “hull.” IYC argued, unsuccessfully, that the idea-merger doctrine precludes copyright protection over BUC’s selection of yacht headers-field identifiers because BUC had expressed the idea of organizing a vessel listing by using standard industry terms. However, the Appeals Court found that many brokers used different headings and organized information in different formats for their vessel listings.

As for the jury instruction, “identicality” vs. “substantial similarity,” the 11th Circuit did not extend the holding in the computer program case of MiTek Holdings, Inc. v. Arce Eng’g Co., 89 F.3d 1548, 1558 n.24 (11th Cir. 1996). See also, Apple Computer v. Microsoft, 35 F.3d 1435 (9th Cir. 1994). In Mitek, the 11th Circuit held that “virtual identicality:”

applies to “claims of compilation copyright infringement of nonliteral elements of a computer program.” MiTek involved a copyright infringement claim for the “selection, coordination, and arrangement embodied in [a computer] program and its user interfaces.” We recognized that “a user interface, [such as] a screen display (itself an audiovisual work), may be entitled to copyright protection as a compilation.” Ultimately, we affirmed the district court’s decision that “virtual identicality” between the two implicated programs was lacking because, in part, one program “depict[ed] its commands as icons in the Windows environment” while the other program displayed them as words. We note that MiTek, while not elaborating on the basis for its adoption of the “virtual identicality” standard, did make clear that its application of the standard was specific to the type of compilation copyright claim in that case, i.e., “claims of compilation copyright infringement of nonliteral elements of a computer program.”
Buc at 1149-50 (citing Mitek at 1558 – 59, and quoting MiTek Holdings, Inc. v. Arce Eng’g Co., 864 F. Supp. 1568, 1584 (S. D. Fla. 1994)).

The 11th Circuit said that BUC was not claiming infringement in the selection or arrangement embodied in a screen display or some other nonliteral element of its computer program. Nor was BUC contending that IYC had copied the overall appearance of the BUC program as viewed on a computer screen. BUC presented the jury with claims for the infringement of the selection, order and arrangement of a factual compilation, not the nonliteral elements of a computer program. “Substantial similarity” was, therefore, the appropriate standard.

BUC also confirms that facts are not subject to copyright protection, only that selection, arrangement and coordination, if original, are protectable elements of a factual compilation. BUC at 1141; see also BellSouth, 999 F.2d at 1440 and Feist, 499 U.S. at 348, 111 S. Ct. at 1289.

In re Bilski in the Supreme Court – A First Quick Glance

Thursday, July 15th, 2010

On June 28, 2010, the U.S. Supreme Court issued its ruling in the biggest patent case in recent years, Bilski v Kappos. (See  http://www.supremecourt.gov/opinions/09pdf/08-964.pdf).  The case related to the patentability of business methods.  The Supreme Court’s decision encompassed three different opinions with shifting coalitions of Justices joining different aspects of the primary opinion of the Court.  Justice Kennedy delivered the opinion of the Court, except for parts II–B-2 and II-C-2. Justices Roberts, Thomas and Alito agreed with Kennedy’s opinion but Justice Scalia only partly agreed with Kennedy, joining the plurality opinion except for parts II-B-2 and II-C-2. Justice Stevens filed a concurring opinion which was followed by Justices Ginsburg, Breyer, and Sotomayor. Justice Breyer filed his own opinion, concurring in the Court’s judgment, and Scalia joined Breyer only for Part II of Breyer’s opinion.  It is fair to state that the Court’s thoughts on this topic are not well settled and that future guidance will be needed.

Briefly, the Court affirmed the Federal Circuit Court of Appeals decision (see http://www.cafc.uscourts.gov/opinions/07-1130.pdf) which held that the Bilski patent claims were not patentable subject matter.  Five members of the Court agreed with the following holding by Justice Kennedy:

“Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas.” slip opn. 13.

Further study is needed to understand the full scope of the Bilski opinion.  However for the time being, it is clear that the following Bilski business method software patent claims are NOT patentable subject matter:

“[M]anaging the consumption risk costs of a commodity sold by a commodity provider at a fixed price, [which consists of] (a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity ata fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumers; (b) identifying market participants for said commodity having a counter-risk position to said consumers; and (c) initiating a series of transactions between said commodity provider and said market participants at asecond fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.” Id., J. Stevens concurring slip opn. 3.

A more through analysis will follow.

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