Intellectual Property Law Firm Florida

Posts Tagged ‘Method Patent’

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.

Financial Patent Method Claims Held Invalid As Covering Only Abstract Idea

Thursday, April 21st, 2011

The U.S. District Court for the District of Columbia invalidated patent claims directed to a method of exchanging financial obligations between parties in CLS Bank Int’l v. Alice Corp. Pty, Ltd., Case No. 07-974 (D.D.C. March 9, 2011) (available here).  In summary, the District Court held that all of the claims at issue were directed to unpatentable subject matter under 35 U.S.C. § 101 because (a) the patent claims at issue did not involve any transformation of data and (b) the claims were not tied to a particular machine or computer.  The patent specification described computer systems and methods employing the use of a computer with specific programming, but the claims at issue were independent of the broader trading platform disclosed in the specification.  This trial court decision shows the uncertainties of litigation and the application of the “abstract idea” test under Section 101 of the Patent Statute.

As for the technology, the patents owned by Alice Corp. include computer aided processes and methods directed to a method of exchanging financial obligations between parties.  The computer system claims, also invalidated by the trial court, cover data processing systems which implement steps for exchanging obligations.  Computer product claims (non-transitory software stored in computer readable media) enable a computer to send a transaction to the system which further enables a user to view the exchange of financial obligations performed by the computer system.  The broad based disclosure of Alice Corp’s prime parent patent, the ‘479 patent, is directed to a complex trading platform that facilitates a wide array of parties to participate, via the patented computer-based exchange, and enter into contracts to hedge against future risks of various types. See Alice Corp’s ‘479 patent (available here).  The patents at issue include: U.S. Patent No. 5,970,479 (“’479 Patent”); U.S. Patent No. 6,912,510 (“’510 Patent”); U.S. Patent No. 7,149,720 (“’720 Patent”); and U.S. Patent No. 7,725,375 (“’375 Patent”).  One key method patent claim from the ‘479 Patent is reproduced below.

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.

Claim 33, U.S. Patent No. 5,970,479.

Dependent claim 34 provides:

34. The method as in claim 33, wherein the end-of-day instructions represent credits and debits netted throughout the day for each party in respect of all the transactions of that day.Claim 34, ‘479 Patent.

Readers of this blog may note that an argument can be made that the reference to “credits and debits being irrevocable, time invariant obligations placed on the exchange institutions” seems to indicate that data representing money has changed hands.  The contrary position, adapted by the U.S. District Court is that “instructing” the exchange of credits and debits (element d) is not the same as the exchange of a financial obligation between the parties.

As a representative example of a computer system claim, claim 1 of the ’720 Patent is directed to: 1. A data processing system to enable the exchange of an obligation between parties, the system comprising: data storage unit having stored therein information about …(a) computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust …

Claim 39 of the ’375 Patent is directed to:
39. A computer program product comprising a computer readable storage medium having computer readable program code embodied in the medium for use by a party to exchange an obligation between a first party and a second party, the computer program product comprising: program code for causing a computer to send a transaction … program code for causing a computer to allow viewing of information relating to processing, by a supervisory institution, of said exchange obligation, wherein said processing includes (1) maintaining information about a first account for the first party …(2) electronically adjusting said first account and said third account … and  (3) generating an instruction to said first exchange institution and/or said second exchange institution to adjust …

Generally speaking, the patent portfolio is directed to a complex trading platform that facilitates a wide array of parties to come together and enter into contracts to hedge against future risks of all sorts.

CLS attacked the validity of Alice Corp’s patents in this declaratory judgment action under Section 101.  The Patent Statute provides: “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 therefor.”  The District Court relied upon two recent decisions on this topic, In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc) (“Bilski I”) and the subsequent Supreme Court decision, Bilski v. Kappos, 130 S. Ct. 3218 (2010) (“Bilski II”), and ultimately held that all of the claims at issue were directed to unpatentable subject matter.  The Court said:

“The Supreme Court has enunciated three exceptions to the Patent Act’s broad subject matter eligibility framework: ‘laws of nature, physical phenomena, and abstract ideas.’ Bilski II, 130 S. Ct. at 3225 (quoting Chakrabarty, 447 U.S. at 309). Thus, even if an invention appears to nominally claim subject matter that would be statutorily covered by the Patent Act, it will be denied patent protection if it falls into one of the ‘fundamental principles’ exceptions, i.e. a law of nature, natural phenomena, and/or an abstract idea, which have been expounded by the  Supreme Court in Gottschalk v. Benson, 409 U.S. 63 (1972), Parker v. Flook, 437 U.S. 584 (1978), Diehr, 450 U.S. 175, and most recently Bilski II, 130 S. Ct. 3218. An underlying reason for these exceptions is that ‘[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.’ Benson, 409 U.S. at 67; accord Diehr, 450 U.S. at 185 (‘A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.’) (citation omitted). Although the ‘fundamental principles’ exceptions are not statutory, the Supreme Court has found them to be consistent with the requirement that a patentable invention be ‘new and useful.’ Bilski II, 130 S. Ct. at 3225 (citing 35 U.S.C. § 101). The Supreme Court recently emphasized that a lower court should be attentive to the ‘guideposts’ of Benson, Flook, and Diehr when considering these exceptions to subject matter patentability. Id. at 3231.”  Slip opinion pg. 14 (herein “P. 14″).

The trial court recognized that “There is no clear definition of what constitutes an abstract idea … [and] [t]he Federal Circuit declined to ‘presume to define ‘abstract’ beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.’” P. 17-18, quoting Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010); see also Bilski II, 130 S. Ct. at 3238.

With this degree of uncertainty, while citing many cases and administrative decisions referring to the abstract idea test, the District Court found that:

(a) the process claims did not pass the “machine-or-transformation” (“MOT”), wherein a process is patentable under Section 101 if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Bilski I, 545 F.3d at 954.  The process claims must impose meaningful limits on the claim’s scope to impart patent-eligibility and the claimed use of the machine or transformation of data must not merely be an insignificant extra-solution activity. Id. at 961–62. See P. 20.

(b) legal obligations were not enough to qualify as transformations under the Patent Act. Bilski I, 545 F.3d at 962, notwithstanding Alice Corp’s arguments that the electronic transformation of data caused by the methods’ electronic adjustment of accounts satisfies the transformation prong of the test.

(c) the nominal recitation of a general-purpose computer in a method claim does not tie the claim to a particular machine or apparatus or save the claim from being found unpatentable under § 101. See, e.g., Fuzzysharp Techs., Inc. v. 3D Labs Inc., Ltd., No. 07-5948, 2009 U.S. Dist. LEXIS 115493, *12 (N.D. Cal. Dec. 11, 2009).

(d) the system and computer readable medium claims are invalid because “the system claims in the ’720 Patent would preempt the use of the abstract concept of employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk on any computer, which is, as a practical matter, how these processes are likely to be applied.”  P. 51.

This decision and the others cited by the District Court highlight the importance of finding  a clear annunciation of a data transformation in financial patent claims.

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