• Litigators’ Perspective on the Patent Eligibility of Software: Courts Continue to Refine the Analysis in the Wake of Key Supreme Court Decision
  • November 23, 2016 | Authors: Brandon Scruggs; Lisa M. Tittemore
  • Law Firm: Sunstein Kann Murphy & Timbers LLP - Boston Office
  • Recent precedential opinions from the Federal Circuit Court of Appeals - one of which represented a victory for our client Iatric Systems[1] - allow some insight regarding the boundary between what is and what is not patent-eligible subject matter in the field of computers and computer software. In the two cases, FairWarning IP, LLC v. Iatric Systems, Inc. and McRO, Inc. v. Bandai Namco Games America Inc., the Federal Circuit interpreted the Supreme Court’s controversial 2014 decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, which we have previously discussed.

    In Alice, the Supreme Court announced the applicability of a two-step framework for determining patent eligibility under Section 101 of the Patent Act in the context of computer-related patents:
    • First, courts must determine whether the patent claims at issue are “directed to” a patent-ineligible concept, such as an abstract idea.
    • Second, if the claims are directed to patent-ineligible subject matter, courts must ask whether any of the additional limitations in the patent claims transform the claim into a patent-eligible application of a patent-ineligible concept.
    Using that framework, which the Supreme Court had earlier articulated in the biotechnology context, the court in Alice invalidated patents that covered mitigating settlement risk in financial transactions using a computer system. The court cautioned that patent eligibility requires more of a patent claim than simply stating an abstract idea and saying “apply it.” However, the court also warned against reading its decision broadly, “lest it swallow all of patent law,” acknowledging that at some level all inventions rest upon laws of nature, natural phenomena, or abstract ideas. Although simply implementing a process on a computer does not impart patent eligibility, patents that “improve an existing technological process” may be patent-eligible.

    The analysis in Alice dramatically altered the approach that courts had applied in evaluating patent-eligibility for computer-related inventions. Trial judges and the Federal Circuit alike have struggled to apply the Alice framework without slipping into an impenetrably vague “I know it when I see it” standard. The Federal Circuit’s September and October 2016 decisions in McRO and Fairwarning IP provide useful guideposts.

    McRO involved patent claims that describe a method for automatically producing lip synchronization and facial expressions in animated characters, a process which was previously done by human animators, using a computer, to manipulate the character model using an intuitive process. The invention automated the 3D animator’s task, using rules with specific characteristics that require several variables to interact in a certain way. The federal court in Los Angeles granted the defendant’s motion to throw out the case, finding the asserted claims “too broad” and unpatentable.

    The Federal Circuit reversed and sent the case back to the lower court. The appeals court panel felt that the claimed rules sufficiently focused on the technological improvement realized by the invention rather than a result or effect (i.e., an abstract idea) that relied on generic computer processes and machinery. The automation went beyond “merely organizing [existing] information.” Instead, the rules rendered information into a specific format that created a sequence of synchronized, animated characters. Because the claims were directed to “limited rules in a process specifically designed to achieve an improved technological result,” the claim was not “directed to” ineligible subject matter. Accordingly, the court determined that it was unnecessary to reach step 2 of Alice.

    In FairWarning IP, the patent disclosed ways to detect fraud and misuse of protected health information. A federal judge in Florida invalidated the patent, granting our firm’s motion to dismiss. The judge found that FairWarning’s patent claims merely implemented in a computer environment the age-old practice of analyzing records of human activity to detect suspicious behavior.

    The Federal Circuit affirmed the dismissal, agreeing that the rules in FairWarning’s claims were generic database queries that asked the same questions that humans have long asked to detect fraud. Thus, the patent in FairWarning merely implemented an old practice in the computer environment.

    The Federal Circuit first determined that, under step 1 of Alice, the claims of the patent were “directed to an abstract idea,” namely, the concept of analyzing records of human activity to detect suspicious behavior. While the patent claims in FairWarning included possible rules to analyze data (e.g., related to accessing data in excess of a specific volume, accessing data during a predetermined time period, or access to data by a specific user), the court distinguished the “rules” from those in McRO because the claims in McRO “were not directed to an abstract idea, but instead were directed to ‘a specific asserted improvement in computer animation, i.e. the automatic use of rules of a particular type.... The claimed rules in McRO transformed a traditionally subjective process performed by humans into a mathematically automated process.”

    In McRO, it was the incorporation of the rules that improved the technological process, not the use of the computer per se. The “rules” set forth in the FairWarning patent claims, by contrast, merely implemented an existing practice in the computer environment and did not improve a technological process.

    The Federal Circuit also explained that the patent claims in FairWarning were not like the claims in its May 2016 decision in Enfish, LLC v. Microsoft Corp., where the patent required a self-referential table for a computer database, which functioned differently from conventional database structures. The court found that the table is a “specific type of data structure” which provided an improvement over prior methods because it allowed faster searching of data, more effective data storage, and more flexibility in configuring databases.

    The court in FairWarning explained that in Enfish the claims were patent-eligible under Section 101 because the invention improved the functioning of the computer itself, rather than just taking some abstract concept and implementing it on a computer. The court explained that while the claimed system and method in FairWarning “certainly purport to accelerate the process of analyzing audit log data, the speed increase comes from the capabilities of a general-purpose computer, rather than the patented method itself.” Thus, the focus of the claims was not on improvement of the computer as a tool.

    Under step 2 of Alice, the court did not find anything additional to transform FairWarning’s patent claims into a patent-eligible application. The reference to implementation in a “computer environment” and “generic computer elements like a microprocessor or user interface” was insufficient. The court explained that the “practices of collecting, analyzing, and displaying data, with nothing more, are practices ‘whose implicit exclusion from § 101 undergirds the information-based category of abstract ideas.’”

    These cases show the Federal Circuit incrementally defining the boundary between eligibility and ineligibility under Section 101. This process will continue, in both the computer and non-computer contexts. The possibility of further Supreme Court intervention also looms, although the Supreme Court has declined several opportunities to clarify its Section 101 interpretation since Alice. The Federal Circuit is left to bring order to the turmoil in Section 101 litigation by accepting the core of Alice while narrowing its interpretation a bit at the edges.

    [1] We represented Iatric at both the district court and appellate levels.