The Patentability of Business Methods: The Continuing Search … · · 2015-10-12The...

The Patentability of Business Methods: The Continuing Search for a Clear Rule

Michelle M. Umberger, Perkins Coie

LLP, Office Managing Partner, Madison

Tiffany P. Cunningham, Perkins Coie

LLP, Partner, Chicago

Steve F. Borsand, EVP, Intellectual

Property, Trading Technologies

International, Inc.

PLI Seminar: Patent Litigation 2015

October 8, 2015

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Introduction

• Many expected the U.S. Supreme

Court’s 2014 Alice Corp. decision

to provide clarity on defining

business method patentability.

• Despite those expectations, the

full scope of Alice remains unclear.

• There are still a number of

unanswered questions regarding

where courts are drawing the line

between patentable and

unpatentable subject matter.

If there’s one thing that’s certain in business, it’s uncertainty.

Stephen Covey

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Agenda

• Business Method Patents 101

• The History of Business Method Patents & the Alice Decision

• What are the big picture effects of Alice?

• PTO’s New Guidelines

• Impact on Litigation

• How have the courts interpreted Alice?

• Recent Federal Circuit & District Court Decisions

• Conclusion

• Questions

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Business Method Patents 101

• Business method patents formalize and codify new

methods of doing business, which inventors can sell

or license to market intermediaries or entrepreneurs.

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Business Method Patents & The Patent Act

Section 101 of the Patent Act identifies four

independent categories of inventions that are

eligible for patent protection:

• Processes

• Machines

• Manufactures

• Compositions of matter

35 U.S.C. § 101.

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Exceptions to Section 101

The Supreme Court has created three specific exceptions to section 101’s broad patent-eligibility:

• laws of nature

• physical phenomena

• abstract ideas

Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).

• Although these exceptions are not statutorily required, they are consistent with language in section 101 that a patentable process must be “new and useful.” Bilski v. Kappos, 561 U.S. 593, 601-02 (2010).

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The Alice Decision

Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014)

• Invention: Computerized scheme for mitigating settlement risk or the risk that only one party to an agreed upon financial exchange would satisfy its obligation.

• Holding: Claims to the abstract idea of intermediated settlement are unpatentable; generic computer implementation does not transform the claims into a patentable invention.

• Applied two-step test for determining patent eligibility to abstract ideas:

• (1) determine whether the claims at issue are directed to a patent-ineligible concept, and if so…

• (2) examine the elements of the claim to determine whether it contains an inventive concept sufficient to transform the claimed abstract idea into a patent-eligible application.

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What are the big picture effects of Alice?

New trends in the patent world

PTO’s Stance

• PTO modified guidelines

by creating a set of

standards for patent

review in light of Alice.

• As part of its guidance,

the PTO provided a

flowchart for determining

patentable subject

matter, as well as

examples of patentable

claims.

Effect on Filing of

Patent Suits

• In 2014, the number of

filed patent suits

decreased by ~13%.

• Even before Alice,

filings were down by

more than 8% in 2014.

• Note the uptick in

patent litigation in 2015

with projections to

exceed 6,000 filings.

Effect on

Parties

• Ability to assert

invalidity early on in

litigation has also

affected strategy for

defendants and

plaintiffs.

• Companies consider

Alice motions as part

of their overall

resolution strategy.

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2014 USPTO Alice Guidance - Examples

Patentability

Flow Chart

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Form Language

7.05 Rejection, 35 U.S.C. 101, -Heading Only- (Utility, Non-Statutory, Inoperative) [REVISED]

Claim [1] rejected under 35 U.S.C. 101 because

7.05.015 Rejection, 35 U.S.C. 101, -Non-Statutory (Directed to a Judicial Exception without

Significantly More) [NEW]

the claimed invention is directed to a judicial exception (i.e., a law of nature, a natural

phenomenon, or an abstract idea) without significantly more. Claims(s) [1] is/are directed to

[2]. The claim(s) does/do not include additional elements that are sufficient to amount to

significantly more than the judicial exception because [3].

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After receiving over 60+ comments on its 2014 Interim Guidance on Subject

Matter Eligibility, the USPTO updated its Alice guidance in July 2015,

addressing 6 common issues:

• Requests for additional examples of § 101 exceptions

• Further explanation of their markedly different characteristics (“MDC”) analysis

• Further information regarding how examiners identify abstract ideas

• Discussion of the prima facie case and the role of evidence in eligibility rejections

• Information regarding application of the 2014 Interim Eligibility Guidance in the

corps

• Explanation of the role of preemption in the eligibility analysis

*The USPTO is accepting comments on this update until October 28, 2015.*

July 2015 Update: Subject Matter Eligibility

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How have the courts interpreted Alice?

Digitech Image Techs., LLC v. Elecs. for Imaging, Inc.,

758 F.3d 1344 (Fed. Cir. 2014)

• Claims to generation and use of improved device

profile, including both spatial and color properties of

an imaging device.

• The method described a process of organizing

information via “mathematical correlations” and is

not tied to a structure or machine.

• Ineligible for patent protection due to abstractness.

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How have the courts interpreted Alice? (cont’d)

Planet Bingo, LLC v. VKGS LLC, 576 Fed. Appx. 1005

(Fed. Cir. 2014)

• Computer-aided systems and methods of managing a bingo game.

• Invention sought to decrease the risk of tampering during the

purchase of bingo tickets.

• Claims are directed to abstract ideas.

• Claims lacked an “inventive concept” sufficient to render them

patent-eligible.

• Only recited conventional computer functions.

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buySAFE, Inc. v. Google,

Inc., 765 F.3d 1350 (Fed.

Cir. 2014)

Invention: Claims to computerized

guarantees of on-line commercial

transactions.

• Held patent claims are directed

to an abstract idea.

• The computer functionality was

generic and did not add an

inventive concept.

Ultramercial, Inc. v. Hulu,

LLC, 772 F.3d 709 (Fed. Cir.

2014)

Invention: Over the Internet, the

consumer receives free,

copyrighted media products in

exchange for viewing ads.



• The computer functionality only

amounted to “routine,

conventional activity.”

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Content Extraction &

Transmission LLC v. Wells

Fargo Bank, Nat’l Ass’n, 776

F.3d 1343 (Fed. Cir. 2014)

Invention: Claims to extracting

information from scanned data and

storing it in memory.



• Additional limitations recite well-

known, routine and

conventional functions of

scanners and computers.

OIP Techs., Inc. v. Amazon.com,

Inc., 788 F.3d 1359 (Fed. Cir. 2015)

Invention: Claims to price

optimization method in e-commerce.


to an abstract idea – price

optimization.

• Describe fundamental economic

concept of offer-based price

optimization using generic

computer functions.

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Internet Patents Corp. v. Active

Network, Inc., 790 F.3d 1343

(Fed. Cir. 2015)

Invention: Claims to retaining

information lost in the navigation of

online forms.



• Dependent claims recited

generic data collection and

technological environment and

did not add an inventive

concept.

Versata Dev. Grp., Inc. v. SAP

Am., Inc., 793 F.3d 1306 (Fed. Cir.

2015)

Invention: Method for determining a

price of product(s) offered to a

purchasing organization using

hierarchical groupings.



• The computer functionality is

purely conventional (e.g.,

storing, retrieving and sorting

pricing information).

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Yet Some Claims Have Survived…

DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed.

Cir. 2014)

Invention: Systems and methods of generating a composite web page

that combines certain visual elements of a host website with content of a

third-party merchant.

Holding: Claims are patent eligible.

• Patent claims directed to an abstract idea, but the court found the claims

distinguishable from those previously held unpatentable.

• Claims do not broadly and generically claim use of the Internet to perform

an abstract business practice.

• Claims resolved issues specific to the world of computer networks.

• Claims do not preempt every application of the idea of increasing sales by

making two web pages look the same.

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Yet Some Claims Have Survived… (cont’d)

District Court Cases

California Inst. of Tech. v. Hughes Commc’ns Inc., 59 F. Supp.

3d 974 (C.D. Cal. 2014)

Invention: Method and apparatus claims directed to a form of error

correction called an irregular repeat and accumulate code.

Holding: Asserted claims are patentable.

• Claims directed to abstract ideas because directed to the fundamental

concepts of encoding and decoding data for error correction.

• Patent on these concepts, without more, could preempt entire field of error

correction.

• Claims contained inventive concepts tied to a specific error correction

process, such as the repetition of bits and use of linear transform

operations.

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Smartflash LLC v. Apple Inc., 2015 WL 661174 (E.D. Tex. 2015)

Invention: Data storage and access systems for paying for and

downloading digital content for data, including audio, video, text, software

and games.

Holding: Claims are patent-eligible.

• Claims recite abstract ideas because their purpose of “conditioning and

controlling access to data based on payment” addressed basic building

blocks of the digital economy.

• Claims do not recite commonplace business method or apply a known

business process to the technological environment of the Internet.

• Claims do not risk preemption of all future inventions relating to

exchanging access to data for payment on the Internet.

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Trading Techs. Int’l, Inc. v. CQG, Inc., 2015 WL 774655 (N.D. Ill.

2015)

Invention: Solve problems of prior graphical user interface devices

(GUIs) in the context of computerized trading, relating to speed, accuracy

and usability.

Holding: Claims are patent-eligible.

• Claims are not directed to the abstract idea of placing an order for a

commodity on an electronic exchange.

• Claims do not preempt every way of placing an order for a commodity on

an electronic exchange (e.g., other systems without infringing claims of

patents-in-suit).

• At least static price axis element of patents-in-suit was an inventive

concept eliminating some problems of prior GUIs relating to speed,

accuracy and usability.

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Conclusion

The question of how courts will interpret whether claimed business

method inventions constitute patentable subject matter is still in flux.

• Be able to compare and

distinguish the invention from

other claims found unpatentable

or patentable.

• Explain how invention improves

upon preexisting process.

• Look for specificity in the invention

and be able to explain how the

invention does not preempt a

field.

• Future decisions will continue to

define the contours of §101 law.

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Contact Information

Tiffany P. Cunningham | Perkins Coie LLP

PARTNER

131 S. Dearborn Street, Suite 1700

Chicago, IL 60603-5559

D. +1.312.324.8423

F. +1.312.324.9423

E. [email protected]

Michelle M. Umberger | Perkins Coie LLP

PARTNER

1 East Main Street, Suite 201

Madison, WI 53703-5118

D. +1.608.663.7460

F. +1.608.663.7499

E. [email protected]

Steve F. Borsand

EVP, Intellectual Property

Trading Technologies International, Inc.

222 South Riverside Plaza, Suite 1100

Chicago, IL 60606

P. +1.312.476.1000

F. +1.312.476.1001

[email protected]

mailto:[email protected]



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Questions

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