the patentability of business methods: the continuing search … · · 2015-10-12the...
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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
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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2015 USPTO Alice Guidance - Examples
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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How have the courts interpreted Alice? (cont’d)
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.
• Held patent claims are directed
to an abstract idea.
• The computer functionality only
amounted to “routine,
conventional activity.”
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How have the courts interpreted Alice? (cont’d)
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.
• Held patent claims are directed
to an abstract idea.
• 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.
• Held patent claims are directed
to an abstract idea – price
optimization.
• Describe fundamental economic
concept of offer-based price
optimization using generic
computer functions.
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How have the courts interpreted Alice? (cont’d)
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.
• Held patent claims are directed
to an abstract idea.
• 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.
• Held patent claims are directed
to an abstract idea.
• 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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Yet Some Claims Have Survived… (cont’d)
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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Yet Some Claims Have Survived… (cont’d)
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
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
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