On January 20, 2012, the U.S. Court of Appeals for the Federal Circuit (the “CAFC”), in an opinion by Judge Linn, decided Dealertrack, Inc. v. Huber (“Dealertrack II”).  Applying Bilski, the court invalidated claims in Dealertrack’s U.S. Patent No. 7,181,427 (the “’427 Patent”) relating to a computer aided business method as patent ineligible subject matter.  See Dealertrack, Inc. at 38.  On appeal, was the district court’s grant of summary judgment of invalidity for failure to claim patentable subject matter in claim 1 of the ‘427 Patent and its dependent claims.  DealerTrack, Inc. v. Huber, 657 F. Supp. 2d 1152 (C.D. Cal. 2009) (“Dealertrack I”).  Dealertrack II included numerous other interesting appeals and cross-appeals, including whether in 1995 the term communication medium encompassed the Internet.  This post, however, will focus on the patent eligibility question.

Dealertrack’s invention relates to automating the process by which car dealer seek loans on behalf of their customers from one or multiple funding sources.  Id at 3.  “Dealertrack proposed to automate the process through the use of a ‘central processor,’ which receives credit application data from dealers, processes the data to conform to the individual application forms of different banks, forwards the completed applications to banks selected by the dealer, receives answers from the banks, and forwards those answers back to the dealer.”  Id.

Dealertrack sued David L. Huber and Finance Express, LLC and RouteOne (the “Defendants”), claiming that each of their various competing products infringed, among other patents, the ‘427 Patent.  Id. at 4.  “All of the accused products offer automobile dealers loan management services that pass all communications between dealers and lenders through the Internet.”  Id.

Claim 1 of the ‘427 Patent claims:

A computer aided method of managing a credit application, the method comprising the steps of:

[A] receiving credit application data from a remote application entry and display device;

[B] selectively forwarding the credit application data to remote funding source terminal devices;

[C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;

[D] wherein the selectively forwarding the credit application data step further comprises:

[D1] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

[D2] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic, funding] source returns a positive funding decision;

[D3] sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding [sic, funding] sources returns a positive funding decision or until all funding sources have been exhausted; or,

[D4] sending the credit application from a first remote funding source to a second remote finding [sic, funding] source if the first funding source declines to approve the credit application.

Id. at 31–32 (outline provided by CAFC).

The district court concluded that a “general purpose computer that has been programmed in some unspecified manner,” is inadequate to confer patent eligibility as a machine.  Id. at 33 (quoting Dealertrack I).  Upon review, the CAFC affirmed the grant of summary judgment and “conclude[d] that the claims are invalid as being directed to an abstract idea preemptive of a fundamental concept or idea that would foreclose innovation in this area.”  Dealertrack II at 35.  The court simplified the process in Claim 1 of the ‘427 Patent to three steps:

1) “receiving data from one source (step A);”

2) “selectively forwarding the data (step B, performed according to step D);” and

3) “forwarding reply data to the first source (step C).”

Id.  It then concluded that “[t]he claim ‘explain[s] the basic concept’ of processing information through a clearing-house” and “[n]either Dealertrack nor any other entity is entitled to wholly preempt the clearinghouse concept.”  Id. Because “[t]he claims are silent as to how a computer aids the method, the extent to which a computer aids the method, or the significance of a computer to the performance of the method,” the court disagreed that the “the ‘computer-aided’ limitation in the preamble sufficiently limits the claims to an application of the idea.”  Id.  In this way, “‘computer aided’ is no less abstract than the idea of a clearinghouse itself.”  Id. “Simply adding a ‘computer aided’ limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible.”  Id. at 36 (citing SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1333 (Fed. Cir. 2010)).

Finally, the court distinguished Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011) (“Ultrmercial”).  Here ‘computer aided’ is recited “without specifying any level of involvement or detail.”  While in Ultramercial, “the patent claimed a practical application with concrete steps requiring an extensive computer interface.”  In adopting this approach it chose to reject Dealertrack’s argument that the specification describes certain algorithms that make this non-abstract, because “patent eligibility under § 101, one must focus on the claims . . . because a claim may ‘preempt’ only that which the claims encompass.”  Dealertrack II at 36.

In an interesting dissent, Judge Plager argued that the CAFC should not analyze the claim under § 101, which he refers to as “jurisprudential morass” that should be avoided “unless absolutely necessary.”  Dealertrack II at 2 (Plager, J., concurring-in-part and dissenting-in-part).  Rather, the trial court’s decision under § 101 should have been vacated and the case should be remanded for evaluation under § 103 (obviousness).  Id. Perhaps Judge Plager is suggesting that the method of using a computer to aid in the clearinghouse process is obvious.

Clearly, the method claims in question here were only nominally tied to computing apparatus, such that the “invention” was claimed in such a way as to minimize the importance of its apparatus or technical aspects.  Perhaps had those aspects been better incorporated into the claims, the CAFC would have viewed the invention more as a practical, technical one, as opposed to an abstract business method.

[Posting contributed to by Brian Wallenfelt]

Contrary to reports and rumors, sources in the know say this is report is not true.

My thanks to Lucas Hjelle for the following post:

More than 20 months after Apple filed a complaint against HTC, the U.S. International Trade Commission has concluded its investigation by issuing a boycott of certain HTC Android devices.

Though Apple’s original complaint alleged infringement of several patents, ITC’s decision affects only HTC devices that infringe claims 1 and 8 of Patent 5,946,647:

1. A computer-based system for detecting structures in data and performing actions on detected structures, comprising:

an input device for receiving data;

an output device for presenting the data;

a memory storing information including program routines including

an analyzer server for detecting structures in the data, and for linking actions to the detected structures;

a user interface enabling the selection of a detected structure and a linked action; and

an action processor for performing the selected action linked to the selected structure; and

a processing unit coupled to the input device, the output device, and the memory for controlling the execution of the program routines.

…

8. The system recited in claim 1, wherein the user interface highlights detected structures.

The application of highlighting detected structures is made clear by Figure 7 within the ‘647 patent:

Interpreted broadly, this claim may affect any service that highlights phone numbers, e-mail addresses, or physical addresses.  However, the ITC ruling indicated the boycott is not precluded by public interest factors within 19 U.S.C. §1337(d), which requires consideration of “the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers . . . .”

The ITC decision also noted that Apple had previously sued Nokia for several of the same patents.  However, before the ITC could rule on infringement, Apple and Nokia entered into an undisclosed settlement.  HTC’s stock price suggests it may also be ripe for settlement negotiations: following the decision, HTC has been trading around 500 TWD, down from its high of 1300 TWD on April 28, 2011.

The importation boycott is scheduled to commence on April 19, 2012, though HTC can import refurbished devices for warranty replacements until December 19, 2013.

My thanks to Paul Cole and Paul Casbon from Lucas & Co., Warlingham, UK, UK and European patent attorneys, for this guest post on a recent UK Patents Court decision on patentable subject matter:

Although arising mainly under the “mental act” exclusion contained in the UK Patents Act, 1977 and in the EPC, an opinion of Colin Birss Q.C. sitting as a judge of the Patents Court and handed down on 5^th October 2011 deals with the general approach to be adopted by the UK courts to computer-related inventions and is likely to be highly influential. The decision will also cause the UK IPO to change its current Practice Notice on the patentability of computer programs.

The disputed inventions

            The appeal concerned a number of UK patent applications relating to the design of roller cone drill bits for use in oil drilling (Fig. 1). The drill bits were to be formed with cutting elements and cutting structures having cutting element profile angles selected to minimize cone wobble and improve life of associated bearings and seals. The claimed subject matter concerned a computerised design stage for the drill bit involving calculating a three-dimensional mesh for each portion of the earth formation used in the simulated drilling, simulating interaction of each cutting element with each portion of the earth formation for a selected drilling time interval, determining contacts between each mesh segment of each cutting element and mesh segments of the earth formation during the selected drilling time interval, calculating forces acting upon each mesh segment of each cutting element during the selected drilling time interval and outputting to a resource the results of the method.

            It was common ground that the application contained patentable subject matter, but the objection raised by the IP Office related to the form of the claim which was considered to relate to an unpatentable mental act.

If they wished to overcome the objection and obtain easy patent grant, Halliburton had only to play the “get out of jail card” of adding the step of manufacturing a drill bit using the results of the method. However they were unwilling to do this because the proposed claim would not give them realistic commercial protection, and the reasons though not stated in the decision are not difficult to discern.

Suppose that a novel drill bit was designed in the UK according to the patented method (including a manufacturing step), and the resulting design data was then sent to China (where there is a corresponding patent application CN 1782321). There would be no direct infringement of the UK patent because the manufacturing step would be carried out in China, not the UK. There would be no contributory infringement by the supply of the design data because on the assumption that the data amounted to an essential element of the invention within s.60(2) of the Patents Act, 1977, it was not intended to put the invention into effect in the UK as required by that sub-section. Nor would there be clear infringement of the Chinese patent if granted because only the manufacturing step would be carried out in China, and the fact that relevant data had been supplied from the UK might well not suffice. In order to obtain a claim worded in a way that had a realistic prospect of being infringed, Halliburton had no alternative but to pursue their claim to the design aspects of the method only.

The meaning of the claim – if your claim uses a computer, say so!

             A preliminary dispute was whether the claim covered only simulations carried out on a computer or whether it covered the same steps carried out by a human using paper and pencil. As the claim did not include the word “computer” the IP Office took the position that the crucial simulation steps could be carried out by a person without a computer at all. The Court held that the phrase “ outputting to a resource” would be understood as being to a computer resource such as a memory or printer, and that the claimed subject matter was a computer-implemented method. It commented, however:

“This case is by no means unique as an example of a computer implemented invention in which the word “computer” is conspicuous by its absence from the patent claims.  I am quite certain that one reason for this is a desire by applicants to try and play down the fact that their inventions are really based almost entirely on computer software.  It fools no-one and in some cases makes things more complicated than they need to be.”

Established UK approach or EPO approach?      

            UK courts and the UK IP Office follow an approach set out by the Court of Appeal in Aerotel v Telco / Macrossan’s Application [2007] RPC 7 and Symbian v Comptroller [2009] RPC 1. The issue of patentability is dealt with under the heading of qualifying subject-matter and the question is decided by considering what task it is that the program (or the programmed computer) actually performs.  A computer programmed to perform a task that makes a contribution to the art which is technical in nature, is a patentable invention and may be claimed as such, as may the program itself. However, if the task the system performs itself falls within the excluded matter and there is no more to it, then the invention is not patentable, examples being computers programmed to operate a method of doing business, such as a securities trading system or a method of setting up a company. In contrast, the EPO adopts an “any hardware” approach in which the issue of patentable subject matter is avoided by anything which can be said to be of a technical nature, but non-technical features are precluded from consideration in relation to inventive step, that approach being set out in Pension Benefit (T931/95), Hitachi (T2587/03) and Microsoft/data transfer (T424/03). It was argued for Halliburton that the Enlarged Appeal Board decision in G3/08 President’s Reference showed that the EPO approach was now settled and that it should therefore be followed by the UK courts.

            Judge Birss was of the opinion that UK courts should refuse to make that change. There was no reason why different outcomes should emerge from a consistent application of the approach based on the consistent jurisprudence of the UK (and earlier in the EPO) and the current approach in the EPO. In the Pension Benefit case the concern was not with the result which UK courts recognised as correct but with the reasoning which lead there. In the present case the applicants had submitted that the Examiner had found that the claim was not obvious and so the only hurdle left was the problem of patentability.   They urged the court to take the EPO’s approach to patentability but sought to take advantage of the UK IPO’s approach to inventive step, which would not do.  The EPO’s approach to patentability went hand-in-hand with its special approach to inventive step. It was far from clear that the EPO’s approach when applied as a whole and correctly was any more favourable to patentees than the UK approach.

Attitudes of the UK IPO and the EPO

            A further issue which Halliburton raised was the difference in attitude between the two patent offices concerning the treatment of computer-implemented inventions. Judge Birss held that this was not relevant and concluded:

“However, self-evidently the law is not concerned with the attitude of either Office.  The difficulties perceived in the UK with the way the EPO now approaches computer implemented inventions are genuine jurisprudential concerns of respectful nature. As a matter of law computer implemented inventions are just as patentable in the UK as in the EPO.  The Patents Act is in accordance with the EPC in that both contain an exclusion for computer programs as such.  That is a matter of legislation and in my judgment it is not for any court to interpret that exclusion out of existence.”

Mental act – a broad or narrow exclusion?

            The court was asked to decide between two possible interpretations of this exclusion. A wide construction was that a method was “a scheme, rule or method for performing a mental act” if it was capable of being performed mentally regardless of whether, as claimed, it was in fact performed mentally.   Read this way a claim to a computer programmed to carry out a method of performing a calculation (say a square root) would not only be caught by the computer program and mathematical method exclusions but would also be covered by the mental act exclusion because calculations are the kind of thing that can be performed by the human mind. A narrow construction was that the exclusion only excluded acts carried out by the human mind, so that a claim to a calculation carried out on a computer could never be caught by the mental act exclusion. The fact that calculations in general were the kinds of thing which were capable of being performed as mental acts was irrelevant.

            Judge Birss concluded that the balance of authority in England was in favour of the narrow approach to the mental act exclusion.  Its purpose was to make sure that patent claims cannot be performed by purely mental means and that was all.  The exclusion would not apply if there were appropriate non-mental limitations in the claim. 

  The outcome on the particular facts

            Once the scope of the mental act exclusion had been identified the decision on the particular facts was straightforward. Although obviously some mathematics was involved, the contribution was  not solely a mathematical method (on top of being a computer program) because the data on which the mathematics was performed has been specified in the claim in such a way as to represent something concrete (a drill bit design etc.). Designing drill bits was obviously a highly technical process, capable of being applied industrially. Moreover the detailed way in which this method works – the use of finite element analysis  – was also highly technical. Accordingly the appeal would be allowed and the applications would be remitted to the Comptroller for further prosecution.

Comment

            The present decision is not the last word on UK/EPO approaches to computer-related inventions because the possibility of another computer-related invention being further appealed to the Court of Appeal remains open. Judge Birss has provided credible reasons for maintaining the approach presently adopted by the UK courts, and his decision does not seem easy to reverse.

However, the differences in attitude between the UK IPO and the EPO are real. For example, the UK Manual of Patent Practice as revised in July 2010 states at 1.22.1:

“Thus a game implemented on a conventional computer system or network would be excluded as both a scheme, rule, or method for playing a game and a computer program as such.”

In contrast, EPO practice is to grant patents for computer games where a technical problem can be identified, as in T 717/05 LABTRONIX CONCEPT INC./Auxiliary game where the Appeal Board acknowledged a technical problem in terms of maintaining the player’s interest; see also T 1225/10 NINTENDO/Game program  and  T 1769/10 IGT/Internet remote game server. It is to be hoped that ways can be found of reducing the possibility of real differences in outcome within the established UK approach which it seems will continue to be followed.

As a practical matter, applicants will also note the effect this decision has on patent strategy in the UK and in particular on the perceived value of patents in this area:

(a)    Patent coverage for the software would control its distribution and use which if unauthorised would now be a direct infringement of the patent. Such coverage can be obtained by claims to the software itself and on computer-readable media, see Astron Clinica v Comptroller-General [2008] R.P.C. 14; [2008] EWHC 85 Pat Ct. Further, and in contrast to the position in the US, signal claims are allowable in the UK and Europe and can control distribution via the Internet. US applicants should be advised to include basis for such claims in their US first filed applications and in any subsequent UK, European and International applications, otherwise it may be difficult to add such claims during prosecution owing to the well-known added subject-matter issues of a.123(2) EPC.

(b)   Claims to the design method as in Halliburton would arguably cover the direct product of that method i.e. the design data produced by that method, and would provide additional opportunities to control the distribution and use of that data.

(c)    Claims to the overall manufacturing process remain valuable and should be included since the licensing revenue (or potential infringement damages) arising at the manufacturing stage may be considerable.

Lucas & Co.

Web: www.lucas-uk.com

Email: pcole@lucas-uk.com

Tel: INT+44+(0)1883+626211

Fax: INT+44+(0)1883+622997

Last fall, I reported that the District Court for the Central District of California had used the Bilski abstract idea subject matter exclusion to invalidate the claims of Ultramercial’s U.S. Patent No. 7,346,545.  At that time I wasn’t 100% confident that the Federal Circuit wouldn’t agree.  Fortunately for holders of Internet-based inventions, Chief Judge Rader, joined by Lourie and O’Malley, in a well reasoned and common sense opinion, reversed and remanded in Ultramercial v. Hulu – Case No. 2010-1544.

As described in the decision, the claimed invention of the ‘545 patent is a “method for monetizing and distributing copyrighted products over the Internet.”  The court further observed that the ’545 patent seeks to remedy problems with prior art banner advertising, such as declining click-through 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.  ’545 patent col. 2 ll. 14-18. 

The court found that the claimed invention was “a practical application of the general concept of advertising as currency and an improvement to prior art technology.”  The court concluded that the claimed invention is not “so manifestly abstract as to override the statutory language of section 101.” 

In its discussion, the Federal Circuit reinforced the notion that 35 U.S.C. Section 101 at least includes technical inventions:  “Moreover, title 35 does not list a single ineligible category, suggesting that any new, non-obvious, and fully disclosed technical advance is eligible for protection, subject to the following limited judicially created exceptions.”  The court also pointed out the claimed invention involved technical advances:  “[v]iewing the subject matter as a whole, the invention involves an extensive computer interface,” and that, “[b]y its terms, the claimed invention invokes computers and applications of computer technology.”  The notion that technical inventions in the software area fall within Section 101 was also put forth last year in Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010).  In that case, the court noted 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 court also takes time to dismiss the contention that the software programming necessary to facilitate the invention deserves no patent protection or amounts to abstract subject matter or, in the confusing terminology of machines and physical transformations, fails to satisfy the “particular machine” requirement.  In doing so, the court reaches back nearly 20 years to its discussion in In re Allapat, Fed. Cir. 1994, where it observed that “programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”

The court notes that, in other words, a programmed computer contains circuitry unique to that computer.  That “new machine” could be claimed in terms of a complex array of hardware circuits, or more efficiently, in terms of the programming that facilitates a unique function.  The digital computer may be considered by some the greatest invention of the twentieth century, and both this court and the Patent Office have long acknowledged that “improvements thereof” through inter-changeable software or hardware enhancements deserve patent protection.  Far from abstract, advances in computer technology—both hardware and software—drive innovation in every area of scientific and technical endeavor.  

This notion, that a programmed computer is in itself a “particular machine”, refutes and rejects the notion that a claim to software in combination with a computer requires the computer itself to be “partricular” and not just a general purpose machine, in order to satisfy the “particular machine” requirement of the machine or transformation test.  Clearly this is good news for software patent claims. 

On the other hand, the decision makes clear that claims reciting only a mathematical algorithm or steps that can be performed by the human mind are more likely to be abstract.  The court distinguished the claims of Cybersource from the Ultramercial claims: “Unlike the claims in CyberSource, the claims here require, among other things, controlled interaction with a consumer via an Internet website, something far removed from purely mental steps.”

While the Ultramercial case advances the principle that complex software programs with technical features (as carried out on a computing infrastructure) are in the statutory bucket, it  does not address what is to done with non-technical software inventions, indeed if there is anything such as that, that apply or implement abstract ideas.  To be on the safe side in drafting claims, it would be advisable to focus on describing and claiming the technical aspects of any invention involving a financial or otherwise suspect abstract concept.

Those holding or seeking software patents should be encouraged by this sensible decision, and I am encouraged the opinion continues to bring a solid common sense approach back to analyzing the patentability of software inventions.  While the “abstract idea” exception is far from dead, it at least appears that software inventions that are arguably “technical” in nature will survive a challenge from Bilski, at least as far as the Federal Circuit is concerned.

 For your reference, the ’545 patent claims:

A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;

a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously pre-sented is less than the number of transac-tion cycles contracted by the sponsor of the sponsor message;

a third step of providing the media product for sale at an Internet website;

a fourth step of restricting general public access to said media product;

a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the con-sumer views the sponsor message;

a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;

a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;

an eighth step of, if the sponsor message is not an interactive message, allowing said con-sumer access to said media product after said step of facilitating the display of said sponsor message;

a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;

a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and

an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

With all the confusion about Section 101 and how it includes or excludes computer software inventions, or what level of disclosure constitutes “structure” for the purposes of 35 U.S.C. Section 112, it may help to take a quick step back and look at exactly what “software” is.  While Wikipedia is far from a perfect source to quote, I like its definition of software:  “Computer software, or just software, is a collection of computer programs and related data that provide the instructions for telling a computer what to do and how to do it. In other words, software is a conceptual entity which is a set of computer programs, procedures, and associated documentation concerned with the operation of a data processing system.” (http://en.wikipedia.org/wiki/Software)

In other words, “software” constitutes both a definition of specific electronic operations to be performed by an electronic computing system, and also, at its base level, actual instructions, in the form of electrical logic signals, to cause the computer to perform the electronic operations.  Generally, software can be divided into two categories:  low-level software that constitutes instructions in the form of digital logic elements that can be read by the computer, transformed into digital signals usable by the computer’s electronic circuits, and executed from a collection of possible machine operations.  Different combinations of these electronic operations can be used to accomplish a multitude of modern data processing results.

High-level software is software that can be used, by compilation or by interpretation using a computer itself, to produce the low-level software needed to program/cause the computer to perform desired electronic operations.  A computer, suitably programmed, can read high-level software to produce the low-level software and in turn electronic operations required to cause a computer to perform electronic computer operations.

High-level software itself if often represented by a flowchart, which itself typically describes a sequence of desired computer operations, at the electronic level, to perform a given computerized process.  In some cases, a flowchart can represent exactly the precise, lowest level electronic operations performed by a processor, such as peforming add functions, shift functions, load functions, bus functions, etc…   Such a flowchart would also serve as an exact specification for the construction of a fully hardware electronic device, i.e., one in which no software was involved, but rather all functionality was built into the electrical architecture/design of the electronic device.

Higher level flowcharts by nature and perhaps by definition, define less precisely exactly how a particular processor will perform the desired sequence of electronic operations, and as such omits the details of such operations.  However, the ultimate result or functionality to be achieved by whatever exact sequence is chosen is defined.  Where such “high level functionality” is novel, it could meet the test of non-obviousness. 

Interestingly, cases such as In re Aoyama, discussed in a previous posting, suggest that some such software inventions can be described too generally to constitute “structure” under 35 U.S.C.  § 112 ¶ 6, and as such claims directed to such functionality in a means plus function format are unpatentable as indefinite under 35 U.S.C. § 112 ¶ 2.  This begs the question, what constitutes “structure” in a software environment.  Certainly, if the software is low-level, in that it exactly describes an exact electronic process, i.e., sequence of computer operations to be peformed, it must constitute an acceptable level of structure or else it is not possible to achieve a means plus function claim for a software invention.  When the description of functionality is at such a high level that a multitude of different low-level software-specified processes are possible for achieving the defined functionality, it can be said that constraints on “equivalents” under 35 U.S.C.  § 112 ¶ 6 can only be applied at the high level of the software description, since there is no low-level definition.  If the high-level description is a series of high level functions or steps, then one could argue that the specific means to achieve each function or step is unconstrained, and that the only constraint on equivalents is whether the high level functionality, i.e, the high level functions or steps, are equivalent. 

The majority in In re Aoyama seems to be suggesting that where a software process is claimed under 35 U.S.C. § 112 ¶ 6, a machine-specific implementation must be provided, i.e., an implementation that describes with particularlity how the low level electronic operations available in a particular type of computer are used to perform the claimed operation.  This description would provide the most definitive description of software structure possible to describe, and therefore would have to pass muster or software description ever could.

In the end, software practicioners need to be aware that the safest grounding for a software case is in the actual electronic operations performed by a computer in response to the software.  The more examples of how high-level software can be implemented by low-level code, the more bullet proof a software application will be from the perspective of 35 U.S.C. § 112.  While one would think that actual source code (and the compiler or interpreter to be used) or object code may be overkill in this day and age, when it is available, submission of such code in an appendix may be the easiest way to always provide at least one very specific implementation in low-level software that is unassailably as structural as one can achieve.

My thanks to Justin McCarthy for this guest post:

On July 29, 2011, The Federal Circuit decided The Association for Molecular Pathology v. Myriad Genetics, 2010-1406 (Fed. Cir. July 29, 2011).  While this case deals with the patentability of gene fragments and methods of use, the case does present interesting questions surrounding the patentability of software.   Myriad was brought by a number of medical organizations, researchers, genetic counselors, and patients as a declatory judgment proceeding against a number of patents that Myriad had secured which protect both the isolated gene fragment BRCA1 and BRCA2 as well as methods for using those gene fragments to detect certain breast and ovarian cancers.  Myriad, at 8-9.   The court’s decision has two parts, both having implications for the software patent landscape.

Part I – The method claims:

The patent included claims drawn both to the gene fragments themselves as well as methods for using the gene fragments.  The court’s decision on the method claims was the only part of the decision that was unanimous.  The decision on the patentability of the gene fragments was split 2-1.

The challenged method claims recite:

1. (‘999 patent) A method for detecting a germline alteration in a BRCA1 gene, said alteration selected from the group consisting of the alterations set forth in Tables 12A, 14, 18 or 19 in a human which comprises analyzing a sequence of a BRCA1 gene or BRCA1 RNA from a human sample or analyzing a sequence of BRCA1 cDNA made from mRNA from said human sample with the proviso that said germline alteration is not a deletion of 4 nucleotides corresponding to base numbers 4184-4187 of SEQ ID NO:1.

1. (‘001 patent) A method for screening a tumor sample from a human subject for a somatic alteration in a BRCA1 gene in said tumor which comprises [] comparing a first sequence selected from the group consisting of a BRCA1 gene from said tumor sample, BRCA1 RNA from said tumor sample and BRCA1 cDNA made from mRNA from said tumor sample with a second sequence selected from the group consisting of BRCA1 gene from a nontumor sample of said subject, BRCA1 RNA from said nontumor sample and BRCA1 cDNA made from mRNA from said nontumor sample, wherein a difference in the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said tumor sample from the sequence of the BRCA1 gene, BRCA1 RNA or BRCA1 cDNA from said nontumor sample indicates a somatic alteration in the BRCA1 gene in said tumor sample.

20. (‘282 patent) A method for screening potential cancer therapeutics which comprises: growing a trans-formed eukaryotic host cell containing an altered BRCA1 gene causing cancer in the presence of a compound suspected of being a cancer therapeutic, growing said transformed eukaryotic host cell in the absence of said compound, determining the rate of growth of said host cell in the presence of said compound and the rate of growth of said host cell in the absence of said compound and comparing the growth rate of said host cells, wherein a slower rate of growth of said host cell in the presence of said compound is indicative of a cancer therapeutic.

The court held all but claim 20 invalid under 35 U.S.C. 101 as directed to abstract ideas and therefore not patent eligible.  The court found that claims 1 and 2 recited nothing more than abstract mental steps necessary to compare two different nucleotide sequences.  The court summarized the claims as “look at the first position in a first sequence; determine the nucleotide sequence at that first position; look at the first position in a second sequence; determine the nucleotide sequence at that first position; determine if the nucleotide at the first position in the first sequence and the first position in the second sequence are the same or different, wherein the latter indicates an alteration; and repeat for the next position.” Myriad, at 50.

The court stated that while the application of a formula or abstract idea in a process may describe patentable subject matter, the claims at issue did not describe applying the step of comparing two nucleotide sequences in a process, rather the comparison was the process. 

The court also briefly distinguished Prometheus Labs., Inc. v. Mayo Collaborative Servs., 628 F.3d 1347, 1350 (Fed. Cir. 2010), cert. granted 2011 WL 973139 (June 20, 2011), which upheld a claim including the steps of  “(a) “administering” a thiopurine drug to a subject, and/or (b) “determining” the drug’s metabolites levels in the subject, wherein the measured metabolite levels are compared with predetermined levels to optimize drug dosage.” Myriad, at 52.  The court stated that in addition to the “administering” step being transformative, that the “determining step” was both transformative and central to the purpose of the claims.  Because the determining step could not be determined merely by inspection, the determining step required a transformation, i.e. the metabolites must be extracted and analyzed from a bodily sample.  The court held that the method claims in the instant case were capable of being performed by mere inspection and thus were not transformative. Id.

The court did hold that claim 20 was valid stating: “the claim recites a method that comprises the steps of (1) ‘growing’ host cells transformed with an altered BRCA1 gene in the presence or absence of a potential cancer therapeutic, (2) ‘determining’ the growth rate of the host cells with or without the potential therapeutic, and (3) ‘comparing’ the growth rate of the host cells. The claim thus includes more than the abstract mental step of looking at two numbers and ‘comparing’ two host cells’ growth rates. The claim includes the steps of ‘growing’ transformed cells in the presence or absence of a potential cancer therapeutic, an inherently transformative step involving the manipulation of the cells and their growth medium. The claim also includes the step of ‘determining’ the cells’ growth rates, a step that also necessarily involves physical manipulation of the cells.” Id. at 53.

The impact of this case is likely to be important to software patents as many such patents commonly contain method claims which rely on analyzing and comparing data.  To avoid invalidation after Myriad, practitioners’ should consider adding transformative limitations which attempt to remove the method from physically being able to be performed by a human mind.  For example, practitioners’ may consider adding limitations relating to the computer system as a whole, such as using calculated information to control a peripheral device or another computing device; transforming data from one form to another using a processor; receiving input (preferably reciting the source of the input – e.g. a network, a keyboard, or the like); or any other tangible connection that ties into the software method.  This will leave an argument that the method cannot be performed simply by a human mind and that some tangible step (such as physically sending electrons to a device) is necessary.  Such a connection should be as substantial as practically possible as a court may find such connections to be merely post-solution activity or data gathering steps which will not save the claim.  However, at least it leaves the litigators an argument for why the claim is not so abstract as to be unpatentable. 

Bottom line, practitioners’ may be better off with a slightly narrower claim with more specific limitations that concretely tie the method to a particular machine, rather than a broad method claim which could literally be performed by a human mind.

Part II the Gene Fragment Claims

The gene fragment claims are only applicable to computer software patents in the sense that the arguments used by the Federal Circuit to uphold the validity of Myriad’s gene fragment claims undercut the very reasoning that the Federal Circuit used weeks later to invalidate a patent drawn to a machine readable medium in Cybersource Corp. v. Retail Decisions, Inc., App. No. 2009-1358 (Fed. Cir. Aug 16, 2011).  In Cybersource, the court addressed both method and machine-readable medium claims.  The court first held that the method claims were invalid under 35 U.S.C. 101 as drawn to an abstract idea.  Continuing with the machine-readable medium claim, the court held that “[r]egardless of what statutory category . . . a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.  Here, it is clear that the invention underlying both claims 2 and 3 is a method . . . “ Id. at 17.  So in essence, the court ignored the structural limitations that are inherent when discussing a machine readable medium (e.g. the physical re-arrangement of electrons on a medium) to look at what the machine-readable medium does as opposed to what it is.

The Myriad panel had three separate opinions.  The opinion from Judge Lourie took an approach that is inconsistent with the Cybersource court to save the gene fragment claims.  Namely, Judge Lourie ignored the functional similarities between the function of an isolated gene fragment and the function of that same gene fragment as a part of the full gene in the human body and focused instead on the structural differences between the gene in the human body and the patented fragment.  Judge Lourie found that in nature, isolated DNA fragments are covalently bonded to other such molecules.  When cleaved to form the claimed fragment, those bonds are broken forming an isolated DNA molecule that is a “distinct” entity. Myriad, 43-4.  Dismissing arguments from the Plaintiffs’ that despite any change in the chemical makeup of this molecule, the serve the same purpose – they both store the same set of information (e.g. to encode for protein production), the court stated: “[w]e disagree, as it is the distinctive nature of DNA molecules as isolated compositions of matter that determines their patent eligibility rather than their physiological use or benefit.”  

Judge Lourie here is clearly going to great lengths to uphold the patentability of the gene fragment, going into extreme detail regarding slight changes in chemical composition (one wonders why these small changes aren’t an obvious variation of the gene found in nature – but I digress) and ignoring altogether the function and purpose of the gene fragments.  This is contrary to the court’s reasoning in the Cybersource case where they only looked at the function of the product as opposed to its structure.  

Judge Moore’s opinion further highlights the structural differences between natural DNA and the patented fragments, but qualifies it saying that the structural differences are not enough without some new utility.  And what was Judge Moore’s unique utility for the gene fragments? Nothing more than the fragment’s diagnostic abilities, something Judge Moore points out, cannot be inherently done by the body.  However, as with the chemical structure, this seems to be a thin distinction, and certainly the machine readable medium in Cybersource achieves some “new” utility – namely it causes a computer to perform the method steps. 

In some ways the structure of the machine readable medium claim may be to blame for the Cybersource decision as it is a hybrid claim type in that it recites both structure and method limitations.  However, this is by necessity, as the actual structure of the machine readable medium is a series of electrons arranged in a certain fashion and such an arrangement is indescribable. Rather than claim a machine-readable medium comprising: one, zero, one, one, zero, one (etc…), the claim is written in terms of its result – i.e. what the machine-readable medium does, rather than what it is.  This may give the false impression that a machine-readable medium claim is a method claim wrapped in a product shell.  Perhaps if practitioners’ began describing how the machine readable medium is created (e.g. including the instructions AND including compiling steps, etc…) rather than simply what it does, these claims would find a more favorable reception.

Regardless, it is clear that the court is viewing these two technologies differently and appears to be applying a more lenient standard to biotechnology cases than computer science cases.  It will be interesting to see how this plays out as Cybersource is likely headed to further review.

11. A system for supply chain management com-prising:

reverse logistics means for generating transfer data; and

 The majority then found, agreeing with the Board, that “[t]here is no structure or algorithm for generating transfer data disclosed in the discussion of Figure 8 at Specification paragraphs 0088-93. These paragraphs do discuss generating shipping data, but again without disclosing any structure or algorithm for doing so.”  According to the majority, the Board properly recognized that while Figure 8 provides a high level process flow, “it does not describe any structure.”  Accordingly, the majority agreed with the Board’s conclusion that Figure 8 “fails to describe, even at a high level, how a computer could be programmed to produce the structure that provides the results described in the boxes.”  Finally, the majority found that “[b]ecause the means-plus-function limitation of claims 11 and 21 lacked sufficient disclosure of structure under 35 U.S.C. § 112 ¶ 6, these claims are unpatentable as indefinite under 35 U.S.C. § 112 ¶ 2. 

The majority further states that “For means-plus-function limitations where the disclosed structure is a computer programmed to implement an algorithm, the patent must disclose enough of an algorithm to provide the necessary structure under 35 U.S.C. § 112 ¶ 6.” 

As aptly pointed out by the dissenting Judge Newman, Figure 8 and the corresponding portion of the Applicants’ specification discuss at length the computer operation corresponding to the claimed function of generating transfer data.  As such, it is difficult to understand the majority’s insistence that the disclosure did not describe sufficient structure or disclosure to satisfy  35 U.S.C. § 112 ¶ 6, particularly since the specification specifies that the functionality described in the flow charts:

 ”can be implemented in hardware, software, or a suitable combination of hardware and software, and each of which can be one or more software systems operating on separate general purpose processing platforms. As used herein, a hardware system can include discrete semiconductor devices, an applica-tion-specific integrated circuit, a field programma-ble gate array or other suitable devices. A software system can include one or more objects, agents, threads, lines of code, subroutines, separate soft-ware applications, user-readable (source) code, ma-chine-readable (object) code, two or more lines of code in corresponding software applications, data-bases, or other suitable software architectures. “

One question raised by In re Aoyama is whether or not the disclosure supports any structural claim that requires “generating transfer data”, or whether it is only means plus function claims that the disclosure is inadequate to support.  Logically speaking, it would seem that if Figure 8 and the specification do not disclose enough structure to support a means plus function claim element, it would not likely comply with 112 (2) either. 

If one seeks to avoid having software patent claims found inadequate under 112(2) or 112(6), it would appear that the safest bet is to include object or source code to support the claimed functionality.  With object or source code, the application would describe at least one highly particular implementation that would, for any given compiler or interpreter, define a specific software structure.  On the other hand, anything short of what might be considered a specific machine-implemented process may be found inadquate.







In the previous post my guest blogger Greg Stark discussed the Federal Circuit’s recent decision in Cybersource Corp v. Retail Decisions, Inc. Greg’s take on on the case is an academic one, one that assumes the the case fits into a logical framework of legal jurisprudence that logical minds can digest and use for sorting inventions, and in particular software inventions, into Section 101 eligible and ineligible categories.

Unfortunately, if we didn’t all know already that the Federal Circuit and Supreme Court were stuck in an endless loop of a hopelessly contradictory algorithm (one part bizarre, one part incomprehensible, and one part schizoid)  for deciding the Section 101 issue for software, we were painfully reminded again by the Cybersource decision.  It seems that no one is ever going to simply acknowledge that the Supreme Court’s Benson and Flook decisions are largely if not entirely contradictory to the Diehr decision.  For example, in my estimation it is quite reasonable to say that the invention in the ’154  patent constituted an improvement to an automated verification system for use in verifying credit card transactions.  If we assume for the sake of argument that such verification systems constitute patent eligible “machines”, then it stands to reason that the application of an otherwise abstract idea to the improvement of the operation of such a machine is patent eligible under the standard laid down in Diehr.  In Diehr, an abstract mathematical algorithm was applied to making a rubber mold work better.   Accordingly, had the Diehr Court decided the Cybersource decision, using my assumption that an automated credit card verification system is patent eligible, it would have most likely found that the “invention” was an improved credit card verification system, and therefore patent eligible notwithstanding that the point of novelty is found in an abstract idea.  In fact, I thought one of the key points in Diehr was to avoid dissecting claimed subject matter into novel and old portions, and focusing on the novel part for patent eligibility.  Obviously, if that had been done in Diehr, it would have resulted in rejection of the patent for failure to claim patent eligible subject matter.

Perhaps the Federal Circuit considered an automated credit card verification system as falling outside the type of technology or machines eligible for protection, but on this point they would definitely be flying in the face of common sense.  For instance, take a look at the definition for USPTO Patent Class 705:

“This is the generic class for apparatus and corresponding methods for performing data processing operations, in which there is a significant change in the data or for performing calculation operations wherein the apparatus or method is uniquely designed for or utilized in the practice, administration, or management of an enterprise, or in the processing of financial data.”

Granted, the US patent classification system has no bearing on patent eligibility, but it represents the commonly held view that apparatus to perform data processing operations in support of the administration of an enterprise, or the processing of financial data, is real technology, not a mere abstraction.

Will someone please reset the Federal Circuit program running the Section 101 subject matter eligibility test?

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My thanks to Greg Stark, Schwegman, Lundberg & Woessner P.A., for this brief of the Cybersource decision.

From Greg:

The Federal Circuit put a warning shot across the bow of patent attorneys that focus on patenting software related inventions. In the case of Cybersource Corp v. Retail Decisions, Inc. the Federal Circuit held that a computer-readable medium claim (Beauregard claim) that merely recites an unpatentable method is also non-statutory subject matter. In other words, the Federal Circuit held that merely putting method steps on a computer-readable medium (CRM) cannot make the method statutory subject matter.

The method claim found unpatentable recites:

3. A method for verifying the validity of a credit card transaction over the Internet comprising the steps of:
a) obtaining information about other transac-tions that have utilized an Internet address that is identified with the [ ] credit card transaction;
b) constructing a map of credit card numbers based upon the other transactions and;
c) utilizing the map of credit card numbers to determine if the credit card transaction is valid.

The unpatentable computer readable medium claim read as follows:

program instructions for detecting fraud in a credit card transaction between a consumer and a mer-chant over the Internet, wherein execution of the program instructions by one or more processors of a computer system causes the one or more processors to carry out the steps of:
a) obtaining credit card information relating to the transactions from the consumer; and
b) verifying the credit card information based upon values of plurality of parameters, incombination with information that identi-fies the consumer, and that may provide an indication whether the credit card transac-tion is fraudulent,
wherein each value among the plurality of pa-rameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the mer-chant with a quantifiable indication of whether the credit card transaction is fraudulent,
wherein execution of the program instructions by one or more processors of a computer system causes that one or more processors to carry out the further steps of;
[a] obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction;
[b] constructing a map of credit card numbers based upon the other trans-actions; and
[c] utilizing the map of credit card num-bers to determine if the credit card transaction is valid.

The Federal Circuit analogized this case to In re Abele to support disposing of the CRM claim as non-statutory subject matter. The court states that “[r]egardless of what statutory category a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes.” Thus, the Federal Circuit considered this CRM claim to be nothing more than a claim to a process, which they considered analogous to the method claim that was already determined to be unpatentable subject matter.

What about the fact that operations stored on a CRM can only be executed on a computer, one might ask. The opinion does not directly address this, but does make the following related arguments. The first concerning related argument is stated as, “Cybersource has not met its burden to demonstrate that claim 2 is ‘truly drawn to a specific’ computer readable medium, rather than to the underlying method of credit card fraud detection.” What is a specific computer readable medium? At least in theory, any CRM with unique instructions stored on it would have been considered a “specific computer readable medium,” at least prior to this opinion.  Judge Dyk continues with the following statement regarding the CRM claim, “the incidental use of a computer to perform the mental process of claim 3 does not impose a sufficiently meaningful limit on the claim’s scope.” While it is undeniable that the claims at issue in this matter are broad, reciting operations in a CRM format means that all of the operations must be performed by a computer. The fact that the operations must be performed on a computer seems to make it more than “incidental use” of a computer.

It will be interesting to watch this case to see if the patent owner requests a rehearing en banc. Unfortunately, despite the opinion’s statement that “it is clear from the emphasized text that claim 2 recites nothing more than a computer readable medium containing program instructions for executing the method of claim 3,” the CRM actually contains at least one additional element. The additional recitation in the CRM claim reads as follows:

verifying the credit card information based upon values of plurality of parameters, in combination with information that identifies the consumer, and that may provide an indication whether the credit card transaction is fraudulent,

wherein each value among the plurality of parameters is weighted in the verifying step according to an importance, as determined by the merchant, of that value to the credit card transaction, so as to provide the merchant with a quantifiable indication of whether the credit card transaction is fraudulent,…

Interestingly, at least the highlighted portion of the additional recitation in the CRM appears to be claiming a tangible result that would be produced by a computer performing these operations (e.g., scoring a transaction – quantifiable indication). The fact that this panel of the Federal Circuit appears to ignore this portion of the CRM claim provides any future panel an easy out for overturning this decision. Because the CRM claim does not literally recite only the unpatentable method steps, this case is unlikely to provide any clear guidance to the patent community.

Obviously, this decision from the Federal Circuit is concerning for patent attorney’s attempting to draft valid claims to software implemented inventions. The decision highlights the need to include independent claims from as many different statutory classes as possible (e.g., method, system, and CRM). Additionally, the decision emphasizes the importance of drafting method claims that recite statutory subject matter (ideally methods that satisfy the machine or transformation test). At a minimum, the Federal Circuit has made the difficult job of claiming software implemented inventions more difficult and less predictable.

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