Federal Circuit reverses course in Ultramercial v. Hulu; finds method of delivering advertisements to be an abstract idea

Yes or NoA method of providing advertising in connection with streaming media is not eligible for patenting, according to the latest decision of the Federal Circuit in the long-running Ultramercial v. Hulu patent saga.

Ultramercial’s patent claimed a method of distributing media over the Internet.  Claim 1 included eleven steps.  The steps described a process of associating ads with streaming media, allowing a consumer to access the media for free if the consumer first views the ad, and receiving payment from the advertiser after the consumer views the ad.

When the Federal Circuit first considered the claims in 2013, it found the claims to be patent-eligible. At the time, the court stated that ” it wrenches meaning from the word to label the claimed invention ‘abstract.'”  The court’s 2013 decision also stated that “the claim appears far from over generalized, with
eleven separate and specific steps with many limitations and sub-steps in each category.”

Fast forward to 2014, after the United States Supreme Court issued its decision in Alice v. CLS Bank.  The Alice decision established a two-part test for determining patent-eligibility: (1) Is the claim directed to an abstract idea? (2) If so, are there other elements in the claim sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?

When faced with a new post-Alice appeal in the case, the Federal Circuit applied the new two-part test of Alice.  This time, the court reached a different conclusion Continue reading

IP Protection for Websites

33004976_sFor many businesses, a website is among the company’s most valuable intangible assets. A company’s website (or mobile site) serves as its front door, calling card, storefront, and corporate bio for actual and potential customers.

However, many businesses fail to protect this asset until it is exposed to risk. For example, small businesses who rely on a single employee or contractor to develop and maintain the site can face problems maintaining and updating the site if that employee or contractor relationship ends. Or, they may find a competitor copying the features that provide the most business value.  

What can companies do to avoid these issues?  Useful practices include:

  • Own the code.  Many companies hire outside contractors to design and maintain the company website. When doing this, it’s critical that the development agreement provide the company with rights to control, modify, copy and use the code — whether through ownership or license. A company who pays for software development typically does not have the right to copy, modify or distribute it unless the development agreement specifically says so.
  • Control the code.   It’s also important that the company receive copies of all developed code, even if the contractor is hosting the website. If the contractor fails to perform, loses a key employee, or simply starts to charge more than the company wants to pay, the company will find it impossible to go in another direction unless and until it has the  code. Too often, companies fail to include this requirement in their development agreements. Or if they do, they don’t enforce it until a problem occurs — at which point it may be too late.
  • Identify your trademarks.  A website is the first place that many customers will go to discover information about the company’s products or services. The names of many products and services may be trademarks, even if the company hasn’t registered the marks with the U.S. Patent and Trademark Office (USPTO). Although not legally binding, the use of a “TM” symbol with unregistered marks can help put others on notice of the words or phrases that a company considers to be its valuable trademarks.
  • Consider trade dress protection.  Trade dress protection, which is available under U.S. trademark law as well as state laws of unfair competition, covers the distinctive features of product’s physical appearance.  Several federal district courts, including those in Pennsylvania, CaliforniaLouisiana, Washington and Texas, have held that the overall “look and feel” of a website can be trade dress that is entitled to protection under the federal trademark statute.  To receive trade dress protection, the look and feel must (1) be distinctive, (2) have secondary meaning, and (3) be non-functional.
  • (Maybe) patent the unique features. Many websites contain unique functionality that can be considered to be a patentable invention under U.S. patent law.  While patenting software has become much more difficult in the wake of the U.S. Supreme Court’s decision in Alice v. CLS Bank, patent applications that claim  significantly more than just an abstract idea can still find success at the USPTO.

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Federal Circuit: Private entities do not infringe patent when performing “quasi-governmental actions”

31220041_sPrivate entities cannot be liable for patent infringement when performing “quasi-governmental actions” with the express or implied consent of the U.S. government, according to a recent decision of the U.S. Court of Appeals in Iris Corporation v. Japan Airlines Corporation (Fed. Cir. 2014).

Iris Corporation’s patent number 6,111,506 covered a method of making an identification document (such as a passport) with a contactless communication unit.  The case arose after Iris accused Japan Airlines Corporation (JAL)  of infringing Iris’ patent by scanning the electronic passports of its U.S. passengers.  Iris argued that by using and scanning passports that contain RFID chips, JAL infringed the patent.

At least two U.S. statutes required JAL to perform the scanning. Because of this, in its defense JAL argued that it could not be liable for infringement because its actions were required by federal law.  JAL also noted that 28 U.S.C. §1498(a)) states (with emphasis added):

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States.

The court agreed with JAL’s argument.  The court noted that an activity is “for the United States” if two requirements are met: (1) it is conducted “for the Government,” and (2) it is conducted “with the authorization or consent of the Government.”

The court found the first requirement to be satisfied because the scanning of passports was a “quasi-governmental activity” done for the benefit of the U.S. government.  The second requirement was satisfied because “JAL cannot comply with its legal obligations without engaging in the allegedly infringing activities.”

Because of this, the court dismissed the case and held that IRIS’s exclusive remedy is to file suit against the U.S. government, not any private entity.

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U.S. patent law needs a definition of “abstract idea”

Recent U.S. Patent and Trademark Office actions relating to software patents have confused and frustrated many patent applicants. After the U.S. Supreme Court published its opinion in Alice Corporation Pty Ltd. v. CLS Bank Int’l, the USPTO’s application of the Court decision to software inventions has been anything but consistent. Does the USPTO’s action signal a need for Congressional action or another Supreme Court decision with more concrete guidelines?

In Alice, and as explained by the recent USPTO Preliminary Examination Instructions in view of the Supreme Court Decision in Alice, the determination of subject matter eligibility involves a two part test:  (1) Is the claim directed to an abstract idea?  (2) If so, are there other elements in the claim sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?

However, rather than a rigorous application of any test, in the past few months the USPTO’s patent-eligibility determinations contain little analysis of any specific claim language. Instead, they primarily consist of a boilerplate paragraph stating that the claimed invention is directed to an abstract idea.

To illustrate this problem, the USPTO recently issued a rejection asserting that the following claim was patent-ineligible because it is directed to a “fundamental economic practice:”

8.   A device for predicting a future occurrence of a transportation system incident, the device comprising:
  a processor; and
  a computer readable medium operably connected to the processor, the computer readable medium containing a set of instructions configured to instruct the processor to perform the following:
          collect historic operating information related to the previous operation of a vehicle along a transportation route,
          determine schedule deviation information for the transportation route based upon the historic operating information and observed schedule adherence for the vehicle along the transportation route, the schedule deviation information comprising at least an identification of a driver and a sequence number for a period of time associated with the historic operating information and the observed schedule adherence,
          construct a plurality of models, each of the plurality of models including at least one combination of factors that contribute to schedule deviation,
          rank each of the plurality of models according to at least one information criterion,
          assess an impact of the driver and the sequence number on a highest ranked model to produce a results set, wherein the results set comprises at least a highest ranked model showing at least one combination of factors that most contributes to schedule deviation, and
          present the results set. Continue reading

Is the predicted “death of hundreds of thousands of patents” coming true?

In May 2013, Judge Moore of the U.S. Court of Appeals for the Federal Circuit predicted that the court’s decision in CLS Bank Int’l v. Alice Corporation Pty Ltd. would result in the “death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents.”

In the year that followed, not much changed.  The U.S. Patent and Trademark Office continued to issue patents in these areas.  And the Federal Circuit issued other decisions affirming that software was still patentable.  While patents covering financial business methods and purely human activity faced difficulty, patents for non-financial software inventions continued to grant at a fast clip.

Then, in June 2014, the U.S. Supreme Court issued an opinion that affirmed the Federal Circuit’s decision. The Court’s decision in Alice Corporation Pty. Ltd. v CLS Bank Int’l said: “there is no dispute that many computer-implemented claims are formally addressed to patent-eligible subject matter,” and subsequent USPTO guidance suggested that “the basic inquiries to determine subject matter eligibility remain the same.” Soon afterward, however, the practical effect of the Court’s decision became quite different.

In the weeks following the Supreme Court decision, I’ve seen that the USPTO is rejecting nearly every application assigned to its business methods examining unit for failure to meet the post-Alice patent eligibility standard. Other patent attorneys have noted this too, and have commented on it with concern.

District Courts and the Patent Trial and Appeal Board have been similarly critical of software patents in recent weeks. Dennis Crouch of Patently-O recently published a comprehensive summary of District Court and PTAB decisions that overturned software patents after the Alice decision.

In addition, in one of its first published opinions that addressed the Alice decision, the Federal Circuit found an invention for a computer-implemented method and system for playing bingo to be a mere abstract idea and thus not patent-eligible. Although the case (Planet Bingo LLC v. VKGS LLC) is non-precedential, it may serve as a harbinger of things to come in future software patent cases.

The USPTO is continuing to issue patents for software-related inventions that are assigned to it’s non-business-method examining units, so it’s clear that at least some software remains eligible for patenting. However, it’s also clear that new and potentially significant challenges are now in place for those who want to obtain or enforce software patents in the future.

If a patent says something is “essential,” then it must be so

To help a patent attorney prepare a patent application, inventors often provide a copy of a manuscript for an upcoming technical journal, research publication or white paper. The manuscript often goes into great detail to explain what features of the invention are essential, critical, or otherwise important to achieve certain results.

Then the patent attorney guts all of that language and produces a document that describes nothing with certainty, and that suggests everything is an option.

Why does this happen?

recent opinion from the U.S. Court of Appeals for the Federal Circuit helps to explain the reasoning behind this.

A basic tenet of patent law is that the scope of the patent is defined by the patent’s claims. The detailed description serves as an instruction manual for how to make and use the invention, while the claims define the boundaries of the patent rights that cover the invention.  In order to infringe the patent, someone has to make, use or sell a product or process that contains all elements of at least one of the claims.

Ordinarily, when evaluating a patent infringement case, a court is not supposed to read words into the claims that aren’t already there. A court can use the detailed description to understand what the claim terms mean.  However, in most cases a court should not add features to a claim (and thus narrow the scope of the claim) if those features aren’t expressly recited in the claim.

The recent Federal Circuit decision, X2Y Attenuators, LLC v. Int’l Trade Commission, highlights an exception to this rule:  if the detailed description describes an element as “essential,” then the court may interpret it as being so — even if the claims don’t include that element.

In the X2Y Attenuators case the patent covered a structure for Electrodereducing electromagnetic interference in electrical circuits. The claims covered a structure with four electrodes.  The claims also described the positioning of certain electrodes in a way that caused certain pairs of the electrodes to be physically shielded from each other. The detailed description also said that a common conductive pathway electrode was “an essential element of all embodiments or connotations of the invention.” Because of this language, the court concluded that one could only infringe the patent if one were to make, use or sell a product with a common conductive pathway electrode, even though the patent claims did not specifically recite that element. In particular, the court noted:

we have held that labeling an embodiment as “essential” may rise to a disavowal.

One of the first questions I typically ask an inventor when talking about a new invention is whether he or she has been through the patent process before. If the answer is “no,” then I try to prepare the inventor for the fact that the patent application’s description may soften some of the inventor’s absolute statements.

It’s important to recognize that what’s “essential” to achieve the best possible practical implementation of an invention may not always be “essential” for the purpose of patentability.  The X2Y Attenuators case helps illustrate what happens when a patent application confuses the difference between the two.

If a patent can’t cover an “abstract idea,” can it be a trade secret?

Should I patent my invention or keep it a trade secret?  QuestionInventors often ask me this question.  And after a recent court decision and USPTO actions that raise the bar for patenting software inventions, the question is becoming even more important for software developers who want to protect their IP.

In Alice Corporation Pty Ltd. v. CLS Bank Int’l, the Supreme Court made it clear that “abstract ideas” are not eligible subject matter for patent protection. The decision, as well USPTO Preliminary Examination Instructions that followed the decision, suggest that inventive concepts such as algorithms, financial business methods and methods of organizing human activity are not, in themselves, patentable unless claimed with additional elements that make the claim cover significantly more than just the abstract idea.

So, does this mean that it’s better to keep certain inventions as a trade secret? Will trade secret law protect abstract ideas in a way that patent law can’t?

In most cases, probably not. Several state court decisions suggest that a trade secret needs to be described in an enabling manner in order for the owner to enforce trade secret rights against others.

For example,the Court of Appeal for the State of California recently held that in California, a “trade secrets plaintiff must, prior to commencing discovery, ‘identify the trade secret with reasonable particularity.’” New Castle Beverage, Inc. v. Spicy Beer Mix, Inc., (Cal. App. 6/17/2014).  In that case, the complaint described the trade secret as a “process of applying a secret solution to the inner and outer surfaces adjacent the lip of a beverage cup to permit a first mixture of spices to adhere to those surfaces.” The court found this description to be too vague.  Also, the lower (trial) court expressed a concern that if it were to grant a preliminary injunction, the court would have difficulty determining whether the defendant was violating the injunction.

This means that when deciding whether to patent a process or keep it trade secret, the inventor should work with his or her attorney to assess which area of law provides the best protection, not which regime is easier to use. In both situations, the inventor should identify and document a complete description of the process.  This description needs to include more than just the general idea itself, it needs to explain how the idea is implemented as technology.

So, if the question is “can I protect it,” patent law and trade secret law will often lead to similar answers.  Neither area of law is likely to help an inventor who either can’t or won’t fully describe the process in a way that enables a reader to make and use the process, and that allows a court to determine when an infringer is using the process.

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