One step forward, two steps back for software patents at the Federal Circuit

In the past year, several Federal Circuit decisions defined situations in which software inventions could be eligible for patenting in the United States. However, two recent Federal Circuit decisions show that the path for patent-eligibility is not yet clear, especially for patents that claim methods of processing or presenting data.

In Secured Mail Solutions LLC v. Universal Wilde, Inc. (Fed. Cir. Oct. 16, 2017), the court considered seven patents covering the use of intelligent mail barcodes, QR codes, and personalized URLs on a package to communicate information about the package. The court considered a representative claim of U.S. patent 8,429,093 that read:

1. A method for providing electronic data to a recipient of a mail object, comprising:

   Generating, by a processor, a barcode for a mail object, said barcode including at least a first set of mail data, said first set of mail data including data corresponding to said recipient of said mail object;
affixing said barcode to said mail object;
   submitting said mail object to a mail carrier for delivery to said recipient of said mail object;
receiving said first set of mail data, including data corresponding to said recipient of said mail object, from a reception device of said recipient via a network;
   providing said electronic data to said reception device via said network in response to receiving said first set of mail data, said electronic data including a content of said mail object;
   wherein said reception device displays said electronic data to a recipient of said mail object by displaying said electronic data on a screen of said reception device.

The district court found all of the patents’ claims to be directed to the abstract idea of “communicating information about [a mail object] by use of a marking.” The Federal Circuit agreed and explained that the claims “are not directed to specific details of the barcode or the equipment for generating and processing it.” The Federal Circuit also noted that in the claims there “is no description of how the unique identifier … is different from a personal name, or return address.”

After agreeing that the claims were directed to an abstract idea, the court noted that the claims did not include sufficiently more than the idea because they were “‘replete’ with routine steps, including ‘affixing mail identification data,’ such as a barcode, to a mail object.” The patent holder argued that the generation of the unique identifier is inventive, but the court noted that “the use of barcodes was commonplace and conventional” when the patent applications were first filed, and “sending a personalized URL to a recipient was not an unconventional use of the Internet” at that time.

In Smart Systems Innovations, LLC v. Chicago Transit Authority (Fed. Cir. Oct. 18, 2017), the court considered four patents relating to open-payment fare systems in mass transit networks. A representative claim from U.S. patent 7,568,617 read:

13. A method for validating entry into a first transit system using a bankcard terminal, the method comprising:
downloading, from a processing system associated with a set of transit systems including the first transit system, a list of bankcards comprising, for each bankcard in the list, a hash identifier of a bankcard previously presented, by a respective holder of the bankcard, to the processing system, wherein the bankcard comprises one of a credit card and a debit card;
receiving, from a bankcard reader, bankcard data comprising data from a bankcard currently presented by a holder of the bankcard;
generating a hash identifier based on the bankcard data from the currently presented bankcard, wherein the hash identifier comprises a hash of at least part of the bankcard data;
determining whether the currently presented bankcard is contained in the list of bankcards;
verifying the currently presented bankcard with a bankcard verification system, if the bankcard was not contained in the list of bankcards; and
denying access, if the act of verifying the currently presented bankcard with the bankcard verification system results in a determination of an invalid bankcard.

The court found the claims to be directed to the formation of financial transactions in the field of mass transit. The court stated: “[t]he Asserted Claims are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes. Rather, the claims are directed to the collection, storage, and recognition of data.” The court also stated that the claims’ improvement on the operation of existing fare collection systems, and their limitation to the field of mass transit, did not save them from being considered an abstract idea.

Notably, in Smart Systems Innovations the court stated: “[o]ur mandate from the Supreme Court under Alice step one is to ascertain what the claims are ‘directed to,’ not the ‘thrust,’ ‘heart,’ or ‘focus’ of the invention.” The court also appeared to limit the applicability of its previous decisions in Enfish Corporation v. Microsoft LLC and DDR Holdings, LLC v. Hotels.com, L.P. to the specific “claims [that the patentee shows] are directed to an improvement in computer technology.” The court also suggested that its McRO v. Bandai NAMCO Games America, Inc. decision was limited to a particular “claimed process us[ing] a combined order of specific rules [that] improved upon existing technological processes.”

While the Federal Circuit may have reached the correct conclusions regarding the claims at issue in these two new cases, certain aspects of the court’s decisions create confusion for patent applicants and litigants who seek clarity in the Section 101 analysis. In Secured Mail Solutions, rather than asking whether the claims offered a technical solution that was significantly more than the abstract idea, the court’s analysis focused on whether the claimed steps have been done before. Thus, the court appeared to merge Section 101 with a Section 102(a) novelty analysis. In Smart Systems Innovations, the court suggested that its earlier Enfish, Microsoft and McRO decisions are limited to the specific claim terminology at issue in those cases and may not provide a general roadmap to be followed in the future.

The Federal Circuit’s case-specific, and sometimes inconsistent, interpretations of Alice leave software patent applicants, patent litigants, and USPTO Examiners with even less definitive guidance as to the patent-eligibility of software inventions than they had a few weeks ago. And with the Supreme Court’s recent decision to deny certiorari in a case that asked “Whether [a] technological breakthrough is not an inventive concept under the second step of Alice merely because the court believed the breakthrough could theoretically be implemented without a computer,” clarification from a higher authority is not likely on the horizon.

UPDATE:  In the first few days of November 2017, the Federal Circuit issued two more decisions that seem to be at odds with the earlier Enfish, Microsoft and McRO decisions.

In Two-Way Media Ltd. v. Comcast Cable Communications, LLC (Fed. Cir. Nov. 1, 2017) the court considered representative claims such as the following:

1. A method for transmitting message packets over a communications network comprising the steps of:

converting a plurality of streams of audio and/or visual information into a plurality of streams of addressed digital packets complying with the specifications of a network communication protocol,

for each stream, routing such stream to one or more users,

controlling the routing of the stream of packets in response to selection signals received from the users, and

monitoring the reception of packets by the users and accumulating records that indicate which streams of packets were received by which users,

wherein at least one stream of packets comprises an audio and/or visual selection and the records that are accumulated indicate the time that a user starts receiving the audio and/or visual selection and the time that the user stops receiving the audio and/or visual selection.

The court found that this claim “recites a method for routing information using result-based functional language…but does not sufficiently describe how to achieve these results in a non-abstract way.” The court also noted that the “claim uses a conventional ordering of steps—first processing the data, then  routing it, controlling it, and monitoring its reception—with conventional technology to achieve its desired result.”

In Intellectual Ventures i LLC v. Erie Indemnity Co. (Fed. Cir. Nov. 3, 2017), the court considered the following representative claim of U.S. Patent 7,757,298:

1. A computer-implemented method for identifying and characterizing stored electronic files, said method comprising:
under control of one or more configured computer systems:
selecting a file from a plurality of files stored in a computer storage medium, wherein selecting the file is performed according to at least one of:
selecting the file based on the size of the file by determining whether an aggregate size of plural identically-sized files exceeds a predetermined threshold;
selecting the file based on whether content of the file matches a file type indicated by a name of the file; or
selecting the file based on whether the file comprises data beyond an end of data marker for the file;
generating an identification value associated with the selected file, wherein the identification value is representative of at least a portion of the content of the selected file;
comparing the generated identification value to one or more identification values associated with one or more of a plurality of unauthorized files; and
characterizing the file as an unauthorized file if the identification value matches one of the plurality of identification values associated with the unauthorized files.

The court found that the claim was directed to the abstract idea of identification of unwanted files. Despite the patent application’s explanation that the claims were directed to solving problem of “abuse of Web server space in which users upload files that are offensive, illegal, unauthorized, or otherwise undesirable and thus wasteful of storage resource,” the court noted that the specification explained that the selection of errant files could be done by humans, although with less efficiency. The court also noted that “‘claiming the improved speed or efficient inherent with applying the abstract idea on a computer’ does not ‘provide a sufficient inventive concept.'”

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