In Aatrix Software, Inc. v. Green Shades Software, Inc., [2017-1452] (June 1, 2018), the Federal Circuit denied rehearing and rehearing en banc of the panel decision.  Judge Moore, concurring, explained that Aatrix stands for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.  As this is a factual question, the normal procedural standards for fact questions must apply, including the rules in the Federal Rules of Civil Procedure applicable to motions to dismiss or for summary judgment and the standards in the Federal Rules of Evidence for admissions and judicial notice.

Turning to the case at hand, Judge Moore noted that when patent eligibility is challenged in a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6),
the Court must apply the well-settled Rule 12(b)(6) standard which is consistently applied in every area of law: A motion to dismiss for failure to state a claim must be
denied if “in the light most favorable to the plaintiff and with every doubt resolved in the pleader’s favor—but disregarding mere conclusory statements—the complaint states any legally cognizable claim for relief.”  Judge Moore noted that the second amended
complaint in Aatrix included “concrete allegations . . . that individual elements and the claimed combination are not well-understood, routine, or conventional activity” and that nothing in the limited record at the Rule 12(b)(6) stage refuted these allegations, so there was no legal basis to affirm the dismissal of the complaint.

In Two-Way Media Ltd. v. Comcast Cable Communications, LLC, [2016-2531, 2016-2532] (November 1, 2017), the Federal Circuit affirmed the district court’s determination that the asserted patents were directed
to patent ineligible subject matter under 35 U.S.C. § 101.

At issue were claims of U.S. Patent Nos. 5,778,187,  5,983,005, 6,434,622, and 7,266,686 on a “Multicasting Method and Apparatus,” and generally relate to a system for streaming audio/visual data over a communications system like the internet.  The district court denied the patent owner’s request to take judicial notice of materials from prior procedings relating to the novelty and non-obviousness of the invention, saying that the novelty and nonobviousness of the claims under 35 U.S.C. §§ 102 and 103 does not bear on whether the claims are directed to patent-eligible subject matter under §101.

The district court found that the ‘187 and ’005 patents were directed to the abstract idea of (1) sending information, (2) directing the sent information, (3) monitoring receipt of the sent information, and (4) accumulating records about receipt of the sent information. The claims are thus directed to methods of sending and monitoring the delivery of audio/visual information, and did not recite a saving inventive
concept under Alice step two.  The district court also determined that the ’622 patent was directed to the abstract idea of monitoring the delivery of real-time information to a user or users, and the ’686 patent was directed to the abstract idea of measuring the delivery of real-time information for commercial purposes, and the claims contained no saving inventive concept because although they recited some
computer components, they required only ordinary functionality
of these components.

Regarding the ’187 and ’005 patents, the Federal Circuit said that under Alice Step I the claims are considered in their entirety to ascertain whether their character as a whole is directed to excluded subject matter.  The Federal Circuit added that claims directed to generalized steps to be performed on a computer using conventional computer activity are not patent eligible. The Federal Circuit disagreed with Two-Way Media argument that the district court erred by oversimplifying the claim and ignoring claim limitations present in its proposed constructions.  The Federal Circuit said that the claims required the functional results of “converting,” “routing,” “controlling,” “monitoring,” and “accumulating records,” but did not sufficiently describe how to achieve these results in a non-abstract way. The Federal Circuit further found Two-Way’s constructions merely propose the use of generic  computer components to carry out the recited abstract idea.

At Alice Step II, the Federal Circuit considered the elements of the
claim, both individually and as an ordered combination, to assess whether the additional elements transform the nature of the claim into a patent-eligible application of the abstract idea.  Merely reciting the use of a generic computer or adding the words “apply it with a computer” cannot convert a patent-ineligible abstract idea into a patent eligible
invention.  To save the patent at Step II, an inventive concept must be evident in the claims, and the Federal Circuit said that Two-Way Media could not overcome that the claim — as opposed to something purportedly described in the specification — is missing an inventive concept.

Regarding the ’622 and ’686 patents, at Step I the Federal Circuit rejected Two-way’s argument that the district court erred by  oversimplifying the claims down to merely their preamble and failing to recognize the claims solve technical problems.  The Federal Circuit saw no error here in the district court citing to the preamble in its review of whether the claims are directed to an abstract idea, citing BASCOM and Elec. Power Grp.  The Federal Circuit further agreed that the claims suffered from the same infirmities as the claims of the first two patents.

At Step II, the Federal Circuit agreed with the district court that nothing in these claims requires anything other than conventional computer and network components operating according to their ordinary functions. The Federal Circuit further did not find any inventive concept in the ordered combination of these steps.

In Smart Systems Innovations, LLC v. Chicago Transit Authority, [2016-1233] (October 18, 2017), the Federal Circuit affirmed the district court’s judgment on the pleadings that the asserted claims of U.S. Patent Nos. 7,566,003, 7,568,617, 8,505,816, and 8,662,390, relating to regulating entry in a transit system using information from a bankcard, were patent ineligible.

The claims of the patent were directed to “a method for validating entry into a first transit system using a bankcard terminal,” “a method of funding transit rides associated with at least one public transit network, from a plurality of funding sources,” and “a method of using a bank card as an identifying token for time-based mass transit fare products,
without using writeable memory on the bank card.”

The district court held that “[s]tripped of the technical jargon that broadly describes non-inventive elements (e.g., the ‘interfaces’ and ‘processing systems’), and further shorn of the typically obtuse syntax of patents, the patents here really only cover an abstract concept: paying for a subway or bus ride with a credit card.”  The district court further found that “the recent case law has reiterated that whatever bells and whistles may be added, when reduced to their core, claims directed to the performance of certain financial transactions—and paying a fare is a financial transaction—must be categorized as
involving abstract ideas.”

The Federal Circuit agreed with the district court, finding that taken together, the Asserted Claims are directed to the formation of financial transactions in a particular field (i.e., mass transit) and data collection
related to such transactions. The Asserted Claims were 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.

The Federal Circuit rejected the argument that the Asserted Claims are patent eligible because they improve prior systems of fare collection
by speeding up the process at the turnstile.  The Federal Circuit found that this was not an improvement in computer technology (as in DDR Holdings), but merely the use of computers as a tool. The Federal Circuit further found that the claims were not directed to a combined order of specific rules that improve any technological process (as in McRo), but rather invoke computers in the collection and arrangement of data. Finally the Federal Circuit rejected the arguments that the claims applied to a particular concrete field, saying that merely limiting the field of use of the abstract idea to a particular environment does not
render the claims any less abstract.

Agreeing with the district court that the claims are directed to an abstract idea at step 1, the Federal Circuit turned to step 2.  The district court held that invoking various computer hardware elements,
which save time by carrying out a validation function on site rather than remotely, does not change the fact that in substance, the claims are still directed to nothing more than running a bankcard sale—that is, the performance of an abstract business practice, and the Federal Circuit agreed.  The Federal Circuit distinguished Diehr because the claims at issue merely use generic computer components in which to carry out the abstract idea.  The Federal Circuit distinguished DDR Holdings because the asserted claims do not attempt to solve a challenge
particular to the Internet.

In dissent Judge Linn,  arguing that the majority engaged a reductionist exercise of ignoring the limitations of the claims in question, would have found the claims in two of the patents patent-eligible, but finding that the analysis with respect to the remaining two patents “consistent with past decisions finding ineligibility” reluctantly concurred because he was bound by precedent to reach that conclusion.

Judge Linn explained that the three nonstatutory exceptions to patentability are intended to foreclose only those claims that preempt and thereby preclude or inhibit human ingenuity with regard to basic building blocks of scientific or technological activity. He said they are intended to be read narrowly.  He observed that the contours of the abstract idea exception are not easily defined, and for that reason, the abstract idea exception is “almost impossible to apply consistently and coherently.”

Of the Alice test, Judge Linn said:

The problem with this test, however, is that it is indeterminate and often leads to arbitrary results. Moreover, if applied in a legal vacuum divorced from its genesis and  treated differently from the other two exceptions, it can strike down claims covering meritorious inventions not  because they attempt to appropriate a basic building block of scientific or technological work, but simply because they seemingly fail the Supreme Court’s test.

In particular, Judge Linn took exception to Step 1 of the Alice Test:

Step one cannot be a hunt for the abstract idea underlying the claim, because underlying virtually every claim is an abstract idea. And if the task under step one is to assess whether the claim is directed to no more than an abstract idea, what is left for determination under step two? Where do you draw the line between properly determining what the claim is directed to and improperly engaging in an overly reductionist exercise to find the abstract idea that underlies virtually every claim?

In particular Judge Linn says that individual claim limitations
cannot be ignored. By virtue of their inclusion in the claims, every limitation warrants some consideration as to the role it plays in reciting the invention.  He said that it is also important to read the claims “in light of the specification.  Ultimately, the fundamental question in “abstract idea” cases is whether the claim is directed to such a basic
building block of scientific or technological activity as to foreclose or inhibit future innovation or whether the claim instead is directed to a tangible application that serves a new and useful end.

Judge Linn concluded that claims directed not merely to basic building blocks of scientific or technological activity but instead to innovative solutions to real problems that result from human activity and are not capable of performance solely in the human mind should be fully eligible for patent protection and not lightly discarded.

Judge’s Linn’s dissent correctly reveals that Alice’s Step 1, or at least the way that it is applied, does not correctly reveal whether a claim is directed to unpatentable subject matter.   Rather “it is indeterminate
and often leads to arbitrary results.”  He points out that claims to meritorious inventions are struck down “not because they attempt to appropriate a basic building block of scientific or technological work, but simply because they seemingly fail the Supreme Court’s test.”

Judge Linn is not the first to make these points, but his articulate and well reasoned dissent is like a shout — Alice isn’t wearing any clothes.  The question remains: will the rest of us stand around and gasp, or actually do something about it?

In Secured  Mail Solutions LLC v. Universal Wilde, Inc., [2016-1728](October 16, 2017), the Federal Circuit affirmed the grant of a motion to dismiss on the grounds that U.S. Patent Nos. 7,814,032, 7,818,268, and 8,073,787 (the “Intelligent Mail Barcode” patents), U.S. Patent Nos. 8,260,629 and 8,429,093 (the “QR Code” patents), and U.S. Patent Nos. 8,910,860 and 9,105,002 (the “Personalized URL” patents) are directed to subject matter ineligible for patenting under 35 U.S.C. § 101.

The Intelligent Mail Barcode patents recite a method for verifying the authenticity of the mail object. The identifier or barcode is a single set of encoded data that is generated by concatenating a sender-assigned unique identifier with sender data, recipient data, and shipping
method data.  The barcode is affixed to the outside of the mail object and an authenticating portion of the barcode is stored in a database. The
recipient of the mail object can access the database and use that authenticating portion to verify that a mail object is authentic.

The QR Code patents, require that the identifier is a QR code (two-dimensional barcode) which a user can scan to look up additional electronic information related to the mail object. Specifically, the barcode includes data that allows the recipient of the mail object to request data
directly from the sender and allows the sender to provide personalized data directly to the recipient, without the involvement of the mail carrier.

The Personalized URL patents are similar to the QR Code patents, except the identifier is a personalized network address, or URL. For example, the
user can type the URL into her web browser and be directed straight to a specific account, or to other personalized information.

The Federal Circuit rejected Secured Mail’s argument that the district court described the invents at too high a level of abstraction at Step 1 of the Alice inquiry.  The Federal Circuit noted that despite the district court’s statement that “a reasonably high level of generality” should be used, the district court’s analysis correctly found that Secured Mail’s claims are directed to an abstract idea.

The Federal Circuit distinguished Enfish, noting that Secured Mail’s
patents are not directed to an improvement in computer functionality — the were not directed to a new barcode format, an improved method of generating or scanning barcodes, or similar improvements in computer
functionality.

The Federal Circuit rejected Secured Mail’s argument that S the claims are specifically directed to a sender-generated unique identifier, which  improved on the existing process both by reliably identifying the sender of the mail object and by permitting the sender to create a bi-directional communication channel between the sender and recipient of the mail object. The Federal Circuit found that the fact that an identifier can be used to make a process more efficient, however, does not necessarily render an abstract idea less abstract.

The Federal Circuit noted that the claims of the Intelligent Mail Barcode patents are not directed to specific details of the barcode or the equipment for generating and processing it. The claims generically provide for the encoding of various data onto a mail object but do not set out how this is to be performed.  The Federal Circuit noted that in contrast to McRO and Thales, no special rules or details of the computers, databases, printers, or scanners are recited.  The Federal Circuit noted that there is no description of how the unique identifier is generated or how a unique identifier is different from a personal name, or return address. Rather, the claim language cited by Secured Mail merely recites that the unique identifier is generated by the sender.

The QR Code patents fared no better. The Federal Circuit noted taht their claims were not limited to any particular technology of generating, printing, or scanning a barcode, of sending a mail object, or of sending the recipient specific information over a network. Rather, the Federal Circuit found that each step of the process is directed to the abstract process of communicating information about a mail object using a personalized
marking.

Lastly, the Federal Circuit found that the Personalized URL patents are directed to the same abstract idea as the QR Code patents.

The Federal Circuit concluded:

The claims of the three sets of patents are not limited by rules or steps that establish how the focus of the methods is achieved. Instead, the claims embrace the abstract idea of using a marking affixed to the outside of a mail object to communicate information about the mail  object, i.e., the sender, recipient, and contents of the mail object. Because the claims are directed to an abstract idea, we turn to the second step of the Alice inquiry.

At step 2 of Alice, the Federal Circuit rejected Secured Mail’s argument that the district court erred by failing to search for an inventive concept, and instead only asking whether the underlying technology were conventional.  The Federal Circuit said that the claims in Secured Mail’s
patents are non-specific and lack technical detail. Rather than citing a specific way to solve a specific problem as in DDR, the asserted claims cite well known and conventional ways to allow generic communication between a sender and recipient using generic computer technology.  The Federal Circuit pointed out that the patents themselves admit that the technologies were well known, describing them as “generally known to those skilled in the art.”

The Federal Circuit affirmed the district court’s invalidation of all seven patents.

In Visual Memory LLC v. NVIDIA Corp., [2016-2254](August 15, 2017), the Federal Circuit reversed the district court’s determination that Visual
Memory’s U.S. Patent No. 5,953,740, on a memory system with programmable operational characteristics that can be tailored for use
with multiple different processors, was drawn to patent ineligible subject matter.

Claim 1 states:

   1. A computer memory system connectable to a processor and having one or more programmable operational characteristics, said characteristics
being defined through configuration by said computer based on the type of said processor, wherein said system is connectable to said processor
by a bus, said system comprising:
a main memory connected to said bus; and
a cache connected to said bus;
wherein a programmable operational characteristic of said system determines a type of data stored by said cache.

The Federal Circuit said that the framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts comprises two steps.  The first step requires courts to determine whether the claims at issue are directed to one of those patent-ineligible concepts.  If they are, the court must then analyze whether the claim elements, either individually or as an ordered combination, contain an “inventive concept” that transforms the nature of the claim into a patent-eligible application.

At step one, the Federal Circuit asked whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.  Analogizing to Enfish (self-referential table for a computer
database) and Thales (unique configuration of inertial sensors), the Federal Circuit  found that the claims were directed to an improved computer memory system, not to the abstract idea of categorical data storage.

The Federal Circuit noted the many benefits explained in the specification; the elimination of the one-size-fits-all approach of the prior art, which resulted in trade-offs; interoperability with multiple different processors; and improved performance over prior art systems with even larger caches.  The Federal Circuit said that the claims were directed a technological improvement: an enhanced computer memory system.  The Federal Circuit said this was not a case where the claims merely recite the “use of an abstract mathematical formula on any general purpose computer,” “a purely conventional  computer implementation of a mathematical formula,” or “generalized steps to be performed on a computer using conventional computer activity.”

The Federal Circuit went on to distinguish Content Extraction which merely employed a computer, and TLI Communications which used conventional hardware and were “not directed to a specific improvement to computer
functionality.”

The opinion addressed the dissent’s contention that the claimed programmable operational characteristic is “nothing more
than a black box” by pointing out there was a microfiche appendix of computer code, that enablement was a §112 issue not a §101 issue, and finally by pointing out that the innovative effort was not in the programminer required, but in the creation of the memory system.

The Federal Circuit conceded that the concept of categorical data storage underlies the patent’s claims, but said that this is not enough to doom a claim under § 101 because the claims are not so limited, and “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature,
natural phenomena, or abstract ideas.”  The Federal Circuit ended the inquiry at Step 1 and remanded the case.

In the end the finding of patentable subject matter was 2 judges for and 2 judges (the dissent and the district court judge) against.  If only all patentability determinations were as certain as 50-50.

The AIPLA has proposed a new Section 101:

35 U.S.C. § 101—Inventions Patentable

(a) Eligible Subject Matter.—Whoever invents or discovers any useful process, machine, manufacture, composition of matter, or any useful improvement thereof, shall be entitled to a patent therefor, subject only to the conditions and requirements set forth in this title.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

(c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

This proposed version of 101 would eliminate the “abstract idea” exception created by the Supreme Court, and which the courts have been unwilling (and unable) to properly define, and which has denied protection to inventors or novel and useful computer related inventions.

It is about time that the patent bar solved the patentability problem it created.  Hopefully this proposal or something similar will end the  tyranny that is the Alice v. CLS.