Federal Circuit and USPTO Turn Corner on Software Patent Eligibility

In May 2016, the U.S. Court of Appeals for the Federal Circuit decided Enfish, LLC v. Microsoft Corp and TLI Communications LLC v. A.V. Automotive. These decisions, along with related guidance from the U.S. Patent and Trademark Office (USPTO), may help clarify the law of software patent eligibility.

The law regarding patent eligibility of software has been unclear, and in many cases, patents on inventions previously thought to be protectable have been invalidated. For example, after the Alice decision of 2014, more than 70% of motions to invalidate patents under the Alice decision were granted.

Alice sets forth a two-step test for evaluating the patent eligibility of a claim. The first step is determining whether the claim is directed to an abstract idea. If the claim is not directed to an abstract idea, the claim is patent eligible, and the inquiry ends. If the claim is directed to an abstract idea, the second step is determining whether the claim elements amount to significantly more than the abstract idea, in which case the claim is patent eligible.

In 2012, Enfish sued Microsoft for infringement of two patents with claims directed to self-referential tables in a computer database. Microsoft filed for summary judgment, arguing the patents were ineligible as being directed to abstract ideas. The district court agreed, and Enfish appealed. On May 12, 2016, the Federal Circuit reversed its decision, noting that step one of the Alice test should assess whether the focus of the claims is on a specific improvement of an existing technology, as compared to merely applying computer components to well-known business practices. Following this guidance, the Federal Circuit found that the claims at issue do indeed focus on an improvement to computer functionality and are therefore patent eligible.

The Federal Circuit noted that the specification emphasized the particularity of the claimed invention and clearly explained the invention’s improvements over the prior art. The Federal Circuit also differentiated the claims from other claims previously found to be directed to abstract ideas that merely added conventional computer components to well-known business practices (for example, those in Alice and Versata Dev. Grp. v. SAP America). Significantly, for software inventions, the Federal Circuit found that claims may be patent eligible even when the claim limitations are not defined by reference to physical components. In particular, the Federal Circuit stated, “[m]uch of the advancement made in computer technology consists of improvements to software that, by their very nature, may not be defined by particular physical features but rather by logical structures and processes.” The Federal Circuit also admonished the district court for describing the claims “at such a high level of abstraction” and “untethered from the language of the claims,” noting that such description “all but ensures that the exceptions to § 101 swallow the rule.”

In a parallel case, TLI sued A.V. Automotive, et al. for patent infringement in 2014 over claims directed to recording, storing and administering digital images using a telephone unit. The district court dismissed the complaint, finding that the asserted patent fails to claim patent eligible subject matter. On May 17, 2016, the Federal Circuit affirmed. In step one of the Alice test, the Federal Circuit concluded that the claims were directed to “the abstract idea of taking, organizing, classifying, and storing photographs.” Continuing to step two, the Federal Circuit concluded that the additional claim elements of a telephone unit and a server do not add significantly more to the abstract idea because “they merely provide a generic environment in which to carry out the abstract idea.” In its opinion, the Federal Circuit differentiates the asserted claims from the claims at issue in Enfish by noting that the asserted claims “are not directed to a specific improvement to computer functionality.” In addition, the Federal Circuit noted the asserted claims “are directed to the use of conventional or generic technology in a nascent but well-known environment, without any claim that the invention reflects an inventive solution to any problem presented by combining the two.” The Federal Circuit noted that, in contrast to Enfish, “[t]he specification fails to provide any technical details for the tangible components, but instead predominately describes the system and methods in purely functional terms.”

Following these decisions, on May 19, 2016, Robert Bahr, Deputy Commissioner for Patent Examination Policy at the USPTO, issued a memorandum to the Patent Examining Corps. In the memorandum, Bahr explains that Enfish “provides additional information and clarification . . . for identifying abstract ideas.” Bahr notes that the Enfish decision is consistent with previous guidance issued by the USPTO. In particular, he points to the Federal Circuit’s caution in Enfish “against describing a claim at a high level of abstraction untethered from the language of the claim when determining the focus of the claimed invention,” and the Federal Circuit’s finding that “an invention’s ability to run on a general purpose computer does not automatically doom the claim.” Bahr also instructs that “an examiner may determine that a claim directed to improvements in computer-related technology is not directed to an abstract idea under [step one] of the subject matter eligibility examination guidelines (and is thus patent eligible), without the need to analyze the additional elements under [step two].” Bahr concludes by instructing that “examiners are to continue to determine if the claim recites (i.e., sets forth or describes) a concept that is similar to concepts previously found abstract by the courts. The fact that a claim is directed to an improvement in computer-related technology can demonstrate that the claim does not recite a concept similar to previously identified abstract ideas.”

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