Amdocs (Israel) Ltd. v. Openet Telecom, Inc., No. 2015-1180 (Fed. Cir. Nov. 1, 2016)

In a recent case, the U.S. Court of Appeals for the Federal Circuit revisited the vexing problem of assessing patent eligibility for computer-related technologies. The court ruled that four patents claiming systems and methods used to collect data from a network and filtering and aggregating the data for use in billing for Internet communication services all claimed eligible subject matter under 35 U.S.C. § 101 because the claimed inventions were not directed to abstract ideas and, in any event, recited inventive concepts. The case may signal a broadening of the eligibility rationale adopted by the court in DDR Holdings, LLC v. Hotels.com, LP, 773 F.3d 1245 (Fed. Cir. 2014), and suggests strategies for drafting patent applications to address anticipated eligibility issues.

Background

Amdocs (Israel) Ltd. filed suit in the U.S. District Court for the Eastern District of Virginia alleging that Openet Telecom, Inc. and other defendants infringed four patents: U.S. No. 7,631,065, U.S. Patent No. 7,412,510, U.S. Patent No. 6,947,984, and U.S. Patent No. 6,836,797. The patents all describe and claim distributed systems of software and components operating over a computer network that solve the accounting and billing problem faced by network service providers in charging users for services based on their amount and type of network usage. For example, the'065 patent is directed to "a system, method, and computer program for merging data in a network-based filtering and aggregating platform as well as a related apparatus for enhancing networking accounting data records." Slip op. at 3.

Following the Supreme Court's decision in Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014), the district court granted Openet's motion for judgment on the pleadings, ruling that the asserted claims in the four patents were patent-ineligible abstract ideas. Amdocs appealed to the Federal Circuit.

Federal Circuit Rules that Patents Are Eligible

In a divided panel opinion written by Senior Circuit Judge Plager, the appeals court reversed the district court and ruled that all four Amdocs patents claimed eligible subject matter under Section 101.

The court applied the now-familiar Alice/Mayo framework for assessing patent-eligibility to each of the Amdocs patents. Under that framework, if the claims at issue recite a process, machine, manufacture, or composition of matter, the court determines in a first step whether they are directed to a judicially-established exception, such an as abstract idea, natural phenomenon, or law of nature. In that event, the court performs a second step of dissecting the "elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application." Slip op. at 8 (quotation omitted).

As to the first step of the Alice/Mayo framework, the appeals court noted that although a court must identify whether the claims at issue are directed to an abstract idea, "a search for a single test or definition in the decided cases concerning § 101 from this court, and indeed from the Supreme Court, reveals that at present there is no such single, succinct, usable definition or test." Slip op. at 9. Rather than attempting to fashion a working definition for an abstract idea, the court compared the technology claimed in the Amdocs patents with the inventions in earlier cases considering whether patents were directed to abstract ideas. The cases discussed included Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014); Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat'l Ass'n, 776 F.3d 1343 (Fed. Cir. 2014); In re TLI Commc'ns LLC Patent Litig., 823 F.3d 607 (Fed. Cir. 2016); DDR Holdings, 773 F.3d at 1257; and BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341 (Fed. Cir. 2016).

Turning first to the '065 patent, the court concluded that the claimed invention was not directed to an abstract idea. The court noted that the claims were "much closer" to those in BASCOM and DDR Holdings, where the court found that the claimed inventions were not abstract ideas, than to those in Digitech, Content Extraction, and In re TLI Commc'ns, where the claims were found to be abstract.

An important issue in the majority decision was the court's construction of the claimed invention. In an earlier appeal, a different Federal Circuit panel had relied on the patent specifications in construing the claims to require a "number of field enhancements in a distributed fashion." The court noted that the distributed enhancement was an "unconventional technological solution" to a technical problem, and thus was not an abstract idea:

As explained by the patent, this distributed enhancement was a critical advancement over the prior art. . . .  [T]his claim entails an unconventional technological solution (enhancing data in a distributed fashion) to a technological problem (massive record flows which previously required massive databases). The solution requires arguably generic components, including network devices and "gatherers" which "gather" information. However, the claim's enhancing limitation necessarily requires that these generic components operate in an unconventional manner to achieve an improvement in computer functionality.

Slip op, at 22. Unlike the claims found to be abstract in other cases, including Digitech, the appeals court noted that the claims of the '065 patent were:

[T]ied to a specific structure of various components (network devices, gatherers, ISMs, a central event manager, a central database, a user interface server, and terminals or clients). It is narrowly drawn to not preempt any and all generic enhancement of data in a similar system, and does not merely combine the components in a generic manner, but instead purposefully arranges the components in a distributed architecture to achieve a technological solution to a technological problem specific to computer networks.

Slip op. at 24. In addition, the court noted that even if the '065 claims were considered to be abstract, they would be eligible under the second step of the Alice/Mayo framework because the claims recite a sufficient "inventive concept." "[E]ven though the system in the '065 patent relies upon some arguably generic limitations, when all limitations are considered individually and as an ordered combination, they provide an inventive concept through the use of distributed architecture." Id. at 25. Thus, the court found that the '065 patent claimed inventions that were patent-eligible.

The court then applied the Alice/Mayo framework to the three other Amdocs patents with similar results. For example, in connection with the '510 patent, the court used an approach announced in BASCOM by passing over step one of the Alice/Mayo test, and ruling that regardless if the claims were directed to an abstract idea in Alice/Mayo step one, the claims satisfied step two. It noted that the claims' recited steps of:

[C]ollection, filtering, aggregating, and completing (including enhancing) steps all depend upon the system's unconventional distributed architecture. While some individual limitations arguably may be generic, others are unconventional and the ordered combination of these limitations yields an inventive concept sufficient to confer eligibility without undue preemption. The claim recites a technological solution to a technological problem specific to computer networks—an unconventional solution that was an improvement over the prior art. The claim is therefore more similar to the eligible claims in DDR Holdings and BASCOM than the ineligible claims in Digitech, Content Extraction, and In re TLI Commc'ns.

Slip op. at 28. Thus, the court reversed the district court's judgment of invalidity as to all patents.

In a dissenting opinion, Circuit Judge Reyna raised two primary objections to the majority's approach. First, he criticized the majority's application of the Alice/Mayo framework. He argued that the majority approach was contrary to the Supreme Court cases, because it "avoids determining whether the asserted claims are directed to an abstract idea, or even identifying what the underlying abstract idea is." Rather than determining whether a claim is directed to an abstract idea by comparing and contrasting the claims to other cases, Reyna proposed a specific test:

Based on the Supreme Court's use of the abstract idea exception, it is apparent that a desired goal (i.e., a "result or effect"), absent structural or procedural means for achieving that goal, is an abstract idea. Not every abstract idea is naturally phrased as a goal, and indeed, the Supreme Court has treated somewhat disparate ideas, such a "mathematical formula," Gottschalk v. Benson, 409 U.S. 63, 71 (1972), and a "fundamental economic practice," Bilski v. Kappos, 561 U.S. 593, 611 (2010), under the abstract idea rubric. Nevertheless, long-standing Supreme Court precedent clearly establishes that a desired goal without means for achieving that goal is an abstract idea.

Dissent, at 6-7. Based on that working definition, Reyna argued that the claims of the '065,' 984, and '797 patents were ineligible, but that the '510 patent was patent-eligible. Writing for the majority, Judge Plager dismissed Judge Reyna's proposed test for abstractness, stating that, "We commend the dissent for seeking a creative way of incorporating aspects of well-known doctrine in the search for what is an 'abstract idea,' but that is not now the law, either in statute or in court decision."

Second, Judge Reyna argued that the majority's eligibility analysis was erroneous because it relied on a construction of the claimed inventions that relied on statements in the specification, not language in the claims:

The majority also relies on the specification to import innovative limitations into the claims at issue. For each of the four patents at issue, the majority's eligibility determination rests on the use of a "distribution architecture." . . . [H]owever, this limitation is insufficient to satisfy Alice step two. Indeed, that limitation does not exist in all of the claims at issue. This contravenes the fundamental principal that the section 101 inquiry is about whether the claims are directed to a patent-eligible invention, not whether the specification is so directed.

Dissent, at 2.

Practical Significance:

The Amdocs decision is likely to assist patentees arguing that claims directed to systems and processes implemented in computer environments are eligible under Section 101, even if the claims recite mainly software and components known in the art. The case joins DDR Holdings and BASCOM as finding such an invention to be eligible if it provides a technological solution to a technological problem specific to the computer environment, and thereby improves the computer's function or operation.

The Amdocs decision reinforces the point that it is essential for patentees to clearly articulate a technical problem in the specification and to demonstrate that the claimed invention provides a technical solution to the noted problem.

The Amdocs patents were notable because the specifications contained a detailed description of the technical aspects of the inventions and how they specifically related to the technical problem that the inventions solved. The Federal Circuit relied on the extensive disclosure of a distributed solution in identifying the claimed invention. The case is an example of the value of "selling the invention" in the specification, and shows that the effort invested in stressing the technical advantages of the invention may be rewarded in any Alice/Mayo eligibility analysis.

Furthermore, Amdocs demonstrates that even though the claimed elements each may be separately known in the art, a software invention may be patent-eligible so long as the ordered combination of the claimed elements provides an inventive concept. That is, the invention is patent-eligible if the ordered combination of elements provides something more than routine or conventional aspects in the computer, and an improvement can be directly linked to the ordered combination. Amdocs requires an analysis into how the claimed features are arranged in combination and whether the ordered combination of claimed elements as a whole provides something that is inventive in view of a technical problem.

Finally, as in BASCOM, the Amdocs decision suggests that if the ordered combination of recited elements constitutes an inventive concept, then a court need not resolve whether the claim is directed to an abstract idea or other judicially-excluded subject matter. In other words, the Alice/Mayo steps may be applied in either order.

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