Since the Supreme Court's decision earlier this year in Alice Corp. v. CLS Bank Int'l., 134 S.Ct. 2347 (2014), the Federal Circuit has decided a series of cases in which it invalidated software patents for failing to claim eligible subject matter under 35 U.S.C. § 101. As recently as mid-November, the Federal Circuit invalidated a patent that claimed a detailed method for providing internet content in exchange for watching an advertisement, reversing its pre-Alice ruling that the patent claimed patent-eligible subject matter. Ultramercial, Inc. v. Hulu, LLC, 2014 U.S. App. LEXIS 21633 (Fed. Cir. Nov. 14, 2014). On December 5, however, a Federal Circuit panel held in a 2-1 decision written by Judge Chen that the claims of a software patent relating to Internet e-commerce "clear the § 101 hurdle." DDR Holdings, LLC v. Hotels.com, L.P., 2014 U.S. App. LEXIS 22902 (Fed. Cir. Dec. 5, 2014), found here.
The DDR Holdings patent is directed to the problem of a "host" website losing internet traffic when a website visitor clicks on a hypertext link in an advertisement for a third-party vendor, taking the visitor to the advertiser's website, and thus away from the host website. The patent solved this purported problem by providing a composite webpage that retained the "look and feel" of the host website but displayed the products of the advertiser. When a user clicked on an advertisement, the visitor would be taken to this composite webpage, giving the visitor the impression that he or she was still on the host website, and thus allowing the host to retain its visitor traffic.
The DDR Holdings patent claims a system containing a "data store" which stores the "visually perceptible elements," i.e. the "look and feel," of several host web pages. When a website visitor activates a link in an advertisement on the host website, the claimed system identifies the host web page and transmits a composite web page using the "look and feel" of the host website and the advertiser's product information to the visitor's web browser. In essence, the claimed system does nothing more than substitute a hyperlink leading to the advertiser's website with a hyperlink leading to a composite webpage that had the "look and feel" of the host website.
The contrast between Judge Chen's majority opinion and Judge Mayer's dissent in DDR Holdings demonstrates how patent eligibility under the Alice analysis can easily turn on how a particular judge characterizes the case law and the claimed invention.
For example, in his analysis, Judge Chen cabins in the prior Supreme Court and Federal Circuit § 101 decisions by characterizing the patents in those cases as limited to "the performance of an abstract business practice on the Internet or using a conventional computer." Those cases, Judge Chen asserts, claimed abstract ideas that are "plainly identifiable and divisible from the generic computer limitations recited by the remainder of the claim." The claims in those cases, Judge Chen asserts, "were recited too broadly and generically to be considered sufficiently specific and meaningful applications of their underlying abstract ideas." Thus, Judge Chen appears to conclude that an invention is patent eligible as long it is a "specific and meaningful application" of an abstract idea.
In contrast to prior cases which merely claimed "performance of an abstract business practice on the Internet," Judge Chen characterizes the DDR Holdings patent as "a challenge particular to the Internet." The claims of the DDR Holdings patent, Judge Chen concludes, "stand apart because they do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet. Instead the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks." The DDR Holdings patent, Judge Chen asserts, overcomes a problem created by "the routine, conventional functioning of Internet hyperlink protocol" that is not comparable to similar concepts used in the "brick and mortar" context.
Judge Mayer's dissent, on the other hand, reaches the opposite conclusion by characterizing the DDR Holdings patent as directed to the goal of "confusing consumers by making two web pages look alike" and "long on obfuscation but short on substance." Much of the patent's disclosure, Judge Mayer asserts, "is so rudimentary that it borders on the comical" with generic computer limitations and "conventional elements long-used in e-commerce." One of the defendants, in fact, previously sold products through displays inside BJ's Wholesale Clubs. Just as customers at BJ's Wholesale Clubs could purchase the defendant's products without leaving the BJ's warehouse, the claimed system allows a website user to purchase an advertiser's products without knowing that he or she has left the host website. Further, Judge Mayer notes, one of the inventors acknowledged that the innovative aspect of the claimed invention consisted of taking something that worked in the real world and doing it on the Internet.
In the end, Judge Chen's distinction between Internet-created problems whose solutions are patent-eligible and pre-Internet business practices that are patent-ineligible does not withstand scrutiny. For one, several of the Federal Circuit's post-Alice § 101 decisions , particularly Ultramercial and buySAFE v. Google, 765 F.3d 1350 (Fed. Cir. 2014), involved patents that claimed specific solutions to problems that were unique to the Internet. What is more, as Judge Mayer noted in his dissent, the Supreme Court has repeatedly rejected the idea that limiting inventions to a particular technological environment, like the Internet, confers patent eligibility. Judge Mayer also effectively argues that the Supreme Court has rejected the notion that claims are patent eligible if they disclose a specific solution to a problem.
Once the technological environment of the problem solved by the DDR Holdings patent and the specific nature of the solution to that problem are set aside, Judge Chen's analysis collapses. What is left is only the practice of the abstract idea of giving website visitors the impression that they remain on a host website after they have left that website implemented using conventional computer technology.
Judge Mayer's analysis, which relies on a distinction between "technological" and "entrepreneurial" inventions, is more in line with the Federal Circuit and District Court cases addressing patent eligibility since Alice. As he did in his concurrence in Ultramercial, Judge Mayer advocates the position that Alice "articulated a technological arts test for patent eligibility. This "technological arts standard" distinguishes between inventions rooted in technology from solutions that are "entrepreneurial." An "entrepreneurial" invention is one that takes existing information and uses conventional technology to organize the information in a new form. The "broad and sweeping reach" of such inventions is "vastly disproportionate to their minimal technological disclosure" and so
Judge Chen's opinion is not likely to be the last word in the DDR Holdings case. Judge Mayer notes that DDR Holdings has brought numerous additional infringement actions against e-commerce companies, and Patently-O predicts in its analysis of the case, that there will be a strong push for en banc review and certiorari.
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