United States: Data Transmission And Storage Invention Held Not Patent Eligible; Telephone Not Specialized Machine

Background

In Cyberfone Systems, LLC v. CNN Interactive Group, Inc.,1 the Federal Circuit held a telephone/transaction entry device used to enter transaction data into databases was ineligible subject matter for a patent. The Federal Circuit explained that the claimed device merely used the well-known concept of collecting information in classified form, then separating and transmitting that information according to its classification. The Federal Circuit also reasoned that the claimed process of sending exploded data transactions over a channel was insufficient to meet the transformation prong of the patent eligibility test, and the claimed telephone that obtained data only when in an unclaimed mode of operation and which could be a range of different machines was not considered a particular machine.

Cyberfone Systems, LLC ("Cyberfone") was the assignee of U.S. Patent No. 8,019,060 ("the '060 patent"). The '060 patent related to methods and a system for capturing and storing data. In September 2011, Cyberfone sued eighty-one defendants, alleging, inter alia, infringement of the '060 patent. In May 2012, multiple defendants moved for summary judgment on the ground that the '060 patent claimed unpatentable subject matter under 35 U.S.C. § 101.2

Representative claim 1 asserted:

1. A method, comprising:

obtaining data transaction information entered on a telephone from a single transmission from said telephone;

forming a plurality of different exploded data transactions for the single transmission, said plurality of different exploded data transaction[s] indicative of a single data transaction, each of said exploded data transactions having different data that is intended for a different destination that is included as part of the exploded data transactions, and each of said exploded data transactions formed based on said data transaction information from said single transmission, so that different data from the single data transmission is separated and sent to different destinations; and

sending said different exploded data transactions over a channel to said different destinations, all based on said data transaction information entered in said single transmission.3

Thus, the method steps required obtaining data, "exploding" the data, i.e., separating it into component parts, and sending those parts to different destinations. The district court found that the subject matter of the '060 patent was "nothing more than a disembodied concept of data sorting and storage" and granted summary judgment of invalidity under 35 U.S.C. § 101.4

The Federal Circuit's Decision

On appeal, the Federal Circuit affirmed. The Federal Circuit noted that the Supreme Court has offered guidance on patentable subject matter, including the establishment of a bar on patenting "laws of nature, natural phenomena, and abstract ideas."5 The Supreme Court has also held that "[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right."6 The Federal Circuit stated that, under Supreme Court precedent, basic tools of scientific and technological work are also not patentable.7

The Federal Circuit also noted that in Bilski, the Supreme Court rejected claims that sought to patent the fundamental economic practice of hedging, on the basis that those claims were merely well-established concepts and therefore were unpatentable as abstract ideas.8 The Federal Circuit stated that claim 1, like the unpatentable claims in Bilski, involved abstract ideas. "Like protecting against risk, using categories to organize, store, and transmit information is well-established," the Federal Circuit said after examining claim 1.9 As the Federal Circuit explained:

Here, the well-known concept of categorical data storage, i.e., the idea of collecting information in classified form, then separating and transmitting that information according to its classification, is an abstract idea that is not patent-eligible.10

Cyberfone argued that the patent was not directed to abstract ideas because a human, unaided by devices, would not be able to perform all of the recited steps. This, the Federal Circuit said, was a misunderstanding of the applicable standard. Although it acknowledged that methods that can be performed by the human mind alone are not patentable, it also stated that "the category of patent-ineligible abstract ideas is not limited to methods that can be performed in the human mind."11

The Federal Circuit noted, however, that determining when an abstract idea is ineligible subject matter is just the first step in the process. The second step requires the court to assess whether, through "'additional substantive limitations'" the patentee has been able to "'narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.'"12

Cyberfone argued that claim 1was sufficiently limited by the machinery that it required and the transformations that were performed.13 The Federal Circuit explained that although it has held that a process that is either tied to a particular machine or apparatus or transforms an article into a different state can be patent-eligible, in such a scenario, the machine or apparatus must be pivotal to permitting the claimed method to be performed. The Federal Circuit remarked that it is not enough for the computer to merely implement an abstract concept, without imposing any meaningful limitations on that concept.14

Turning to claim 1, the Federal Circuit reasoned:

Cyberfone asserts that the method of claim 1 requires a "telephone," and that it is a specific machine that plays an integral role in the method. But the specification explains that "[w]hen in telephone mode, the telephone operates in a conventional manner."

The telephone can only obtain data "in the transaction entry mode, [when] menus are used to navigate the user to forms which facilitate the entry of data." Thus, the telephone does not obtain data when it is functioning as a telephone, only when in an unclaimed mode of operation. . . .The "telephone" recited in claim 1 is not a specific machine, and adds nothing of significance to the claimed abstract idea.15

The Federal Circuit also rejected Cyberfone's argument that the reference in claim 1 to sending exploded data transactions over a channel "requires an additional specific machine." The argument fails, the Federal Circuit explained, because Cyberfone provided no guidance as to what particular machine is required to perform the function of the recited channel.16

The Federal Circuit then addressed Cyberfone's contention that the claims are sufficiently limited by the transformation that results from "exploding" data transactions, i.e., sending information, in whole or in part, gathered from one source to different destinations. The Federal Circuit rejected this theory as follows:

Here, the exploding step effects no meaningful transformation because it merely makes the originally-gathered information accessible to different destinations without changing the content or its classification. Nor does the particular configuration of steps—obtaining, separating, and then sending information—confer patentability. As in Mayo, the "ordered combination adds nothing" because it follows from the underlying idea of categorical information storage.17

The Federal Circuit agreed with the district court that the '060 patent claims were directed to ineligible subject matter and thus it affirmed that the patent was invalid under § 101.18

Going Forward

The line continues to be blurry as to when a computer software application invention is patent eligible. The Federal Circuit appears to have again confused patent eligible subject matter with anticipation and obviousness and consistency in this area of the law is lacking. For example, in SIRF Technology v. ITC,19 the Federal Circuit held that the claimed method was properly directed to patentable subject matter because the claims explicitly required the use of a GPS receiver, which was a particular machine, and the method could not be performed without the use of such a GPS receiver.

Contrast the decision in this case, Cyberfone Systems, LLC v. CNN Interactive Group, Inc., with the en banc decision of the Federal Circuit in In re Alappat,20 where the Federal Circuit held that a general purpose computer becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software:

Alappat admits that claim 15 would read on a general purpose computer programmed to carry out the claimed invention, but argues that this alone does not justify holding claim 15 unpatentable as directed to nonstatutory subject matter. We agree. We have held that such programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software. . . . Consequently, a computer operating pursuant to software may represent patentable subject matter, provided, of course, that the claimed subject matter meets all of the other requirements of Title 35.21

Patent filers are well-advised to ensure that the patent specification and claims describe the computer-implemented aspects of the invention in as much detail as possible. To the extent an invention involves the use of multiple computers/processors/computer systems and/or intricate computer processes, such an invention is more likely to be patent eligible when properly disclosed and claimed.

For More Information

Irah H. Donner
212.806.6630
idonner@stroock.com

Footnotes

1. Cyberfone Systems, LLC v. CNN Interactive Group, Inc., Civ. App. 2012-1673, 2014 WL 718153 (Fed. Cir. February 26, 2014) (Unpublished).

2. Id., slip op. at 4.

3. Id., slip op. at 4-5.

4. Id., slip op. at 5. Section 101 allows an inventor to obtain a patent for "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof."

5. Id., slip op. at 6 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293, 101 USPQ2d 1961, 1965 (2012)).

6. Id., slip op. at 6 (quoting Bilski v. Kappos, 130S.Ct. 3218, 3230, 95 USPQ2d 1001, 1009 (2010)).

7. Id., slip op. at 6 (citing Gottschalk v. Benson, 409 U.S. 63, 175 USPQ 673(1972)).

8. Id., slip op. at 6 (citing Bilski v. Kappos, 130 S.Ct. 3218, 3230, 95 USPQ2d 1001, 1009 (2010)).

9. Id., slip op. at 7.

10. Id., slip op. at 7.

11. Id., slip op. at 8.

12. Id., slip op. at 8 (quoting Accenture Global Servs., GmbH v. Guidewire Software, Inc., 728 F.3d 1336, 1341, 108 USPQ2d 1173, 1177 (Fed.Cir.2013).

13. Id., slip op. at 8-9.

14. Id., slip op. at 9.

15. Id., slip op. at 9-10.

16. Id., slip op. at 10.

17. Id., slip op. at 10 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1298, 101 USPQ2d 1961, 1968 (2012)).

18. Id., slip op. at 10.

19. SIRF Technology v. ITC, 601 F.3d 1319, 94 USPQ2d 1607 (Fed. Cir. 2010).

20. In re Alappat, 33 F.3d 1526, 31 USPQ2d 1545 (Fed. Cir. 1994) (en banc).

21. Id., 31 USPQ2d at 1558 (citing In re Freeman, 573 F.2d 1237, 1247 n.11, 197 USPQ 464, 472 n.11 (C.C.P.A. 1978); In re Noll, 545 F.2d 141, 148, 191 USPQ 721, 726 (C.C.P.A. 1976); In re Prater, 415 F.2d 1393, 1403 n.29, 162 USPQ 541, 549–50 n.29 (C.C.P.A. 1969)).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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