United States: A Novel Outcome at the International Trade Commission: Patent Claims Invalidated Under Alice in the 100-Day Pilot Program

Last Updated: August 31 2016
Article by James Wodarski, Andrew H. DeVoogd, Daniel B. Weinger and Matthew A. Karambelas

On August 22, 2016, Administrative Law Judge David Shaw of the International Trade Commission ("ITC" or "Commission") issued his final initial determination ("the ID") in Certain Portable Electronic Devices and Components Thereof, Inv. No. 337-TA-994. The ID invalidated all of the asserted claims for lack of patentable subject matter under 35 U.S.C. § 101 and terminated the investigation. This decision resulted from an early evidentiary hearing, conducted by order of the Commission within 100 days of its Notice of Institution. 81 Fed. Reg. 29307 (May 11, 2016). The Notice of Institution ordered ALJ Shaw to conduct an early "pilot program" evidentiary hearing to determine whether US Patent No. 6,928,433 ("the '433 patent") claimed patent eligible subject matter in light of Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2351 (2014) ("Alice"). As a result, the ID came a mere 104 days after institution of the investigation, and 152 days from the filing of the complaint.

If the Commission declines to review the ID, this would mark only the second time an ITC investigation has been terminated after an early evidentiary hearing under the pilot program (the only other pilot program hearing resulted in a finding that the complainant had standing and the investigation continued). This would also mark only the fourth time that a patent has been invalidated due to Alice at the ITC.

This ID underscores two important points. First, the 100-day pilot program is a very rare but powerful tool at the ITC and, second, the Commission may be willing to order early disposition for potentially dispositive issues such as Alice-based validity challenges if the claims of asserted patents are not selected with sufficient care. This case is instructive for ITC practitioners on both points.

100-Day Pilot Program

In June 2013, the Commission initiated the 100-day pilot program, designed to test whether the early disposition of dispositive issues in ITC investigations would "limit unnecessary litigation, saving time and costs for all parties involved." See  Pilot Program Will Test Early Disposition of Certain Section 337 Investigations. In these cases, the Commission would require the presiding ALJ to: (1) order discovery taken early on a potentially dispositive issue, such as the existence of a domestic industry (which is a mandatory showing by any complainant seeking relief in the ITC under section 337); (2) if necessary, conduct an early hearing on the potentially dispositive issue; and (3) issue an initial determination within 100 days of institution. Id. Some believed that the utilization of the pilot program would or should be limited to threshold jurisdictional issues, such as domestic industry, importation, and/or standing.

Since its initiation in 2013, the Commission has ordered the pilot program on only three occasions. Before the 994 Investigation, previous occurrences of the pilot program had been limited to determining whether a complainant had the requisite domestic industry or standing to assert the patents in question. See, e.g., Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof, Inv. No. 337-TA-874, Initial Determination on the Economic Prong of the Domestic Industry Requirement (U.S.I.T.C. July 5, 2013) (ALJ Essex); Certain Audio Processing Hardware and Software and Products Containing Same, Inv. No. 337-TA-949, Notice of Commission Determination Not to Review an Initial Determination (U.S.I.T.C. July 13, 2015) (affirming finding of ALJ that complainant had standing to bring the investigation). The 994 Investigation marks the first time the Commission has utilized the 100-day pilot program to determine the validity of the patents being asserted, here under the rubric of Alice.

Through the 994 investigation, the Commission has indicated that it is now willing to adjudicate additional issues in the 100-day pilot program beyond just predicate jurisdictional questions. Though infrequently utilized in its three-year existence, the Commission has demonstrated a commitment to early adjudication of dispositive issues (albeit in rare circumstances), and has proposed rules for a permanent, rather than pilot, early disposition program at the ITC. See  19 CFR Parts 201 and 210. Proposed in September of 2015, the Commission has yet to take action on the new rules, but could act any time because the comment period is over.

Now that the 100-day program appears here to stay and that the Commission has demonstrated the willingness to use it for additional dispositive issues (and at least one ALJ has found a patent invalid in the program), proposed respondents may consider advancing other potentially dispositive issues for the 100-day program. However, it should be noted that use of the program is extremely rare, even on request by proposed respondents—the Commission has rejected a number of pre-institution requests that the pilot program be imposed. See, e.g., Certain Computing or Graphics Products, and Components Thereof, Inv. No. 337-TA-925, Doc. ID 539464, Letter to Commissioner Regarding Complaint Being Appropriate for Early Determination in Pilot Program (Aug. 4, 2014).

However, respondents may have little to lose by requesting the 100-day program—at worst the request is rejected and the investigation is instituted per usual. And if the request is granted, even if the complainant overcomes the issue at an early hearing, the target date of the investigation will very likely be longer than normal. In the 949 investigation (the only investigation yet to survive the pilot program), the ALJ ordered a 19-month target date – far longer than the usual 15 or 16-month target date. Of course, because all relief in the ITC is prospective in nature, time is on the respondents' side.

For their part, complainants should know that bringing a complaint with any noticeable defect risks being placed in a 100-day early disposition schedule, even though this risk is demonstrably tiny and comparatively unlikely. Even if the issue is ultimately traversed by the complainant, a delay of more than three months can have adverse consequences when time is of the essence, such as where an infringed patent is nearing expiration, or where the unfair importation of infringing articles is causing material competitive harm to the protected domestic industry.

Alice

In the ID, ALJ Shaw ruled that the asserted claims of the '433 patent were ineligible under §101, in light of Alice. The '433 patent, entitled "Automatic Hierarchical Categorization of Music by Metadata," discloses "an efficient user interface for a small portable music player." Certain Portable Electronic Devices and Components Thereof, Inv. No. 337-TA-994, Final Det. at 6, 24 n.5 (Aug. 19, 2016).

The ALJ determined under the first of two steps in the Alice analysis that the asserted claims were directed to an abstract idea. ALJ Shaw noted that, under this first step, the Federal Circuit has contrasted claims "directed to an improvement in the functioning of a computer with claims 'simply adding conventional computer components to well-known business practices'...or 'generalized steps to be performed on a computer using conventional computer activity.'" Id. at 28 (quoting TLI Commc'ns LLC v. AV Auto., LLC, 823 F.3d 607, 611 (Fed. Cir. 2016) (citing Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016))). Referencing the specification, the ALJ concluded that the portable media player, storage medium, and display elements are all "generic components for which there are no particularized limitations" and merely provide a "generic environment in which to carry out the abstract idea of organizing media tracks." Id. at 34. The ALJ found, in view of Enfish, that there was "no specific asserted improvement...[i]n fact, there is nothing 'specific' at all about the limitations of claim 1...[i]nstead, the asserted claims are directed to application of the abstract and well-known idea of a hierarchically navigated user interface itself to the portable media player computing environment." Id. at 34, 39. And comparing the '433 Patent to another patent recently held ineligible at the ITC, "the '433 patent...recites an electronic device...on which a method is performed, but describes the device itself only in functional terms." Id. at 37 (citing Certain Activity Tracking Devices, Inv. No. 337-TA-963, Order No. 40 at 22-23 (March. 3, 2016)).

At the second step of the Alice analysis, having determined that the asserted claims were directed to an abstract idea, the ALJ held that there was no inventive concept to transform the abstract idea into something patent eligible. To reach this conclusion, the ALJ focused on the lack of evidence that "accessing a track" through a hierarchy or "playing a plurality of tracks associated with the selected subcategory" are inventive concepts. Id. at 45. Again referencing the specification, the ALJ noted that the patent itself acknowledges that playing tracks or a group of tracks (e.g., an album) is routine, reinforced by the fact that there are no flowcharts or computer codes provided in the patent for those activities. Id. at 45-46. Distinguishing the '433 patent from the patents previously held eligible by the Federal Circuit, the ALJ held that there were no non-conventional or non-generic arrangements of elements, and that "applying a well-known abstract idea in a particular technological setting, as the '433 patent claims do, cannot render a claim patent-eligible." Id. at 47-48 (distinguishing BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC, et al., No. 2015-1763, 2016 U.S. App. LEXIS 11687 (Fed. Cir. June 27, 2016) and DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014)). This decision marks only the fourth time that the ITC has invalidated patents based on § 101.

ALJ Shaw's ID in the 994 investigation is consistent with developing Alice jurisprudence. Specifically, patent claims that merely recite well-known methods tied to generic computer components will likely be found to be not patent eligible. In addition, the ID follows a growing trend in the wake of Enfish which finds courts placing increased emphasis on step one of the Alice test. This case underscores that practitioners should pay close attention to both steps of the Alice analysis, and also teaches that it is critical to carefully select asserted claims with an eye toward Alice-based vulnerability. Some observers anticipated such vulnerability of the claims asserted in the 994 investigation when the complaint was filed, and believe this explains why the case was placed in the 100-day program.

Conclusion

Following this result in the 994 investigation, the manner in which the Commission handles future requests for early disposition under Alice will be closely watched. The Alice invalidity defense is not available at inter partes review, and in any event, the Commission has expressed an unwillingness to stay investigations due to IPRs. In light of those restrictions, future proposed respondents may request early disposition in view of Alice with increasing frequency, now that the Commission has shown a willingness to resolve Alice questions in early stages of an investigation. However, it is likely that the 100-day program will continue to rarely be utilized by the Commission, even on request by the proposed respondents. In addition, prevention may be the best cure, as avoiding Alice questions altogether can be accomplished by carefully selecting claims prior to assertion.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
James Wodarski
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions