United States: Evolving Post-Alice Law On Patent Eligibility

In two recent cases addressing patent eligibility of software patent claims, the US Court of Appeals for the Federal Circuit found the challenged claims patent ineligible. In both cases, the Federal Circuit cited its Enfish decision ( IP Update, Vol. 19, No. 6) and its McRO decision ( IP Update, Vol. 19, No. 10) in delineating what qualifies as patent-eligible subject matter in software patent claims. FairWarning IP, LLC v. Iatric Systems, Inc., Case No. 15-1985 (Fed. Cir., Oct. 11, 2016) (Stoll, J); Synopsys, Inc. v. Mentor Graphics Corporation, Case No. 15-1599 (Fed. Cir., Oct. 17, 2016) (Chen, J).

In FairWarning, the patent at issue related to detecting fraud and misuse by identifying unusual patterns in users' access to sensitive data. According to the patent specification, pre-existing systems were able to record audit log data concerning user access of digital stored sensitive data. The invention aimed to automate this process by recording the sensitive data, analyzing the stored data against a rule, and providing a notification if the analysis detected misuse. After FairWarning sued Iatric alleging patent infringement, Iatric moved to dismiss the complaint on § 101 grounds. The district court granted the motion, concluding that the claims were not patent eligible under § 101. FairWarning appealed.

The Federal Circuit affirmed, finding that the patent claims were directed to an abstract idea. The Court explained that the "realm of abstract ideas" includes collecting information, and that the idea of analyzing data, including user identifier data, was abstract. The Court also concluded that the claimed invention relied on a combination of abstract-idea categories previously recognized by the Court. Citing McRO, the Court explained that the claimed rules (in the McRO cases) transformed a traditionally subjective process performed by human artists into a mathematically automated process executed on computers, explaining that "it was the incorporation of the claimed rules . . . that improved the existing technological process." In McRO, the Court found that the traditional process, as compared to the claimed method, stood in contrast, and noted that while both practices produced a similar result, they operated in fundamentally different ways. 

Here, the Federal Circuit found the claims at issue distinguishable from those at issue in McRO, explaining that the asserted claims merely implemented an old practice in a new environment. The Court explained that the claimed rules in FairWarning recited "the same questions . . . that humans in analogous situations detecting fraud have asked," concluding that the incorporation of a computer—not the claimed rules—purportedly improved the existing technological process. 

The Court also cited its Enfish decision, explaining that the technical improvement recited in the claims in Enfish stands in contrast to the FairWarning patent claims, which did not recite any technical improvement. Any speed increase in performing the claimed process of analyzing audit log data was the result of the capabilities of a general-purpose computer, not the claimed method.

Under the Alice step-two inquiry, the Federal Circuit concluded that the asserted claim limitations failed to add "something more" to "transform" the claimed abstract idea into "a patent-eligible application," explaining that the use of generic computers, such as a microprocessor or user interface, does not transform an otherwise abstract idea into patent-eligible subject matter. 

In Synopsys, the patent at issue related generally to the logic circuit design process. The claimed subject matter was directed to a process for interpreting hardware description language (HDL) code that uses predetermined assignment conditions to identify a circuit diagram as the hardware that performs the function recited in the HDL code, where the hardware is represented as a level sensitive latch. After Synopsys sued Mentor Graphics alleging patent infringement, Mentor Graphics moved for summary judgment that the asserted claims were not patent eligible. After the district court granted the motion, Synopsys appealed. 

The Federal Circuit agreed with the district court that the idea of translating a functional description of a logic circuit into a hardware component description of the logic circuit was abstract, dismissing the patent owner's argument that the asserted claims were directed to patent-eligible subject matter because the claimed subject matter related to complex algorithms used in computer-based synthesis of logic circuits. Most notable was the Court's recognition that the district court did not construe any of the asserted claims to require the use of a computer—general purpose or otherwise—or any other type of hardware. The Court concluded that the incorporation of software code alone cannot invoke the Court's Enfish and McRO decisions, explaining that the asserted claims on their face did not call for any computer implementation of the claimed functions, such as employing a computer or any other physical device.

Regarding step two of the Alice inquiry, the Federal Circuit cited its decisions in DDR Holdings ( IP Update, Vol. 18, No. 1) and BASCOM ( IP Update, Vol. 19, No. 8) for guidance. In DDR Holdings, the claims at issue involved a technological solution that overcame a specific challenge unique to the internet that ultimately amounted to the requisite inventive concept. In BASCOM, the requisite inventive concept was found "in the non-conventional and non-generic arrangement of known, conventional pieces." The Court found the Synopsys claims distinguishable from those at issue in DDR Holdings and BASCOM, explaining that the challenged claims contained no limitations that addressed the alleged technical improvements of using assignment conditions as an intermediate step in the translation process. 

In its inventive concept inquiry, the Federal Circuit explained that the search for a § 101 inventive concept is distinct from demonstrating § 102 novelty, dismissing the patent owner's argument that the challenged claims were not shown to have been anticipated by, or obvious over, the prior art and therefore did not employ conventional computer technology. The Court noted that even a claim directed to a new abstract idea is still an abstract idea. Thus, these claims were also found to be patent ineligible under Alice.

Evolving Post-Alice Law on Patent Eligibility

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