Ancora Technologies, Inc. v. HTC America, Inc., No. 2018-1404 (Fed. Cir. Nov. 16, 2018).
On November 16, 2018, the U.S. Court Appeals for the Federal Circuit ruled that a software security patent owned by Ancora Technologies, Inc. claims eligible subject matter under 35 U.S.C. § 101. The decision reversed a district court ruling that the patent was invalid as directed to an abstract idea. The decision establishes that patents claiming computer-related inventions directed to improving the function of a computer system by applying a specific improvement, rather than claiming only the improvement in the abstract, are patent-eligible under §101. Brooks Kushman PC represented Ancora in the Federal Circuit appeal.
Ancora owns U.S. Patent No. 6,411,941 claiming methods for identifying and permitting software to run on a particular authorized computer. Ancora filed suit against HTC America, Inc. and HTC Corporation alleging infringement of the '941 patent. HTC moved for dismissal on the grounds that the patent was directed to ineligible subject matter under § 101, allegedly because the claimed invention was merely an abstract idea. The district court granted the motion and ruled that Ancora's patent was invalid. Ancora appealed the decision to the Federal Circuit.
Federal Circuit Holds '941 Patent Invention Not "Abstract Idea"
In a precedential decision written by Circuit Judge Richard G. Taranto, the Federal Circuit reversed the district court and ruled that the '941 patent was patent-eligible.
Applying the two-step framework established in Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), the court first considered whether the '941 patent invention was directed to an abstract idea, one of the judicially-recognized exceptions to patent eligibility under § 101. The court noted that the '941 patent method involves a software authentication method requiring a "key" with a unique identification code to be placed in a computer's Basic Input Output System module, known as BIOS. The court noted that the use of BIOS ROM memory for software security purposes was unconventional.
The inventive method uses a modifiable part of the BIOS memory—not other computer memory—to store the information that can be used, when a program is introduced into the computer, to determine whether the program is licensed to run on that computer. BIOS memory is typically used for storing programs that assist in the start-up of a computer, not verification structures comparable to the software-licensing structure embodied by the claimed invention. Using BIOS memory, rather than other memory in the computer, improves computer security, the patent indicates, because successfully hacking BIOS memory (i.e., altering it without rendering the computer inoperable) is much harder than hacking the memory used by the prior art to store license-verification information.
Slip op. at 3-4.
The court compared the improvement claimed in the '941 patent with subject matter found to be not abstract in other Federal Circuit cases, including Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016), Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253 (Fed. Cir. 2017), and Finjan, Inc. v. Blue Coat System, Inc., 879 F.3d 1299 (Fed. Cir. 2018). As in those cases, the Federal Circuit found that the claimed invention, including saving the key in BIOS memory, was "a concrete assignment of specified functions among a computer's components to improve computer security, and this claimed improvement in computer functionality is eligible for patenting." Slip op. at 2. The Federal Circuit noted:
Improving security—here, against a computer's unauthorized use of a program—can be a non-abstract computer-functionality improvement if done by a specific technique that departs from earlier approaches to solve a specific computer problem. The claimed method here specifically identifies how that functionality improvement is effectuated in an assertedly unexpected way: a structure containing a license record is stored in a particular, modifiable, non-volatile portion of the computer's BIOS, and the structure in that memory location is used for verification by interacting with the distinct computer memory that contains the program to be verified. In this way, the claim addresses a technological problem with computers: vulnerability of license-authorization software to hacking.
Slip op. at 10-11 (citation omitted). Thus, the court concluded that the '941 patent:
[I]s directed to a solution to a computer-functionality problem: an improvement in computer functionality that has the specificity required to transform a claim from one claiming only a result to one claiming a way of achieving it. It therefore passes muster under Alice step one, as it is not directed to patent ineligible subject matter.
Slip op. at 11 (quotation omitted).
Since the '941 patent invention was not directed to an abstract idea, the court did not consider step two of the Alice framework. It did note, however, that the step of placing the authentication key in BIOS memory "indirectly reinforce[s]" the court's conclusion under Alice step one, since it "justifies the conclusion that claim 1 of the '941 patent is not directed to an abstract idea, but to a computer-functionality improvement." Slip op. at 13.
The Ancora decision is the latest in a series of recent Federal Circuit decisions finding computer-related inventions patent eligible under the Alice framework. The case reinforces the eligibility of patent claims directed to practical applications of hardware or software modifications that actually improves the performance of a computer system, rather than merely claiming the modifications in the abstract. In addition, the Federal Circuit relied heavily on uncontradicted statements in the '941 patent specification, which explained the improvement and the unconventional nature of the invention.
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