Alice of Christmas future

In the Internet age we are all bombarded with “push” content on a wide range of topics. Recently, I was directed to an article about a company called “CounterPath” in the Wall Street Journal. I am not affiliated with Counterpath in any manner. In fact, I was blissfully unaware of the company’s existence until a link to the article appeared unbidden in my inbox.

The article has the look and feel of a press release and it touts the recent grant (June 24, 2014) of US 8,763,081. Specifically, the article says “Consumer expectations for apps are high and this patented technology positions us at the forefront of the industry as the only VoIP application provider with a patented SIM based authentication methodology.”

Those readers familiar with USPTO procedures will understand that that publication of a patent on June 24, 2014 means that the notice of allowance was issued considerably earlier (in this case on February 3, 2014).  This is significant because it means that the Supreme Court decision in Alice v CLS bank occurred between the time the notice of allowance was issued and the time the granted patent was published. The Preliminary instructions to the Examining corps of the USPTO which explain how Examiners should apply the Supreme Court decision in   Alice v CLS Bank were published one day after CounterPath’s patent (June 25, 2014). This means that neither the Examiner nor the Applicant was able to consider the newly promulgated criteria for evaluation of §101 patent eligibility during examination (The first office action on the merits issued on October 30, 2009; after the CAFC had suggested the machine or transformation test in Bilski and before the Supreme court had ruled on the Bilski case; At that time the operative instructions to Examiner’s were the “first” Bilski memorandum dated August 24, 2009).

As a VoIP consumer “SIM based authentication” sounds interesting, but as a patent practitioner, the set of circumstances outlined above sent me straight to PAIR to have a look at the file wrapper.

Here’s what I found: application 11/397,313 was the subject of a restriction requirement and five office actions. The issue of § 101 patent eligibility does not seem to have been raised during examination.  Several §102 and §103 rejections were made during prosecution and the application was eventually placed in condition for allowance by an Examiner’s amendment.

The granted patent contains two independent claims, 1 and 11, which are presented here with the Examiner’s amendment underlined:

1.      An apparatus that is removably attachable to a computer system, the apparatus comprising:

an authentication module including a module compatible with authentication in a mobile telephone network, the module including at least one of a Subscriber Identification Module (SIM), a Universal Subscriber Identity Module (USIM), a 3GPP IP Multimedia Subsystem Services Identity Module (ISIM), and a module compatible with a CDMA or 3GPP2 networks;

a memory with application software stored therein, the application software, including instructions for execution of a communication application on the computer system, the communication application including a configurable user interface for emulating one of a plurality of mobile telephone devices; and

an interface for communicating with a remote server over a data communication network;

wherein the application software includes instructions, which, when loaded and executed on the computer system cause the computer system to:

establish by a first application executing as a stand-alone application in an operating environment of an operating system of the computer system an application layer connection between the first application and the remote server without requiring a service of another application on the computer system to:

 establish the application layer connection; and

use by the first application executing on the computer system the authentication module to automatically authorize an application layer interaction between the first application and the remote server on the application layer connection.

11.         A method comprising:

loading executable software for a first application from a removable device onto a computer system, the first application including a communication application including a configurable user interface for emulating one of a plurality of mobile telephone devices; and

executing the software on the computer system, including:

establishing by the first application an application layer connection between the first application executing as a stand-alone application in an operating environment of an operating system of the computer system and a remote server over a data communication network without requiring a service of another application on the computer system to establish the application layer connection,

accessing by the first application executing on the computer system an authentication module on the removable device, the authentication module including a module compatible with authentication in a mobile telephone network, the module including at least one of a Subscriber Identification Module (SIM), a Universal Subscriber Identity Module (USIM), a 3GPP IP Multimedia Subsystem Services Identity Module (ISIM), and a module compatible with a CDMA or 3GPP2 networks, and

using the first application executing on the computer system the authentication module to automatically authorize an application layer interaction between the first application and the remote server on the application layer connection.

The notice of allowance indicates that the claims “…are allowable over the prior art of record through this Examiner’s amendment.”

Looking at this statement through the lens of Alice Corp v CLS Bank one can read it as meaning that the portions of claims 1 and 11 which are not underlined  describe a “…generic computer performing generic computer functions that are well understood, routine and conventional activities previously known to the industry.” This seems like a plausible assessment since the applicant was unable to overcome the art based rejections after five office actions (although the possibility of an intransigent Examiner cannot be ruled out).

Now let’s try to guess how an accused infringer might try to invalidate claims 1 and 11 based upon the current §101 standards for subject matter eligibility using the two part test the USPTO is currently telling their Examiners to use. The application was filed on April 3, 2006.

Part 1:  Determine whether the claim is directed to an abstract idea. The accused infringer might say that the claims are directed towards the abstract idea of using various types of SIM cards (the authentication module) for authentication in a network. This could be characterized as “An idea of itself” by the accused infringer. This would then require analysis under part 2.

Part 2: Determine whether any element or combination of elements in the claim …ensures that the claim amounts to significantly more than the abstract idea itself.

Of course the problem we all have with significantly more is that we are not sure what it means.  Looking at the list of positive and negative examples provided by the USPTO, the one that the accused infringer would most likely latch onto here is  “requiring no more than a generic computer performing generic computer functions that are well understood, routine and conventional activities previously known to the industry.”

If we look at claim 1 we have:

An apparatus that is

               -attachable to a computer;

               -has a SIM based authentication module

               - a memory storing application software

-interface with a remote server

-description of the application software.

If we leave aside for a moment the description of the application software we are left with attachable to a computer (IBM had a commercially available PDA/mobile phone available in 1992 which presumably attached to a computer for synchronization), a SIM card (first made/sold by Giesecke and Devrient in 1991), a memory storing application software (Sony’s memory stick was available in 1998; first patent on a flash drive was filed in 1999), interface with a remote server seems to be best explained by Fig 4 “…connectivity over the Internet and can access the NCG 310 using standard IP- and UDP/TCP-based communication. As an initial step of execution of the communication application, the application sends a request to the dongle 100 to read the identity of the NCG server 310 with which it should register, and the dongle 100 returns a SIP identity where the application should register,…” (again all based on protocols thast were standard in the 1990s).

If the hypothetical accused infringer were to put forward this type of argument, the patentee would have to devote valuable trial resources to offering a counter analysis. Even if that effort by the patentee were successful, it would still shift the focus of the proceedings away from the actual activity of the accused infringer.

In summary, arguments of this type seem destined to replace the inequitable conduct defense employed almost reflexively by accused infringers prior to the Therasense decision, at least in the field of computer implemented inventions.

Meanwhile, back at the ranch

Speculation about the dim future of patents on computer based inventions in the US following the Supreme Court’s recent decision in Alice Corp. v. CLS Bank Int’l  seems to be well founded judging by the way that the PTAB is interpreting the law in the context of covered business methods (CBM).

Specifically, my own speculation that “…a vast number of granted US patents on computer implemented inventions will turn out to be invalid if they are ever litigated…” (June 29 posting ; last paragraph) may prove to be accurate.

On July 8 the PTAB ruled that US 8,165,939 is not patent eligible subject matter according to §101. The PTAB heard the case in the framework of “transitional program for Covered Business Method patents” established by AIA. The patentee (Segin Software) filed an infringement suit against Stewart Title et al. and the accused infringers responded by filing a petition to the PTAB for post grant review as part of the CBM program.

A complete copy of the PTAB decision is available here if you enter 8165939 as the patent number.

Claim 1 of the patent at issue recites (emphases added):

A method of tracking and verifying in real time financial transactions defined at a real estate settlement, the steps comprising:

a) storing, in a database of a settlement financial tracking and verifying computer system, data that includes at least data enumerated on a completed HUD-1 (Housing and Urban Development-1) form associated with a closing upon a piece of real property, wherein said settlement financial tracking and verifying computer system operates automatically and in real time;

b) selecting from said database, by said settlement financial tracking and verifying computer system, data defining at least one anticipated financial transaction enumerated on said completed HUD-1 form, whereby said anticipated financial transaction represents a transfer of funds to be made;

c) automatically initiating in real time a fund transferring action defined by said at least one anticipated transaction selected from the group: disbursing funds, and expecting payments; d) storing data representative of said initiated fund transferring action in said database as an initiated fund transferring action;

e) automatically tracking in real time each of said initiated fund transferring actions;

 f) detecting, by said settlement financial tracking and verifying computer system, completion of each of said initiated fund transferring actions whereby a tracked result is generated; g) storing in said database, each of said tracked results;

h) automatically comparing in real time said tracked result with said data representative of an associated one of said at least one anticipated transaction stored in said database; and

i) automatically alerting in real time a user of said settlement financial tracking and verifying computer system selected from the group comprising a bank, a settlement agent, an attorney, and an auditor when said tracked result differs from said data representative of an associated one of said at least one anticipated transaction.

For those of you that do not want to wade through the whole decision, here are a few highlights:

“As evident from the disclosure above, the individual steps of claim 1 previously were known to the real property settlement industry, and software and other computer-based tools were available to help perform them. Thus, on this record, the individual functions performed by the settlement financial tracking and verifying computer—e.g., storing, selecting, tracking, and comparing data—appear to be “‘well-understood, routine, conventional activit[ies]’ previously known to the industry,” and previously performed, at least in part, by computer. See Alice, 2014 WL 2765283, at *11; Mayo, 132 S. Ct. at 1294. The same is true of the steps of tracking financial transactions and automatically issuing instructions and disbursements. “In short, each step does no more than require a generic computer to perform generic computer functions.” Alice, 2014 WL 2765283, at *11.

Claim 1 fares no better when the steps are considered “as an ordered combination.” The Specification of the ’939 patent indicates that this combination of steps is conventional, but implementing the steps on a “settlement financial tracking and verifying computer system” allows them to be performed faster and more efficiently, with fewer opportunities for fraud or innocent error, than if the steps were performed manually or piecemeal. Ex. 1001, 1:28–45. Nevertheless, we note that simply implementing an abstract concept faster and more efficiently on a computer is not sufficient to transform a patent-ineligible claim into a patent eligible one. See Bancorp Servs., LLC v. Sun Life Assurance Co. of Can.,687 F.3d 1266, 1279, 1280 (Fed. Cir. 2012) (“Here . . . the computer merely permits one to manage a stable value protected life insurance policy more efficiently than one could mentally. Using a computer to accelerate an ineligible mental process does not make that process eligible subject matter.”).

On this record, we are not persuaded by Patent Owner’s argument that the “settlement financial tracking and verifying computer system” is a “special purpose” computer (Prelim. Resp. 29), which requires specific, complex, nontrivial programming to perform the steps of the claimed method (id.at 21, 24). We note that no such programming is disclosed in the ’939 patent. Rather, the Specification of the ’939 patent merely indicates that interactive financial management software tools (e.g., RynohLive ^TM web-based software) suitable for performing the claimed method were commercially available, as were several automated “production systems” for performing detailed financial transactions, and such tools and systems were “well known to those of skill in the art.” Ex. 1011, 4:45–46, 6:14–20. It follows, then, that merely labeling the computer system of claim 1 a “settlement financial tracking and verifying computer system” does nothing to convert the generic computer to a specific computer, when the functions performed by the computer—individually and in combination—are generic and conventional. As in Alice, “[t]he method claims do not . . . purport to improve the functioning of the computer itself” (Alice, 2014 WL 2765283, at *11), “[n]or do they effect an improvement in any other technology or technical field.” Id.

In summary, the types of data, and the speed with which they are handled by the various “modules” do not convince the PTAB that the computer recited in claim 1 is anything other than a general purpose computer. This is hardly surprising. All software developers are constrained by the need to write code that will run in one or more standard operating systems. Indeed if the patentee had developed a stand-alone dedicated device that only performed the claimed methods, it is unlikely that they would have had a sale-able product (although they may have been eligible for a patent)

Where does that leave us in terms of patenting new technology which adds a new function to an existing  machine? Perhaps Bob Dylan was prophesying the post-Alice judicial landscape when he wrote “Beyond here lies nothing”; at least for business method patents.

Alice through the looking glass

Following the Supreme Court’s recent decision in Alice Corp. v. CLS Bank Int’l  there has been much speculation about the future of patents on computer based inventions in the US.

I previously speculated that “…a vast number of granted US patents on computer implemented inventions will turn out to be invalid if they are ever litigated…” (June 29 posting; last paragraph).

There has recently been a lot of fanfare over the CAFC’s decision in Digitech Image Technologies, LLC v. Electronics For Imaging, Inc.

The CAFC found the claims in that case invalid based upon § 101 subject matter ineligibility.

At Issue was US 6,128,415. Claim 1 of that patent recites:

 A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:
                first data for describing a device de-pendent transformation of color information content of the image to a device independent color space; and

               second data for describing a device de-pendent transformation of spatial in-formation content of the image in said device independent color space.

Astute readers will note (as did the CAFC)  that the claim is directed solely towards “first data” and “second data”.

Therefore, it is not surprising that the court concluded “ … asserted claims are not directed to any tangible embodiment of this information (i.e., in physical memory or other medium) or claim any tangible part of the digital processing system.”

If the claims had recited a physical memory or tangible part of the digital processing system the court might have seen fit to invoke the Supreme Court’s analysis from  Alice Corp.

As it was, the court relied on an ancient precedent [Burr v. Duryee, 68 U.S. 531, 570 (1863) ] to remind us that “To qualify as a machine under section 101, the claimed invention must be a “concrete thing, consisting of parts, or of certain devices and combination of devices.”

For novice practitioners of the draftsman’s art, recitation of “digital image reproduction system” in the claim preamble does not serve as a claim limitation.

The court then went on to point out that:  “To qualify as a manufacture, the invention must be a tangible article that is given a new form, quality, property, or combination through man-made or artificial means.”  [ Diamond v. Chakrabarty, 447 U.S. 303, 308 (1980).]

This meant that the claimed invention did not belong to one of the statutory categories of invention, so that there was no need to consider “abstract idea” and “significantly more” as taught in  Alice Corp.

Perhaps most interesting is that the opinion, written by Judge Reyna, cites only two CAFC precedents:

“a claim reciting an abstract idea does not become eligible “merely by adding the words ‘apply it.’”  Bancorp Servs., LLC v. Sun Life Assurance Co. of Can. (U.S.), 687 F.3d 1266, 1276 (Fed. Cir. 2012).; and

“a preamble does not limit claim scope if it “merely states the purpose  or intended use of an invention.”  Bicon, Inc. v. Straumann Co., 441 F.3d 945, 952 (Fed. Cir. 2006). 

In summary, the CAFC’s decision in this case is no surprise, as even the district court was able to see that the claims were not directed to patentable subject matter. What is most interesting is the almost exclusive reliance on Supreme Court precedent and the explicit recitation of all the older Supreme Court precedents mentioned in the recent Bilski, Mayo and Alice Corp decisions.

If this is the beginning of a trend, let us all hope that it will be a trend that fosters innovation.   

Troll is a bad word

Three cheers for Judge Lucy Koh of the US district court for the Northern District of California!

GPNE is suing a plethora of defendants in Judge Koh’s court for alleged infringement of US 7555267. The list of defendants includes Amazon, Apple, Barnes and Noble, Garmin, Nokia, Pantech, Research in Motion, Sharp and Sony Ericsson.  A copy of the complaint can be found here.

The reason for cheering is that Judge Koh issued a pre-trial order which forbids counsel for the alleged infringers from using the expressions “patent troll’; “pirate”; “bounty hunter”; “privateer”; “bandit”; “paper patent”; “stick up”; “shakedown” ; “playing the lawsuit lottery”; “corporate shell game” or “corporate shell” to characterize the patentee.

In the interest of fairness the judge has indicated that counsel for the alleged infringers may use the phrases “non-practicing entity”; “patent assertion entity”; “licensing entity”;  or “company that doesn’t sell anything” to characterize the patentee.

The only thing that doesn’t quite make sense is that the reported reason for allowing these terms is that they are “…relevant to the calculation of reasonable royalties and to secondary considerations of non-obviousness”.

It is not at all clear how the fact that GPNE is not producing anything is relevant to a calculation of reasonable royalties. That calculation should be based mainly upon what licensing deals in similar technology areas have set as a “standard”. In this technology area there should be numerous deals to compare to, some of which may even involve the defendants.

It is also not clear how a company like GPNE (which has no product of its own) could demonstrate any of the secondary considerations of non-obviousness (criticality or unexpected results, commercial success, long-felt but unsolved needs, failure of others, skepticism of experts).

Perhaps most puzzling is that there is no apparent mention of the fact that GPNE, as a non-practicing entity, is not entitled to request any lost revenues.

For those of you that are interested, claim 1 of the patent at issue reads:

A first node in a data network, the data network including a plurality of nodes including a first node, the first node comprising: at least one processor; a memory providing code to the least one processor; and an interface controlled by the least one processor to: transmit a random access request signal in a first slot, the random access request signal including information that allows determination that the first node requires an allocation of resources to transmit a reserve access request signal; receive a first grant signal subsequent to transmission of the random access request signal, said first grant signal including information relating to an allocation of a second slot to the first node for transmitting the reserve access request signal for transmitting first data packets containing a message; transmit the reserve access request signal in the second slot in response to the first grant signal; receive a second grant signal subsequent to transmission of the reserve access request signal, said second grant signal including information relating to an allocation of additional resources for transmitting the first data packets; and transmit the first data packets in response to the second grant signal, wherein the first data packets can be transmitted during transmission of a request signal by a second node into a third slot assigned to the second node.

The patent at issue was granted on June 30, 2009 but has a chain of priority that goes back to June 24, 1994 through a series of continuation and divisional applications. The title of the earliest application in the chain of priority is “PAGING METHOD AND APPARATUS”. Among the allegedly infringing devices are APPLE’s iPAD.

Let us all hope that Judge Koh’s position shapes the attitude of the Executive and Legislative branches of the Federal government.