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.

Farewell to Chief Judge Rader

The tension between the CAFC and the Supreme Court (SCOTUS) is a recurring theme in this blog.

 The June 19 SCOTUS decision in AliceCorp. v. CLS Bank Int’l  followed by Chief Judge Rader’s retirement from the CAFC on June 30^th  may prove to be the climax and dénouement of this tension.

Those of us that find drama in such matters have been following Alice Corp. v. CLS Bank Int’l  since it was heard by a first  CAFC panel (Linn, Prost and O’Malley) July 2012 which found that the claims at issue were directed to patent eligible subject matter under § 101.  In that decision the CAFC noted that SCOTUS had granted cert, vacated, and remanded in Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011).”

Since that time, the CAFC  reheard Alice Corp. v. CLS Bank Int’l en banc in May 2013, concluded that the claims are not patent eligible according to § 101 and was subsequently confirmed by SCOTUS which granted cert a second time and heard the Alice Corp. case in full.

 In the meantime, the CAFC had a second panel hearing (Rader, Lourie and O’Malley) in Ultramercial v. Hulu as required by SCOTUS.

The second panel decision is a masterpiece of judicial reasoning. For example, the CAFC cites the SCOTUS decision in Bilski saying “This Court’s [SCOTUS] precedents establish that the machine-or-transformation test is a useful and important clue . . . for determining whether some claimed inventions are processes under § 101.”

It is also a bold attempt to stand up to the higher court while appearing to concur with that Court’s decisions:

“Prometheus used the language of “inventive concept” to describe the “other elements or a combination of elements . . . sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself” and explain that purported limitations must be more than “routine” or “conventional” to confer patent eligibility. 132 S. Ct. at 1294, 1298-99. While these inquiries do require an understanding of what existed in the ken of those skilled in the art during the relevant time frame, principles of patent eligibility must not be conflated with those of validity, however. The Supreme Court repeatedly has cautioned against conflating the analysis of the conditions of patentability in the Patent Act with inquiries into patent eligibility.  See Diehr, 450 U.S. at 190 (“The question therefore of whether a particular invention is novel is wholly apart from whether the invention falls into a category of statutory subject matter.” (internal quotation marks omitted)); see also Prometheus, 132 S. Ct. at 1304 (recognizing that “to shift the patent-eligibility inquiry entirely to [§§ 102, 103, and 112] risks creating significantly greater legal uncertainty, while assuming that those sections can do work that they are not equipped to do”). Because a new combination of old steps is patentable, as is a new process using an old machine or composition, subject matter eligibility must exist even if it was obvious to use the old steps with the new machine or composition. Otherwise the eligibility analysis ignores the text of §§ 101 and 100(b), and reads § 103 out of the Patent Act.”

 The second CAFC panel decision goes on to explain that “This inquiry focuses on whether the claims tie the otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something; if so, they likely will be patent eligible. On the other hand, claims directed to nothing more than the idea of doing that thing on a computer are likely to face larger problems. While no particular type of limitation is necessary, meaningful limitations may include the computer being part of the solution, being integral to the performance of the method, or containing an improvement in computer technology.  See SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319, 1332-33 (Fed. Cir. 2010) (noting that “a machine,” a GPS receiver, was “integral to each of the claims at issue” and “place[d] a meaningful limit on the scope of the claims”). A special purpose computer, i.e., a new machine, specially designed to implement a process may be sufficient. See Alappat, 33 F.3d at 1544”

The second CAFC panel decision concludes “In sum, as a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not “so manifestly abstract as to override the statutory language of section 101.” Research Corp., 627 F.3d at 869. [see also first CAFC panel decision in Alice Corp. v. CLS Bank Int’l].

In what can only be described as an ironic coincidence, the Supreme court granted certiorari, vacated and remanded to the CAFC in (what is now) Wildtangent v Ultramercial (see order list 537; June 30 2014) as Chief Judge Randall R. Rader was formally taking leave of colleagues and co-workers at the CAFC on June 30^th.  The remand specifies “for further consideration in light of Alice Corp. v. CLS Bank Int’l, 573 U. S. ___ (2014).”

The CAFC appears to have no choice but to reverse a decision that they have twice made, and twice supported with citations to Supreme Court decisions (as well as their own).

In light of the June 30^th GVR in Wildtangent v Ultramercial, it seems almost certain that a vast number of granted US patents on computer implemented inventions will turn out to be invalid. Indeed, the phrase “presumption of validity” seems greatly diminished in effect.

Perhaps it is Just as well that Judge Rader will not be a party to the third CAFC decision in Wildtangent v Ultramercial.

Give and Take

A lot has already been written about the recent Supreme Court decisions in Limelight Networks, Inc. v. Akamai Technologies, Inc.  and Alice Corp. v. CLS Bank Int’l .

This posting will not go into the details of either case, as that has already been done by others.

Instead, this post will try to make some sense out of the recent interest displayed in patent cases by the Supreme Court, using this pair of cases as a point of reference.

First, both of these cases were appealed to the Supreme Court from the Court of Appeals of the Federal circuit (CAFC).

The CAFC was created when Congress passed the Federal Courts Improvement Act of 1982. The Act merged the United States Court of Customs and Patent Appeals with the appellate division of the United States Court of Claims. The CAFC is the only Federal court with jurisdiction based upon subject matter rather than location. With regard to patents, the CAFC hears appeals from the Patent Trial and Appeal Board (PTAB; formerly Board of Patent Appeals and Interferences (BPAI)) of the USPTO as well as appeals from the various United States District Courts.

This means that CAFC decisions in patent cases are binding precedent on all of the lower federal courts which are the courts of first instance for infringement litigation. It also means that the USPTO, including the PTAB, shapes policy in consideration of CAFC decisions.

The Supreme Court is, of course, the highest court in the land with respect to patent related matters, as for all other matters. However, traditionally the Supreme Court has accepted patent cases infrequently and has often granted certiorari only to vacate the decision of the CAFC and remand the case for further consideration by that court (as happened in Alice Corp. v. CLS Bank Int’l), usually in light of one or more Supreme Court Decisions.

My own initial reaction to the pair of cases under discussion is that Limelight v. Akamai represented a return to the status quo in which the Supreme court gave back to us something we had come to cherish, while Alice v. CLS Bank represented a disruption in the status quo in which something we had come to cherish was taken from us by the Supreme Court. That initial reaction led to the “give and take” title of this posting.

After giving the matter more thought, it seems more correct to say that the Supreme Court has, in both cases under consideration, preserved the status quo, at least from the viewpoint of the Court.

More specifically, when the en banc CAFC decided Limelight v. Akamai., in 2012 that court ruled that induced infringement could occur even in the absence of direct infringement by a single party. This represented a significant departure from the previously accepted definition of induced infringement which required that a single actor induce a second actor to commit direct infringement.

The CAFC acknowledged this departure from previous policy and explicitly stated that the court was overturning its own previous policy as exemplified by BMC Resources v Paymentech (2007) and Multiauction v Thomson (2008) and earlier CAFC decisions and promulgating a concept of divided infringement in which induced infringement occurs when an infringing act is induced by a single actor that influences two or more other actors to perform acts which, together, infringe a patent claim.

The CAFC acknowledged that Supreme Court precedent required that indirect (i.e. induced) infringement can only occur if direct infringement occurs citing Deepsouth Packing v Laitram (1972); Aro Mfg. v Convertible Top Replacement (1961) and Henry v A.B. Dick (1912) but side-stepped the issue by noting that the Supreme Court had never expressly ruled that the direct infringement must be attributable to a single actor. As the CAFC put it “Requiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” This was a clear departure from both CAFC and Supreme Court precedent.

In Limelight v. Akamai the CAFC was reversed by the higher Court because the Supreme Court felt that insufficient attention had been paid to precedent. This case was clearly a swift return to the status quo.

Turning our attention now to Alice v. CLS Bank, the situation here is more complicated. The CAFC heard this case twice. A first panel (Linn, Prost and O’Malley) heard the case in July 2012 and concluded that the claims at issue were directed to patent eligible subject matter under § 101.

The CAFC panel ruled that “…when-- after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101.” ;

while noting:

“When it comes to subject matter patentability, we do not write on a blank slate. Just a few months ago, the Supreme Court reversed us in a § 101 case for a second time in its last three terms, hinting (not so tacitly) that our subject matter patentability test is not sufficiently exacting. [Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012); Bilski v. Kappos, 130 S. Ct. 3218 (2010); see also WildTangent, Inc. v. Ultramercial, LLC, (No. 11-962), 2012 WL 369157 (2012), granting cert., vacating, and remanding Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011).]”

A petition for en banc rehearing was granted by the CAFC in October 2012. An en banc court heard the case and a divided court decided in May 2013 that the same claims were not directed to patent eligible subject matter under § 101. In addition to the per curiam opinion of the court, a concurring opinion, three opinions which dissented in part and a dissenting opinion, as well as “additional reflections” by Chief Judge Rader were filed. Following this en banc reversal, the case was appealed to the Supreme Court, which upheld the CAFC’s (second) decision.

The CAFC’s (second) decision, and the Supreme Court’s subsequent confirmation, bring to an end the era of decisions influenced strongly by the CAFC’s 1994 decision In re Alappat which held that a installation of software on a computer to provide a new function creates (in effect) a new machine which meets the § 101 standards for patent eligibility. The CAFC’s first panel decision in Alice v. CLS Bank relied heavily on In re Alappat while the CAFC’s second en banc decision in Alice v. CLS Bank distanced itself from In re Alappat and gave more weight to historic Supreme court decisions (Benson; Flook and Diehr) as well as the recent § 101 Supreme court decisions in Bilski and Mayo Collaborative Services v. Prometheus Laboratories, Inc.

It is the loss of the Alappat principles that prompted the “take” portion of the title of this post. However, seen through the eyes of the Supreme court, the In re Alappat decision was a departure from the status quo and the final resolution of Alice v. CLS Bank represents a return to the status quo (albeit after 20 years).

Many colleagues are upset by the apparent conflation of §101 subject matter eligibility with the requirement for an “inventive concept” which we tend to equate with the §103 obviousness analysis.

However, the Supreme Court has long held this to be the proper analysis:

“Respondent's process is unpatentable under 101, not because it contains a mathematical algorithm as one component, but because once that algorithm is assumed to be within the prior art, the application, considered as a whole, contains no patentable invention. Even though a phenomenon of nature or mathematical formula may be well known, an inventive application of the principle may be patented. Conversely, the discovery of such a phenomenon cannot support a patent unless there is some other inventive concept in its application. ” [PARKER v. FLOOK, 437 US 584 (1978)]; and

“In Flook, this Court clarified Benson in three significant respects. First, Flook held that the Benson rule of unpatentable subject matter was not limited, as the lower court believed, to claims which wholly pre-empted an algorithm or amounted to a patent on the algorithm itself. 437 U.S., at 589-590. Second, the Court made it clear that an improved method of calculation, even when employed as part of a physical process, is not patentable subject matter under 101. Id., at 595, n. 18. Finally, the Court explained the correct procedure for analyzing a patent claim employing a mathematical algorithm. Under this procedure, the algorithm is treated for 101 purposes as though it were a familiar part of the prior art; the claim is then examined to determine whether it discloses "some other inventive concept. Id., at 591-595. ” [Diamond v. Diehr - 450 US 175 (1981)].

The Supreme Court has even previously admonished the lower courts for not adhering strictly to its precedents:

“Although the Court of Customs and Patent Appeals in several post-Flook decisions held that program-related inventions were not patentable subject matter under 101, see, e. g., In re Sarkar, 588 F.2d 1330 (1978); In re Gelnovatch, 595 F.2d 32 (1979), in general Flook was not enthusiastically received by that court. In In re Bergy, 596 F.2d 952 (1979), the majority engaged in an extensive critique of Flook, concluding that this Court had erroneously commingled "distinct statutory provisions which are conceptually unrelated." 596 F.2d, at 959. In subsequent cases, the court construed [450 U.S. 175, 205] Flook as resting on nothing more than the way in which the patent claims had been drafted, and it expressly declined to use the method of claim analysis spelled out in that decision. The Court of Customs and Patent Appeals has taken the position that, if an application is drafted in a way that discloses an entire process as novel, it defines patentable subject matter even if the only novel element that the inventor claims to have discovered is a new computer program. The court interpreted Flook in this manner in its opinion in this case. See In re Diehr, 602 F.2d 982, 986-989 (1979). In my judgment, this reading of Flook - although entirely consistent with the lower court's expansive approach to 101 during the past 12 years - trivializes the holding in Flook, the principle that underlies Benson, and the settled line of authority reviewed in those opinions.” [Diamond v. Diehr supra]

Thus, from a historic perspective, the Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l is hardly a surprise.

The Supreme Court has again asserted its judicial superiority over the CAFC, despite that lower court’s legislative mandate to function as a subject matter specific court.

In terms of predicting how the Supreme Court will handle patent related matters in the future, the pair of cases analyzed here suggest that the Court has a low tolerance for statutory interpretations by lower courts that do not base themselves strictly on Supreme Court Precedent.

Hopefully, the Supreme Court's control over the CAFC in patent related matters will promote progress in the useful arts as the founding fathers intended.

In the short term, it seems likely that a vast number of granted US patents on computer implemented inventions will turn out to be invalid if they are ever litigated due to the long standing disparity between the Supreme Court view of §101 and a more expansive view taken by the CAFC.