Eyes on Alice: Federal Circuit Strikes Down Asserted Claims of 11 Patents in Two Different Cases as Unpatentable Subject Matter

The Federal Circuit has issued two additional precedential decisions to its line of cases delineating between patent-eligible and patent-ineligible improvements in computer-related technology. On October 16, 2017, the Federal Circuit issued a decision concluding that seven patents related to a system used to identify and track letters and packages are directed to patent ineligible subject matter under 35 U.S.C. § 101. Similarly, on October 18, 2017, the Federal Circuit issued another decision finding four patents directed to mass transit fare payment technology unpatentable under section 101.

In Secured Mail Solutions LLC v. Universal Wilde, Inc., the Federal Circuit affirmed the United States District Court of the Central District of California’s ruling granting the defendant’s motion to dismiss for failure to state a claim based on patent eligibility grounds. No. 2016-1728, slip op. at 2 (Fed. Cir. October 16, 2017). That patents-in-suit “involve methods whereby a sender affixes an identifier on the outer surface of a mail object (e.g. envelope or package) before the mail is sent. Id. “Computers and networks are used to communicate the information about the mail object’s contents and its sender after the mail object is delivered.” Id.

Under step one of the Alice test, the district court found that the patents-in-suit were “directed to the abstract idea of communicating information about a [mail object] by use of a marking.” Id. at 7. Turning to step two of the Alice test, the district court found that the “asserted claims, viewed individually or in combination, do not meaningfully limit the abstract idea.” Id. at 6.

On appeal, the Federal Circuit agreed, finding that “the claims embrace the abstract idea of using a marking affixed to the outside of a mail object to communicate information about the mail objects, i.e., the sender, recipient and contents of the mail object.” Id. at 10. The Court emphasized that the claims were “not directed to an improvement in computer functionality,” such as “a new barcode format, an improved method of generating or scanning barcodes, or similar improvements in computer functionality.” Id. at 8. Nor did the claims recite “special rules or details of computers, databases, printers, or scanners.” Id. at 9. The Court also explained that simply “mak[ing] a process more efficient . . . does not necessarily render an abstract idea less abstract.” Id. at 8.

At step two, the Federal Circuit found nothing in the claims added an inventive concept, “which is something sufficient to ensure that the claim amounts to sufficiently more than the abstract idea itself.” Id. at 10. Rather, the Court endorsed the district court’s finding that the “claims are ‘replete’ with routine steps, including affixing mail identification data,’ such as a barcode, to a mail object or ‘submitting a mail object to a mail carrier for delivery.’” Id. at 11. The Federal Circuit found the claims were “non-specific and lack[ing] technical detail” and “cit[ed] well known and conventional ways to allow generic communications between a sender and a recipient using generic computer technology.” Id. at 12.

In Smart Systems Innovations, LLC v. Chicago Transit Authority, the Federal Circuit affirmed the United States District Court of the Northern District of Illinois’ ruling granting the defendant’s motion for judgment on the pleadings based on patent eligibility grounds. No. 2016-1233, slip op. at 2-3 (Fed. Cir. October 18, 2017). In Smart Systems, the patents-in-suit involved an “open payment fare system” which allows mass transit riders to “use[] existing bank cards, such as debit or credit cards, thereby eliminat[ing] the need for and added operational cost of, dedicated fare-cards, paper tickets, and tokens.” Id. at 5 (internal quotations omitted).

Under step one of the Alice test, the district court found that, “[s]tripped of the technological jargon that broadly describes non-inventive elements . . . and further shorn of the typically obtuse syntax of patents, the patents here really only cover an abstract concept: paying for a subway or bus ride with a credit card.” Id. at 12. Under step two of the Alice test, the district court held that the asserted claims “lack an inventive concept because they recite general computer and technological components . . . the technical details of which are not described.” Id. at 17-18. The district court further held that “invoking various computer hardware elements, which save time by carrying out a validation function on site rather than remotely, does not change the fact that in substance, the claims are still directed to nothing more than running a bankcard sale—that is, the performance of an abstract business practice.” Id. at 18.

Again, the Federal Circuit agreed. The Court found that the asserted claims are “directed to the formation of financial transactions in a particular field (i.e., mass transit) and data collection related to such transactions” and “not directed to a new type of bankcard, turnstile, or database.” Id. at 14. “Rather the claims are directed to the collection, storage, and recognition of data.” Id. The Court further noted that the claims are not “directed to an improvement in computer technology,” like those at issue in Enfish and DDR Holdings, nor are they “directed to specific rules that improve a technological process,” like those at issue in McRO. Id. at 15. The claims simply “invoke computers in the collection and arrangement of data.” Id. And “limiting the field of use of the abstract idea to a particular . . . environment,” here, mass transit, “does not render the claims any less abstract.” Id. at 16.

At step two, the Federal Circuit held that when claims “merely require[e] generic computer implementation, they do not move into section 101 eligibility territory,” noting that the asserted claims teach the use of a “processor,” “memory,” and “data.” Id. at 18-19. Thus, the claims “offer no inventive concept that transforms them into patent-eligible subject matter.” Id. at 20.

These two decisions by the Federal Circuit further emphasize the need to focus on how the invention improves computer technology, including for example that it is a new type of apparatus or an improved method, or including specific rules that improve a technological process to survive scrutiny under Alice and its progeny.

Other Notable Decisions – Week Ending October 13, 2017

Owens Corning v. Fast Felt Corporation, No. 2016-2613 (Fed. Cir. October 11, 2017) (precedential): In Owens Corning, the Federal Circuit reversed the Board’s ruling that the challenged patent was valid in view of the prior art concluding that the Board applied an overly-narrow claim construction in view of the challenged patent’s specification. The Court noted that the Board erred in effectively construing the claims to exclude materials expressly contemplated by the specification. The Federal Circuit held that once the key claim term is given its broadest reasonable interpretation, the record conclusively establishes obviousness.

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