Plaintiff Verint asserted six patents against Red Box (U.S. Patent Nos. 7,774,854, 5,790,798, 6,510,220, RE43,324, RE43,386, and 8,189,763) in the District Court for the Southern District of New York. Red Box rebutted, asserting that all claims were invalid under 35 U.S.C. § 101 due to being directed to patent-ineligible abstract ideas.
The patents are generally directed to recording a telephone or Internet communication between parties. Specific features claimed by the patents include identifying communication content to record, recording packets that make up the communication, protecting some of the recorded information from unauthorized access, monitoring of telephonic call-center transactions, and graphical user interfaces for monitoring voice communications and related events.
While the language of the claims varies from patent to patent, the Court's reasoning for all six was similar. Therefore, we focus on just one "representative" claim, claim 1 of the '854 patent:
A method of protecting information provided to an agent via a communication network comprising:
receiving, at a communication monitoring server, an interactive communication responsive to an agent request via a communication network, the communication including information that is to be protected;
routing the communication to an agent;
recording at least a portion of the communication;
electronically identifying the information that is to be protected from the communication; and
preventing unauthorized access to the information that is to be protected during replay of the portion of the communication.
In the words of the Court, this claim is directed to recording a "telephone or computer communication containing information a party wishes to protect from further dissemination." The claimed invention facilitates identifying the information to protect and "rendering it unintelligible to anyone without authorization to access that information." Particularly, it involves a "monitoring system that receives information from a communications network and uses a set of rules that can be stored in a database and that control the start/stop/break functions of the recording device." If the sensitive information is recorded, it may be obscured (e.g., encrypted) to prevent unauthorized access.
A claimed invention is eligible for patenting under 35 U.S.C. § 101 if it meets the requirements of the two-step test set forth by the Supreme Court in Alice Corp. v. CLS Bank Int'l. According to the test, one must first determine whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If so, then one must further determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion. But generic computer implementation of an otherwise abstract process does not qualify as "significantly more." A goal of this test is to prevent one from patenting judicial exclusions, and thereby preempting others from using these basic scientific tools.
Applying this test, the Court observed that, during the step one analysis, "patent claims must be considered in light of the specification, based on whether their character as a whole is directed to excluded subject matter," and that the core question is whether the claims focus on a "specific asserted improvement in computer capabilities [or] on an abstract idea for which computers are invoked merely as a tool." The Court further noted that, at step two, "[t]he proper question is therefore not whether the invention is novel or whether it would be obvious to someone skilled in the art, but whether the claims contain an inventive concept such that the invention does not claim an abstract idea." Similar to the step one analysis, a claim purporting to "improve the functioning of [a] computer itself or effect an improvement in any other technology or technical field [will] suffice under step two," as does a claim that involves "the non-conventional and non-generic arrangement of known, conventional [pieces]."
In order to address these inquiries, this District Court has developed a list of questions relevant to the Alice analysis:
(1) Is there an improvement recited?
(2) Is there a benefit recited?
(3) Is something new recited?
(4) Does the patent have one or more particular applications?
(5) What are the steps and limits to be followed in applying the invention?
But prior to applying these factors to the claims under dispute, the Court telegraphed the outcome of the case. Particularly, the Court opined that:
[V]irtually any invention could be described as simply addressing that which others long ago addressed: the Socratic method to acquire information; quills, pens, typewriters, to create written text; corkscrews to open wine bottles; and clay jugs with covers to prevent spills. This reductionist simplicity may obscure underlying complexity, and it may jeopardize the innovative improvements upon longstanding accomplishments that patents are intended to incent. Patent law protects the builder of a better mousetrap, even if his or her invention could be described as, simply, a mousetrap—or as a "method to catch a mouse."
Many recent motions seeking determinations of patent ineligibility suffer from such reductionist simplicity—from characterizing as simply a mousetrap that which is in fact a better mousetrap. Courts faced with such motions must scrutinize reductive descriptions with great care. It has also become increasingly common for litigants to pursue such judicial rulings, which can be as complex as Markman rulings but without a similar record. Courts must therefore be alert to motions seeking factual determinations of what a claimed invention "is" when unaccompanied by the necessary submissions from those skilled in the art.
In short, the current fad of ineligibility motions in patent cases has, in certain respects, gotten ahead of itself. There are instances in which a patent—or a single claim—may truly be ineligible under 35 U.S.C. § 101. But courts should make such determinations on a proper record and should not confuse such determinations with the inquiries properly made under §§ 102 or 103—the sections of the patent law governing novelty and obviousness.
Relying on this strong language, the Court reviewed claim 1. Red Box argued that this claim (and all other asserted claims) amounted to no more than "the abstract idea of processing (i.e., recording, monitoring, analyzing, and/or securing) data and information in telecommunications." The Court rejected this characterization as an example of the improper reductionist practice described above. Instead, the Court found that:
It is more accurate to describe these claims as a method to contemporaneously and automatically record, screen, and protect sensitive information exchanged over an electronic network. Access to such information may either be permitted for those with authorization, or there may be a deletion of the information that occurs in real time, thereby preventing access. This [is] not an abstract concept.
Thus, claim 1 passes muster under step one of Alice. The Court went on to describe how it would meet the requirements of step two as well. Putting that inquiry in context, the Court noted that:
The difference between what the second step of Alice examines, and that which a court would examine in analyses under §§ 102 and/or 103, is that step two of Alice is limited to claimed benefits and improvements, versus true novelty or obviousness as measured against prior art. These inquiries are no doubt closely related. Certainly, if an invention passes a §§ 102 or 103 analysis, it should pass Alice step two.
The specification describes a number of advantages that the claimed invention has over existing methods. These include addressing both telephonic and computer communications, automated, triggered identification of sensitive information, and automatically starting and stopping the recording. The Court found no factual basis to ignore the patent's contentions, and Verint also supplied an expert declaration to support its position.
Therefore, the Court concluded that claim 1 of the '854 patent satisfied both steps of Alice, and was eligible under § 101.
2016 has been an interesting year for patent eligibility, with the Federal Circuit introducing two clear lines of reasoning with which challenges to claims under § 101 can be rebutted. This shift in the law has found its way to the district courts, as we are seeing more cases like this one -- where a judge refuses to accept a 10,000 foot level description of an invention when making an eligibility determination.
But one must wonder whether the Federal Circuit will eventually overturn such a case, adding more nuance to the landscape. In this decision, the Court's statement that "if an invention passes a §§ 102 or 103 analysis, it should pass Alice step two" could be viewed as a misinterpretation of decisions such as Ultramercial v. Hulu, where claims were found to fail the second prong despite there being no §§ 102 or 103 invalidity arguments at issue. Under the current law, a claim can be abstract even if it is novel and non-obvious, and these analyses are still intertwined to some extent. This is the legacy of Mayo v. Prometheus, and may ultimately require clarification from the Supreme Court.
Verint Systems Inc. v. Red Box Recorders Ltd. (S.D.N.Y. 2016)
Opinion & Order by District Judge Katherine B. Forrest
