Summary

On November 1, 2016, the Federal Circuit issued a decision in Amdocs (Israel) Ltd. v. Openet Telecom, Inc., finding that asserted computer program and method claims for solving an accounting and billing problem faced by network service providers are patent- eligible, reversing a district court’s granting of a motion for judgment on the pleadings and remanding for further proceedings.  The Federal Circuit held that the claims “entail[] an unconventional technological solution . . . to a technological problem,” and are thus patent-eligible subject matter under 35 U.S.C. § 101 and the framework as set forth in the Supreme Court’s decision in Alice Corp. Pty Ltd. v. CLS Bank Int’l, ___ U.S. ___, 134 S.Ct. 2347, 2355 (2014). 

In the decision, the Federal Circuit stated that “the classic common law methodology for creating law when a single governing definitional context is not available” should be followed in making patent eligibility decisions.  It found that the patents-in-suit are sufficiently similar to patents previously held eligible and involve “limitations that when considered individually and as an ordered combination recite an inventive concept through the system’s distributed architecture” to sufficiently satisfy the second step of the Alice framework.

The Technology at Issue

The patents-in-suit concern parts of a system that allows network service providers to account for and bill for internet protocol network communications.  The components are “arrayed in a distributed architecture that minimizes the impact on network and system resources.”  The claimed technologies provide an “advantage over prior art systems that stored information in one location, which made it difficult to keep up with massive record flows from the network devices and which required huge databases.”

The District Court Decision

Plaintiff-Appellant Amdocs (Israel) Limited (“Amdocs”) sued Defendants-Appellees Openet Telecom, Inc. and Openet Telecom Ltd. (collectively, “Openet”) for infringing four patents, namely, U.S. Patent Nos. 7,631,065, 7,412,510, 6,947,984 and 6,836,797.  The United States District Court for the Eastern District of Virginia granted Openet’s motion for judgment on the pleadings, finding that the patents were not directed to patent eligible subject matter under § 101.

The Federal Circuit’s Analysis of the Abstract Idea Exclusion

Under the Supreme Court’s Alice decision, the Federal Circuit, district courts, and the U.S. Patent and Trademark Office employ a two-step process for assessing whether claims are directed to patentable subject matter under Section 101, namely:

1. “determine whether the claim at issue is ‘directed to’ a judicial exception, such as an abstract idea;” and
2. “consider whether the claims contain an ‘inventive concept’ sufficient to ‘transform the nature of the claim into a patent-eligible application.’”

In its decision, the Federal Circuit first noted that:

[T]he analysis [of eligibility based on Alice framework] presumably would be based on a generally-accepted and understood definition of, or test for, what an ‘abstract idea’ encompasses.  However, a search for a single test or definition in the decided cases concerning § 101 from this court, and indeed from the Supreme Court, reveals that at present there is no such single, succinct, usable definition or test. . . .  That is not for want of trying; to the extent the efforts so far have been unsuccessful it is because they often end up using alternative but equally abstract terms or are overly narrow.

(Emphasis in original).

The Federal Circuit then stated that “the decisional mechanism courts now apply is to examine earlier cases in which a similar or parallel descriptive nature can be seen — what prior cases were about, and which way they were decided.”  The Court noted that it “shall follow . . . the classic common law methodology.”

The Federal Circuit began its analysis of the patents-in-suit with “an examination of eligible and ineligible claims of a similar nature from past cases.”  The Court cited a few post-Alice cases in the software technical field and compared the claims in those cases and the claims at issue.  Helpfully, the Court provided lists of examples of both ineligible and eligible claims post-Alice.  The Court then turned to an examination of the claims in the patents at issue.  Applying “classic common law methodology,” the Court found that the claims in the patents-in-suit are dissimilar from the ineligible claims post-Alice.  At the same time, the Court found that the claims are similar to the eligible claims post-Alice.  The Court essentially skipped step one of the Alice analysis and found the claims at issue, like other eligible claims, to “entail[] an unconventional technological solution . . . to a technological problem” and “involve[] limitations that when considered individually and as an ordered combination recite an inventive concept.”  The Court thus found the claims at issue to be patent eligible under § 101 and reversed the district court’s judgment. 

Judge Reyna filed a dissenting opinion.  He insisted that the Court should first engage in the first step of the Alice analysis to determine whether the claims are directed to an abstract idea.  He also faulted the majority’s reliance on the specification to import innovative limitations into the claims at issue.

Patent-Eligibility for Computer-Implemented Inventions

This decision provides guidance for application of the Alice analysis.  The Federal Circuit explicitly endorsed a “classic common law methodology” approach to analyze the eligibility of claims, and essentially declared the futility of identifying a “test” or a “definition” for determining what is, or is not, an abstract idea.  Helpfully, the Federal Circuit enumerated examples of eligible and ineligible post-Alice claims, providing patent practitioners with a valuable tool for supporting the patent-eligibility of computer-implemented inventions under § 101 review.  Given the Court’s common law approach, the patent-eligibility analysis may be fact-sensitive and may be decided on a case-by-case basis. 

The Amdocs decision adds to the Federal Circuit’s recent decisions that uphold the patent-eligibility of claims directed at computer-implemented inventions.  In addition, the case itself provides a fact pattern for application of the second Alice step that can be used by both patent applicants and patentees.  The Federal Circuit may identify more “fact patterns” in future cases. 

In conclusion, the Amdocs decision provides a positive decision that applicants and patentees can cite in seeking to obtain and defend claims directed to computer-implemented inventions.  The Amdocs decision, BASCOM Global Internet Services, Inc., v. AT&T Mobility LLC, No. 2015-1763 (Fed. Cir. June 27, 2016), Enfish, LLC v. Microsoft Corp., No. 2015-1244 (Fed. Cir. May 12, 2016), upholding claims under step one of the Alice inquiry, and DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014) are four important decisions counterbalancing many post-Alice decisions that provided examples of claims that were not patentable under Alice. 

In view of the continuing legal developments regarding the patentability of computer-implemented inventions, applicants and patentees continue to be well-served by developing a patent portfolio that tells a story behind inventions that provides improvements over and solutions to disadvantages of prior art technology.