Federal Circuit Knocks Out Patents After CBM Challenge

by Foley & Lardner LLP
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Apple successfully invalidated three patents for failure to recite patent eligible subject matter. Apple, Inc. v. Ameranth, Inc., 2015-1792, 2015-1793 (Fed. Cir. 2016). The patents relate to synchronous communication systems for electronically generating and transmitting menu selections. While the covered technology is not directly related to personalized medicine, the Federal Circuit’s review of the patents’ specifications and the court’s claim constructions in the context of a 35 U.S.C. § 101 challenge is instructive to patent applicants seeking to patent methods that may be characterized as an abstract idea, such as methods linking treatment options or clinical trials to potential patients.

The Patents at issue

Ameranth, Inc. (Ameranth) is the owner of the three patents in issue, namely U.S. Patent No. 6,384,850 (‘850 Patent), U.S. Patent No. 6,871,325 (‘325 Patent), and U.S. Patent No. 6,982,733 (‘733 Patent). The patents are related to each other as parent (‘850 Patent), continuation (‘325 Patent) and continuation-in-part (‘733 Patent). Each patent specification discloses a first menu having categories and items and software that can generate a second menu from that first menu by allowing the categories and items to be selected. The menus can be configured using a graphical user interface and then transmitted to a wireless handheld device.

Claim 1 of the ‘850 Patent was determined to be representative of the challenged claims and is reproduced below:

1. An information management and synchronous communications system for generating and transmitting menus comprising:

a central processing unit,

a data storage device connected to said central processing unit,

an operating system including a graphical user interface,

a first menu consisting of menu categories, said menu categories consisting of menu items, said first menu stored on said data storage device and displayable in a window of said graphical user interface in a hierarchical tree format,

a modifier menu stored on said data storage device and displayable in a window of said graphical user interface,

a sub-modifier menu stored on said data storage device and displayable in a window of said graphical user interface, and

application software for generating a second menu from said first menu and transmitting said second menu to a wireless handheld computing device or Web page,

wherein the application software facilitates the generation of the second menu by allowing selection of catagories [sic] and items from the first menu, addition of menu categories to the second menu, addition of menu items to the second menu and assignment of parameters to items in the second menu using the graphical user interface of said operating system, said parameters being selected from the modifier and sub-modifier menus.

Slip Op. at page 5.

A preferred embodiment of the claimed invention is its use in the restaurant industry. In that embodiment, a menu consists of categories such as appetizers and entrees, items such as chicken Caesar salad, modifiers such as dressing, and sub-modifiers such as Italian and bleu cheese.

The case came to the Federal Circuit by Ameranth’s appeal of the Patent Trial and Appeal Board’s (Board’s) finding that the patents are covered business methods (“CBM”) eligible for CBM review. Ameranth also argued that the Board erred in misconstruing the claims and in holding that certain claims of the patents failed under 35 U.S.C. § 101. Slip Op. at 8.

Standards of Review and Construction of the Claims

In CBM, the claims are construed according to their broadest reasonable construction in light of the patent’s specification. Slip Op. at 9. The Federal Circuit, in reviewing CBM determinations, construes the claims de novo. Id. However, “[i]f the Board makes subsidiary factual findings about extrinsic evidence that underlie its construction,.. [the court reviews] those factual findings for substantial evidence.” Id. The court reviews § 101 patent eligibility de novo.

Before entertaining the merits of Ameranth’s grounds for appeal, the Federal Circuit reviewed and construed certain claim elements.

Menu

Ameranth had argued to the Board that the term “menu” should be construed as “computer data representing collections of linked levels of choices or options intended for display in a graphical user interface.” Slip Op. at 10. The Board disagreed, and construed the term to be a list of options available to the user displayable on a computer. On appeal, Ameranth stated that Board’s construction was incorrect because it disregarded that the claimed menus are hierarchical. The Federal Circuit disagreed, noting that the Board was correct in excluding this term from the construction because it was expressly recited in the claims. Id.

Synchronous Communications System

Ameranth also challenged the construction of the term “synchronous communications system.” Ameranth alleged the term to be limiting in that it requires “a central back-office server that communicates data updates to and from multiple client devices.” Slip Op. at 11. The Board and the Federal Circuit disagreed, noting that “nothing in the patents’ specifications indicate that a synchronous communications systems is required to include a central back-office server….” Id.

Central Processing Unit

Ameranth had argued at the Board that the term “central processing unit” should be construed as “central server.” Slip Op. at 12. The Board disagreed and construed the term as “the computational and control unit of a computer.” Id. The Federal Circuit concurred, declining Ameranth’s position because to include these terms would be to “include features of that term that are already recited in the claims would make those expressly recited features redundant.” Id.

Ameranth argued on appeal that the Board erred because its construction disregarded the doctrine of claim differentiation, “as claim 5 of the ‘733 patent expressly recites ‘microprocessor.’” Id. The Federal Circuit disagreed, confirming the Board’s refusal to apply the doctrine because the doctrine does not apply when the considered claims are not otherwise identical in scope, citing Indacon, Inc. v. Facebook, Inc., 824 F.3d 1352 (Fed. Cir. 2016). In reaching this conclusion, the court focused on the use of the term “microprocessor” in certain claims while other claims recited “central processing unit.” The court also found that the Board’s construction of the term was consistent with its use in the patent specifications.

CBM Patent Determinations

A CBM patent is defined in §18 of the America Invents Act (AIA) as a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions. Slip Op. at 14, citing Leahy-Smith America Invents Act, Publ. L. No. 112-29, § 18(d)(1), 125 Stat. 284, 331 (2011) (emphasis added).

The US Patent Office promulgated a regulation for determining whether a patent is for technological invention for the purpose of §18. That is, whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution. 37 C.F.R. § 42.301(b). Slip Op. at 14.

The Board found that neither prong of the rule was satisfied. The Board determined that the patents did not claim a technological feature that is novel and unobvious over the art. On the second prong, the Board held that the inventions did not solve a technical problem using a technical solution.

On appeal Ameranth contended that the patents fall within the “technological inventions” exception because the inventions solved “the problem of how to display and synchronize computerized menus on non-standard devices/interfaces.” Slip Op. at 15. In rejecting this argument below, the Board explained “that the claims did not recite a solution to this problem, as they do not include recitations about how to display or synchronize the menus, but instead include descriptions about menu generation.” Slip Op. at 16.

The Federal Circuit agreed with the Board, finding that neither prong of 37 C.F.R. § 42.301(b) was satisfied. For the first prong the court stated that the claimed systems require only “typical” hardware and “commonly known” programming steps, as so described in the patent’s specification. Slip Op. at 16. For the second prong, the court stated that the problem or the solution recited in the claims as non-technical. Ameranth had argued that the patents solved the problem of how to display and synchronize computerized menus on a non-standard devices/interface, but the court found that the claims recited only how to generate the menus. Slip Op. at 16 (emphasis added). Similarly, Ameranth had argued that the ‘733 Patent was intended to solve a problem in restaurant ordering when customers wanted something unusual and unanticipated, but the court determined that this was more of a business problem than a technical one. Id.

Thus, the Federal Circuit affirmed the Board’s holding that the patents were for covered business methods and eligible for CBM reviews.

Section 101 Determinations

To determine whether Ameranth’s claims are directed to patent-eligible subject matter under 35 U.S.C. § 101, the court applied the Supreme Court’s two-step “Alice” test. Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347, 2355 (2014). Slip Op. at 17. The two-step Alice test requires that the PTO or court first determine whether the claims at issue are directed to a patent-ineligible concept, and if so, proceed to the second step of determining whether the claim’s elements, considered both individually and as an ordered combination, transform the nature of the claims into a patent-eligible application.

Step One

The Board had determined that all of Ameranth’s claims are directed to a patent-ineligible concept, i.e., an abstract idea for “generating a second menu from a first menu and sending the second menu to another location.” Slip Op. at 19. On appeal, Ameranth did not contest the general categorization, but argued that the Board erred because it had changed slightly how it characterized the abstract idea between its institution decisions and its final decisions.

In affirming the Board, the Federal Circuit noted that an abstract idea can be described at different levels of abstraction, and the particular expression chosen by the Board does not impact the patentability analysis. Rather, the focus of a step one inquiry is whether the claims “focus on a specific means or method that improves the relevant technology,” or are “directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.” Slip Op. at 18, citing McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299, 1314 (Fed. Cir. 2016).

The court found Ameranth’s claims to be the latter, holding that the claims, in essence, are directed to a certain functionality (i.e., the ability to generate menus with certain features) rather than a specific improvement in the way computers operate, as they do not claim a particular way of programming or designing the software to create menus having particular features, but instead merely claim the resulting system. Having determined that the claims are directed to a patent-ineligible concept, the court moved on to step two of the Alice test.

Step Two

Even if the claims are directed in whole or in part to a patent-ineligible concept, the claims may be patent-eligible if claim elements, considered both individually and as an ordered combination, transform the nature of the claims into a patent-eligible application.

The Board determined that the claims also failed this element of the Alice test because the hardware components recited in the claims were “typical” hardware elements. Slip Op. at 19. In addition, the recited menus were described in the specification as being conventional. Id.

On appeal, Ameranth argued that the term “second menu is manually modified after generation” in claim 1 of the ‘733 Patent transformed the claims to patent-eligible subject matter. Ameranth also focused on the synchronization limitation in independent claims 4, 5, and 12 of the ’733 Patent, the printing features of dependent claims 2 and 10 of the ’733 Patent, and the recitation of types of ordering in claims 1 to 6 of the ’325 Patent, as additional elements that transformed the claims.

The Federal Circuit agreed with the Board that all four features were insignificant post-solution activities that do not transform the claims. Slip Op. at 22. Particularly, the court noted that the preferred embodiment of the claimed invention is a restaurant preparing device that can be used by a server taking orders from a customer. The claimed invention replaces the server’s notepad or mental list with an electronic device programmed to allow menu items to be selected as a customer places an order. As noted above, the specifications describe the hardware elements of the invention as “typical” and the software programming needed as “commonly known.” The Federal Circuit stated that therefore, the invention merely claims the addition of conventional computer components to well-known business practices.

The Federal Circuit also dismissed Ameranth’s argument that programming the software to perform various parts of the claimed systems’ functionality was difficult. The court explained that these programming details are not recited in the actual claims, and the degree of difficulty in implementing an abstract idea does not itself render an abstract idea patentable.

The Board had found that certain dependent claims patentable on the ground that they contained inventive features sufficient to transform the abstract idea into a patent-eligible application. These include the feature of linking orders to specific customers of dependent claims 3 and 11 in the ‘733 Patent and the features involving handwriting and voice capture of dependent claims 6-9 and 13-16 in the ‘733 Patent. The Federal Circuit disagreed and reversed the Board’s holding.

The Federal Circuit stated that the claims essentially cover the classic manual tasks of a restaurant server taking order from a customer and keeping track of which customer placed that order, when done using a computer. However, in addition to expressly reciting that the hardware needed was typical and that the programming steps were commonly known, the specification merely calls for the desired result of associating a customer’s order with the customer, with no disclosure of how this would be technically implemented.

Similarly, regarding the claims that require that the second menu is manually modified by handwriting or voice recording, the Federal Circuit also found that there is no recitation of inventive methods for technologically achieving the claimed functionality in the patents. Ameranth conceded that it had not invented voice or handwriting capture technology and it was known in 2001 to use these technologies for entering data into a computer system.

The Federal Circuit noted that a claim that merely describes an effect or result dissociated from any method by which it is accomplished is not directed to patent-eligible subject matter. Here, Ameranth claims no more than the desired result of associating a customer’s order with the customer, or the use of existing technologies for entering data into a computer system. Merely pending these insignificant post-solution activities to those independent claims did not make them patent eligible.

Thus, the Federal Circuit held all challenged claims ineligible under 35 U.S.C. § 101.

Lessons for Personalized Medicine

While the claimed technology in this decision is not related to personalized medicine, it does have a feature common to some diagnostic and certain methods used in personalized medicine, that is, computer functionality applied to methods having features that previously were carried out manually by one or several independent users.

The Board’s and the Federal Circuit’s construction of the claims featured prominently in the ultimate determination that the claims failed patent-eligibility. It is apparent that features of the invention that may have led to a different outcome were absent from the claims and not expressly defined in the specification, such as how to implement certain functionality that was unknown or otherwise not routinely applied in the methods. Thus, patent applications directed to new methods and systems for precision medicine that could be construed as an abstract idea should clearly identify inventive features that go beyond pointing to conventional systems and functions merely applied by use of a computer. These may involve disclosing and claiming special hardware components and specific instructions regarding how to use that hardware unique to the invention. These may also involve disclosing and claiming specific features and details of method steps to achieve the desired functionality.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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