Federal Circuit Split On Specification's Role In Determining Patent Eligibility

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HIGHLIGHTS:

  • The U.S. Court of Appeals for the Federal Circuit reversed a district court ruling that four related software patents are patent ineligible under 35 U.S.C. §101, by considering the specification to determine that the patents do not claim an abstract idea. Amdocs (Isreal) Limited v. Openet Telecom, Inc. (2015-1180, slip. op. (Fed. Cir. Nov. 1, 2016)).
  • Until the Federal Circuit addresses the §101 patent eligibility analysis en banc, the outcome of an appeal addressing patent eligibility will be panel-dependent.
  • Should the factual statements of the specification, which were relied upon by the Federal Circuit to reverse the judgment on the pleadings, prove to be unfounded on remand, the trial court may potentially be faced with the legal dilemma of finding infringement and invalidity based on different interpretations of the claims.

The U.S. Court of Appeals for the Federal Circuit recently reversed a district court ruling that four related software patents are patent ineligible under 35 U.S.C. §101, by considering the specification to determine that the patents do not claim an abstract idea. Amdocs (Isreal) Limited v. Openet Telecom, Inc. (2015-1180, slip. op. (Fed. Cir. Nov. 1, 2016)).

The majority and dissenting opinions highlight different analytic approaches to a §101 analysis of patent eligibility. Specifically, the dissent does not agree that the specification should be considered in an analysis of whether patent claims are directed to an abstract idea. Consideration of the specification in such an analysis has a bearing on the likelihood of finding a patent eligible or ineligible under §101.

Thus, since the Federal Circuit is divided on its approach to determination of §101 patent eligibility, the results of any such case will be panel-dependent. In addition, because the Federal Circuit reversed the grant of judgment on the pleadings and remanded for the trial court to address other grounds of invalidity and infringement, the holding may raise a potential dilemma for the trial court. That is, should the factual statements relied upon to find patent eligibility prove to be unfounded on remand, it is conceivable that the trial court could find that the claims read on the alleged infringing product without the technological improvements set forth in the specification. Were that to occur, the violation of fundamental patent law doctrine – that claims be construed the same way for determination of infringement and validity – would need to be resolved.

Subject Matter Eligibility

Under Section 101 of the Patent Act "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor ... ." 35 U.S.C. §101. The U.S. Supreme Court has repeatedly articulated three long-held exceptions to patentable subject matter: laws of nature, natural phenomena and abstract ideas. See, e.g., Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107, 2116 (2013); Bilski v. Kappos, 561 U.S. 593, 601 (2010). The Supreme Court put forth a two-step process for "distinguishing patents that claim laws of nature, natural phenomena and abstract ideas from those that claim patent-eligible applications of those concepts." Alice Corp. Pty Ltd. v. CLS Bank Int'l, 134 S. Ct. 2347, 2355 (2014); see also Mayo Collaborative Serv. V. Prometheus Labs., Inc. 132 S.Ct. 1289, 1296-97 (2012).

In the first step, the court determines if the claims are directed to a patent-ineligible exception. Alice, 134 S. Ct. at 2355. In this first step, the court considers the breadth of the claims and evaluates whether the claims cover a "fundamental ... practice long prevalent in our system ... ." Id. Only if the court finds that the claims are directed to a patent-ineligible exception does it proceed to the second step of determining if the elements of the claim "transform the nature of the claim" into a patent-eligible invention. Alice, 134 S. Ct. at 2355. A claim directed to a law of nature, for example, may be patent-eligible if the "claimed process include[s] ... unconventional steps ... that confine[] the claim[] to a particular, useful application of the principle." Mayo 132 S. Ct. at 1300; see also BASCOM Global Internet Servs. v. AT&T Mobility LLC, 827 F.3d 1341, 1348 (Fed. Cir. 2016) ("some inventions' basic thrust might more easily be understood as directed to an abstract idea, but under step two of the Alice analysis, it might become clear that the specific improvements in the recited computer technology go beyond 'well-understood, routing, conventional activit[ies]' and render the invention patent-eligible") (quoting Alice, 134 S. Ct. at 2359). On the other hand, a claim remains patent-ineligible if it includes only "purely 'conventional or obvious'" elements. Mayo, 132 S. Ct. at 1299.

The Patents And District Court Ruling

The Amdocs patents in the suit concerned data mediation software used by network service providers to monitor and bill for customer data usage. Each of the patents' written descriptions describes the same system, which includes hardware and software components arranged in a "distributed architecture" that functions to reduce network congestion. Amdocs slip. op. at 3-4. Granting the alleged infringer's motion for judgment on the pleadings, the district court ruled that because the claims were directed to "correlating two network accounting records to enhance the first record," "using a database to compile and report on network usage information," "generat[ing] a single record reflecting multiple services" or "reporting on the collection of network usage information from a plurality of network devices" using ordinary technology, the patents are directed to an abstract idea with no inventive concepts. Amdocs (Israel) LTD. v. Openet Telecom, Inc., 56 F. Supp. 3d 813, 820, 823-825 (E.D. Va. 2014).

Specification Informs The Patent Eligibility Analysis

The majority used the specification to inform their analysis of whether exemplary claims were patent eligible under §101. In a prior appeal, the Federal Circuit construed "enhance" in exemplary claim 1 of the '065 patent (exemplary claims are reproduced below) to mean "to apply a number of field enhancements in a distributed fashion." Amdocs slip op. at 5, 22. The Federal Circuit also approved of the district court's construction of "completing" in exemplary claim 16 of the '510 patent to mean "enhance a record until all required fields have been populated," where "enhance" has the same meaning as in claim 1 of the '065 patent. Id. at 27. The majority opinion reasoned that in a §101 patent eligibility analysis, not only are the claims examined "taking into consideration the approved claim constructions," but the claims are examined "in light of the written description." Id. at 19-20 (citing Enfish v Microsoft, 822 F.3d 1327 (Fed. Cir. 2016) and In re TLI Commc'ns LLC Patent Litig., 823 F.3d 607 (Fed. Cir. 2016).

The specification explained the "distributed architecture" of the invention was a critical advancement over the prior art that, according to the majority opinion, provided "an unconventional solution (enhancing data in a distributed fashion) to a technological problem ...," even though it utilized generic components. Id. at 22-23, 27-28, 30-31, 32-33.

Referring to exemplary claim 1 of the '797 patent, the majority concluded that "an examination of the claim in light of the written description reveals that many of these components and functionalities are in fact neither generic nor conventional ... ." Amdocs slip op. at 34. Because the claims of the patents in suit require components to operate in an unconventional manner to improve computer function, they include the type of inventive concept required in step two of the Alice/Mayo approach and are, therefore, patent-eligible. Id. at 23.

In contrast, the dissent opined that the decision "contravenes the fundamental principal that the Section 101 inquiry is about whether the claims are directed to patent-eligible invention, not whether the specification is so directed." Amdocs dissenting slip op. at 2 (citing Synopsys, Inc. v. Mentor Graphics Corp., No. 2015-1599, slip. op. at 20-21 (Fed. Cir. Oct. 17, 2016)). That is, "the inquiry is not whether the specifications disclose a patent-eligible system, but whether the claims are directed to a patent ineligible concept." Id. at 12 (emphasis in original).

The dissent strictly applied the two-step Alice/Mayo analysis to the exemplary claims, which in the first step requires an analysis of whether the claim is "directed to" an abstract idea. Amdocs slip dissenting op. at 2. Then if the second step is necessary in the analysis, it should include an evaluation of whether the claim limits the abstract idea in ways other than "illusory" – limitations that do not narrow the claim – or "contextual" – field-of-use limitations that do not convert an abstract idea to a patentable invention. Id. at 10-11.

Applying the Alice/Mayo two-step analysis, the dissent concluded that because exemplary claim 1 of the '065 patent recites software stored on a physical storage medium without limitations that provide inventive concept, that claim is patent ineligible. Id. at 14. Similarly, exemplary claim 1 of the '797 patent, directed to "the abstract concept of collecting information about network services," recites no limitation that would redirect the claim to patent eligibility. Id. at 25.

According to the dissent, the majority relied on the description of "distributed architecture" in the specification that was not described in these claims. Id. at 2. On the other hand, exemplary claim 16 of the '510 patent and exemplary claim 1 of the '984 patent recites enough of the "distributed architecture" protocol described in the specification to provide inventive concept to those claims. Id. at 18, 21.

Conclusion

Until the Federal Circuit addresses the §101 patent eligibility analysis en banc, the outcome of an appeal addressing patent eligibility will be panel-dependent. In addition, should the factual statements of the specification, which were relied upon by the Federal Circuit to reverse the judgment on the pleadings, prove to be unfounded on remand, the trial court may potentially be faced with the legal dilemma of finding infringement and invalidity based on different interpretations of the claims.

Representative Claims

U.S. Patent No. 7,631,065, Claim 1:

1. A computer program product embodied on a computer readable storage medium for processing network accounting information comprising:

computer code for receiving from a first source a first network accounting record;
computer code for correlating the first network accounting record with accounting information available from a second source; and
computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.

U.S. Patent No. 7,412,510, Claim 16:

16. A computer program product stored in a computer readable medium for reporting on a collection of network usage information from a plurality of network devices, comprising:

computer code for collecting network communications usage information in real-time form a plurality of network devices at a plurality of layers;
computer code for filtering and aggregating the network communication usage information;
computer code for completing a plurality of data records from the filtered and aggregated network communications usage information, the plurality of data records corresponding to network usage by a plurality of users;
computer code for submitting queries to the database utilizing predetermined reports for retrieving information on the collection of the network usage information from the network devices; and
computer code for outputting a report based on the queries; wherein resource consumption queries are submitted to the database utilizing the reports for retrieving information on resource consumption in a network; and
wherein a resource consumption report is outputted based on theresource consumption queries.

U.S. Patent No. 6,947,984, Claim 1:

1. A method for reporting on the collection of network usage information from a plurality of network devices, comprising:

(a) collecting networks communications usage information in real-time from a plurality of network devices at a plurality of layers utilizing multiple gatherers each including a plurality of information source modules each interfacing with one of the network devices and capable of communicating using a protocol specific to the network device coupled thereto, the network devices selected from the group consisting of routers, switches, firewalls, authentication servers, web hosts, proxy servers, netflow servers, databases, mail servers, RADIUS servers, and domain name servers, the gatherers being positioned on a segment of the network on which the network devices coupled thereto are positioned for minimizing an impact of the gatherers on the network;

(b) filtering and aggregating the network communications usage information;

(c) completing a plurality of data records from the filtered and aggregated network communications usage information, the plurality of data records corresponding to network usage by a plurality of users;

(d) storing the plurality of data records in a database;

(e) allowing the selection of one of a plurality of reports for reporting purposes;

(f) submitting queries to the database utilizing the selected
reports for retrieving information on the collection of the network usage information from the network devices; and

(g) outputting a report based on the queries.

U.S. Patent No. 6,836,797, Claim 1:

1. A method for generating a single record reflecting multiple services for accounting purposes, comprising:

(a) identifying a plurality of services carried out over a network;

(b) collecting data describing the plurality of services; and

(c) generating a single record including the collected data,
 wherein the single record represents each of the plurality of
services;
wherein the services include at least two services selected
from a group consisting of a hypertext transfer protocol (HTTP) session, an electronic mail session, a multimedia streaming session, a voice over Internet Protocol (IP) session, a data communication session, an instant messaging session, a peer-to-peer network application session, a file transfer protocol (FTP) session, and a telnet session;
 wherein the data is collected utilizing an enhancement
procedure defined utilizing a graphical user interface by:
    listing a plurality of available functions to be applied in
real-time prior to end-user reporting;
    allowing a user to choose at least one of a plurality of
fields, and allowing the user to choose at least one of the listed functions to be applied to the chosen field in real-time prior to end-user reporting.

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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