In re TLI Communications LLC Patent Litigation (Fed. Cir. 2016)

by McDonnell Boehnen Hulbert & Berghoff LLP

This case is notable mainly because it is the first Federal Circuit decision to distinguish itself from Enfish LLC v. Microsoft Corp., and also because it is another reminder that the wall between patentable subject matter, obviousness, and written description is now rubble.

TLI sued AV and a number of other parties in the U.S. District Court for the Eastern District of Virginia, alleging infringement of its U.S. Patent No. 6,038,295.  Claim 17 of this patent recites:

17.  A method for recording and administering digital images, comprising the steps of:
    recording images using a digital pick up unit in a telephone unit,
    storing the images recorded by the digital pick up unit in a digital form as digital images,
    transmitting data including at least the digital images and classification information to a server, wherein said classification information is prescribable by a user of the telephone unit for allocation to the digital images,
    receiving the data by the server,
    extracting classification information which characterizes the digital images from the received data, and
    storing the digital images in the server, said step of storing taking into consideration the classification information.

According to the specification, the '295 patent "relates generally to an apparatus for recording of a digital image, communicating the digital image from the recording device to a storage device, and to administering the digital image in the storage device."  Further, "the problems of locating the data of an image data file increase as the number of images to be archived increases," and the invention addresses this problem "by providing for recording, administration and archiving of digital images simply, fast and in such way that the information therefore may be easily tracked."

The defendants filed a Rule 12(b)(6) motion to dismiss, alleging that the '295 patent was not directed to patentable subject matter under 35 U.S.C. § 101.  This motion was granted, with the District Court stating that the claims merely recited "the abstract idea of taking, organizing, classifying, and storing photographs."  TLI appealed to the Federal Circuit.

On appeal, the Court proceeded to review the two-prong test for patent-eligibility set forth in Alice Corp. v. CLS Bank Int'l.  First, one must 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 something more than the judicial exception.  Notably, generic computer implementation of an otherwise abstract process does not qualify as "something more."

With respect to the first prong, the Court observed that "[w]hile claim 17 requires concrete, tangible components such as 'a telephone unit' and a 'server,' the specification makes clear that the recited physical components merely provide a generic environment in which to carry out the abstract idea of classifying and storing digital images in an organized manner."  Invoking Enfish, the Court confirmed that "a relevant inquiry at step one is to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea."  Notably, the Federal Circuit's post-Alice case law draws a line (albeit a rather thin one) between "claims directed to an improvement in the functioning of a computer with claims simply adding conventional computer components to well-known business practices, or claims reciting use of an abstract mathematical formula on any general purpose computer, or a purely conventional computer implementation of a mathematical formula, or generalized steps to be performed on a computer using conventional computer activity."

In order to determine where TLI's claims fall, the Court looked to the specification of the '295 patent.  Particularly, the patent states that the prior art includes digitization and transmission of still images, as well as "an image and audio communication system having a graphical annotation capability in which voice, data and image communications are used in telephone systems."  Further, the specification also concedes that it was known that cellular telephones could transmit images, audio, and video, and also had graphical annotation ability.

On top of these observations, the Court further determined that "the claims here are not directed to a specific improvement to computer functionality . . . [r]ather, they are directed to the use of conventional or generic technology in a nascent but well-known environment, without any claim that the invention reflects an inventive solution to any problem presented by combining the two."  Moreover, "[t]he specification fails to provide any technical details for the tangible components, but instead predominately describes the system and methods in purely functional terms."

As a result, the Court concluded that the claims were abstract under prong one of Alice.

Moving on to prong two, the Court essentially performed the same analysis again.  Under prong two, "[i]t is well-settled that mere recitation of concrete, tangible components is insufficient to confer patent eligibility to an otherwise abstract idea . . . the components must involve more than performance of well understood, routine, conventional activities previously known to the industry."  Ultimately, the Court found that the claim terms of "telephone unit" and "server," while concrete, were both generic devices used in an expected fashion, thus having no patentable weight even when viewed as an ordered combination with the other claim elements.

Thus, the claims were found not to recite significantly more than the abstract idea therein, and were invalidated under § 101.

As alluded to above, the line distinguishing between this case and Enfish is not particularly clear.  Both specifications explained at least some advantage of the respectively claimed invention, though the Enfish patent went into more detail when doing so.  Also, the '295 patent conceded that many of its features were well known in the art, though the combination thereof might not have been.  Consequently, one must be careful when characterizing the improvement that a claimed invention has over the prior art so that this characterization does not become an admission that parts of the invention were well known.

Following closely on that thought, this decision reads like the Court was finding the claims obvious over applicant admitted prior art.  The bedrock principle from Diamond v. Diehr that §§ 101 and 103 do not overlap is completely shattered at this point (an probably has been for some time).

Furthermore, the Court's concluding remarks are telling:  "Although the claims recite that the abstract idea of classifying and storing digital images in an organized manner is carried out in a telephone system, the '295 patent fails to provide the requisite details necessary to carry out that idea."  If this looks like § 101 is also being used as a proxy for § 112, you would not be mistaken.

Finally, the Enfish interpretation of Alice, where the improvement provided by an invention can be considered in both prong one and prong two of the latter's test, results in somewhat non-aesthetic situation in which the same analysis might be applied at both prongs.  This goes to show that, for some claims, the Alice test essentially has one prong -- the claims either recite an improvement to a computer or a technology or they don't.

In re TLI Communications LLC Patent Litigation (Fed. Cir. 2016)
Panel:  Circuit Judges Dyk, Schall, and Hughes
Opinion by Circuit Judge Hughes

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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