The Federal Circuit Adopts Classic Common Law Approach for Analyzing Patent Eligibility

Miles & Stockbridge P.C.

On November 1, 2016, the Court of Appeals for the Federal Circuit (“CAFC”) in Amdocs (Israel) v. Openet Telecom, No. 2015-1180 (“Amdocs II”), rendered a precedential opinion with regard to the issue of patent eligibility and reversed the district court’s finding of patent ineligibility under 35 U.S.C. § 101.

The suit between Amdocs and Openet was brought in 2010 in the District Court for the Eastern District of Virginia (“EDVA”) by Amdocs, asserting that Openet infringed claims of four patents. Openet asserted patent invalidity, unenforceability, and non-infringement. The EDVA granted Openet’s motion for summary judgment of non-infringement, but denied the parties’ motions for summary judgment with respect to validity. Amdocs appealed. In Amdocs (Israel) v. Openet Telecom, 761 F.3d 1329, 1331-36 (Fed. Cir. 2014) (“Amdocs I”), the CAFC rendered an opinion regarding claim construction and non-infringement. Following the remand from the CAFC in Amdocs I, Openet moved for judgment with respect to validity, asserting that, pursuant to Alice, [i] all asserted claims were ineligible under § 101. Openet’s motion was granted, and the EDVA found the asserted claims of all four patents ineligible under § 101. Amdocs again appealed.

In analyzing patent eligibility of claims, the CAFC in Amdocs II adopted a flexible common law approach in which claims were compared with eligible and ineligible claims of a similar nature from past cases.  

The CAFC recognized that even though the more comprehensive analysis in search of the “inventive concept” is generally reserved to step two of the two-step patent eligibility framework set out by the Supreme Court in Alice and Mayo, [ii] there is “considerable overlap between step one and step two” and “in some situations this analysis could be accomplished without going beyond step one.” [iii] According to the CAFC, the more detailed analysis could be undertaken either at step one or at step two. In both situations, “the analysis presumably would be based on a generally-accepted and understood definition of, or test for, what an ‘abstract idea’ encompasses.” [iv]

The CAFC further recognized the lack of a “single, universal definition of ‘abstract idea’” and the difficulty to “fashion a workable definition to be applied to as-yet-unknown cases with as-yet-unknown inventions.” [v] According to the CAFC, when a single governing definitional context is not available, “examin[ing] earlier cases in which a similar or parallel descriptive nature can be seen—what prior cases were about, and which way they were decided” is “the classic common law methodology for creating law” that the court should follow. [vi]

The patents-in-suit include U.S. Patent Nos. 7, 631,065 (“’065 patent”), 7,412,510 (“’510 patent”), 6,947,984 (“’984 patent”), and 6,836,797 (“’797 patent”).  These patents concern, among other things, “parts of a system designed to solve an accounting and billing problem faced by network service providers.” [vii] As an example, claim 1 of the ’065 patent (“claim 1”) recites:

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. [viii]

Applying the common law approach, the CAFC compared claim 1 with eligible and ineligible claims from past cases and concluded that claim 1 was much closer to eligible claims from BASCOM [ix] and DDR Holdings [x] than those ineligible claims from Digitech, [xi] Content Extraction, [xii] and In re TLI Commc’ns. [xiii] No determination of “abstract idea” was made.

The CAFC explained that according to the approved claim construction in Amdocs I, “enhance” means “to apply a number of field enhancements in a distributed fashion,” and that the “in a distributed fashion” and the “close to the source” of network information requirements are read into the term “enhance.” [xiv] Based on the claim construction, the CAFC stated that the claim “entails an unconventional technological solution (enhancing data in a distributed fashion) to a technological problem (massive record flows which previously required massive databases).” [xv] The CAFC reasoned that even though the solution requires “arguably generic components,” “the claim’s enhancing limitation necessarily requires that these generic components operate in an unconventional manner to achieve an improvement in computer functionality.” [xvi] In addition, the enhancing limitation also depends upon the network devices and gatherers working together in a distributed manner. [xvii] The “enhancing limitation necessarily involves the arguable generic gatherers, network devices, and other components working in an unconventional distributed fashion to solve a particular technological problem.” [xviii]

Claim 1 was therefore found to be distinct from the ineligible claims in Digitech, Content Extraction, and In re TLI Commc’ns that were “not tied to any particularized structure, broadly preempted related technologies, and merely involved combining data in an ordinary manner without any inventive concept.” [xix] Claim 1 was also distinct from the ineligible claim in Content Extraction, “which involved the generic, well-known steps of collecting data, recognizing data, and storing data.” [xx] In contrast, like the eligible claims in DDR Holdings and BASCOM, claim 1 involved limitations that “when considered individually and as an ordered combination recite an inventive concept” through the use of the distributed architecture. [xxi]

Claim 1 of the ’065 patent was therefore eligible. The majority found the other representative claims of the ’510 patent, ’984 patent, and the ’797 patent eligible for the similar reasons as stated for claim 1 of the ’065 patent.

In sum, the CAFC adopted a common law approach for analyzing patent eligibility. It will be interesting to see if more CAFC’s patent eligibility decisions will be based on this approach.  

[i] Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).
[ii] Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 10 (2012).  
[iii] Amdocs II, at 8 (citing Enfish, LLC, v. Microsoft Corp., 822 F.3d 1327, 1334-36 (Fed. Cir. 2016) and Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016)).
[iv] Id. at 9.
[v] Id.
[vi] Id. at 9-10 (citing KARL N. LLEWELLYN, THE COMMON LAW TRADITION: DECIDING APPEALS (1960)) (modified).
[vii] Id. at 2.
[viii] U.S. Patent No. 7,631,065, at 16:4–14.
[ix] BASCOM Global Internet Servs. v. AT&T Mobility, 827 F.3d 1341 (Fed. Cir. 2014).
[x] DDR Holdings, LLC v., LP, 773 F.3d 1245 (Fed. Cir 2014).
[xi] Digitech Image Techs., LLC v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014).
[xii] Content Extraction & Transmission, LLC v. Wells Fargo Bank, Nat’l Ass’n, 776 F.3d 1343 (Fed. Cir. 2014).
[xiii] In re TLI Commc’ns, LLC Patent Litigation, 823 F. 3d 607 (Fed. Cir. 2016); see Amdocs II, at 20-25.
[xiv] Amdocs II, at 22 (citing Amdocs I, at 1338-40).
[xv] Id. at 22.
[xvi] Id. at 22-23.
[xvii] Id. at 23.
[xviii] Id. at 23-24.
[xix] Id. at 24.
[xx] Id. at 24 (citing Alice, 134 S. Ct. at 2355).
[xxi] Id. at 25 (emphasis added).

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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