New Cases Help Defend Patentability Challenges Under Section 101

Authored by Luke J. McCammon and Jason E. Stach

In its unanimous Alice Corp. v. CLS Bank [Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014)] decision last year, the Supreme Court found that claims for a computer-implemented technique for mitigating "settlement risk" in financial transactions were ineligible for patenting under 35 U.S.C. § 101. [Id. at 2351-2352.] The court reaffirmed that its test in Mayo Collaborative Services v. Prometheus Laboratories, Inc. should be used for distinguishing patents that claim patent-ineligible concepts, such as "laws of nature, natural phenomena, and abstract ideas[,] from those that claim patent-eligible applications of those concepts." [Id. at 2355.] Under Mayo, one first determines whether the claim is directed to one of those patent-ineligible categories of abstract ideas. [Id.] If so, one then determines whether the claim contains an "inventive concept" sufficient to "transform" the claimed abstract idea into a patent-eligible concept. [Id. at 2357.] Alice made clear, however, that mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. [Id. at 2358.]

The Aftermath of Alice

After the Supreme Court's Alice decision, the number of courts invalidating patents under Section 101 increased dramatically. Sources vary regarding the exact percentage of invalidation, but they agree that in the six months following Alice, district courts invalidated well over 50 percent of patents challenged under Section 101. The Federal Circuit similarly invalidated patents under Section 101 in six decisions in just the first six months following Alice. [Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014); Planet Bingo, LLC v. VKGS LLC, 576 Fed. App'x. 1005 (Fed. Cir. 2014); buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014); Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014); Univ. of Utah Res. Found. v. Ambry Genetics Corp., 774 F.3d 755 (Fed. Cir. 2014); Content Extraction & Transmission LLC v. Wells Fargo Bank Nat'l Assoc., 776 F.3d 1343 (Fed. Cir. 2014).] The Patent and Trademark Office (PTO) continues this trend, invalidating patents challenged under Section 101 in Covered Business Method reviews at an extremely high rate. [Data derived from Docket Navigator as of June 6, 2015.]

A Standout Case

After a stretch of cases finding claims patent-ineligible, the Federal Circuit issued an opinion providing some guidance on what types of computer-implemented claims may survive a patentability challenge. In December 2014, it issued its first (and at the time of this writing, still only) opinion upholding the patentability of claims under Section 101 in DDR Holdings, LLC v. Hotels.com, L.P. [DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014).] The patent at issue addressed a problem faced by Web site owners whose visitors were lured away by advertisements of third-party merchants. [Id. at 1248.] It disclosed a system to retain Web site visitors by changing the processing of links to third-party Web sites. [Id. at 1248-1249.] Instead of transporting a Web site visitor away from an owner's site, a user who clicked on an advertisement would instead be directed to a Web page that displayed product information from the third-party merchant, while still retaining the host Web site's "look and feel." [Id.] This allowed the host Web site to display the third-party merchant's product while still retaining its visitor traffic by displaying a Web page that appeared to be served by the host Web site.

In analyzing whether the claims were patent eligible, the Federal Circuit acknowledged that the claims addressed a business challenge, but it noted that the business challenge was particular to the Internet (i.e., retaining Web site visitors). [Id. at 1257.] The patent's claims did not merely address performance of a business practice known from the pre-Internet world and require it to be performed on the Internet. [Id.] Instead, the court noted that the claimed solution was "necessarily rooted in computer technology" and that it served "to overcome a problem specifically arising in the realm of computer networks." [Id.] Because of this, the court held that the claims amounted "to an inventive concept for resolving this particular internet-centric problem," which rendered them patent-eligible. [Id. at 1259.]

Application of DDR Holdings at the District Court

While district courts continue to invalidate patent claims under Section 101 at a high rate, some district courts have relied on DDR Holdings' guidance to find claims patent eligible. In Smartflash LLC v. Apple Inc., Smartflash asserted patents related to digital rights management. [Smartflash LLC v. Apple Inc., No. 6:13-cv-447, 2015 WL 661174, at *8 (E.D. Tex. Feb. 13, 2015).] Smartflash argued that its patents did not have generic computer limitations, but were instead directed to a computer-specific problem: Allowing content providers to protect their content from copying over digital networks while still allowing consumers of digital content to store the digital content permanently. [Id. at *7.]

The district court agreed with Smartflash, and relying on DDR Holdings, it noted that digital rights management is a technology that was developed after widespread use of the Internet. [Id. at *8.] The court noted that it was the "[e]ntry into the Internet Era [that] presented new and unique problems for digital content providers in combating unauthorized use and reproduction of protected media content." [Id.] The court went on to explain that digital piracy became widespread in ways that were not contemplated in the pre-Internet world, and that the patents claimed methods and systems to prevent this problem. [Id.] Because the patent's claims solved a problem that was new to the Internet era, and because they "improve[d] the functioning of the computer itself by providing protection for proprietary digital content," the court held that the claims were patent-eligible. [Id. at *8-9.]

The District of Delaware addressed a similar patentability issue in Intellectual Ventures I, LLC v. Motorola Mobility LLC [2015 WL 846532, at *2, *10 (D. Del. Feb. 24, 2015)]. One of the patents was directed to a wireless data transmission architecture that allowed for optimizing data transmission based on a "quality of service" mechanism. Although the court found that the claims may be directed to an abstract idea, it nonetheless held that they were "limited by an 'inventive concept' " sufficient to make them patent eligible. [Id. at *9-10.] According to the court, the claimed invention " 'specif[ies] how interactions with the [network] are manipulated to yield a desired result' by reallocating bandwidth based on the contents of packet headers." [Id. at *10 (quoting DDR Holdings, 773 F.3d at 1258).] Relying on DDR Holdings, the court held that because of its specific implementation, the claimed invention was "necessarily rooted in computer technology," solving a "problem specifically arising in the realm of computer networks." [Id. at *10 (quoting DDR Holdings, 773 F.3d 1257).] The court in Trading Technologies International, Inc. v. CQG, Inc. [No. 05-cv-4811, 2015 WL 774655 (N.D. Cal. Feb. 24, 2015)] confronted similar issues while upholding the patentability of an invention based on the reasoning in DDR Holdings.

Opposing Challenges to Patentability

While owners of computer or software-based patents often face an uphill battle when defending against patentability challenges, the Federal Circuit's DDR Holdings decision provides helpful guidance in opposing those attacks. Characterizing the patented invention as solving a problem that only arose due to use of computers or the Internet may provide a court with the context needed to uphold the patentability of claims. If possible, characterizing the invention as improving the functioning of the computer itself also may help a court uphold the challenged claims. Some thought Alice would bring about the end of certain classes of computer and software-based patents, but cases such as DDR Holdings demonstrate that at least some of those patents remain unaffected.