Software Patent Eligibility Update

Before an invention is evaluated under the standards of novelty and non-obviousness, it must be determined if the invention is patent eligible subject matter. The basic principal is that patent eligible inventions, according to statute, are directed to: a process; machine; article of manufacture; or a composition of matter. However, judicial exceptions have been established by the case law to prevent patenting: laws of nature (such as e=mc2); natural phenomena (going by different names in different cases but including such phenomenon as naturally occurring minerals, organisms and molecules called products of nature, and naturally occurring correlations between or among measurables); and abstract ideas (such as mental steps, information, conventional business practice, generic computing). There has been much uncertainty in determining whether a particular claim falls into one of the exceptions. In an infamous decision, Alice Corp. Pty. Ltd. v. CLS Bank Int’l. 134 S. Ct. 2437 (2014), the Supreme Court laid out an analysis procedure. Step 1, determine whether the claim is directed to one of the 4 statutory categories. If not, it is not patent eligible. If so, perform step 2 to determine whether the claim is covered by one of the judicial exceptions. Step 2 has two parts. Step 2A, determine whether the claim is directed to, when taken as a whole, a judicial exception. If not, it is patent eligible. If so, then, in step 2B, determine whether the claim adds significantly more. If not, it is not patent eligible.

In Alice, claims to software to determine whether an account had enough funds to execute a purchase on an instantaneous basis was found to be directed to the abstract idea of performing conventional business practices on a computer and that the claims had nothing more than mental steps and generic computer operations. Therefore the claims at issue were patent ineligible. This decision was considered to be a significant blow to software based patents.

Several recent decisions by the U.S. Court of Appeals for the Federal Circuit (CAFC) and a memorandum from the Deputy Commissioner for Patent Examination Policy disseminated on November 2, 2016 provide more arguments that breathe life into software-related patent claims that had been receiving resistance from many examiners as not patent eligible.

In DDR Holdings, LLC. v. Hotels.Com, L.P., 773 F.3d 1245 (Fed. Cir. 2014),the CAFC indicated that software for solving a problem that is rooted in the field of computer technology is not directed to an abstract idea.

In Enfish LLC v. Microsoft Corp. 2016 U.S. App. LEXIS 8699, 2016 WL 2756255 (Fed. Cir. May 12, 2016), The CAFC points out “Software can make non-abstract improvements to computer technology” and pass at the first stage of analysis and does not need the second stage to find “substantially more.” The CAFC further points out “The ‘directed to’ inquiry . . . cannot simply ask whether the claims involve a patent-ineligible concept … Rather . . . whether their character as a whole is directed to excluded subject matter.” This case also stands for the proposition that a physical component need not be recited in a software method claim, stating “that the improvement is not defined by reference to “physical” components does not doom the claims. To hold otherwise risks resurrecting a bright-line machine-or-transformation test . . . or creating a categorical ban on software patents.” Interestingly, the CAFC did not refer to software steps as “mental steps” performed on a general purpose computer, which is often argued by examiners when rejecting software patents.

In the non-precedential decision in SmartGene, Inc., v. Advanced Biological Labs., SA , No. 2013-1186 (Fed. Cir. Jan. 24, 2014), the CAFC clarified that prior cases taught mental steps were steps that could be and routinely are carried out mentally. This leaves room for software patents that apply complex routines that were never meant to be carried out manually by humans.

In McRO, Inc. v. Bandi Namco Games America, 120 USPQ2d 1091 (Fed. Cir. 2016), the CAFC expanded patent eligible software to computer-related technology. In this case the computer program was directed to improving appearance of animated speech, which could be considered information processing, and not directed to making a better computer or network device. These claims passed eligibility under step 2B, as specifying algorithms that were significantly more than the idea of generic computer operations and did not preempt all ways of accomplishing the same result. After this case, the USPTO distributed a memorandum to patent examiners, which stated, among other things, patent eligible claims are “not limited to improvements in the operation of a computer or a computer network per se, but may also be claimed as a set of “rules” (basically mathematical relationships) that improve computer-related technology by allowing computer performance of a function not previously performable by a computer.” This is a big help because, in the past, examiners have rejected claims directed to processing medical images. Now we can argue that medical image process is a computer-RELATED technology.

In Trading Technologies International Inc., v CQG, Inc., No. 2016-1616 (January 18, 2017), the CAFC found eligible a specific structured graphical user interface (GUI) paired with functionality that resolves a specific problem in computerized trading. In this case the CAFC provided additional factors that favor eligibility: “not an idea that has long existed”; “Precedent has recognized that specific technologic modifications to solve a problem or improve the functioning of a known system generally produce patent-eligible subject matter”; “claim elements are considered in combination for evaluation under Alice Step 1, and then individually when Alice Step 2 is reached.” This case is remarkable for demonstrating the first commercial software found patent eligible since the Bilski v. Kappos., 561 U.S. 593 (2010) decision by Supreme Court found software to mitigate risk are abstract ideas; and, for adding “computerized trading” to computer-related technologies.

Currently we are recommending to clients that using computer software for processing information already available to produce output information is not patentable unless the processor performs specific, non-mental, non-routine processing that does not pre-empt all ways of producing the stated output from the stated input.