When Alice and Bilski expanded the “abstract idea” exception beyond “preexisting truths,” such as mathematical formulas, the Supreme Court relied on the fact that “hedging risk” and “intermediated settlement” were “fundamental” and “long prevalent in our system of commerce.” See Alice, 134 S. Ct. at 2356; Bilski, 561 U.S. at 611. Thus, the Supreme Court has never considered “novel” business practices or methods of organizing human activities to be “abstract ideas.” Yet, US courts have improperly expanded the holdings in Alice and Bilski to include “just discovered” methods of organizing human activity within the category of the judicially created “abstract idea” exception.
In Versata Dev. Grp. v. SAP Am., 793 F.3d 1306 (Fed. Cir. 2015) (“Versata”), despite the fact that the Federal Circuit had previously recognized in a prior appeal that the commercial embodiment of the patent-in-suit “received praise as a ‘breakthrough’ that was ‘very innovative,’” (Versata Software, v. SAP Am., 717 F.3d 1255, 1259 (Fed. Cir. 2013), cert. denied, 134 S. Ct. 1013 (2014)), it nonetheless held that the novel concept of “[u]sing organizational and product group hierarchies to determine a price is an abstract idea that has no particular concrete or tangible form or application.” 793 F.3d at 1333.
Unfortunately, such an analysis is commonplace throughout the courts. For example, the one district court in Hawaii relied on the Versata decision to find something akin to “using the same hierarchical ordering based on metadata to facilitate the display and locating of video content”—which the court expressly recognized to be a novel concept— to be directed to an abstract idea by comparing it to, inter alia, “the broad concept of using organizational and product group hierarchies to determine prices for products and customers” found to be an abstract idea in Versata. Broadband iTV v. Oceanic Time Warner Cable, 2015 U.S. Dist. LEXIS 131726, at *20 (D. Haw. Sept. 29, 2015) (“BBiTV-TWC”); Broadband iTV v. Hawaiian Telcomm., 2015 U.S. Dist. LEXIS 131729, at *16 (D. Haw. Sept. 29, 2015) (“BBiTV-HT”). This interpretation of the “abstract idea” category drastically expands the exclusionary principle beyond Supreme Court precedent, rather than “tread[ing] carefully” as directed by Alice. 134 S. Ct. at 2354.
There is also a trend among US courts of improperly including substantially more detail into the alleged “abstract idea” than allowed for by Supreme Court precedent. By erroneously including the “novel” aspects, instead of merely the “long standing” aspects into the alleged “abstract idea,” the courts remove the aspects of the claim that in step two of the Alice analysis would be properly considered as “something more.”
In Versata, the Federal Circuit erred in adopting overly-detailed abstractions of the claims instead of “fundamental,” “long prevalent” and broadly-phrased “methods of organizing human activity” to which the claims purportedly relate. In particular, Versata did not simply identify the claims as pertaining to the abstract idea of “determining price,” but instead identified the claims as “directed to the abstract idea of determining a price, using organizational and product group hierarchies.” 793 F.3d at 1333. While “determining price” may be a “fundamental” and “long prevalent” principle, there is no evidence that “determining price, using organizational and product group hierarchies” was prevalent prior to the invention. To the contrary, the record reflects that Versata’s software was a “breakthrough” that was “very innovative.” 717 F.3d at 1259 (citing J.A. 1304).
In Netflix, Inc. v. Rovi Corp. (“Netflix”), another case infected by this type of analysis, the district court characterized the alleged abstract idea of the claims of one of the patents-in-suit as “filtering search results using selectable categories.” 114 F. Supp. 3d 927, 941 (N.D. Cal. 2015). While perhaps “filtering” search results may have been prevalent prior to the invention, by redefining the alleged abstract idea to include “using selectable categories,” the court improperly front-loaded a potential “inventive concept” into the alleged abstract idea. Accordingly, that detail was then discounted in step two, when a court is supposed to consider the “inventive” aspects that were not “long prevalent” under the Alice framework. See id. at 943.
Step Two: US Courts Are Over-Discounting Claim Elements and Failing to Recognize “Something More”
US courts have erred in step two of the analysis by erroneously ignoring “inventive” aspects of the claimed invention, that are not “routine or conventional,” and invalidating these patent claims merely because those inventive aspects use a computer.
For example, in addressing step two in Versata, the Federal Circuit considered such inventive aspects of “arranging a hierarchy of organizational and product groups” and “eliminating less restrictive pricing information,” but ultimately determined that the claims lacked “sufficient additional limitations to transform the nature of any claim into a patent-eligible application of an abstract idea.” 793 F.3d at 1334. This was because “the function performed by the computer at each step is purely conventional.” Id. Further, when considered as an ordered combination, the Federal Circuit found the claims did not pass step two since the unconventional “organizational and product group hierarchies” were performed by a generic computer. Id.
While Alice does stand for the proposition that “the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention,” this means that use of a generic computer itself does not confer patentability; however, use of a computer does not destroy patent-eligibility. See Alice, 134 S. Ct. at 2358. Alice mandates that the additional elements, even if added by the computer, are relevant and must be considered both separately and as an ordered combination, in step two. Id. at 2355. These computer limitations may add the inventive concept required for patent-eligibility. Cf. id. at 2357–58 (comparing Benson, in which “the computer implementation did not supply the necessary inventive concept,” with Diehr, in which the “additional steps” that included making calculations on a computer did supply the required inventiveness); DDR Holdings v. Hotels.com, 773 F.3d 1245, 1258 (Fed. Cir. 2014) (finding claims-at-issue patent-eligible because they were directed to a novel solution, using a potentially “well-known” concept, to solve a technology-driven problem).
Similarly, in Netflix, after characterizing the ‘709 Patent as being directed to the “novel” “abstract idea of generating viewing recommendations,” the court went on to discount the computer-implemented steps because they purportedly “do not go beyond routine, conventional means of generating viewing recommendations.” 114 F. Supp. 3d at 946–47. But if “generating viewing recommendations” was indeed novel, then how could the claim be using “routine, conventional means of generating viewing recommendations?”
Relatedly, US courts have failed to follow the Supreme Court’s guidance that all of the additional elements of each claim be considered both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application. Alice, 134 S. Ct. at 2355.
In Versata, the Federal Circuit barely paid lip service to the claims “as an ordered combination” in applying step two of the analysis. Rather than analyzing the patent claims “as a whole,” Versata made the conclusory statements that “the components of each claim add nothing that is not already present when the steps are considered separately. Viewed as a whole, the claims simply recite the concept of price determination by using organizational and product group hierarchies as performed by a generic computer.” 793 F.3d at 1334. Unlike in Alice and Mayo, Versata simply failed to evaluate all of the additional novel and unconventional elements of each claim “as an ordered combination.” In doing so, Versata ignored the technical improvements advanced by the claims as a whole.
This error of stripping elements out of the claim in an Alice analysis is far too widespread among US courts. In BBiTV-TWC and BBiTV-HT, the district court’s failure to even reproduce the detailed claim at any point in the opinion exemplifies the tendency among many courts to neglect to meaningfully consider all of the limitations of the claims. Instead of including the full claims in the opinions, the court resorted only to “summar[ies],” which the court itself recognized did not “capture all of the precise terms used in the patent itself.” See 2015 U.S. Dist. LEXIS 131729, at *15–16, n.12; 2015 U.S. Dist. LEXIS 131726, at *19–20, n.15. Thus, the court could not have considered all of the additional elements of the claim, both separately and as an ordered combination, as dictated by Alice.
The Supreme Court has repeatedly affirmed that a method or process is not unpatentable simply because it contains an abstract idea, law of nature, or a mathematical algorithm. See Mayo, 132 S. Ct. at 1293–94; Alice, 134 S. Ct. at 2354 (“an invention is not rendered ineligible for patent simply because it involves an abstract concept.”).
Despite these admonitions, many US courts have misread the recent guidance in Alice as de facto eliminating “business method” patents and effectively banning computer-implemented inventions from the patent system. While some courts have heeded the US Supreme Court’s admonition that Alice does not lead to the conclusion that all computer-implemented claims are directed to abstract ideas, unfortunately, many others have not followed this guidance, indiscriminately killing computer-implemented patents by ignoring the computer elements in the claims as irrelevant. As one district court observed, although “intervening precedent [since Benson and Flook] and Congressional action have demonstrated that software is patentable,” “[t]he aftermath of Alice tells a different but misleading story about software patentability.” Enfish v. Microsoft, 56 F. Supp. 3d 1167, 1172 (C.D. Cal. 2014).
The time is now for the US Courts and/or Congress to rectify these grave errors.
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