Blockchain & Business: Improving Your Companies’ Future

By Pablo N. Garcia Rodriguez

As a second post on this blog series regarding Blockchain, Stein IP introduces “Blockchain & Business: Improving Your Companies’ Future.”

Considering the power of Blockchain, it is not surprising that it can also be applied to business. In fact, companies such as Walmart and FedEx implement Blockchain technology as a way to manage their supply chains since it makes possible tracking a product from its origin[1] and controlling assets’ conditions instantly. There are a lot of applications for this technology in the business field, such as smart contracts and transactions recording which can be achieved thanks to Blockchain being a distributed ledger. But what is a distributed ledger and why is everyone talking about it?

A distributed ledger is a decentralized, synchronized and shared database where information is recorded.

  • Decentralized: Data doesn’t rely on a central point of control, it is stored within a network of nodes. Due to lack of a single authority[2], is a more secure place to record transactions and valuable information to the company.
  • Shared: Every member on the network has access to the recorded information, unless there is a permission prohibiting it. This helps the organization save time and money as everything is uploaded just once.  
  • Synchronized:The information is shared simultaneously among all the network’s participants.

Permissions

Because Blockchain is a shared ledger, organization members might be concerned about people from their network having the possibility of modifying information that is important for the company, causing security problems such as data leaks. This leads us to another concept: permissions. If the business network’s operator chooses to set permissions, he or she will have the ability to restrain members’ participation and access to information. This means that participants get a selective visibility into the ledger which protects the organizations’ relevant data from malicious attacks.

Smart Contracts

Contracts are commonly used in business transactions, and Blockchain is no stranger to this area. Although traditional contracts and smart contracts have the same objective, which is to get parties to reach an agreement, there are many differences that make smart contracts more suitable for the business world in the future. Below, a graph shows how smart contracts work.

pasted image 0
Graph from “What Are Smart Contracts? A Beginner’S Guide To Smart Contracts”. Blockgeeks, 2018, https://blockgeeks.com/guides/smart-contracts/

Consensus is an important part of smart contracts’ functionality because conditions are settled and accepted by the parties. The next step is that requirements are met to validate the contract which executes automatically with no third party intervention.

According to a PwC’s[3] 2018 survey of 600 executives, 84% say their organizations have at least some involvement with Blockchain technology. Also, there are some existing predictions that express that by 2030 10% to 20% of global economic infrastructure will be running on blockchain-based systems. This means that companies are getting into this technology because of its benefits since costs are reduced, there is more transparency and a better control in what transactions concern, and besides is easier to trace the origin and conditions of assets and information. Blockchain is certainly improving business and that is why everyone is talking about it.

 


References:

[1] “5 Companies Using Blockchain To Drive Their Supply Chain”. Youtube, 2018, https://www.youtube.com/watch?v=5BGia46oBGA.

[2] “What Is Decentralization? » Basics Explained | Lisk Academy”. Lisk, 2018, https://lisk.io/academy/blockchain-basics/benefits-of-blockchain/what-is-decentralization.

[3] PricewaterhouseCoopers is the biggest Professional Services’ company in the world headquartered in London, United Kingdom.

Sources:

 

Blockchain 101: The Basics

By Carla Vercellone

As the first post in our new series on Blockchain technology, we will comment on the basics of blockchain, who participates in a blockchain network and how it works, and finally we’ll touch on the major cryptocurrency in the network, Bitcoin. Since its introduction in 2008 as the creation of a person, or group of people, known by the pseudonymous Satoshi Nakamoto, blockchain has grown and evolved into becoming the future of today’s internet and transactions.

What is blockchain?

The blockchain is a decentralized, shared, and immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, a car, etc.) or intangible (intellectual property, patents, copyrights, etc.).

  • Anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved. Transactions made in bitcoin or other cryptocurrencies are recorded chronologically and publicly between two parties, being efficient and in a verifiable and permanent way.

A peer-to-peer (P2P) network like Blockchain is, according to the Oxford English Dictionary, a network in which each computer can act as a server for the others, allowing shared access to files and peripherals without the need for a central server.

How is it decentralized you may ask? Every participant is an “administrator” of the blockchain, joins the network voluntarily and thus, anything that happens on it is a function of the network as a whole. As opposed to traditional transaction (as seen below in a server-based network on Fig. 1) methods involving third parties, such as banks, in which every piece of information is stored and recorded by one entity, the central bank. A main characteristic of this decentralization is that information is continually managed and hosted by millions of computers simultaneously worldwide on a distributed database, making the data accessible to anyone on the internet.

p2p 2
Figure 1. Kologynski, Maria. “P2P”. Proyectoidis.org

Who participates?

To understand how Blockchain works, we need to first learn who participates in a blockchain network. The main participants of a blockchain network are (See Fig. 2 above):

  • User: A participant with permissions to join the blockchain network and conduct transactions with other network participants.
  • Node: A computer connected to the network.
  • Regulator: Individuals who oversee the transactions happening within the network, don’t have the authority to issue or control assets
    • Regulators simply receive blocks and view blockchain data.
    • Perform the duty of an observer, auditor, and/or analyst.
  • Developer: Creator of applications and smart contracts that interact with the blockchain and are used by the users.
  • Operator: Individuals who have define, create, manage, and monitor the blockchain network.
    • Businesses on a blockchain network have a blockchain network operator.
    • Determines who can participate in the blockchain, gather valid transactions from participants, etc.
  • Certificate authority: Manages the different types of certificates required to run a permissioned Blockchain.
  • Traditional Processing Platform: An existing computer system, such as Windows, Android, Apple OS X or iOS, Linux, etc., that may be used to augment processing or to initiate requests into the Blockchain.
    • There’s a mobile blockchain-enabled virtual operating system being developed now called “Nynja” that would allow the mobile device to combine communication and commerce in a single unified platform.
  • Traditional Data Sources: An existing data system which may provide data to influence the content and structure of smart contracts, as well as define how communications or data transfer will occur into the blockchain.

How does Blockchain work?

Figure 2 - Hash (blockchain)
Figure 3 – Gupta, Manav. Blockchain stores transaction records in a series of connected blocks. 2018. Graph. Blockchain for Dummies. Hoboken, NJ: John Wiley & Sons, Inc., 2018. 14. Print

In order for exchanges in today’s traditional transaction methods to take place, one of three things needs to happen: the individuals exchanging the item or data need to trust each other, engage in a legal contract, or involve third parties. Most of the time these exchanges are subject to several challenges, such as the time a customer waits between transaction and settlement, fraud and cyberattacks due to simple mistakes, the possibility of exposing the participants in the network to risk if the central system (i.e., a bank) is hacked or compromised, etc. On the other hand, Blockchain promises to facilitate the process of business transactions through tracking and trading of valuable assets in a shared, immutable network.

Blockchain owes its name to the way it stores transaction data —in blocks that are linked together to form a chain. As the number of transactions grows, so does the blockchain. Each block contains a hash (a digital fingerprint or unique identifier), timestamped batches of recent valid transactions, and the hash of the previous block. The previous block hash links the blocks together and prevents any block from being altered or a block being inserted between two existing blocks (Fig. 3 above). When a user requests a transaction (cryptocurrency, contracts, records, etc) in a network, said request must be validated by all the participants of the network to reach a consensus (Fig. 3 below). Once it has been verified, a block created with the new hash, the previous hash, and the transaction identifier (Fig 3 above), is added to the existing blockchain making it permanent, visible and unalterable. If the transaction were in error, a new transaction is made to reverse the previous one, and both transactions are visible to the participants, showing transparency in the network. All the nodes in the network check for errors in this transactions with the previous transactions correlated to the asset the user wants to transfer. When all transactions are finished, validated, and added to the blockchain, the transaction is complete.

how does it worl
Figure 4 – What is Blockchain Technology? A Step-by-Step Guide For Beginners. Digital Image. Blockgeeks. Blockgeeks, 13 September 2018. Web.

Key characteristics

What makes Blockchain different from other transaction systems are four key characteristics:

  • Consensus: As explained before, all participants of a network must agree for a transaction to be considered valid.
  • Provenance: Participants know where the asset came from and how its ownership has changed over time due to the trajectory of the asset in the ledger shown to the participant (Fig. 3).
  • Immutability: No participant can tamper with a transaction after its been recorded to the ledger.
    • If a transaction is in error, a new transaction must be used to reverse the error, and both transactions are then visible.
    • Transactions are combined into single blocks and are verified every ten minutes through mining[1]. The nature of this structure permanently timestamps and stores exchanges of value, preventing anyone from altering the ledger. If someone wanted to steal a Bitcoin, for example, they’d have to rewrite the coin’s entire history on the blockchain in broad daylight and “fake” all the participant’s consent.
  • Finality: A shared ledger provides one place to go to determine the ownership of an asset or completion of transaction; facilitating information to users in an open network rather than using intermediaries like banks, ports, etc. The accessibility of the blockchain during and after its creation is determined by the blockchain operator and/or the smart contracts associated with the network.

Bitcoin vs Blockchain: Difference

Although most people have heard of the Blockchain’s biggest cryptocurrency, Bitcoin, some still confuse both terms as interchangeable. Blockchain is a database that is simultaneously stored on a set of computers connected to each other on the Internet where each transaction is written down and safely stored; along the lines of an operating system like Microsoft Windows. On the other hand, Bitcoin is a digital currency, created and operated only on the Blockchain network; a similar example can be an application running on an operating system, such as Skype on Microsoft Windows.

 

Next in this blog series on blockchain, we will explore the application of blockchain in Intellectual Property, explaining its role in the field of IP, determining the classes and subclasses of blockchain technology-based patents, and many other topics.


Sources:

 

[1] Mining: Confirmation process. “Cryptocurrency Glossary”. Blockchain Support Center.

Building on Abstract Ideas: Alice v CLS Bank

By Evan Jensen

In its much-anticipated Alice v CLS Bank decision the Supreme Court held that Alice’s software patent was patent-ineligible subject matter under §101. But in its decision the Supreme Court seems to have blended a §101 analysis with a §103 analysis. The Court seems to infer that well-known ideas, such as methods that are fundamental to modern economy, are abstract and therefore patent-ineligible under §101.

There is no debate that abstract ideas are not patentable subject matter. No one may claim exclusive rights to the idea of addition, or of binary-decimal conversion, or any other generic abstract mathematical or conceptual idea. To allow a patent on an abstract idea would preempt everyone else from using that idea, greatly discouraging innovation, which is contrary to the primary goals of the patent system. The issue is which software claims, or whether software claims in general, are made patent-ineligible by the Alice decision.

Continue reading Building on Abstract Ideas: Alice v CLS Bank

Cell Phone Network Patent Survives § 112 Attacks in Federal Circuit

By Chris Reaves

HTC Corporation v. IPCom GmbH & Co., KG, No. 2011-1004, Fed. Cir. Jan. 30, 2012

In a recent infringement suit, a patent for a cell phone network mobile station narrowly survived several attempts at invalidation through indefiniteness.  The Federal Circuit applied numerous rules of claim interpretation, especially for means-plus-function claims, and reminded the defense of the importance of addressing all issues at the trial level.  The case serves as a good lesson in “what not to do” for both prosecutors and litigants.

Background

IPCom GmbH & Co., KG owns US Patent No. 6,879,830 (‘830) and other patents, which go to cell phone networks and their methods.  ‘830 in particular discusses an efficient cellular phone network “handover” – the process by which one cell tower takes over a call from another as the phone moves from place to place.

IPCom and the HTC Corporation countersued each other for, respectively, infringement of three of IPCom’s patents, including ‘830, and declaration of non-infringement.  During the trial’s Markman hearing, HTC moved for summary judgment of invalidity of ‘830 claims 1 and 18.  The district court found that the means-plus-function portion of these claims had the required corresponding structure.  However, it also found that the claims included both method steps and an apparatus, making them indefinite under the rule of IPXL Holdings v. Amazon.com.  It therefore invalidated both claims.

On stipulation of the parties, the decision was promptly declared final and certified for appeal under Fed. R. Civ. P. 54(b).  Judges Bryson, Linn, and O’Malley of the Federal Circuit heard the appeal.

IPXL Indefiniteness Does Not Apply to “Preamble-Within-A-Preamble”

Claim 1 of ‘830 recites, in total:

A mobile station for use with a network including a first base station and a second base station that achieves a handover from the first base station to the second base station by:

storing link data for a link in a first base station,

holding in reserve for the link resources of the first base station, and

when the link is to be handed over to the second base station:

initially maintaining a storage of the link data in the first base station,

initially causing the resources of the first base station to remain held in reserve, and

at a later timepoint determined by a fixed period of time predefined at a beginning of the handover, deleting the link data from the first base station and freeing up the resources of the first base station, the mobile station comprising:

an arrangement for reactivating the link with the first base station if the handover is unsuccessful.

Claim 18 and, by stipulation, claim 16 differ only in ways “immaterial to this appeal.”

The district court had construed the claims to state that the mobile station “achieves a handover” which is then described as a series of steps.  Because the claim described the mobile station both in terms of this method and separately in terms of “an arrangement,” the court therefore invalidated it as indefinite.

The Federal Circuit, however, determined that the “that achieves a handover” clause described “network”, not “mobile station.”  First, “[m]odifiers should be placed next to the words they modify”, and the clause was closer to “network.”  Second, the repetition of “mobile station” in the seventh paragraph “would read in a disjointed manner” if the preceding functions also referred to the mobile station.  And third, the specification confirmed that the base stations of the network, not the mobile station, perform the functions in the handover.

HTC and the district court both tried to overcome this language by pointing to the prosecution history, but the Federal Circuit recalled Phillips v. AWH for the principle that prosecution “often lacks the clarity of the specification and thus is less useful for claim construction purposes.”  Although the applicants had referred to the “claimed process” of claim 1 during prosecution, the Federal Circuit found this insufficient to overcome the “plain language of the claims and the specification” that showed the mobile station was an apparatus.  A single reference to “steps” was similarly unpersuasive.

As the claims did not claim both the apparatus and the process, the Federal Circuit ruled that they did not violate the rule of IPXL.  They were instead merely in a “preamble-within-a-preamble” form, which was “unconventional” but valid under Microprocessor Enhancement Corp. v. Texas Instruments.

General Structure for Means-Plus-Function Claims May Be Implied, Not Explicit

The court then examined HTC’s alternate argument that the claims were indefinite under § 112 ¶ 6.  The parties had agreed that the “arrangement for reactivating” in all three claims was a means-plus-function limitation, which requires disclosure of a corresponding structure in the specification.  But the district court found, and the Federal Circuit agreed, that no literal disclosure was necessary, because a person skilled in the art “would understand that the mobile device would have to contain a processor and transceiver.”  Expert testimony, including the deposition of HTC’s own expert, supported this assessment.

The Federal Circuit also noted that a detailed hardware configuration was not necessary; “reference to such general-purpose processors will suffice” to make the claim definite if the description also discloses an algorithm that “describe[s] a means for achieving [the reactivating] outcome, not merely the outcome itself.”  At the trial level, HTC had argued exclusively that the hardware disclosure was insufficient with or without algorithms, and did not contend in the alternate that the disclosed algorithms were inadequate, even when IPCom argued in briefs that they were.  Therefore, the Federal Circuit did not let HTC raise the argument on appeal, finding no reason not to apply the general appellate policy against considering issues not raised at trial.

With no other cause to invalidate, the panel reversed, declaring all claims valid.

Post-Case Analysis

The Federal Circuit creates little new law here, but reminds us of some existing principles for both prosecutors and litigators.  Prosecutors are reminded of the importance of clarity in drafting.  Although IPCom’s claims survived their second interpretation, clearer attachment of nouns to modifiers would have avoided the initial invalidation.  Simple use of commas or semi-colons to break up the clauses, and then leading each clause with its own element, can be an invaluable rule of thumb.  For instance, opening with “A mobile station for use with a network, the network including…” would have made it undeniable what the following paragraphs referred to.

Similarly, although the courts will treat a structure as implicitly disclosed when it is “understood” by those skilled in the art, it is better to be explicit.  What is “understood” can vary from expert to expert, and had HTC’s own expert not admitted to the validity of IPCom’s position, the patent might well have failed on this point.  Also, this rule has less benefit when the structure is not a processor or similar; that is, one that must be thoroughly defined on its own terms instead of in the context of algorithms.

Means-plus-function claims are especially vulnerable to a few mistakes that IPCom nearly stumbled over.  Prosecutors should always remember to check their claims for IPXL-style indefiniteness, as the drafter is already thinking in terms of the corresponding process and may forget to make the distinction.  Double-checking for the appropriate structure for each function – including the algorithm, if software is involved – is also vital.

Finally, in all cases, proofreading is key.  A second pair of eyes to check for these and other mistakes during drafting can save your client from both a higher risk of invalidity and unnecessary legal fees the first time he tries to enforce.

Litigators, meanwhile, are reminded of the importance of attacking the opponent from every reasonable angle; in this case, to challenge the structure disclosure on both hardware and software.  It is sometimes splitting hairs to say what specific sub-(sub-sub-)issues a party has failed to address, and HTC might have argued that, by bringing up structure disclosure at all, they preserved all aspects of it for appeal.  But at minimum, once IPCom reminded HTC of the algorithm issue in its own briefs, HTC needed to respond.  Leaving that argument unchallenged cost them dearly.

The opinion is available at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1004.pdf

Oral arguments may be heard at: http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2011-1004.mp3

Federal Circuit Says § 101 Requires “Concrete Steps” In Software Methods

By Chris Reaves

Dealertrack, Inc. v. Huber, No. 2009-1566, Fed. Cir. Jan. 20 2012

The Federal Circuit on January 20 once again addressed the question of 35 U.S.C. § 101 eligibility for a software method.   The court found the patent at issue closer to CyberSource than Ultramercial, drawing a distinction between “a practical application with concrete steps” and a mere declaration that the method is “computer-aided.”  It also looked to the interpretation of claims, expanding the rule of Phillips v. AWH to cover exemplary lists.

Background

Plaintiff Dealertrack, Inc. owns three patents related to the same concept: the use of a computer system as a loan intermediary, converting one generalized application for a car loan into several bank-specific applications and processing said applications with their respective banks.  The original patent, U.S. Patent No. 5,878,403 (‘403), was filed in 1995.  Later, 7,181,427 (‘427), patenting the computer system, was filed as a continuation-in-part, and 6,587,841 (‘841), patenting the method, was filed as a divisional application.  All three patents issued, with the latter two claiming priority to ‘403.

Dealertrack sued the defendants, Finance Express, LLC (with its president David Huber) and RouteOne, in the Central District of California, claiming their respective loan management systems infringed on all three patents.  The defendants filed motions for summary judgment on four grounds: that ‘841 was not infringed given its proper interpretation, that certain means-plus-function claims in ‘841 were invalid as indefinite under § 112, that all applicable claims of ‘427 were abstract and ineligible for patent protection under § 101, and that ‘427 did not properly claim priority to ‘403.

The district court found for Dealertrack on indefiniteness and priority but for the defendants on non-infringement and ineligibility, and dismissed the case.  Dealertrack appealed the dismissal to the Federal Circuit and the defendants cross-appealed on the indefiniteness and priority findings.  Judges Linn and Dyk, with Senior Judge Plager, heard the appeal.

Claim Interpretation: Multiple Examples Are Not Always Exhaustive

The preamble of ‘841’s independent claim 7 reads:

“A computer based method of operating a credit application and routing system, the system including a central processor coupled to a communications medium for communicating with remote application entry and display devices, remote credit bureau terminal devices, and remote funding source terminal devices . . .”  (Emphasis added.)

“A communications medium” is also one of the elements of independent claims 12 and 14.  Exemplary mediums are listed in the description as follows:

“Although illustrated as a wide area network, it should be appreciated that the communications medium could take a variety of other forms, for example, a local area network, a satellite communications network, a commercial value added network (VAN) ordinary telephone lines, or private leased lines…  The communications medium used need only provide fast reliable data communication between its users…”

During prosecution of the parent ‘403 patent, the examiner allowed “the Internet” to be added explicitly to a corresponding exemplary list, and ‘841 incorporated ‘403 by reference.  However, in its interpretation of ‘841, the district court interpreted “communications medium” to exclude the Internet, finding its omission in ‘841, in an otherwise thorough list, to be a waiver of its inclusion regardless of ‘403.  Therefore, because both the defendants’ systems used only the Internet for communication, neither had infringed.

The Federal Circuit disagreed, finding that the district court had ascribed too much importance to the list’s contents.  “The disclosure of multiple examples,” it ruled, “does not necessarily mean that such list is exhaustive or that non-enumerated examples should be excluded.”  Rather, it found the case similar to Phillips v. AWH Corp., where a single embodiment listed in a description had not necessarily limited the meaning of the corresponding claims.  Multiple examples did not change the Phillips rule, especially as the context of the ‘841 list – leading with “for example” and closing with “The communication medium used need only provide…” – indicated that it was not meant to be exhaustive.

The district court also found waiver of the term in that the “the Internet” had also been named in ‘841 but the examiner had removed the reference post-allowance.  However, the examiner had given no reason for this removal, and there was no prosecution history suggesting that Dealertrack had deliberately surrendered the term.   The Federal Circuit therefore attached no importance to this removal.  And although the defendants argued that, in 1995, the Internet would not have been seen as “reliable” or “secure” as the description required, the court found they had not presented sufficient evidence on this point.

The court also rejected arguments by the defendants to narrow the meaning of other terms in the patent, noting that explicit embodiments of the claims fell outside the supposed interpretation. It did, however, use the rule of WMS Gaming to apply disclosed software algorithms, not a computer itself, as the structure for claim 12 and 14’s “central processing means” element.  Because claim 14 also stated that the central processing means “further provides for tracking pending credit applications,” without disclosing a tracking algorithm, the court invalidated claim 14 and its dependent claims as indefinite under § 112 ¶ 6.

§ 101: Computer-Aided Methods Require “Practical Application With Concrete Steps”

Claim 1 of ‘427 reads, in total:

1. A computer aided method of managing a credit application, the method comprising the steps of:

[A] receiving credit application data from a remote application entry and display device;

[B] selectively forwarding the credit application data to remote funding source terminal devices;

[C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;

[D] wherein the selectively forwarding the credit application data step further comprises:

[D1] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

[D2] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic, funding] source returns a positive funding decision;

[D3] sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding [sic, funding] sources returns a positive funding decision or until all funding sources have been exhausted; or,

[D4] sending the credit application from a first remote funding source to a second remote finding [sic, funding] source if the first funding source declines to approve the credit application.

When the district court examined ‘427 for § 101 ineligibility, the Supreme Court had yet to rule in Bilski, and the “machine or transformation” test was still definitive.  Dealertrack had conceded lack of transformation and the district court had found that a “general purpose computer” was not a “particular machine” under the existing test.

The Federal Circuit examined the case under the new standard but came to the same conclusion.  While recognizing that, as in Research Corp., abstractness must “exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter,” the court found that ‘427 crossed this line.  Namely, it claimed “the basic concept of processing information through a clearing-house…”   The court found the “computer aided” limitation in the preamble equally abstract and insufficient to save the patent “without specifying any level of involvement or detail,” and distinguished ‘427 from the patent in Ultramercial, which also described “a practical application with concrete steps requiring an extensive computer interface…”  (Perhaps foolishly, Dealertrack conceded in oral arguments that ‘427 would not be § 101 eligible had “computer aided” been omitted.)

Dealertrack argued that disclosed algorithms in the description made the patent less abstract, but the court noted that the claims themselves were not limited to any algorithm, under an interpretation to which Dealertrack itself had already conceded.  The court also found irrelevant that the method was limited to car loan applications, comparing it to that of Bilski, where a method of hedging was no less abstract for being limited to the energy market.  The court therefore invalidated the applicable ‘427 claims as ineligibly abstract.

On this point alone, Senior Judge Plager dissented.  Without commenting on the thrust of the panel’s argument, he proposed that courts should “not foray into the jurisprudential morass of § 101 unless absolutely necessary” instead looking first to whether they can invalidate under other sections of the Patent Act before the court.  But the majority, while calling Plager’s goal “laudable,” noted that the Supreme Court had called § 101 a “threshold test” in Bilski.  They further noted that no other argument for ‘427’s invalidity was presented in the initial motions for summary judgment; although Dealertrack had argued that ‘427 was clearly valid under § 103, the defendants had been happy to leave that question to the jury.

Because it invalidated ‘427 under § 101, the panel did not address whether the same patent failed to claim priority to ‘403.

Post-Case Analysis: Tell Us Why You Need A Computer

The gray area between eligible and ineligible methods narrows again, albeit slower than anyone would like.  As previously noted on this blog, Ultramercial suggested three applicable factors in the analysis.  This case emphasized two: the software must be specialized and well-described in the claims, and the claim must explain why the software is necessary to the claimed method.  Had the claims in this case restricted their scope to the algorithms in the description, they might have survived the panel’s analysis.  Unfortunately, as the defendants noted in oral arguments, Dealertrack had been arguing the opposite.  Existing patent owners might be wise to concede to a narrower interpretation of their own software patents, and future drafters should include a more elaborate disclosure of the software, algorithms, and computer configurations involved.  Most importantly, the computer should be explicitly necessary, not merely helpful, to the claimed method.

Many commenters (including both Chief Judge Randall Rader and Professor Dennis Crouch of the University of Missouri) have argued, like Plager, that § 101’s jurisprudence is unpredictable and overused, and that public policy should encourage its disuse.  A few have gone farther and proposed that § 101 should be reinterpreted by the courts or rewritten by Congress to allow truly “anything under the sun,” leaving the rest of the Act in place to catch the existing, obvious, or abstract.  To both groups, the majority’s response to Plager will be a serious disappointment, and a step back from the direction suggested in Classen and Ultramercial (albeit in apparent dicta).  If § 101 is indeed a threshold in the sense of “it must be considered,” and if its borders remain vague, defendants will have little reason not to include an ineligibility argument against method claims and hope for the best.  We can hope that the Supreme Court itself will clarify the standard in Mayo Collaborative Services v. Prometheus Labs, but with its past pattern of insisting on a case-by-case analysis, it is more likely to leave the Federal Circuit buried in § 101 cases.

Less vogue a topic but still important is the ruling on ‘841’s interpretation.  Exemplary but non-exhaustive lists of embodiments are common practice, and the court’s opinion protects the resulting patents from unintended limitations.  However, Dealertrack was in part protected by the Internet’s mention in the issuing parent patent; other patents are unlikely to have this extra safety net.  Therefore, a good patent drafter should still make it absolutely clear in context that such lists are indeed non-exhaustive, with phrases such as “for example”, “include but is not limited to”, “many other embodiments and modifications should be apparent”, and “need only [do X] to meet the needs of the invention”.

For software patent prosecutors, this case is also a good reminder of the WMG Gaming rule: means-plus-function claims cannot be satisfied with disclosure of “a computer” or similar.  Only a computer with specific algorithms or software for the job will do.  Any good draft should therefore either avoid means-plus-function language or be as exhaustive as possible in the description.

The opinion is available at: http://www.cafc.uscourts.gov/images/stories/opinions-orders/09-1566.pdf

Oral arguments may be heard at: http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2009-1566.mp3

For Rader’s comments on § 101, see Classen Immunotherapies Inc. v. Biogen IDEC, 100 USPQ2d 1492, 1505-07 (Fed. Cir. 2011).  For Crouch’s, see Operating Efficiently Post-Bilski by Ordering Patent Doctrine Decision-Making, 25 Berkeley Tech. L.J. 1673 (2010).

Federal Circuit Confirms Expansive View of Patent Eligibility

In Ultramercial LLC v. Hulu LLC, 657 F.3d 1323 (Fed. Cir. 2011), Ultramercial LLC’s patent claims a method “for distribution of products over the Internet via a facilitator”. As part of the claim, the facilitating web server offers a “sponsor message” to a potential viewer, who, if he views the sponsor message, is then allowed access to a desired “media product”. The claim also recites limitations related to interactions with the sponsors both before and after delivery of the sponsor message. Continue reading Federal Circuit Confirms Expansive View of Patent Eligibility

Federal Circuit Clarified Abstractness in the Context of Software

Court Finds Software Patentable Unless Unmistakably Abstract

In Research Corp. Technologies, Inc. v. Microsoft Corp., Civ. Case. No. 10-1037 (Fed. Cir. December 8, 2010), Research Corporation Technologies, Inc. (“RCT”) owns six related patents: U.S. Patent Nos. 5,111,310 (“’310 patent”); 5,341,228 (“’228 patent”); 5,477,305 (“’305 patent”); 5,543,941 (“’941 patent”); 5,708,518 (“’518 patent”); and 5,726,772 (“’772 patent”).  The six related patents relate to digital image half toning which allows a computer to create more colors than otherwise possible with the limited number of pixel colors available in a typical printer.  In order to measure the quality of the half toning, the inventors created a method of detecting a power spectrum which measures the frequency of the dots used to create the half tone and compares this power spectrum to an ideal spectrum stored in a mask.  By comparing the stored mask and detected power spectrum, the method determines half tone quality. Continue reading Federal Circuit Clarified Abstractness in the Context of Software