SCOTUS Asked to Resolve Splits in Patent-Eligibility Analysis in Context of Video-On-Demand Technology

Supreme Court BuildingOn April 13, 2017, Broadband iTV, Inc. (“BBiTV”) filed a petition for a writ of certiorari with the Supreme Court of the United States, requesting that the Court to take the case to resolve three recurring issues relating to patent-eligibility and the procedure by which courts analyze patent-eligibility. Charles R. Macedo and Sandra A. Hudak of Amster, Rothstein & Ebenstein LLP and Paul Alston and John Rhee of Alton Hunt Floyd & Ing were authors on the brief.

BBiTV appeals from the Federal Circuit’s Rule 36 affirmance of two summary judgment decisions in which the district court found claims of U.S. Patent No. 7,631,336, entitled “Method for converting, navigating and displaying video content uploaded from the internet to a digital TV video-on-demand platform,” to be directed to the abstract idea of “using the same hierarchical ordering based on metadata to facilitate the display and locating of video content.” The following excerpts of the Petition set forth the issues presented and portions of BBiTV’s arguments. Amicus briefs in support of the Petition are due by May 15, 2017.

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QUESTIONS PRESENTED

In Alice v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), this Court summarized the state of patent-eligibility law under 35 U.S.C. § 101 in the context of computer-implemented inventions. Alice explained how each of the prior cases addressing the judicial exception for abstract ideas had observed a very careful balance between concerns of preemption and concerns of construing this exclusionary principle too broadly.

Alice itself did not purport to alter that balance. While it clarified that “the mere recitation of a generic computer cannot transform a patent- ineligible abstract idea into a patent-eligible invention,” it also reiterated that “an invention is not rendered ineligible for patent simply because it involves an abstract concept.” 134 S. Ct. at 2354, 2358. With respect to computer-implemented inventions, Alice adopted the framework set forth in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66 (2012) for natural laws, which was meant to assist in “distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts.” Alice, 134 S. Ct. at 2355. This framework is to be applied cautiously, “lest it swallow all of patent law.” Id. at 2354.

Yet, since Alice, the lower courts have struggled to apply that framework and have thus developed splits that the Federal Circuit has refused to address. Some lower courts acknowledge that all patents are afforded a presumption of validity under 35 U.S.C. § 282, as required by Microsoft Corp. v. i4i L.P., 564 U.S. 91 (2011), whereas others hold that no presumption applies in a § 101 analysis. Similarly, some courts have found that material issues of fact as to the conventionality of the claimed technology may preclude summary judgment of invalidity under 35 U.S.C. § 101 (as they would under 35 U.S.C. §§ 102 or 103), whereas others routinely resolve factual disputes against the non-movant on summary judgment. Finally, some courts have placed importance on this Court’s guidance in Bilski v. Kappos, 561 U.S. 593, 609-13 (2010) and Alice as to what constitutes an abstract idea under § 101, whereas others ignore that precedent and confuse any abstraction of a claim with an “abstract idea.”

The questions presented are:

  1. Whether the statutory presumption of validity set forth in 35 U.S.C. § 282 applies to claims challenged under 35 U.S.C. § 101, as set forth by this Court in Microsoft Corp. v. i4i L.P., 564 U.S. 91 (2011), when the ultimate legal conclusion relies upon underlying findings of fact, such as whether the additional novel and non-obvious elements of the claims are merely well-understood, routine, and conventional or whether they add an inventive concept.
  2. Whether, unlike every other area of law involving motions for summary judgment, as set forth by Fed. R. Civ. P. 56 and Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and its progeny, a district court may resolve material underlying fact disputes against the non-movant party on a summary judgment motion for lack of patent-eligibility under § 101.
  3. Whether the judicially-created exception for “abstract ideas” broadly includes any abstraction of a claim (including novel business practices or methods of organizing human activities) or only “fundamental” and “long-standing” (i.e., pre-existing) practices and methods, as recognized by this Court in Bilski v. Kappos, 561 U.S. 593, 611 (2010) and Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 2356- 57 (2014).

. . .

REASONS FOR GRANTING THE PETITION

. . .

The District Court, Following Ambiguous Case Law from the Federal Circuit, Failed to Apply the Presumption of Validity as Required by this Court in i4i

In Microsoft Corp. v. i4i L.P., 564 U.S. 91 (2011), this Court considered the significance of the statutory presumption of validity codified in 35 U.S.C. § 282(a). It explained that, under § 282, “‘[a] patent shall be presumed valid’ and ‘[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.’” i4i, 564 U.S. at 95, 100 (quoting § 282(a)). Although the ultimate question of patent validity is a legal one, “[i]n evaluating whether [35 U.S.C. §§ 101, 102, 103] and other statutory conditions have been met, PTO examiners must make various factual determinations ….” Id. at 96. “[T]he same factual questions underlying the PTO’s original examination of a patent application will also bear on an invalidity defense in an infringement action” before a district court. Id. at 97. This Court held that, in light of the statutory presumption of validity, a party asserting an invalidity defense bears the burden of proving invalidity and that the evidence in support of the defense must be clear and convincing. Id. at 95, 105 n.7.

. . .

Under i4i, there is no doubt that “by its express terms, § 282 establishes a presumption of patent validity.” 564 U.S. at 100. As with invalidity challenges based on §§ 102, 103, and 112, parties making validity challenges under § 101 must overcome that presumption of validity. Id.; accord CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1284 (Fed. Cir. 2013) (Lourie, J., concurring) (“that presumption applies when § 101 is raised as a basis for invalidity in district court proceedings”), aff’d, 134 S. Ct. 2347 (2014).

The District Court below is not the only district court to have erroneously held that the presumption of validity does not apply to patent-eligibility challenges. Amidst the general confusion as to how to apply the patent-eligibility analysis, district courts are currently split as to whether patents are entitled to a presumption of validity (i.e., eligibility) under § 101. See, e.g., Front Row Techs., LLC v. NBA Media Ventures, LLC, No. CIV 10-0433, 2016 U.S. Dist. LEXIS 116591, at *106 (D.N.M. Aug. 30, 2016) (“District courts have interpreted the recent Supreme Court and Federal Circuit decisions in four primary ways” regarding the presumption of validity and clear and convincing evidence standard.).

. . .

The District Court Improperly Resolved Fact Disputes Against Non-Movant BBiTV on Summary Judgment

. . . i4i expressly noted that § 101 involves factual determinations by the PTO during examination, and that those same factual questions will also bear on a § 101 patent-eligibility defense (a currently recognized invalidity defense). 564 U.S. at 96-97. Although this Court did not make any mention of the presumption of validity in Alice, this Court has continued to hold that even questions of law (like claim construction or obviousness) can turn on underlying findings of fact. Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 836-37 (2015) (claim construction); KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 427 (2007) (citing Graham v. John Deere Co., 383 U.S. 1, 17 (1966)) (obviousness).

At step one of the Alice analysis, the Court is charged with determining whether the claim is directed to an “abstract idea.” This determination often involves questions of fact, such as that which underlies claim construction. Teva, 135 S. Ct. at 836. Another factual issue underlying this step one analysis is the determination of whether the claim is directed to an “abstract idea” that is “longstanding,” “fundamental,” or “long prevalent,” as was found by this Court based on undisputed evidence present in Alice, 134 S. Ct. at 2356 and Bilski, 561 U.S. at 611.

At step two, factual findings include whether the elements of a claim are “well-understood, routine, conventional activities” previously known to the industry, or whether they, individually or as an ordered combination, add “something more” such that the claims include an “inventive concept.” Alice, 134 S. Ct. at 2357.

Thus, just like an obviousness analysis under § 103, a § 101 analysis calls for a legal conclusion based on underlying facts. These factual determinations often overlap with those made for §§ 102 and 103 inquiries. For example, the scope and content of the prior art is one of the Graham factors considered in an obviousness analysis but is also relevant to determining what is well-known and conventional for purposes of patent-eligibility. Thus, §§ 102 and 103 determinations finding that elements were not included in the prior art should at least raise a factual dispute on the conventional nature of such elements on patent-ineligibility making summary judgment inappropriate.

Whether in the context of § 101 or § 103, a validity challenge must show why it is proper to extrapolate from general background knowledge (e.g., that databases are searched, or that metadata may be attached with other electronic files) to argue that the specific application of that general background knowledge was merely conventional. See, e.g., Arendi S.A.R.L. v. Apple Inc., 832 F.3d 1355, 1365 (Fed. Cir. 2016), cert. denied, No. 16-626, 2017 U.S. LEXIS 1873 (Mar. 20, 2017); BASCOM Global Internet Servs. v. AT&T Mobility LLC, 827 F.3d 1341, 1350 (Fed. Cir. 2016). Since these findings as to what was conventional at the time of the invention are the same, whether the patent-at-issue is being challenged under § 103 or § 101, the same standards that apply to fact finding (e.g., the presumption of validity) should apply to both sections. Cf. i4i, 564 U.S. at 95-96.

This Court has made it perfectly clear that a party challenging the eligibility of a patent must prove that the patent is invalid by clear and convincing evidence under i4i, and any factual disputes must be resolved in favor of the non-movant on summary judgment under Anderson. Nonetheless, the District Court here, like the cases it relies upon, has created a special patent-eligibility rule that allowed it to improperly weigh facts (e.g., what was conventional in the prior art) against BBiTV in the context of a § 101 analysis, even though the District Court found those same facts in dispute such that they precluded summary judgment in the context of a § 103 analysis. Because the District Court’s ultimate legal conclusions (e.g., invalid under § 101 and not invalid under § 103) were based on the same underlying facts, this inconsistency illustrates that its patent-ineligibility determination was based on legal errors (e.g., that there is no presumption of eligibility), which requires clarification from this Court.

. . .

The District Improperly Found the Claims Directed to an “Abstract Idea” Even Though the Claims Are Not Directed to a Fundamental or Long-Standing Concept

Like many lower court decisions since Alice, the District Court here applied an incorrect interpretation of this Court’ s patent-eligibility precedent to misidentify alleged “abstract ideas” that were neither the equivalent of traditional “preexisting, fundamental truths” such as Einstein’s E=mc2 or Newton’s law of gravity, nor “fundamental economic practice[s] long prevalent in our system of commerce” such as Bilski’s hedging risk or Alice’s intermediated settlement. Thus, the District Court here erred in defining the alleged abstract ideas by:

  1. improperly including “novel” business practices or methods of organizing human activities; and
  2. including detail well beyond the level of detail used in Alice or Bilsk

Each of these errors is typical of the errors being committed since Alice by the lower courts and requires this Court’s correction. Indeed, this Court’s rationale for creating the exception to patent-eligible subject matter under § 101—that pre-existing fundamental truths such as laws of nature or mathematical algorithms are not truly the subject of “invention”—does not extend to newly discovered methods of organizing human activity or business practices not already known. Nor has this Court ever applied the exception for “abstract ideas” to such novel concepts.

In reviewing the history of patent-eligibility, this Court in Alice recognized that, prior to Bilski, the “abstract idea” exception had only been applied by this Court to “mathematical formulas.” Alice, 134 S. Ct. at 2355-58; Bilski, 561 U.S. at 610-11. In Diamond v. Diehr, this Court explained that mathematical algorithms themselves could not be patented because such “manifestations of nature” were not truly “new.” 450 U.S. 175, 189 n.12, 185, 190 (1981). Even if the algorithms were newly “discovered” by man, they are pre-existing truths that “must be assumed to be within the ‘prior art.’” Id. at 189 n.12 (emphasis added).

This rationale does not apply to newly discovered methods of organizing human activity or business practices not already known.

Thus, prior to Bilski, the three judicial exceptions—laws of nature, natural phenomena, and abstract ideas (i.e., mathematical formulas)—were preexisting fundamental truths that exist in principle apart from any human action. See Bilski, 561 U.S. at 619-20 (Stevens, J., concurring); cf. Alice, 134 S. Ct. at 2356. In essence, these fundamental truths were treated the same.

However, Bilski did not rely on the fact that the concept of “hedging risk” could be reduced to a “mathematical formula” in classifying it as an abstract idea. Instead, Bilski created a new category of “abstract idea” by finding the concept of “hedging risk” to be an “abstract idea” because it was “a fundamental economic practice long prevalent in our system of commerce.” Bilski, 561 U.S. at 611 (emphasis added).

Alice explored the bounds of an abstract idea even further. It recognized that “hedging risk” could have been found an abstract idea in Bilski on the alternative basis that hedging risk could be reduced to a “mathematical formula,” but instead expressly relied on the fact that hedging risk was an “abstract idea” because it was “a fundamental economic practice.” See Alice, 134 S. Ct. at 2356-57 (emphasis added). It did so because the abstract idea in Alice—“intermediated settlement”—was easily identifiable as a similar “fundamental economic practice long prevalent in our system of commerce.” Id. at 2356 (emphasis added).

Alice supported the “fundamental,” “long prevalent,” and “longstanding” nature of the practice of intermediated settlement by, inter alia, citing to publications from 1896 and textbooks to demonstrate how well-known and deep-rooted an economic concept it was. Id.; see also Bilski, 561 U.S. at 611. Because intermediated settlement was so similar in kind to the “long prevalent” concept of hedging risk in Bilski, Alice stopped the analysis there, and did not feel a need to “labor to delimit the precise contours of the ‘abstract ideas’ category.” Id. at 2357. Thus, this Court expressly declined to expand the “abstract ideas” category beyond mathematical formulas and “fundamental economic practice[s] long prevalent in our system of commerce.”

However, because Alice did not “delimit the precise contours of the ‘abstract ideas’ category,” id. at 2357, the lower court here, like other district courts, was confused over the scope of that judicial exception. As a result, these lower courts have misapplied this doctrine and improperly expanded the “abstract idea” category to include “novel” business practices or methods of organizing human activities. The present Petition should be granted so this Court can correct that error.

. . .

The Author

Charles R. Macedo

Charles R. Macedo litigates in all areas of intellectual property law, including patent, trademark and copyright law, with a special emphasis in complex litigation and appellate work. Companies and individuals from a wide range of industries turn to him to develop offensive and defensive strategies for the development and enforcement of their patent and trademark portfolios.

For more information or to contact Mr. Macedo, please visit his Firm Profile Page.

Charles R. Macedo

Sandra Hudak is an Associate with Amster Rothstein & Ebenstein LLP. Ms. Hudak works in all areas of intellectual property law, including patents, trademarks, copyrights, and unfair competition. She has been involved in numerous ARE litigation matters with responsibilities including developing strategies and defenses, analyzing prior art, managing document review, and drafting motions and pleadings. Her areas of focus in patent law include subject matter eligibility under 35 U.S.C. § 101, invalidity based on prior knowledge or use, and divided infringement. She prepares and prosecutes patent applications in a wide range of technologies, including financial services, internet marketing, consumer products, and therapeutic agents. She also assists clients in post-grant proceedings before the U.S. Patent and Trademark Office, such as, inter partes reviews and covered business method reviews.

For more information or to contact Ms. Hudak, please visit her Firm Profile Page.

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