Recently, we filed an amicus brief with the United States Court of Appeals for the Federal Circuit in support of Broadband iTV, Inc., the appellant in the case styled Broadband iTV, Inc. v. Hawaiian Telcom, Inc. et al. Our brief requests the Federal Circuit provide further guidance regarding the proper scope and application of Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014), both generally and specifically with regard to software patents.
Tranxition is a software company that has developed PC system deployment software and computer personality tools that cater to businesses and, therefore, software patent protection is a matter of great importance for our company. Tranxition began with an idea: Computer Personality is how a computer takes on the style and habits of a user over time. If people could manage these personas, they would have all the things they need across all computer systems. Since 1998, Tranxition has been producing award-winning software products, which specifically address Windows user transition between systems. These tools give users their Computer Personality especially when the OS and apps are different versions. We have what we believe to be a strong patent portfolio, and we continue to add to our portfolio in order to protect new inventions. Like many innovative software companies, we have a significant interest in the proper application and scope of patent laws.
Broadband iTV’s appeal raises critical issues affecting patent-eligibility of computer-implemented inventions under 35 U.S.C. § 101. Federal Circuit guidance is needed because many district courts have misapplied Alice and sidestepped the rigorous factual analysis that has historically been required, and should still be required, prior to patent invalidation under Section 101. Over 7,500 claims in 150 patents have been invalidated as a matter of law. We believe an essential part of the Federal Circuit’s proper guidance should include addressing the serious missteps in the district court’s decisions as described below.
In a manner consistent with Congress’ intent that Section 101 be construed liberally to find patentability, the Supreme Court has expressly stated that the court-created exceptions to Section 101 patentability should be a narrowly-applied “coarse filter.” Despite this clear admonition, district courts have increasingly invalidated patents based on a misapplication of Alice that demonstrably lacks technical and legal rigor and a body of poorly adjudicated case law is accumulating. It appears that software patents are particularly vulnerable to an improper utilization of both Alice and the Federal Circuit’s subsequent interpretative decisions construing and applying Alice.
The District Court’s errors in the Broadband iTV decision are a paradigmatic and telling manifestation of certain of the manners in which district courts are misapplying the two-step Alice test in order to invalidate patents, creating something of a fait accompli at the outset of the filing of an Alice motion. Most notable is the alarming trend of certain district court Section 101 Alice invalidations that purport to resolve questions of law but that, upon closer scrutiny, only nominally invoke Section 101 to improperly sidestep the work of Sections 102, 103 and 112 of the Patent Act. The problem in so-doing is that district courts are utilizing the summary legal analysis permissible under Section 101 when, in fact, they should be undertaking the factually-intensive analysis required by Sections 102, 103 and 112. This sleight of hand has resulted in what is becoming a systematic invalidation of patents on a far lesser “legal” showing rather than the rigorous factual showing mandated by the Patent Act.
Adding to this disarray, district courts are ignoring the well-settled presumption of the validity of patents and are inconsistently applying the long-standing “clear and convincing” factual burden to invalidity analysis. Whereas as a matter of settled law, patents enjoy a presumption of validity, Courts are on their own modifying the standard to a mere preponderance based on no controlling case law or statute. Absent a change from Congress or the Supreme Court, applying anything less than the “clear and convincing” standard contravenes settled law. The Supreme Court in 2012 wrote that the standard is “clear and convincing evidence” stating that only congress can change that. District courts evince a pattern of avoiding this mandate from the high court.
Finally, compounding the above-referenced trends, district courts are over-relying on – misunderstanding and misapplying – the discredited “pencil-and-paper” analogy as a convenient and ill-suited proxy for the two-step Alice test.
Clarification of the Section 101 standards – both substantive and procedural – are needed to prevent further deviation from the intent of Congress and from Supreme Court precedent. Additionally, its time to reconsider the history of the patent system and what has guided the application of patent law for hundreds of years: the Patent Act of 1952 states any new and useful invention. Without further clarification from this Court regarding the proper application of Alice to software patents, the damage has been, and could continue to be, catastrophic to the software industry. It was estimated recently that, as of 2015, approximately 240,000 patents relate to computer-implemented inventions; at an estimated invalidation rate of 82.9%, approximately 199,000 of those patents appear vulnerable to Section 101 invalidation in the current climate. Is this really what Congress intended with 101? See Tran, Jasper L., Software Patents: A One-Year Review of Alice v. CLS Bank, 97 Journal Of The Patent and Trademark Office Society 532, 534, 542 (2015). Even accounting for the need to weed out weak patents, the economic damage caused by judicial misapplication of Alice cannot easily be overstated. As district courts rely upon the poorly-adjudicated decisions of other district courts, improper case law is entrenching these unsupportable and improper decisions, further necessitating Federal Circuit guidance.
Lost in the appropriate desire to rein in poorly-conceived patents is the very real toll being exacted upon patentee-inventors with actual inventions– both those whose patents have been unjustifiably invalidated and those who continue to hold patents. There can be little question that the uncertainty caused by the rising tide of invalidations under Section 101 has undermined the value of all patents across entire industries.
For these reasons and more, the Federal Circuit should reverse the district court decisions in Broadband iTV, Inc. v. Hawaiian Telcom, Inc., — F. Supp. 3d —-, No. 14-00169 ACK-RLP, 2015 WL 5769221 (D. Haw. Sept. 29, 2015), and Broadband iTV, Inc. v. Oceanic Time Warner Cable, LLC, — F. Supp. 3d —-, No. 15-00131 ACK-RLP, 2015 WL 5768943 (D. Haw. Sept. 29, 2015) (collectively, the “Broadband iTV Decisions”), and clarify Section 101 jurisprudence consistent with Congressional intent and the narrow holding in Alice.
 According to the author:
“As of June 19, 2015, Alice was cited in 198 PTAB decisions, 63 district court decisions, and 11 Federal Circuit opinions, in a total of 272 court cases, to invalidate patents under § 101— totaling 286 invalidations out of 345 patents or patent applications which appeared before the courts, accounting for an average invalidation rate of 82.9%.”
Id. at 534.