On May 12, 2016, in the case of Enfish, LLC v. Microsoft Corporation, et al., the Court of Appeals for the Federal Circuit issued an opinion (case no. 2015-1244) that should provide some hope for software patents facing invalidation under § 101 (and software patent applicants dealing with subject matter ineligibility rejections) since the Supreme Court’s decision in the seminal Alice v. CLS Bank Int’l case. See 134 S. Ct. 2347 (2014). Prior to Enfish, the only other post-Alice case where the Federal Circuit held that the patent claims at issue met the requirements of § 101 was DDR Holdings v. Hotels.Com, L.P.., 773 F.3d 1245 (Fed. Cir. 2014).
The typical § 101 analysis since Alice has generally involved two steps. First, the courts determine if the claims are indicative of a non-patentable abstract idea. Typically the courts have answered this question in the affirmative. But the analysis does not end there. The courts then determine if the claims, both individually and as an ordered set, transform the abstract idea into an inventive concept or something that itself meets the subject matter threshold of patent eligibility. See, e.g., DDR Holdings at 1248.
The courts have generally found that software-related inventions requiring a computer represent abstract ideas. As such the analyses have generally “moved on” to the second part of the analysis. DDR Holdings has been cited in numerous post Alice decisions invalidating software-based patents as a “distinguishing” case. It was also recently cited by the District Court for the Eastern District of Texas in Motio, Inc. v. Avnet, Inc., et al. (case no. 4:12-cv-647) where this court refused to grant the defendants’ request for summary judgment of patent invalidity on abstract idea grounds. Favorably citing DDR Holdings, the Motio court found that the software disclosed in Motio’s patent “does not simply use a computer to automate what was previously done, but rather improves upon what was previously done with computers by solving a computer specific problem.” Motio at 4. Motio’s abstract idea involving business intelligence software was thus found to contain meaningful limitations that created an inventive concept.
What makes the Enfish case particularly interesting is that the court found that the software patent at issue was not even an abstract idea. As such, the inquiry as to patent eligibility did not proceed beyond the abstract idea analysis step.
In upholding the validity of Enfish’s patent, the court first relied on specific wording in the Alice case as it pertains to the “abstract idea” analysis, i.e., whether the “claims at issue are directed to a patent ineligible concept.” Our emphasis. Enfish at 10 quoting Alice at 2355. The Enfish court then added a limitation to just how the words “directed to” ought to be interpreted by stating that ‘ “the directed inquiry applies to a stage-one filter to claims, considered in light of the specification, based on whether their character as a whole is directed to excluded subject matter.” ’ Enfish at 10 quoting Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1342, 1346 (Fed. Cir. 2015). That is, the wording “directed to” a patent ineligible concept should not be construed to mean “involve” a patent ineligible concept because “essentially every routinely patentable-eligible claim involving physical products and actions involves a law of nature and/or natural phenomenon.” Enfish at 10.
The Enfish court next relied on wording in Alice stating that claims purporting to improve a computer’s functioning or improving an existing technological process might not constitute an abstract idea. This wording actually appears in the second step of the Alice analysis. The Enfish court opined that this was because the High Court in Alice “did not need to discuss the first step of its analysis at any considerable length” because of statements by the Petitioner concerning the abstract nature of the claims. Our emphasis. Enfish at 10 citing Alice at 2358-59. That is, the High Court could just as well have placed this statement in the first step of its Alice analysis.
Basically the Enfish court used the wording in Alice to refute post-Alice perceptions that all improvements in computer related technology and/or software inventions are inherently abstract and therefore “are only properly analyzed at the second step of the Alice analysis.” Enfish at 11. This interpretation represents what could be a meaningful shift in the interpretation of software patent validity.
Even the DDR Holdings court had found that the disputed claims were abstract under the first step of the Alice analysis but represented an inventive concept under the second step of the analysis because the claimed solution is “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks,” namely keeping an Internet user on the host’s own website after clicking on an advertisement and activating a hyperlink. The DDR Holdings court noted that the claims solved the specific Internet challenge of retaining “control over the attention of the customer in the context of the Internet where customers can be suddenly and completely transported outside the original website to a separate website associated with a third party by simply clicking on a hyperlink.” Accordingly, the ‘399 patent solved the Internet-centric problem wherein a “visitor to a host website would be lured away to another website when he clicked on a merchant advertiser’s link.” DDR Holdings at 1257.
Moreover, the Enfish court stated that “[s]oftware can make non-abstract improvements to computer technology, just as hardware improvements can, and sometimes the improvements can be accomplished through either route.“ Enfish at 11. The claims at issue in Enfish were directed to a logical model for a computer database resulting in a “self-referential” database. The patents described benefits not found in the typical relation model for data bases, thereby resulting in benefits related to faster searching of data, more effective storage of data, more flexibility in configuring the database, and smaller memory requirements. Enfish at 7.
The lower court had found that Enfish’s claims were based on the abstract idea of organizing information in a tabular format and therefore patent-ineligible subject matter. Enfish at 14. The lower court’s holding is not surprising based on the post-Alice decisions that have intimated that software patents represent abstract ideas generally comprising a methods of “organizing human activity.”
See, e.g., YYZ v. Hewlett Packard, et al., (U.S. Dist. Ct. for the Dist. of Del., no. 1:2013 cv 00136) citing Intellectual Ventures, LLC v. Capital One Bank (USA), 792 F.3d 1363 (Fed. Cir. 2015).
The Enfish court, on the other hand, emphasized that Enfish’s claims are not directed to any form of storing tabular data but instead are specifically directed to a self-referential table for a computer database. Enfish at 14. In reaching its conclusion, the court also relied on the specification which taught the functional differences between the invention’s self-referential table and conventional database structures. The court further opined that the claims are directed to an improvement of an existing technology and emphasized that the specification taught specific benefits over conventional databases. Enfish at 15.
Microsoft had argued that the rows of the self-referential database represented nothing more than rows with a simple header and this argument had been accepted by the lower court. The higher court disagreed and found that the associated algorithm for creating the inventive self-referential table explains that the “table stores information related to each column in rows of that very same table such that new columns can be added by creating new rows in a table.” That is, the columns entered as rows in the table corresponding to a column are the result of the addition of another header row. Enfish at 16.
The Enfish court further opined that the invention’s ability to run on a general-purpose computer does not render the claims patent ineligible. In reaching this conclusion, the court noted that the claims in Alice and many of the post-Alice invalidated patents are not directed to an improvement in the functioning of a computer (e.g., reducing memory requirements) but to adding conventional computer components to well-known business practices. Enfish at 16.
Although the Enfish court does not cite it, the opinion of the U.S. Court of Customs and Patent Appeals (the predecessor to the current Court of Appeals for the Federal Circuit) in In re Bernhart, 417 F.2d 1395, 1400 (C.C.P.A. 1969) had stated that software can represent patent eligible subject matter. For example, the Bernhart opinion stated that the combination of a general purpose computer and a particular software (our emphasis) forms a particular machine consistent with the statutory requirements of 35 U.S.C. § 101:
[I]f a machine is programmed in a certain and unobvious way, it is physically different from the machine without the program; its memory elements are differently arranged. The fact that these physical changes are invisible to the eye should not tempt has to conclude that the machine has not been changed. If a new machine has not been invented, certainly a “new and useful” improvement of the unprogrammed machine has been and Congress has said in 35 U.S.C. § 101 that such improvements are statutory subject matter for a patent.
In Bernhart, the computer was central to the practice of the invention, i.e., the computer-driven results were something beyond data storage and organization or information that could also have been assembled and organized by “human” hands. Whether or not the Bernhart court would have reached the same conclusion today is highly questionable given the recent history of patent invalidation since Alice. Nevertheless, that decision addressed the substance of the relationship between computers (machine) and software (machine part even if invisible) long before the usage of computers and computer software became so entrenched in our daily lives.
Perhaps the Enfish holding has indirectly resurrected the Bernhart court’s rationale stated nearly fifty (50) years ago. The Enfish Court, in the final part of its opinion finding that the at-issue patent claims are not representative of an abstract idea, further opined that the fact that “the improvement is not defined by reference to [the hardware of an all-purpose computer] does not doom the claims.” Indeed, the stated benefits of Enfish’s invention are invisible although the results are themselves are tangible. The Enfish court goes on to state the following:
Much of the advancement made in computer technology consists of improvements to software, that by their very nature, may not be defined by particular physical features but rather by logical structure and processes. We do not see in Alice, or our other cases, an exclusion to patenting this large field of technological processes. . . . [Here] we are not faced with a situation where a general-purpose computer components are added post-hoc to a fundamental economic or mathematical equation. Rather the claims are directed to a specific implementation of a solution to a problem in the software arts. Accordingly, we find the claims at issue are not directed to an abstract idea. Enfish at 17-18.
As is the case with most § 101 patent invalidation counter-claims, the defendants in the Enfish case also argued that Enfish’s claims should be invalidated as indefinite under §112 and/or anticipatory under §102. The Enfish court disagreed and found that the claims were definite and novel. However, it also found that the defendants had not infringed Enfish’s patents. So the win for Enfish may well be categorized as an “intellectual” win rather than a “financial” win.
Will the Enfish case have any effect on post-Alice jurisprudence which has generally resulted in § 101 patent invalidations? Obviously the owners of software patents and software-based patent applicants hope it does especially based on the dicta. It is also true that the claims may have been found to be valid even if the Enfish Court had gone through Alice’s two-step analysis. Perhaps, however, one advantage of having a decision wherein the claims are found not to be abstract to start with is that some of the issues associated with the second prong of the Alice test can be avoided.
Certainly one of the challenges with the second prong of the Alice test which addresses “inventive concept” is that it is difficult to draw a strict line between a § 101 analysis and a novelty or non-obviousness analysis. For example, the YYZ opinion notes that any “inventiveness” discussion under a § 101 analysis involves “questions of fact which intersect with those raised in the context of §§ 102 and 103.” YYZ at 17.
Interestingly, the YYZ defendants described multiple prior art references in their § 101 challenge to establish “an entire lack of inventiveness.” Yet, they stated that their motion’s focus was on whether the “abstract concept of copying and saving business information implemented via conventional computer components and functionality is patentable subject matter. “ In YYZ the patents could have just as well been invalidated on prior art grounds. Indeed the opinion recites hybrid grounds for invalidating the patents under both § 101 and §§ 102 and 103.
In conclusion, technological developments are changing at a faster rate than ever before as the result of computers and software. Opponents to patents involving software-based claims argue that these patents stifle innovation and generally involve nothing more than automation of human activity. Yet clearly the grant of patent-associated monopolies over the years has resulted in investment and innovation just as the founding fathers envisioned. As Mark Twain stated through the protagonist in A Connecticut Yankee in King Arthur’s Court, “[t]he very first official thing I did, in my administration—and it was on the very first day of it, too—was to start a patent office; for I knew that a country without a patent office and good patent laws was just a crab, and couldn’t travel any way but sideways or backways.”
Perhaps the bigger issue is that with the changing “fast-paced” landscape of innovation in computers and software, the current in-place patent laws covering all utility patents should be revisited by Congress. There is no reason why Congress could not carve out a class of patents specific for software-based inventions perhaps with a shorter patent term relative to utility patents. Federal law need not necessarily be limited to just one type of patent protection and indeed patent protection is available today in the form of design patents and plant patents as well as utility patents. Such an approach would “reward” innovation efforts as U.S. patent law has always done since 1783 and at the same time address the reality that today’s technology itself lends itself to substantially reducing the time frame for innovation thanks to software-driven computer technology. The suggested approach provides balance between the public policy behind patent term monopoly grants to foster investment and innovation and at the same time recognizes that technology will continue to develop far more rapidly than it ever did in the past thanks in part to software technology.
The foregoing suggestion is not intended to circumvent the requirement for subject matter eligibility under § 101. It is intended to encourage the introduction of updated patent laws that are commensurate with today’s computer and software-based technology and better define the requirements for patentability as they pertain to such technologies. In the meantime, the courts will likely continue to invalidate patents based on the current state of post-Alice jurisprudence. In today’s post-Alice world, the concept of patent validity has been turned on its head. And patent applicants will continue to puzzle over what will pass muster under a § 101 analysis. Perhaps the Enfish case, now along with the DDR Holdings and Motio cases, will give some much-needed clarity – that all software-based inventions are not per se subject matter ineligible and all software-based inventions do not merely represent mere automation of a previously automated human endeavor.
As for the software patent applicant, are there any take-home points from both the “good” and “bad” post-Alice decisions for the applicant? Certainly the invention should be scrutinized early on to determine if it could be viewed simply as a fundamental economic practice, a method of organizing human activity, gathering and combining data, and/or a known mathematical relationship. If so, the inventor needs to critically consider whether proposed claim limitations add something significantly more (an inventive concept) to the abstract idea so that the claims will pass muster under Alice’s second step of a § 101 analysis (as they did in Motio and DDR Holdings). Better yet, will the application, when taken as a whole from the specification to the claims, actually “survive” step one of an Alice analysis? The Enfish decision clearly indicates that the thoroughness of the specification greatly assisted the court in reaching its favorable decision for the patent owners at step one of its Alice analysis.