Federal Circuit Clarifies Patent Eligibility Under McRO and Enfish

Federal CircuitFairWarning IP, LLC v. Iatric Systems, Inc., No. 2015-1985, 2016 U.S. App. LEXIS 18313 (Fed. Cir. Oct. 11, 2016) (Before Lourie, Plager, and Stoll, J.) (Opinion for the court, Stoll, J.)

In an October 11, 2016, decision, the Federal Circuit affirmed the district court’s finding that FairWarning’s patent claims were invalid because the claims encompassed an abstract idea under 35 U.S.C. § 101.

Iatric Systems was sued for infringing FairWarning’s ’500 patent, directed to detecting fraud and misuse of personal information by identifying unusual patterns in users’ access to sensitive data. The district court granted Iatric’s motion to dismiss the case under Rule 12(b)(6). The district court found that the claims were directed to a patent-ineligible abstract idea, with no inventive concept, under the controlling principles of Mayo/Alice.

The Federal Circuit agreed that the ’500 patent is directed to the concept of analyzing records of human activity to detect suspicious behavior. The patented method collects information regarding accesses to a patient’s personal health information, analyzes the information according to one of several rules to determine if the activity indicates improper access, and provides notification if such improper access has occurred. The Court stated that the use of an enumerated rule to analyze log data does not make the claims eligible for patenting, citing McRO, Inc. v. Bandai Namco Games America Inc. The claimed rules in McRO transformed a traditionally subjective process performed by humans into a mathematically automated process executed on computers. The human process and computer process in McRO produced a similar result but did so in fundamentally different ways. It was the incorporation of the claimed rules, not the use of the computer, that improved the existing technological process by allowing the automation of further tasks. In contrast, the Court found that FairWarning’s claims did not provide improved rules and “merely implement an old practice in a new environment.” Further, FairWarning’s claims were not like the patentable claims in Enfish, which provided a specific improvement to the way computers operate, not an abstract idea implemented on a computer. Although FairWarning purported to accelerate the process of analyzing audit log data, the Court found that this came from the capabilities of a general-purpose computer, not from the patented method itself.

The Court also agreed with the district court that the claims contained no inventive concept that would save them, under Mayo/Alice step two. First, claims 12 and 13 are system claims that include a “user interface” for selection of a rule, as well as a microprocessor that analyzes audit log data under various rules. The use of generic computer elements, like a microprocessor or user interface, do not transform an otherwise abstract idea into patent-eligible subject matter. The Court held that other disputed claims “add nothing more than similar nominal recitations of basic computer hardware, such as ‘a non-transitory computer-readable medium with computer-executable instructions’ and a microprocessor.” These limitations only add generic computer components to otherwise-ineligible method claims.

The Court rejected FairWarning’s argument that the claims solve technical problems unique to the computer environment and are eligible under DDR Holdings v. Hotels.com. Merely combining data sources did not make the claims patent eligible, nor did limiting the claims to the computer field. Because the patent is simply directed to the broad concept of monitoring audit log data, the Federal Circuit held that it did not contain “something more” to transform the underlying abstract idea into a patent-eligible application.

Finally, the Court rejected FairWarning’s argument that the district court improperly granted Iatric’s motion under Rule 12(b)(6). It reiterated that “in many cases it is possible and proper to determine patent eligibility under 35 U.S.C. § 101 on a Rule 12(b)(6) motion.”

Using new or improved rules applied by a computer may be patent-eligible, and improving the operation of the computer itself may be patent-eligible, but using a computer to implement old practices is not patentable under § 101. Further, claiming a combination of data sources, or limiting claims to the computer field, does not transform an otherwise abstract idea into “something more” that is patent-eligible.

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Discuss this

There are currently 11 Comments comments.

  1. Night Writer October 20, 2016 10:55 am

    “The Federal Circuit agreed that the ’500 patent is directed to the concept of analyzing records of human activity to detect suspicious behavior.” Really? It is directed to a “concept”? I don’t think a physical machine is directed to a “concept.”

    Cabin would be a better verb.

  2. Curious October 20, 2016 11:00 am

    Patent eligibility under 35 USC 101 is very much panel dependent. Draw a good panel (hard to do) and you have a so-so shot of having your claims upheld, draw a bad panel (much easier to do), and your claims are toast.

    There is little consistency between decisions of the Federal Circuit, and the legal gymnastics that the court engages in to justify their decisions is astounding. I was just reading In re Maucorps — a 37 year old CCPA case that is being cited by certain examiners at the USPTO, and I came across the following statement:

    The holding in Benson “forecloses a purely literal reading of § 101.” Flook, 437 U.S. at 588-89, 98 S.Ct. at 2525, 198 USPQ at 196; In re Johnson, 589 F.2d at 1076, 200 USPQ at 205-06.

    This is no great secret, but the Courts have pretty much told Congress that we are going to ignore 35 USC 101 and do whatever we want. Moreover, since SCOTUS stated that “we need not labor to delimit the precise contours of the ‘abstract ideas’ category,” the lower courts are free to interpret 35 USC 101 in pretty much any manner they please. To say that 101 jurisprudence has been ‘clarified’ is more wishful thinking than reality.

  3. Anon October 20, 2016 12:38 pm

    The full extent of no bright lines and the undefined aspects of the “Gist/Abstract” sword render the Court’s own re-writing of 101

    (go ahead and call it an interpretation if you want – that won’t change the conclusion here)

    Renders it Void for Vagueness.

    The Court accuses patent attorneys of being scriveners and should look at their remains of glass castles as they throw that stone.

  4. Gene Quinn October 20, 2016 5:11 pm

    Curious-

    It is hard to argue that anything at the Federal Circuit isn’t panel dependent, but I may give you some push back here. There are now more judges on the Federal Circuit that are in favor of at least some software being patent eligible than those who think every claim should be patent ineligible. Can you still draw a bad panel, yes, of course. But getting good panels is getting easier.

    The problem, from my perspective, is with the patent applications. For some time patent attorneys stopped writing good patent applications in the software space particularly. There was this nonsensical notion that a judge should be able to understand the application. NO! Judges are history majors for crying out loud. If a judge can understand your innovation as you’ve written it up then you don’t have anything patent eligible, period. There is also an aversion to explaining what the improvement is, which runs throughout all areas of patents. You read many, if not most patent applications and at the end you are wondering what is new here. In the software space it is all about the innovation and all about the improvement. That should hardly be surprising. Those who took the time to draft the applications necessary to describe the underlying innovations should be fine. Those who represented clients that demand to file on the cheap, or who didn’t really understand the technology, have been and will continue to be in a world of hurt.

    Thoughts? Anyone?

    -Gene

  5. PatentBob October 21, 2016 8:55 am

    Gene, I think part of the problem is the CAFC itself and to some extent the SC. All of their holdings for obviousness mitigate against calling anything an “invention” or actually pointing out what the invention is. Especially KSR,which basically ruined the obviousness analysis and made everyone afraid of putting anything remotely giving an indication of the prior art, problems with the prior art, or an indication of why your invention is patentable over the prior art. Some of my clients refuse to say anything about the prior art or the problems being solved. This means you drop into the case with no real background whatsoever, and of course are immediately lost. I can’t tell you how many cases have been transferred into us where I literally had no clue what the invention was.

    The other issue I struggle with is what’s known and what should be described? You get into MPF, for instance, and for some reason I don’t understand what one skilled in the art knows is not useful. Instead, one has to describe this. For instance, if you say “hardware configured to generate a random number”, ostensibly you don’t have to describe how to generate a random number (as it’s easily known to those not even skilled in the art — a few minutes of searching will get you any number of algorithms), but if you say “means for generating a random number”, you have to describe an algorithm for generating a random number. This makes no sense to me. On the other hand, since software patents many times are basically claiming functions, I’ve been trying to add in algorithms to prevent a claim from being invalid if the claim is considered to be MPF. But I get a lot of kickback from inventors about this, as they rightly say that a lot of this is known. I ask once or twice then give up.

    I agree that more disclosure (particularly with background) would be beneficial in software patents, but this has to be balanced against what’s known and what the courts keep saying about prior art and use of one’s own disclosure against one’s own claims. I still don’t know the answers to this, particularly since this topic is not being addressed (for what should be disclosed for software) and the courts continue to punish you if you use the term “invention” or provide reasons suitable for an Examiner to combine prior art. And of course, this goes right over the head of all or most judges.

  6. Gene Quinn October 21, 2016 9:43 am

    PatentBob-

    I completely agree with you. The reaction to KSR has made it difficult on at least some levels because of the legitimate and understandable reluctance to say anything about the prior art. I do think there are still ways to talk about the advantages of the innovation and what makes it unique and special even without saying much, if anything, about the prior art. Of course, it is more difficult and lacks context. I feel your pain about reading applications where you can’t figure out what the invention is. Worse yet is when the application is written in a way such that the invention isn’t even there. I’ve had more occasions that I wish to remember when I’ve inherited something and had to speak with the inventor to find out what he/she thought they invented and then had to tell them that what they invented, as cool and interesting as it may be, isn’t disclosed in the application. I think these hide the ball drafting techniques make it too easy to fall prey to failing to disclose the invention. Not really throwing blame at attorneys, we all know what these drafting techniques are used. I do think they have gone too far and are doing clients a disservice though.

    As for the algorithms and a lot of it being known, I agree you are right to ask for it. If they are not going to give it to you then I’d definitely make sure you have CYA letters or e-mails saved. Without that you cannot use means plus function claims. Means plus function claims, as limited as they are, will give the best protection against overactive Alice rejections/problems. I can also envision a future where the rules of the algorithm cases (i.e., 100% of algorithms must be disclosed even if understood/known) are applied across the board regardless of claim technique. That is what Professor Mark Lemley and others are advocating. So just make sure that their refusal to give you what you advise them that they need is documented.

    -Gene

  7. Anon October 21, 2016 11:03 am

    The courts introduce “patent profanity” with their own scrivening, and then turn around and denigrate scriviners trying to protect their client’s innovations.

    A vicious circle indeed.

    Maybe if the courts refrained from creating patent profanity…

    Alas, such wishes are fishes and the battle must be joined as long as the courts seek to limit patents.

  8. A Rational Person October 22, 2016 9:58 pm

    Gene@4

    My thought, further to your comments about the quality of applications written in the computer and software space, is that it was a shame that the Supreme Court went down the 35 USC 101 patent eligibility route to attack computer/software claims that were not supported by or whose scope could not be ascertained the specification rather than the 35 USC 112 enablement/indefiniteness route.

    To me, had the Supreme Court focused on the 35 USC 112 issues with respect to patents related to computers and software that had meagre or vague disclosures of what the invention was and/or how to practice the invention, I think there over time a set of rational formal or informal rules could have been developed by the USPTO based on court decisions as to what was necessary for a software claim to be enabled and not be indefinite under 35 USC 112.

    Going this route would have benefited applicants by providing logical and rational rules as to how to prepare an application with claims relating to software and could have benefited the public by improving the quality of patents issued.

    Instead, we just have a mess mainly created by the Supreme Court and the Federal Circuit.

  9. Anon October 23, 2016 7:36 am

    ARP and Gene,

    From the dialogue, I think that you might both agree that the wrong Means were used in an attempt to arrive at the Court’s desired Ends.

    I think that the ultimate sadness (and frustration) comes from those who know and understand how law is supposed to work and seeing how the highest Court in the land cannot get out of its own way and use the proper means.

    It’s somewhat akin to watching a good friend become a drug addict and spiral out of control.

  10. A Rational Person October 23, 2016 10:07 am

    Anon@9

    I agree about the problem of using the wrong means to arrive at the Court’s desired ends, but I would go further and say that not only that the Court acted in a way that that is contrary to the way lawyers are told in the law school that the system should work, which is horrible enough, but that the Court’s actions short-circuited what I think would have been a profitable discussion, i.e., what is sufficient to supply enablement and avoid indefiniteness for various types of software claims.

    Is drawing a series of boxes with arrows outlining a method sufficient?

    Is some level of conventional flow-charting sufficient?

    Do some parts of the method require an applicant to provide an example of computer code that could accomplish one or more steps of the claimed method?

    I think reasonable and technologically enlightened minds could have disagreed on these issues and still have had a productive discussion that led to rules that most people could live with, event if they did not totally agree with all of the rules, for what met the enablement and definitess requirements with respect to software-related claims.

    And, of course, the fact that such potentially productive discussion did not occur is one of the reasons Courts are supposed to respect the process of first considering the interplay of all parts of the statute, before making any ruling. The fact that the Alice Court provided no explanation why 35 USC 103 and 35 USC 112 could not resolve the issue at hand to me undermines the basic legality of the Alice decision. For example, the following statement by the Court shows just how much they have departed from interpreting what 35 USC 101 actually says and how much they have ignored the fact that 35 USC 112 exists:

    “This conclusion accords with the preemption concern that undergirds our §101 jurisprudence.”

    Why looking at the words of 35 USC 101 should the Court consider this part of the Patent Statute to deal with preemption? And, if the Court was concerned about preemption, why did the Court provide no explanation as to why 35 USC 112, which through its enablement requirement directly addresses the Court’s preemption concern, was considered to be inadequate to address the Court’s concerns about preemption.

  11. Anon October 23, 2016 11:56 am

    All good points, ARP.

    The answer of course has to do with the hubris of the Court.

    They jibe attorneys as “scriviners,” and yet attempt to scriven new statutory law themselves – and do so in such a poor manner as to induce a Void for Vagueness in their own rewriting.

    They care not for the actual history of the Act of 1952, and how that Act reshaped the law. Truth be told, they did NOT WANT to be meticulous enough to trace their authority to the proper place in the revamped (and controlling) statutes, because looking too closely (drawing the curtain that hides the great and wonderful Oz, as it were), would reveal that Congress had acted to remove the authority of the Court to use the tool of common law evolution to set the meaning of the word “invention” – which included such colorful offshoots as “inventive gist, inventive point, gist of the invention – and dozens other like-terms.

    Looking too closely would reveal that the Court has been acting ultra vires and beyond its provided authority, sticking its fingers into the nose of wax of 101.

    Yes, eligibility and patentability were separated in the Act of 1952.

    Yes, Congress changed what was eligible, stripping down the prior single paragraph and moving substantive patentability into their own sections.