CAFC Upholds Section 101 Invalidity Finding on Rule 12(b)(6) Motion, Nixing Patents Covering App Management

By Steve Brachmann
April 20, 2018

On Monday, April 9th, the Court of Appeals for the Federal Circuit upheld the invalidity of a series of patents asserted against the American subsidiary of Japanese consumer electronics firm Funai. The patents, owned by Illinois-based Maxon, LLC, covered electronic means for improving user control over subscription entertainment content but the claimed technologies were deemed to be invalid under 35 U.S.C. § 101, the basic statute governing the patentability of inventions. The decision was issued by a panel comprised of Chief Judge Sharon Prost and Circuit Judges Todd Hughes and Kara Stoll.

There were four patents at issue in the appeal to the Federal Circuit, including:

  • U.S. Patent No. 7171194, titled Network Device Management and issued to Maxon in January 2007. It covers a telephone capable of sharing a common phone number with other telephones and having a computer-readable medium comprising a unique identifier that is not the telephone number, enabling the use of a service associated with a single user across a plurality of devices.
  • U.S. Patent No. 7486649, titled Telephone Management System and Method and issued in February 2009. It claims a method of adding a communications device to a personal communications network with the use of a unique identifier, enabling the management of multiple devices with a common network number.
  • U.S. Patent No. 7489671, same title as the ‘649 patent. It covers a method of removing a communications device from a communications network which enables dynamic interaction with a plurality of enabled devices to configure or alter services on individual devices.
  • U.S. Patent No. 8989160, same title as the ‘194 patent. It claims a method of controlling services to an audio-video device in a personal network in a way that optimizes multiple electronic devices, including laptops, personal digital assistants and video telephones, for a specific use.

Maxon first asserted the patents-in-suit against Funai in a complaint for patent infringement filed in the Northern District of Illinois in late July of 2016. In that complaint, Maxon alleged that various consumer electronic devices marketed by Funai, including Sanyo television sets, infringed upon these patents. In the case of the ‘194 patent, Maxon alleged that Sanyo TVs infringed upon claims covering a user interface that enables a user to select a service “available to but not associated with the device” by incorporating hardware, software and firmware into its TVs enabling them to run and activate applications such as Netflix. Similar TV functionalities allegedly infringed upon claims of the ‘160 patent covering input/output logic enabling the activation or deactivation of a service such as Netflix from the TV.

In October 2016, Funai filed a memorandum in support of its motion to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Funai argued that the asserted claims of the Maxon patents were directed at patent-ineligible subject matter, that the ‘194 patent is directed at the abstract idea of interaction with a device on a shared network and that the remaining patents are directed at the abstract idea of selective interaction with the device in a network. In a response filed by Maxon in November, the plaintiff argued that the motion to dismiss filed by defendant Funai “utterly ignores the claim language and written description setting forth how the consumer may control her content on her personal network of devices.” Instead of merely implementing consumer control of services on a generic computer, the Maxon patents allegedly taught how devices could be programmed to communicate with service providers to activate and deactivate services across multiple devices. “If Funai were to analyze the specification and claim language, it would see the error in arguing things like ‘the claims preempt mail delivery by the U.S. Postal Service,…’ and ‘the term ‘signal’ is literally broad enough to encompass smoke signals,’” Maxon’s response reads.

In May 2017, U.S. District Judge Gary Feinerman filed a memorandum opinion and order describing his rationale for granting Funai’s motion to dismiss the case and invalidate the patents under Section 101. Judge Feinerman agreed with Funai’s argument that the claims of the patents are invalid under the two-step Alice/Mayo framework set by precedent of the U.S. Supreme Court. At step one of the Alice/Mayo test, Judge Feinerman concluded that no analysis was needed because Maxon had already acknowledged that the claims were directed to an abstract idea, in this case the “reversing a trend of centralized service management, allowing the consumer to control through decentralized management the services that the consumer chooses to enjoy across her various devices.” Maxon had argued that the claims survived the patentability standard at step two of Alice/Mayo as the claims were similar to those upheld by the Federal Circuit in 2016’s BASCOM v. AT&T. Judge Feinerman disagreed, finding that individual elements of the claims, including “computer-readable medium,” “logic,” “a processor” and “transceiver,” were not by themselves inventive. BASCOM involved patent claims which provided a technical solution to a technical problem and Judge Feinerman found that Maxon’s claims did not describe an inventive way of achieving the abstract idea.

In its decision on appeal, the Federal Circuit found that the lower court did not err in granting the Rule 12(b)(6) motion to dismiss to Funai. The Federal Circuit cited the lower court’s finding that the specification of the patents did not limit the breadth of elements like “logic” or “computer-readable medium.”

“Put another way, the computer-readable medium ‘could be described as ‘something that stores data that a computer can read…’ Therefore, the district court correctly found that the claims merely recite generic computer elements for their basic functions and thus do not transform the claimed abstract idea into eligible subject matter under Alice.”

The Federal Circuit also agreed with the district court that the claimed elements, even when viewed in an ordered combination, did not reach the level of inventiveness required under step two of Alice/Mayo. “We have considered Maxon’s other arguments and find them unpersuasive,” the opinion reads.

Had Maxon filed an amended complaint at the district court which included allegations about the patent-eligible inventive concept covered by its patents, the company may have had better luck on appeal to the Federal Circuit. Such an argument led the Federal Circuit to vacate and remand the lower court’s Section 101 invalidity finding on a Rule 12(b)(6) motion to dismiss in February’s decision in Aatrix Software v. Green Shades Software. The majority in that opinion found that, although the lower court applied the Alice/Mayo framework in deciding Section 101 invalidity of patent claims, it erred in refusing to accept an amended complaint from the plaintiff including allegations which, if taken as true, would have precluded dismissal of the claims. Of course, Maxon did file a response to argue the patentability of its inventions and the appeal was decided by a different panel than in Aatrix, so that standard may have had little effect in Maxon in any event.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 22 Comments comments. Join the discussion.

  1. Curious April 20, 2018 8:06 am

    I missed the days of the “machine or transformation” test. It wasn’t a perfect test. But it is 1000 times better than the mess we have today.

    What are the fundamental “building blocks of human ingenuity” attempted to be tied up by these patents? Are these patents directed to “basic tools of scientific and technological work”?

    In KSR, the Supreme Court stated “in applying the §101 exception, we must distinguish between patents that claim the “‘buildin[g] block[s]’” of human ingenuity and those that integrate the building blocks into something more.” Has the Federal Circuit done this? Hardly. The Federal Circuit has COMPLETELY FORGOTTEN the difference between “human ingenuity,” which necessarily starts as an abstract idea, and things that are the building blocks of human ingenuity.

    The Federal Circuit’s jurisprudence on 101 is a joke — plain and simple. Alice has been out for 4 years yet no one can tell, with any modicum of certainty, whether any patent that touches upon software falls within the scope of 35 USC 101 based upon what the Federal Circuit has written.

    I doubt that the Federal Circuit fails to appreciate the incredible financial/time drain this failure to produce a coherent test has placed upon inventors, the USPTO, and the Courts themselves. Prior to the Alice/Mayo/Bilski mess, 101 was what it was intended to be — a simple gateway test that was easily overcome. The time most people spent on dealing with a 101 rejection was deminimus. These days, however, I suspect that the various parties (i.e., inventors, the USPTO, and the Courts), probably spend 20-40% of their time dealing with these issues. This is substantially increased costs for inventors. Moreover, this focus on 101 takes away from REAL EXAMINATION by the USPTO as to the inventiveness of the respective patent applications.

  2. Night Writer April 20, 2018 9:07 am

    “Judge Feinerman found that Maxon’s claims did not describe an inventive way of achieving the abstract idea.”

    So, in other words, a judge who knows nothing about technology went back and decided private based on his little understanding of technology that this was not inventive.

    May as well go before a king/queen. No laws. Just some wanker decides what happens to you. Usually they are trained in political science and law and hated technology.

  3. Ternary April 20, 2018 9:11 am

    “that the ‘194 patent is directed at the abstract idea of interaction with a device on a shared network ”

    Interaction with a device on a shared network is an abstract idea? Who can write this nonsense without getting at least some feeling of shame?

    Do Judges even re-read their own words? If they did they must have some notion of how ridiculous this is.

    I would suggest plugging in (interaction), a plug of a lamp (a device) into an active electrical outlet (a shared network). Even the simplest of simple empirical tests shows the earlier statement not to be true. Unless creating light and heat is now also abstract. And who knows with these people.

    Didn’t we have the Age of Enlightenment not to have to deal with this?

  4. Night Writer April 20, 2018 10:28 am

    >>Didn’t we have the Age of Enlightenment not to have to deal with this?

    The problem is that these are people that are not only not trained in science, but typically have not read any philosophy. Just junk people that shouldn’t be on the bench or people like the Google judges who likely pledged to get patents under control in exchange for their appointments. The FBI should really investigate Obama and how these Google appointments were made.

  5. Ternary April 20, 2018 11:50 am

    Indeed Night. In order to become an Examiner, or a patent judge, it should be required to pass an exam on Methodology of Science. They should be able to distinguish between metaphysical sentences and verifiable sentences.

    “The meaning of a sentence is the method of its verification.” We have strayed too much from an empirical, evidenced based patent system. By allowing to call something “abstract idea” or “directed to an abstract idea” while it is verifiably not, we have created a fundamentally irrational and arbitrary patent system.

    One hopeful sign is that Director Iancu appears to be aware of this and is trying to address it.

  6. Brian Pangrle April 20, 2018 12:53 pm

    Today’s precedential decision of the Fed Cir: “we conclude that Alice . . . did not alter the governing law of § 101. . . . We therefore hold that Alice did not alter the governing law under § 101.” Mayo is March 2012, did it alter the governing law? Seems like Mayo relies heavily on Diehr (1981) / Flook (1978). What did change? As Ternary/Night suggest, a less scientifically minded judiciary (or worse)?

  7. B April 21, 2018 7:43 pm

    To Ternary.

    Your question: “Interaction with a device on a shared network is an abstract idea?”

    Think about it. This covers the very device with which you made your post. How long have communication devices been on shared networks?

    I saw this oral argument. The appellee’s attorney did a masterful job on describing the claims as “generic” using express definitions in the patentee’s own spec, and as critical of the Alice/Mayo test as I am, imagine if your posting violated a patent with a 2004 filing date.

    Now think about this. If a patent directed to telephones using a common telephone number is claimed so broadly upon claim construction that it covers TV sets that are Netflix-capable, then maybe – just maybe – the claims are ridiculously broad.

    That said, in case you missed it, I’m about the biggest Alice/Mayo critic around.

  8. B April 21, 2018 7:49 pm

    Psssst – this isn’t to say I agree with the holding. I haven’t thoroughly researched this case in requisite detail, parsed all the claims, etc.

  9. Anon April 21, 2018 8:59 pm

    Psssst,

    Breadth and eligibility are actually distinct legal issues.

    (At least as understood by the laws as written by Congress – if you go by the laws as (re)written by the Court, all bets are off – for everything)

  10. Ternary April 21, 2018 10:49 pm

    B. Being abstract is different from being known, routine or obvious. To reject a patent claim as abstract because it is “ridiculously broad” is sloppy and lazy science.

    You may be right that the claim is “undeserving” to live on in a valid patent. But that is not the issue. if a claim involves patent eligible subject matter, it should not be declared invalid.

    You say: “This covers the very device with which you made your post.” That tells me that whatever the invention is, abstract it is not.

  11. B April 22, 2018 1:14 am

    “Breadth and eligibility are actually distinct legal issues“

    Here I respectfully disagree. Eligibility depends on preemption. Preemption and breadth are closely related. When does breadth expand before it becomes preemption?

  12. Anon April 22, 2018 8:48 am

    You may disagree all you want B, but the point of expansion is 35 USC 112 – NOT 35 USC 101.

    You are making the mistake of thinking that the Supreme Court is not wrong in how they have treated 101.

    They ARE wrong.

    Just because they are the Supreme Court, does not turn their error into a non-error.

    I’ve had this discussion with several others along a slightly different line of reasoning. That different line of reasoning centers around the ethical duties of an attorney and the relative placement of those duties between the Constitution and the Supreme Court.

    There has been only one single example of a state attorney oath (the Commonwealth of Massachusetts) that even arguably places duty to the Supreme Court above duty to the Constitution.

    ALL else is clear: we as attorneys have an ethical responsibility to NOT accept Supreme Court actions that themselves violate the Constitution.

    Separation of Powers,
    Void for Vagueness,
    heck, even exercise of subjective futuristic projections lacking a true current case or controversy (exercise of power beyond the allotted limits)

    EACH of these can be seen in the actions of the Supreme Court when it comes to 35 USC 101.

    As to your direct point of “Eligibility depends on preemption” – where is that in the words of Congress for 35 USC 101?

  13. Ternary April 22, 2018 9:10 am

    In @10 should be: If a claim involves patent eligible subject matter, it should not be declared invalid for being abstract. As B implied, it can still be obvious or anticipated.

  14. B April 22, 2018 10:37 am

    “You are making the mistake of thinking that the Supreme Court is not wrong in how they have treated 101”

    The exception to 101 has always been about preemption. What the SCOTUS changed was to expand the idea of preemption from natural phenomena to man-made things in Alice. Take my word, I disagree with it.

    My point is we have to deal with the 101 we have, not the 101 we want, and explain various holdings in view of the 101 we have.

  15. B April 22, 2018 10:51 am

    “As to your direct point of “Eligibility depends on preemption” – where is that in the words of Congress for 35 USC 101?”

    It’s common law. Been around a long time. I think the SCOTUS got a lot wrong (okay everything) in the 1970’s on 101. Alice is problematic, and Mayo is worse.

    Mayo I understand what the SCOTUS was trying to do, but the test they provided doesn’t properly address preemption except in limited circumstances. Ariosa is a good example: no preemption but still patent ineligible. Cleveland Clinic is an example of another flaw. All steps were well-understood, routine and conventional – just not for the discovery. Hughes dissent in Exergen represents another, but similar, flaw in the test.

  16. Anon April 22, 2018 11:39 am

    B,

    While we do in fact have to deal with the 101 that we have, we should never lose sight of (not fight against) the fact that what we have is not proper under the law as written by Congress.

    As I stated (the BIG THREE):
    Separation of Powers,
    Void for Vagueness,
    decisions beyond the authority of a current case or controversy (based on speculative, future mere possibilities of what MAY happen)

    – each of these legal positions – if and when properly presented may turn the law back to what Congress intended it to be – and what we SHOULD be dealing with.

    (I do not disagree with the fact that until that happens that arguments “in the alternative” need to be pursued).

    As to “ and explain various holdings in view of the 101 we have. – that’s the “internet-winning” point now isn’t it? The various holdings contradict each other and if pursued diligently and in an inte11ectually honest manner, can be shown to NOT be able to be explained cogently in any sense of single cohesive manner.

    As to “preemption” – I invite you to take a closer look at “preemption” and its actual genesis in what is today 35 USC 112 (as opposed to the mere “scrivening” of the Supreme Court as they attempted to shoehorn preemption into 101 – it really does NOT fit there!)

    As to “It’s common law. Been around a long time” – let me point out (again) that common law is NOT proper for all areas of law – especially statutory law and especially statutory law that has been expressly designated in the Constitution as belonging to only one single branch of the government.

    As I have explained previously (in great detail), prior to 1952 Congress HAD shared its authority by allotting to the Supreme Court the ability to shape the meaning of the word “invention” through common law evolution.

    That expressly changed in 1952.

    Congress removed that authority and instead of aiming for “invention” carved out of what was once a single paragraph, the MULTIPLE sections of law known as 101/102/103 – and 103 expressly was in retaliation to a Supreme Court that has become – by its own standards and admissions (the only valid patent is one that has not yet appeared before us) – too anti-patent.

    ALL of this has been written about by one of the architects and a judge with the most knowledge of what Congress did in 1952: Judge Rich.

    To this end, your reply of: ‘It’s common law” is NOT GOOD ENOUGH.

    If you continue to attempt to “justify” what the Court has done, you will continue to FAIL, because what the Court has done fails the BIG THREE item I have already listed.

    Yes, we still have to fight “what” the Court has done – but yes, that fight needs to be more than merely “oh well, common law.”

  17. B April 22, 2018 1:45 pm

    ‘To this end, your reply of: ‘It’s common law” is NOT GOOD ENOUGH.’

    Respectfully, it may not be “good,” but it is enough. Common law exceptions to patent eligibility have been around forever, and the 1952 patent act didn’t remove them.

    Consider this claim:

    A method, comprising:
    E=mc^2; and
    apply it.

    Patent eligible? No
    ——————-
    Now consider this claim

    A method, comprising:
    E=mc^2; and
    apply it to a mass of fissionable material.

    Patent eligible? Still no
    —————-
    Now consider

    A method, comprising:
    E=mc^2; and
    apply it to a mass of refined fissionable material.

    Patent eligible?

    —————
    Now consider:

    A method, comprising:
    gathering and refining an ore to produce a mass m of refined fissionable material;
    apply E=mc^2 to the mass of refined fissionable material to produce energy E, wherein a portion of energy E is heat; and
    using the heat.

    Patent eligible? Under Mayo no; under machine or transformation test yes.

    ————-

    Now consider a situation where man discovers the ONLY possible means to exploit zero-point energy using a four-step process, and the means is claimed in great detail. However, despite the detailed claim there is no other way to theoretically exploit zero-point energy, and therefore the claim 100% preempts using the natural phenomena.

    Patent eligible? Under Mayo, no.

    ————————

    Now take the same circumstance as immediately above, but the four-step process is long-known and widely-used for detecting cosmic rays, and the claim merely preempts the only commercially-viable way to exploit zero-point energy.

    Patent eligible? Maybe; maybe not. See Cleveland Climic versus Exergen.

    My point: the machine or transformation test is inadequate, and the Alice/Mayo test is flawed. The “step two” should be more directly focused on preemption rather than formalities that are, at best, sometimes loosely associately with preemption.

  18. Anon April 22, 2018 4:21 pm

    Your last paragraph rather emphasize my points: ALL of the “common law” answers run into a Gordian Knot of not being cogently cohesive.

    The Courts have made a muck of this – and there is but one way out: cut the Gordian Know and remove the Court from the non-original jurisdiction of patent appeals through the Constitutional power allocated to Congress to employ jurisdiction striping.

    You want to muddle through this? Then you have to face the reality that that what you are muddling through is self-contradictory.

  19. B April 22, 2018 8:05 pm

    ‘Your last paragraph rather emphasize my points: ALL of the “common law” answers run into a Gordian Knot of not being cogently cohesive . . . . The Courts have made a muck of this . . . ”

    Hahahaha – hard to argue with that. Look what happens when you divorce the exceptions to 101 from preemption; capriciously don’t address the claims as a whole in half the CAFC cases; and make patent-eligibility a factual-based issue while relying on a judge’s gut feelings to make the relevant factual determinations.

    Look, we pretty much agree on the state of the law, but we differ on the solution. I’m not counting on the SCOTUS to say “Whooops, we screwed up.”

    If congress gets to the issue in the next five years, I’ll be shocked.

    The most we can do is to put pressure on the CAFC to act sanely. I propose that, if the CAFC fails to get their act together in the next six months, that the community of responsible patent attorneys send at least 20% of the near 14,000 101 rejections from the PTAB to the CAFC, which will create an additional 3-year backlog. Let the CAFC reap the chaos they caused.

  20. Anon April 22, 2018 9:24 pm

    B,

    We do agree more than we disagree (leastwise, about the state and perhaps how the state has come to pass).

    But the way forward, well perhaps the more and varied methods of attack the better!

    Personally, I think that the CAFC has been so shell shocked as to be useless.
    Especially after I had the good fortune of talking with a person with long experience in front of the CFAC and received a rather candid portrayal of just how messed up that body is.

    I cannot see the CAFC acting sanely – much less in ANY WAY respecting one panel decision to the next (we have already seen massive ping-pong effects that in NO POSSIBLE WAY can ever be reconciled.

    As to any form of “reaping,” are you forgetting the new “tool” of R36 that the CAFC as been using? They are not about to let anyone bury them in that manner.

    Sorry B, but the only answer I see is one that attacks at the highest level and with legal arguments that are not afraid to “pay attention to the man behind the curtain” (in the Wizard of Oz sense).

    Of course, my desired path is through Congress – but sadly I must agree with you that THAT group is so dysfunctional and fractured (as well as captured by the “voices” of juristic persons), that I would be genuinely surprised if Congress took my ideas and acted upon them to restore what once was the world’s Gold Standard in patent protection.

  21. B April 22, 2018 10:47 pm

    ‘As to any form of “reaping,” are you forgetting the new “tool” of R36 that the CAFC as been using? They are not about to let anyone bury them in that manner.’

    Even with Rule 36, the CAFC is still obligated to listen to oral arguments and prepare for oral hearing. This is their bottleneck. As 99% of these idiot 101 rejections by the PTAB lack substantial evidence and are just beyond pathetic, Rule 36 is unlikely. Thus, even if the CAFC goes postal on these PTAB 101 appeals, they aren’t hearing all the other things needing appellate review.

    It will look extremely bad, and raise external pressures on the courts.

    FYI, the CAFC has not yet determined if they will rehear Berkheimer. If they do, they’ll either affirm that evidence is a good thing, or in the alternative provide the circumstances necessary for cert. b/f the SCOTUS.

    I’d rather the former, but if the case goes to the SCOTUS, I’ll file an amicus.

  22. Anon April 23, 2018 2:00 am

    Do not count on Rule 36 being applied in a thoughtful manner.

    “unlikely” is NOT a bet that I would accept.

    (as I mentioned, I have had a discussion with someone intimately familiar with the CAFC, and his view is that the madness there has NO end in sight)

    I have no reason to doubt this.

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