“In the present case as well as many others, the Federal Circuit ‘has begun applying its own brand of Section 101 jurisprudence,’ consequently invalidating both preemptive and non-preemptive patents alike.”
Consumer 2.0, Inc. d/b/a Rently has filed a petition with the U.S. Supreme Court asking it to review a U.S. Court of Appeals for the Federal Circuit decision holding its patent claims ineligible for patent protection under 35 U.S.C. § 101. The claims are directed to “the use of lockboxes able to recognize time-limited codes and coordination of those codes with software to facilitate secure automated entry.” Rently’s petition was filed just as the High Court kicked off its new term by denying certiorari yesterday in Chamberlain v. Techtronic, which also sought review of a Section 101 eligibility decision.
In April of this year, Rently, a small California-based property management technology company, filed a combined petition for panel rehearing and rehearing en banc asking the Federal Circuit to review its Rule 36 judgment affirming the United States District Court for the Eastern District of Virginia’s ruling that Rently’s patent claims were ineligible. That petition dubbed “Section 101 and its interpretation by the Courts over the last six years” as “the most turbulent and impactful legal development in patent law in modern history.”
In its Supreme Court petition, Rently further argues that, while Alice v. CLS Bank “provided a welcome clarification to the law of Section 101” and overall “has been effective in stemming the flood of patents directed to nothing more than age-old ideas applied on a computer,” the unfortunate way in which it has been misapplied by lower courts has led to the invalidation of patents on “real innovation”, hurting small inventors and startups the most.
The invention at issue in the Rently case is covered by U.S. Patent No. 9,875,590 (the ‘590 patent), which is titled Automated Entry and claims a method employing a combination of hardware and software for secure, automated entry of real property. The district court applied the two-step framework as set forth by the Supreme Court in Mayo Collaborative Services v. Prometheus Laboratories. Inc. 566 U.S. 66 (2012) and Alice Corp. Pty. v. CLS Bank Int’l. 134 S. Ct. 2347 (2014). In assessing whether the asserted claims of the ‘590 patent describe a patent-ineligible concept in accordance with the first step of the framework, the district court found that the claims were directed to an abstract idea since the “claims use generic computing devices and techniques to provide automated entry to a property without human interaction.”
The court further held at step two that the claims included pre-existing and generic components “arranged in a conventional manner to execute the undoubtedly conventional functions of identity verification, time-sensitive code-generation, remote automated access, information collection and display, and the use of database tables.”
For its part, Rently argued that the court erroneously determined that the asserted claims of the ‘590 patent recited a generic lock box, rather than a “technology-enabled” lock box capable of recognizing “automated entry information.” The claim 7 limitation “upon the visitor providing the code information to the lock box or automated door lock within the specified period of time, the lock box or automated door lock opening to facilitate automated entry to the property” was sufficient to establish that the lock box was “technology-enabled,” Rently said.
Honing the Arguments
In an attempt to distinguish itself from the slew of recent Section 101 petitioners who have been summarily denied cert, Rently asserts in its SCOTUS petition that its plea is different:
Unlike other petitioners who have come before it, Petitioner here does not seek a complete overhaul or revocation of this Court’s decision in Alice. Rather, Petitioner believes this Court was on the right track with Alice, but that more guidance is required in order to reign in the lower courts’ misapplication of the rule so legitimate inventions are not mistakenly invalidated. This Court made clear in Alice that preemption is the “concern that drives [the] exclusionary principal,” and that patents that “pose no comparable risk of pre-emption . . . remain eligible” for patenting.
The petition presents two key questions:
1) Whether preemption is a threshold and defining consideration that the lower courts must consider in determining whether a claimed invention is directed to patent eligible subject matter under Section 101, and
2) Whether the courts below have erred in conflating the Step Two conventionality analysis of Alice with the factual prior art patentability analysis of Section 103, without the evidentiary opportunities and protections against hindsight bias afforded by Section 103 and in conflict with this Court’s precedent in Graham v. John Deere Co. of Kansas City, 383 U.S. 1 (1966).
Rently argues that the Federal Circuit’s refusal to address the issue of preemption has become an overarching problem. In the present case as well as many others, the Federal Circuit “has begun applying its own brand of Section 101 jurisprudence,” consequently invalidating both preemptive and non-preemptive patents alike. “Where there is no risk of broad preemption of an underlying idea, courts must follow this Court’s guidance and find the claims eligible for patent protection,” explains the petition. “The analysis can then proceed under Sections 102, 103, and 112, which is where Congress intended patentability to be assessed.”
Beginning with Ariosa Diagnostics, Inc. v. Sequenom, Inc. the Federal Circuit has increasingly dismissed the preemption analysis, says the petition. In that case, the Court noted that “questions on preemption are inherent in and resolved by the § 101 analysis.” This amounts to “circular logic” that has ignited the current chaos around 101. The petition traces the evolution of the Court’s erroneous approach to preemption, which conflicts with the U.S. Patent and Trademark Office’s (USPTO’s) approach since Alice. Unlike the Federal Circuit, the USPTO has updated its guidance appropriately, recognizing “that the focus on preemption underlies the entirety of the Section 101 analysis, and that patent claims which may appear to involve an abstract idea are nonetheless eligible when the practical application of those claims would not preempt the entire idea.”
Save Small Business
As to the second question, the petition contends that Step Two of the Alice analysis can only be resolved as a matter of law in clear-cut cases of patent ineligibility, such as in Bilski and Alice. “If…it becomes necessary for a court to delve deeper into the factual underpinnings of the prior art to determine how common a particular piece of technology or method was, or whether each individual element was known and to what degree, the patent should survive the eligibility test and instead be analyzed under the separate patentability requirements,” explains the petition. This issue was not addressed in either Bilski or Alice, the Federal Circuit has since improperly conflated Sections 101 and 103, and the CAFC’s practice of ignoring the preemption analysis and/or conflating eligibility and patentability particularly harms small businesses, adds the petition.
Citing research by Mark Lemley and Samantha Zyontz, and an IPWatchdog report on Judge Paul Michel’s remarks to Patent Masters attendees, the petition notes that “every time a legitimate invention is mistakenly invalidated under Section 101, it is more likely the Rentlys of the country that are harmed.”
The petition concludes: “When the patent system fails and legitimate rights are revoked, it fails the small businesses that need the system the most, to the benefit of large corporations.”
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