Patented Philosophy

Patented Philosophy

The question of what counts as patentable subject matter seems to be at the forefront of courts’ minds. A few weeks ago, Matt Levy offered a mini-quiz to see if you could figure out which claims—that may or may not involve a computer—were patentable under § 101, according the various panels at the Federal Circuit. Not to give away the punchline, but the answer was inconceivable. (Check out Matt’s post to get the details!)

Just last week, Antigone Peyton told you about the Supreme Court’s recent decision in Mayo Labs v. Prometheus Labs, Inc., in which the Court concluded that patent claims that disclosed diagnostic tests used to determine correct drug dosage levels weren’t patentable under 35 U.S.C. § 101. As Antigone’s post explains, the Court acknowledged that § 101 jurisprudence requires a tricky balancing act between not allowing patents that merely cover laws of nature and mathematics, and restricting patent protection by interpreting § 101’s requirements too narrowly.

This month, the Federal Circuit tackled the “What’s patentable?” question in two more cases. It continues to be a hot topic, and judges on the court don’t all agree on the best approach.

Is Selling Your Couch on Craigslist Patent Infringement?

MySpace, Inc. v. GraphOn Corp., No. 2011-1149 (Federal Circuit Mar. 2, 2012) (Judges Newman, Mayer, and Plager)

This case is a declaratory judgment action against GraphOn. MySpace and its fellow plaintiffs, Fox Audience Network, Inc. and craigslist, inc., asserted that GraphOn’s patents, which cover a method and apparatus that allow users to create, modify, and search for a database record using a computer network, are invalid because they are anticipated and obvious.

The majority construed the key claim term, “database.” GraphOn’s patents cover a relational database system (one that can synchronize data in multiple tables based on search queries). It argued that the prior art patents cover only hierarchical databases (those like the folder organization system on your computer), so its patents aren’t anticipated or obvious. The court stated that “database” in GraphOn’s patent claims covers both types of database structures, so it agreed with the district court’s ruling that GraphOn’s patents are invalid under a combination of §§ 102 and 103.

Plato versus Aristotle

But that’s not the meat of the case. The rest of the majority’s opinion and the dissent examine whether the case should be decided using § 101. The majority (Judges Newman and Plager) said no, but Judge Mayer, in dissent, said yes. This discussion reads more like a law review article than a typical opinion, and it hones in on an apparently fundamental divide at the court: do we have to ask the Platonic question—“What is a patent?”—in every case before we consider the Aristotelian question—“Is this a patent?”

For Judge Mayer, § 101 presents a threshold question, like standing, that has to be decided before the case can proceed any further. If a claimed invention is so broad and so universal that it’s a fundamental principle or basic concept, then it’s not patentable. In the dissent’s view, § 101 boundaries need to be defined and policed: “A robust application of section 101 is required to ensure that the patent laws comport with their constitutionally-defined objective.” (See page 13 of Judge Mayer’s dissent.) Judge Mayer also implies that § 101 should be used to weed out certain categories of patents—namely business method patents. Software patents, like GraphOn’s, are also suspect in his view: “Given the ubiquity of computers in contemporary life, allowing a process to become patentable simply because it is computer-implemented or invokes the use of the Internet would render the subject-matter eligibility criteria contained in section 101 virtually meaningless.” (See page 8 of Judge Mayer’s dissent.)

For Judges Newman and Plager, other sections of the Patent Act, primarily §§ 102, 103, and 112, perform the function of “weeding out” invalid patents much more cleanly and efficiently than § 101. As the majority puts it:

The problem with addressing § 101 initially every time it is presented as a defense is that the answer in each case requires the search for universal truth: in the broad sweep of innovative technologies, does this invention fall outside the breadth of human endeavor that possibly can be patented under § 101?

The majority describes § 101 jurisprudence as “a murky morass.” It analogizes these cases to those involving the Bill of Rights and proposes following the Supreme Court’s approach to constitutional questions—don’t decide cases on broad grounds when they can be decided on narrower, statutorily-based grounds.

The Supreme Court’s Prometheus decision might have resolved this debate in the dissent’s favor. The Court rejected the Government’s argument (submitted in an amicus brief) that initial questions of patent eligibility can be bypassed if other sections could invalidate the patent. Although the Court conceded that the sections might sometimes overlap, it warned that relying too heavily on sections 102, 103, and 112 might “assum[e] that those sections can do work that they are not equipped to do.” (See page 21 of the Prometheus opinion.)

The other interesting take away from MySpace is that both the majority and the dissent reached the same invalidity conclusion through different jurisprudential paths, but they justified those paths based on GraphOn’s patent claims. The majority’s claim construction made it relatively easy to invalidate the claims on §§ 102 and 103 grounds. And the dissent characterized the scope of GraphOn’s claims as “staggering,” commenting that they “cut across vast swaths of the Internet.” The breadth of the patents’ scope allowed Judge Mayer to conclude, “[T]hey fall outside the ambit of section 101 because they are too useful and too widely applied to possibly form the basis of any patentable invention.” (See page 4 of Judge Mayer’s dissent.) So these particular claims are well suited for a § 101 analysis. GraphOn’s claims had problems in multiple statutory arenas. Other patent claims, though, might present more difficult questions.

This case showcases the two sides of this issue and highlights the Federal Circuit’s split on how to handle § 101 cases, particularly when it comes to business method and software patents. It will be interesting to see if the court attempts to resolve the debate en banc in the near future, particularly on the heels of Prometheus.

Jackson Pollock’s Patents

Fort Properties, Inc. v. American Master Lease LLC, No. 2009-1242 (Fed. Cir. Feb. 27, 2012) (Judges Prost, Schall, and Moore)

Here’s another case for Matt’s software patent quiz, and it continues to explore unpatentable abstract ideas.

The patent in question covers a method to help real estate owners more easily obtain a “like kind exchange” tax benefit. The like kind exchange lets property owners essentially swap similar properties for business uses without incurring a taxable gain or loss. American Master Lease’s (AML) patent includes 41 method claims for combining several pieces of real estate into a “real estate portfolio,” dividing the property into “deedshares,” and using various contract provisions to facilitate the swapping process. There are two main categories of claims: those that don’t require a computer (claims 1-31), and those that do (claims 32-41).

The district court invalidated all 41 claims as unpatentable under § 101. The district court only applied the “machine-or-transformation” test, which was still the prevailing law in 2009 when it decided this case. The district court said that these method claims didn’t “transform any article to a different state or thing,” so they weren’t a patent-protectable process.

The Federal Circuit agreed, concluding that even under Bilski’s “machine-or-transformation-plus” test, these claims didn’t meet the baseline requirements of § 101. The court first examined the non-computer claims. Analogizing to the risk-hedging claims that Bilski invalidated, the court determined that “a real estate investment tool designed to enable tax-free exchanges of property” was just an abstract idea. AML argued that the idea is patentable because deeds and contracts, tie it to the physical world, and, since they reflect real property that must be publicly recorded, the legal documents pull the invention from an abstract “Jackson Pollock” patent into a patentable “Rembrandt.” The court didn’t accept that notion, though, and said that the deeds and contracts didn’t transform the abstract idea into a protectable process, so claims 1-31 are invalid under § 101.

The computer-assisted claims fared no better. Claims 32-41 contained a limitation requiring a computer to “generate a plurality of deedshares.” The court cited its Cybersource and Dealertrack opinions, which explained that adding a computer to an otherwise unpatentable abstract idea doesn’t automatically convert it into a patentable one. The court distinguished Ultramercial because that case required “an extensive computer interface,” but AML’s claims don’t really incorporate a computer meaningfully or extensively.

Do you think the plethora of section 101 decisions is providing guidance or muddying the waters? We’d love to hear your thoughts!

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