Federal Circuit Report

• Citation: Vol. 41 No. 4
• Publication year: 2016
• Author: REX HWANG Glaser Weil Fink Howard Avchen & Shapiro LLP

Federal Circuit Report

REX HWANG Glaser Weil Fink Howard Avchen & Shapiro LLP

NICK HUSKINS Glaser Weil Fink Howard Avchen & Shapiro LLP

The Supreme Court's landmark decision in Alice Corp v. CLS Bank,¹ issued June 2014, fundamentally altered the practice of patent law. And as most practitioners are aware, software patents have been attacked and invalidated at unprecedented rates under 35 U.S.C. § 101 ever since. Indeed, many practitioners have questioned whether all software patents are vulnerable to invalidation, given the lack of guidance afforded judges tasked with deciding Section 101 challenges.

However, a trio of recent Federal Circuit decisions - Enfish v. Microsoft,² Bascom v. ATT,³ and McRO v. Bandai⁴ - may signal a turning point. The Federal Circuit, through these decisions, appears to have incrementally broadened the scope of eligibility for software patents, while also providing courts with much-needed guidance in applying Alice's two-step eligibility test.

THE POST-ALICE LANDSCAPE

In Alice, the Supreme Court set forth a two-part test for determining patent eligibility: (1) whether the claims are directed to a patent-ineligible concept; and (2) whether the claim elements transform the nature of the claim into a patent-eligible application.⁵ Alice, however, provides courts with little guidance as to how to apply the two-step test.

In the absence of specific guidance from the high court, district courts have generally concluded that software-related claims are inherently directed to a patent-ineligible concept. Thus, courts treated the first part of the Alice test as innately affirmative, and quickly moved onto the second part of the Alice test to determine patent eligibility. And while the second Alice step was more closely scrutinized by courts than the first step, software patents did not fare much better at the second stage of the analysis. In fact, in the year following Alice, lower court decisions citing Alice reportedly invalidated software patents at a rate of 82.9%.⁶

Against this backdrop, it took the Federal Circuit approximately two years after Alice to overturn a single invalidity ruling under Section 101, as it did in Enfish v. Microsoft.

ENFISH V. MICROSOFT

In Enfish v. Microsoft, Enfish sued Microsoft alleging infringement of U.S. Patent Nos. 6,151,604 and 6,163,775 (the "Enfish patents"). The Enfish patents are generally directed to a logical model for a computer database. A logical model is a model of data for a computer database explaining how the various elements of information are related to one another.

Specifically, Enfish's claimed invention covers a logical model that utilizes a table where the rows correspond to records and the columns contain attributes of the records. This table-based model is described as "self-referential" because all data entities (i.e., types of things being modeled) are maintained in a single table, and the attributes in a particular column may be defined by reference to a record in another row in the same table. This is distinguishable from conventional "relational" models, which maintain data entities in separate tables. According to the Enfish patents, the logical model invention results in more efficient storage, increased data search speeds, and more flexibility in configuring the database.

[Page 28]

During litigation, Microsoft moved for summary judgment, arguing that Enfish's patents were invalid under Section 101 as being directed to an unpatentable abstract idea.

Applying Alice's two-step framework, the district court first found the claimed invention to be directed to the abstract concept of "storing, organizing, and retrieving memory in a logical table," or more simply, "the concept of organizing information using tabular formats."⁷ The court then concluded that the asserted claims contained no limitations sufficient to amount to an inventive concept because they merely recited conventional elements that were insufficient to "cabin the claims' scope."⁸ Accordingly, the district court granted Microsoft's summary judgment motion, and invalidated the asserted claims under Section 101.⁹

On appeal, the Federal Circuit criticized the district court's approach to step one of the Alice test, opining that generalizing claims "at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to Section 101 swallow the rule."¹⁰ Thus, contrary to the approach taken by the lower court, the Federal Circuit carefully analyzed the relevant claims and found that they were not directed to just any form of storing tabular data, but specifically directed to a self-referential table for a computer database.¹¹ To support this determination, the Federal Circuit explicitly considered the patent specifications, which highlighted the functional, technological improvements Enfish's self-referential table offered as compared to conventional, pre-existing database structures. In the end, the Federal Circuit held that Enfish's claimed invention was patent-eligible, ending its analysis at step one of the Alice test.¹²

The Federal Circuit's analysis in Enfish is significant because until then, courts were effectively skipping the first step of the Alice test in software patent cases, thereby treating software inventions as being intrinsically directed to an abstract idea. But in Enfish, the Federal Circuit explicitly rejected such an approach, stating "[w]e do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two."¹³ The Court further opined, "[n]or do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis."¹⁴ Consequently, with Enfish, the Federal Circuit gave teeth to the first step of the Alice test - forcing a substantive inquiry and rejecting the trend of regarding software patents as covering per se abstract ideas.

The Enfish decision is also significant insofar as the Federal Circuit instructed courts to closely analyze the specific claim language, and avoid broad, sweeping generalizations of a patent's claims.

Finally, the Federal Circuit's consideration of the patent specification in determining whether the claimed invention is directed to an abstract idea could prove to be significant for patent litigators moving forward. Enfish suggests that drafting a patent's specification in a manner that thoroughly demonstrates the invention's claimed benefits and improvements over prior art will help preserve the patent's validity if asserted in litigation.

BASCOM V. AT&T

Less than two months after deciding Enfish, the Federal Circuit decided Bascom v. AT&T, which focused on the second "inventive concept" prong of the Alice test.

In Bascom, Bascom sued AT&T alleging infringement of U.S. Patent No. 5,987,606 ("Bascom patent"). The Bascom patent is...