Patent Lawyer Blog

Defendant American Master Lease LLC ("AML") appealed the decision of Judge Guilford of the Central District of California holding that all claims of U.S. Patent No. 6, 292,788 were invalid for failing to meet the subject matter eligibility requirements of Section 101 of the Patent Statute. The Federal Circuit (in a panel consisting of Circuit Judges Prost, Schall and Moore) affirmed the invalidity of the claims based on the district court's pre-In re Bilski application of the machine or transformation test.

The claims at issue relate to an investment tool to enable property owners to buy and sell property without incurring tax liability pursuant to 26 U.S.C. § 1031 ("1031 Exchange"). All claims in the '788 patent are method claims, with claim 1 being representative:

1. A method of creating a real estate investment instrument adapted for performing tax-deferred exchanges comprising:

aggregating real property to form a real estate portfolio;

encumbering the property in the real estate portfolio with a master agreement; and

creating a plurality of deedshares by dividing title in the real estate portfolio into a plurality of tenant-in-common deeds of at least one predetermined denomination, each of the plurality of deedshares subject to a provision in the master agreement for reaggregating the plurality of tenant-in-common deeds after a specified interval.

Plaintiff, Innova Patent Licensing, LLC ("Innova") filed a patent infringement action against Alcatel-Lucent Holdings ("Alcatel") for a patent claiming methods for using a mail processing program to scan electronic messages to obtain additional information. Alcatel challenged the patent on the ground that it did not claim eligible subject matter under 35 U.S.C. § 101 and moved to dismiss.

The court stated that "[u]nder the patent laws, certain broad categories of subject matter are eligible for patent protection," and cited the language from Section 101 (" Whoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or a new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title") and the United States Supreme Court's decision in Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010) ("in choosing such expansive terms modified by the comprehensive 'any,' Congress plainly contemplated that the patent laws would be given wide scope").

It is now a little more than a year since the Supreme Court decided Bilksi v. Kappos; however, understanding what subject matter falls outside Section 101 remains elusive. The Federal Circuit's decision in Ultamercial, LLC v. Hulu, LLC, emphasizes that Section 101 is to be interpreted broadly. Case No. 2010-1544 (Fed. Cir. September 15, 2011) (before Rader, Chief Judge, Lourie and O'Malley, Circuit Judges) (opinion by Chief Judge Rader). Indeed, in stating "as § 101 itself expresses, subject matter eligibility is merely a threshold check; claim patentability ultimately depends on 'the conditions and requirements of this title,' such as novelty, nonobviousness, and adequate disclosure", it appears that the Federal Circuit may be diminishing - at least in litigation - the significance of Section 101 as a requirement to patentability. Opinion at 6. Many in the patent bar thought Bilski might signal the death of business method patents, but perhaps, as with Mark Twain, the reports of its death were greatly exaggerated.

Ultramercial's U.S. Patent No. 7,346,545 (the "'545 patent") "claims a method for distributing copyrighted products (e.g., songs, movies, books) over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content." Opinion at 2. Claim 1 of the '545 patent consists of the following steps:

In a patent dispute over a method for detecting fetal Down syndrome, the United States District Court for the District of Massachusetts invalidated the patent owner's patent because it was anticipated and obvious. The patent at issue describes screening methods to determine Down syndrome in which physicians estimate the risk of Down syndrome using markers from both the first and second trimesters of a pregnancy. The patent teaches determining the risk for fetal Down syndrome by combining markers from both stages of pregnancy into a single assessment of risk.

According to the district court opinion, after the patent was filed tests that integrate first and second-trimester data into a single calculation of risk were considered to have a higher detection rate than any test that used the data from only one of the trimesters. The testing disclosed by the patent is widely adopted and is licensed to a number of entities with thousands of assessments conducted under theses licenses each year.

Plaintiff's complaint alleged a single count for patent infringement, which asserted that the defendant infringes its patent through the use of an online dating website. The particular feature accused is called "QuickMatch," which notifies two users who demonstrate mutual interest in each other. The patent is directed to a computerized method of notifying individuals of reciprocal interest that offers confidentiality and anonymity. The method described in the patent provides for confidentiality by allowing only the computer system to be aware of each user's expressed interests until the computer determines that there is mutual interest.

The defendant moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. The defendant based its argument on the United States Supreme Court's recent decision in Bilski v. Kappos, 130 S.Ct. 3218 (2010). The defendant argued that the subject matter of the patent is an abstract idea not eligible for patent protection, asserting that the invention is the idea of having an intermediary determine whether two people (or other entities) may be interested in one another and, if so, introducing the two. Defendant also argued that the patent preempts a broad range of human activity including match-making, headhunting and silent auctions.

In a recent decision from the United States District Court for the District of Delaware, the district court considered defendant's motion for summary judgment of invalidity. The plaintiff's patent is directed to a computer program for developing a component based software for the insurance industry. The patent contained both method and system claims.

Defendant's moved for summary judgment on the grounds that the patent was invalid under Bilski v. Kappos, 130 S. Ct. 3218 (2010), contending "that the claims of the [patents] contain abstract ideas and fail the machine or transformation test." Defendant contended that the plaintiff's patents failed the "machine" prong of the Bilski test because the claims only require aspects of a general purpose computer. In addition, the defendant contended that the transformation test also could not be met because the transfer of data regarding insurance cases from one electronic file to another does not transform physical objects to another state or thing. According to the defendant, all of the claims reflect field of use restrictions or insignificant post-solution activity and, therefore, constitute unpatentable abstract ideas under § 101.