Update on Patent- Eligible Subject Matter in U.S. Patent Law SUGHRUE MION PLLC

Overview of §101 35 U.S.C. §101 Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title. Except: Laws of Nature, Natural Phenomena, & Abstract Ideas Policy Rationale: Avoid Pre-emption Preempt use of the basic tools of science & technology in all fields Impede rather than promote innovation Goes against the primary object of patent law

Post-Alice Federal Circuit Decisions Patent Eligible Subject Matter DDR Holdings v. Hotels.com (Dec. 2014) Enfish v. Microsoft (May 2016), Bascom v. AT&T Mobility (June 2016) McRO, Inc. v. Bandai (Sept. 2016) Amdocs v. Openet Telecom (Nov. 2016) Trading Techs. v. CQG (Jan. 2017) Thales Visionix Inc. v. U.S. (Mar. 2017) Visual Memory LLC v. Nvidia Corp. (Aug. 2017)

Trading Techs. Int'l, Inc. v. CQG, Inc. Case No. 2016-1616 (Fed. Cir Trading Techs. Int'l, Inc. v. CQG, Inc. Case No. 2016-1616 (Fed. Cir. 2017) Non-precedential Decided: January 18, 2017 Trading Techs charged CQG with infringement of U.S. Patents No. 6,772,132 and No. 6,766,304, and the district court denied CGQ's motion for judgment as a matter of law, holding that the claims are not directed to an abstract idea and also that they recite an inventive concept, such that the subject mater is patent-eligible under § 101. CQG appealed this holding.

Trading Techs - Invention ● User interface for electronic trading of stock, bonds, futures, options and similar products. ● Problem: “[W]hen a trader attempts to enter an order at a particular price, but misses the price because the market moved before the order was entered and executed. It also sometimes occurred that trades were executed at different prices than intended, due to rapid market movement.“ ● Solution: “[B]id and asked prices are displayed dynamically along the static display, and the system pairs orders with the static display of prices and prevents order entry at a changed price.”

Trading Techs – Claim 1 1. A method for displaying market information relating to and facilitating trading of a commodity being traded in an electronic exchange having an inside market with a highest bid price and a lowest ask price on a graphical user interface, the method comprising; dynamically displaying a first indicator in one of a plurality of locations in a bid display region, each location in the bid display region corresponding to a price level along a common static price axis… dynamically displaying a second indicator in one of a plurality of locations in an ask display region, each location in the ask display region corresponding to the price level along the common static price axis… in response to a selection of a particular location of the order entry region by a single action of a user input device, setting a plurality of parameters for a trade order relating to the commodity and sending the trade order to the electronic exchange.

Trading Techs – § 101 Discussion Step 1: Not Abstract Idea – The district court held that the challenged patents “solve problems of prior graphical user interface devices . . . in the context of computerized trading[] relating to speed, accuracy and usability.“ The CAFC affirmed, stating that “[t]he district court explained that the challenged patents do not simply claim displaying information on a graphical user interface. The claims require a specific, structured graphical user interface paired with a prescribed functionality directly related to the graphical user interface's structure that is addressed to and resolves a specifically identified problem in the prior state of the art.“

Trading Techs – § 101 Discussion Step 2: Inventive Step – “The [district] court identified the static price index as an inventive concept that allows traders to more efficiently and accurately place trades using this electronic trading system. The court distinguished this system from the routine or conventional use of computers or the Internet, and concluded that the specific structure and concordant functionality of the graphical user interface are removed from abstract ideas...“ “The district court's rulings are in accord with precedent. Precedent has recognized that specific technologic modifications to solve a problem or improve the functioning of a known system generally produce patent-eligible subject matter.”

Thales Visionix Inc. v. U.S. Case No. 2015-5150 (Fed. Cir. 2017) Decided March 8, 2017 Thales appeals from the U.S. Court of Federal Claims judgement that claims 1-5, 11-13, 20, 22-26, 32-34 and 41 of U.S. Patent No. 6,474,159 are directed to ineligible subject matter.

Thales – Claim 1 1. A system for tracking the motion of an object relative to a moving reference frame, comprising: a first inertial sensor mounted on the tracked object; a second inertial sensor mounted on the moving reference frame; and an element adapted to receive signals from said first and second inertial sensors and configured to determine an orientation of the object relative to the moving reference frame based on the signals received from the first and second inertial sensors.

Thales – Invention Problem: “[C]onventional solutions for tracking inertial motion of an object on a moving platform were flawed because both object- and platform-based inertial sensors measured motion relative to earth, and the error-correcting sensors on the tracked object measured position relative to the moving platform.“ Solution: “[U]se inertial sensors in a non-conventional manner to reduce errors in measuring the relative position and orientation of a moving object on a moving reference frame.”

Thales – § 101 Discussion Step 1: Not Abstract Idea – “These claims are not merely directed to the abstract idea of using “mathematical equations for determining the relative position of a moving object to a moving reference frame ... Rather, the claims are directed to systems and methods that use inertial sensors in a non-conventional manner to reduce errors in measuring the relative position and orientation of a moving object on a moving reference frame.“ The Court leaned heavily on Diamond v. Diehr as controlling precedent.  In that case, the Supreme Court found claims to meet the requirements of § 101 despite inclusion of a mathematical formula because it described a process that produces “a synthetic rubber product that has been perfectly cured—a result heretofore unknown in the art,“ which is an improved technological process.

Thales – § 101 Discussion Step 2: The Court did not proceed to Step 2 because the claims are not directed to an abstract idea.

Visual Memory LLC v. Nvidia Corp. Case No. 2016-2254 (Fed. Cir. 2017) Decided August 15, 2017 Visual Memory sued NVIDIA for infringement of U.S. Patent No. 5,953,740 and the district court granted NVIDIA's motion to dismiss because the claims were directed to the “abstract idea of categorical data storage,“ which humans have practiced for many years. The district court applied step-two analysis and found no inventive concept because the claimed computer components-a main memory, cache, bus, and processor-were generic and conventional.

Visual Memory - Invention ● An important feature of '740 Patent is that the functionality of the various caches may be varied depending upon the host processor type. For example, for a system employing a 386 or 386sx system processor, internal cache 16 holds only code data, whereas for a system employing a 486 processor, internal cache 16 holds both code and non-code data. ● By selectively defining functions of caches based on the processor type, the claimed system can “achieve or exceed the performance of a system utilizing a cache many times larger than the cumulative size of the subject caches.“

Visual Memory – Claim 1 1. A computer memory system connectable to a processor and having one or more programmable operational characteristics, said characteristics being defined through configuration by said computer based on the type of said processor, wherein said system is connectable to said processor by a bus, said system comprising: a main memory connected to said bus; and a cache connected to said bus; wherein a programmable operational characteristic of said system determines a type of data stored by said cache.

Visual Memory – § 101 Discussion Step 1: Not Abstract Idea – “Our review of the '740 patent claims demonstrates that they are directed to an improved computer memory system, not to the abstract idea of categorical data storage … As with Enfish's self-referential table and the motion tracking system in Thales, the claims here are directed to a technological improvement: an enhanced computer memory system.“ The Court looked at how the specification explains multiple benefits that flow from the '740 patent's improved memory system, as opposed to the problems in the related art, that is, “the need to design a separate memory system for each type of processor, which proved to be costly and inefficient.“

Visual Memory – § 101 Discussion Step 1: Not Abstract Idea – The Court also differentiated claim 1 of '740 patent from those of Content Extraction & Transmission LLC v. Wells Fargo Bank and In re TLI Communications LLC Patent Litigation.  These two cases, in the Court's view, involved claims that were not directed to an improvement in computer functionality, whereas the '740 patent claims recite “an allegedly new, improved, and more efficient memory system.“ Step 2: The Court did not proceed to Step 2 because the claims are not directed to an abstract idea.

Visual Memory – Judge Hughes' Dissent The claimed programmable operational characteristic is “nothing more than a black box,“ that “the patent lacks any details about how [the invention's purpose] is achieved.“ In § 101 analysis, the breadth of the claims is critical, and lack of specificity which may also involve a § 112 enablement issue does not preclude its relevance to the § 101 analysis.

Visual Memory – Majority's Disagreement The majority disagreed with the dissent in three ways.  First, the majority relied on the fact that '740 patent includes a microfiche appendix containing computer code as providing a significant amount of technical specificity.  Second, the majority took position that a lack of specificity falls under § 112 rather than § 101.  Third, the majority asserted that the innovative concept of '740 patent lies in the creation of “a memory system which is efficiently operable with different types of host processors,“ rather than the programming required to implement it.

Practice Tips Important to describe, in the specification, a technical problem and a technical solution to show that the claim is not directed merely to an abstract idea. That is, describe a technical solution in the specification and describe how the problem is solved. Describe in the specification some real world effect(s) of the invention. Describe in the specification how the invention improves computer technology, e.g., makes the computer run faster, more efficiently, use less memory, etc., or some other technology, e.g., acquires a GPS signal more quickly than conventional GPS technology, etc.

Practice Tips (cont.) If available, include in the specification comparative data that shows the invention produced a technical improvement over conventional devices/methods. Include, in the specification, a figure and accompanying text that shows and describes hardware components of a computer, e.g., CPU, memory, I/O, network. This can later help support an argument that the invention has a real world implantation and is not merely an abstract idea. Claim the invention in a manner that includes technical elements or steps that, in combination, produce a useful, preferably technical, effect in the real world. This is in contrast with merely claiming a device or method that produces the effect with little detail of how the effect is achieved. Make sure the specification provides adequate support for such claims.

Practice Tips – Issued Patents Consider filing reissue applications to add new claims that are more likely to survive a §101 challenge Must file within 2 years of issuance if claims are broadened May file a reissue application any time if claim changes do not broaden scope of claim Specification must support added claim limitations

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