“Alice’s Restaurant” is a light-hearted, 18-minute-long, anti-war folk song from the 1960s by Arlo Guthrie that has been played on AM and FM radio during each Thanksgiving holiday over the past 40+ years. The chorus includes the repeated line: “You can get anything you want at Alice’s Restaurant.”
Well, this Thanksgiving season, the Federal Circuit has issued a decision in Ultramercial, Inc. v. Hulu LLC, which applies the U.S. Supreme Court’s recent ruling in Alice Corp. v. CLS Bank Int’l to a computer-based method and reaffirms that when it comes to patenting computer-based subject matter, you can’t get anything you want [at Alice’s Restaurant].
In Alice, the Supreme Court ruled that a computer-based method of exchanging financial obligations between two parties to mitigate risk of non-performance by one of the parties was ineligible for patenting. Using a two-part test for patentable subject matter, the Court in Alice found that (i) the claimed method was directed to the abstract idea of “use of a third party to mitigate settlement risk,” and (ii) by merely using generic computer implementation to apply this abstract idea, the claims did not include anything that transformed the patent-ineligible abstract idea into something that is patent-eligible. The rationale for not allowing patents on abstract ideas (as well as on laws of nature or natural phenomena) is to avoid pre-emption, where the patent would effectively pre-empt or grant a monopoly over the abstract idea, which would impede innovation.
While the subject matter at issue in Alice was a so-called business method, the two-part test for eligible subject matter is applicable to all computer-implemented inventions. The Alice decision does not describe exactly what is an abstract idea (“We need not labor to delimit the precise contours of the ‘abstract idea’ category”) and only gives limited guidance on what is the “something more” that transmutes abstract ideas into patent-eligible gold.
Thus, it falls to the lower federal courts (the Federal Circuit and the district courts) to develop case law that elucidates these concepts by applying them to other situations. In initial subsequent rulings, defendants accused of infringement of computer-based patents have been generally successful in using the Alice two-part test to invalidate the patents they are accused of infringing for being patent-ineligible. Patent applicants and their attorneys see the strong efficacy in such arguments and are hungry for any guidance for navigating their way through the Alice two-part test to improve the likelihood that their computer-based technology is found to be patent-eligible.
In its recent Ultramercial ruling issued earlier this month, the Federal Circuit applied the Alice patent eligibility test to claims directed to a computer-based method for distributing copyrighted material over the Internet to consumers who, in exchange for watching an advertisement, are given access to the copyrighted content. In finding that the claims are ineligible for patenting, the Ultramercial court provided some additional data points on how the Alice test is to be applied.
Computer-based claims will likely be deemed to be directed to an abstract idea
With regard to the first prong of the Alice test, the Ultramercial court agreed with the lower court that the claims are directed to an abstract idea, namely, the use of “advertisement as an exchange or currency.” The court stated that while the claims at issue included some features “such as ‘consulting an activity log’ [that] add a degree of particularity,” “the concept embodied by the majority of the limitations describes only the abstract idea of showing an advertisement before delivering free content,” even though these features may be novel or non-routine. In other words, while the claims were narrower than the broad abstract idea (thereby avoiding total pre-emption of the abstract idea), these features were insufficient to avoid the claims being deemed to be directed to the abstract idea.
As a practical matter, when it comes to certain computer-implemented methods (e.g., in applications such as financial services or organizing human activities), it’s relatively easy to characterize many of the steps as describing an abstract idea. Such methods are generally performed by conventional, generic computers, perhaps utilizing the ubiquitous Internet (as in Ultramercial), and such features have been insufficient to avoid the fate of being an abstract idea. Claims that can be characterized as improving a technological process (e.g., improving the operation of the computer system itself) will have the best likelihood of patent eligibility, so to the extent possible, claims should be drafted with this goal in mind and existing claims should be argued to be so directed. However, in some fields, this will be difficult to do, so such computer-based claims are likely to be found to be directed to an abstract idea.
Patent eligibility will depend on whether the claims include a transmogrifying “something more”
The battle of patent eligibility will more often be waged on the field of whether the claims recite “something more” that transforms the abstract idea to something that is patent-eligiible, the second prong of the Alice test.
Under this second prong, the Ultramercial court looked to whether the claims do “significantly more than simply describe the abstract method” by evaluating “whether the claims contain an ‘inventive concept’ to ‘transform’ the claimed abstract idea into patent-eligible subject matter.” Looking to the rationale of avoiding pre-emption of the abstract idea by the claims at issue, the court explains that to be patent-eligible, a claim that recites an abstract idea must include additional features to avoid monopolization of the abstract idea, but these additional features have to be more than “well-understood, routine, conventional activity.”
Here the court concluded that the claims did not include such additional features to provide the transformation into patent-eligible subject matter. The court again pointed out that “[t]he majority of [the] steps comprise the abstract concept of offering media content in exchange for viewing an advertisement.” The other steps, such as updating an activity log, were dismissed as being merely routine, conventional, specified at a high level of generality, or insignificant data-gathering steps.
Notably, the court acknowledged that some of the claimed steps had not previously been employed in the field of distributing copyright material over the Internet, but stated that this “was not enough—standing alone—to confer patent eligibility.” Thus, the court characterized these steps as being routine, whether or not they had previously been used in the relevant field. Apparently, determining whether there is “something more” does not ride on the novelty of the various steps.
Instead, the court focused on the technological nature of these steps, which included citing the “machine-or-transformation” test as providing a “useful clue” regarding the “something more.” Under this test, a method claim is eligible for patenting if (i) it is implemented by a particular machine in a non-conventional or non-trivial manner, or (ii) it transforms an article from one state to another. For a number of years, this “machine-or-transformation” test had been relied upon by the Federal Circuit as the definitive measure of whether a claim was patent-eligible or not, until the Supreme Court’s ruling in Bilski in 2008 held that the test was not the sole test of patent eligibility. Applying this test to the claims in Ultramercial, the Federal Circuit held that the claims were not tied to a particular novel machine (generic computers and the Internet were not sufficient) and that the claims did not transform any article to a different state or thing. Therefore, the court held that the claims failed the “machine-or-transformation” test, providing a further reason for finding a lack of “something more.”
It’s likely that the “machine-or-transformation” analysis will continue to be used as a substantive indication of patent eligibility. While the Ultramercial court characterized its use of the “machine-or-transformation” test as merely a clue towards patent eligibility, as will future courts to avoid running afoul of Bilski, litigants and patent applicants should expect that the test will continue to be used by courts and the USPTO as strong evidence of patent eligibility or ineligibility.
You can’t always get what you want. But if you try sometimes, you might find, you get what you need.
The ramifications of the Alice decision are still being fleshed out by the federal courts and the USPTO, with the Ultramercial decision being the latest data point from the Federal Circuit. The best likelihood for patent eligibility of computer-implemented methods going to claims that have technological features that can be characterized as being transformative of the underlying abstract ideas to concrete, tangible inventions. Referring to another 1960s song, by narrowing the scope of such claims by strategically including such technological features, patent applicants may find that while they can’t get anything they want, “[they] can get what [they] need.”