Checking in With Alice Part II: Takeaways and Predictions

As we learned in Part I of this article, district courts, the Federal Circuit and the U.S. Patent and Trademark Office (USPTO) routinely confront Alice issues in different ways and with different philosophies. As the volume of Alice jurisprudence grows, so too does our ability to understand important trends. Below we outline those trends that practitioners, particularly litigators, would be wise to pay close attention to.

Data Processing and Organization is Usually Fatal

When it comes to the Federal Circuit and software patents, one variety of patent claim so consistently fails that its ineligibility under Section 101 should perhaps become a rule. These are claims directed to analyzing, organizing and/or displaying data. With limited exception, if a patent claim is directed to analyzing data and displaying the results of that analysis on a general purposes graphical interface — or can be generalized to encompass these activities — the Federal Circuit will invalidate it under Alice.

In recent years, the Federal Circuit invalidated data processing/display claims in decisions such as Berkheimer, SAP America, Interval Licensing, Data Engine, University of Florida, and Solutran. As these cases demonstrate, traditional markers of non-abstractness since DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), such as technology rooted in the computer realm, will not save a data processing and display claim from being found abstract. The Federal Circuit confirmed as much in Berkheimer, where it emphasized that “[l]imiting the invention to a technological environment does not make an abstract concept any less abstract under step one.” Berkheimer, 881 F.3d at 1367 (internal quotations and citations omitted)

But all is not lost for data processing technologies, as the Federal Circuit demonstrated in its Koninklijke decision. There, the Federal Circuit indicated that patent claims directed to data processing may survive an Alice challenge if (a) written with enough detail to capture the specific improvement over the prior art and (b) that improvement enables a discernible advance in computer functionality. See Koninklijke, 942 F.3d at 1151 (“Here, as in Finjan, the claimed invention is . . . directed to a non-abstract improvement because it employs a new way of generating check data that enables the detection . . . that prior art systems were previously not equipped to detect.”). The AI community should take note.

In a Search for Inventiveness, the Alice Test Has Collapsed in On Itself

Although the Supreme Court’s Alice framework requires a two-part analysis, the Federal Circuit’s recent decisions confirm that in many respects the two-part test has been collapsed into a singular search for “inventiveness.”  Often, the Federal Circuit shifts the Step Two “inventive concept” analysis to the Step One “abstraction” analysis, resulting in a search for a sufficient technological advance. See, e.g., Ancora, 908 F.3d at 1349 (“[w]e do note . . . overlaps between some step one and step two considerations. . . .”) Thus, claims directed purely to the computer realm (once thought safe under Alice) will not get a patentee over the Section 101 hump unless there is also a demonstrable and provable technological advance set forth in the claims. See Berkheimer, 881 F.3d at 1367 (“Limiting the invention to a technological environment does not make an abstract concept any less abstract under step one.”) (internal quotation marks and citation omitted).

The crucial question has thus become: what must a patentee do to convince the Federal Circuit that its claims possess enough of a technological improvement to not be abstract? Here, the Federal Circuit’s recent years of Alice jurisprudence provide guidance.

1)     The Claims Must Teach How

Assuming that the claims are directed to an improvement in computer functionality[1], the most important refrain from the Federal Circuit’s recent Section 101 jurisprudence is that to not be abstract, the claim must detail “how” the patentee’s technological solution is implemented:

“Here, the claims themselves do not disclose performing any ‘special data conversion’ or otherwise describe how the alleged goal of ‘conserving bandwidth while preserving data’ is achieved.”

Hawk Tech Sys., 60 F.4^th at 1357.

Claims directed to results, which don’t answer the “how” question, will fall. See ChargePoint, 920 F.3d at 769-70; see also BSG Tech, 899 F.3d at 1288 (“Here, the focus of BSG Tech’s claims is unrelated to how databases function . . . . The claims do not recite any improvement to the way in which such databases store or organize information.”). Thus, during claim construction, practitioners would be well-advised to seek constructions of critical claim terms that incorporate detail as to how results are accomplished.

2)     The Specification Should Confirm the Claimed Advance

In addition to the claims, the specification also plays a critical role in the Section 101 analysis. The specification is where the Federal Circuit first looks to confirm the technological advance of the claims. To do so, the specification must both explain the problem that the patented technology solves, and enable a conceptual link between alleged “inventive” claim limitations and the solution that the invention purports to solve

The Federal Circuit’s Cosmokey opinion is particularly illustrative as to the importance of the specification in overcoming an Alice challenge:

“Here, the claim limitations are more specific and recite an improved method for overcoming hacking by ensuring that the authentication function is normally inactive, activating only for a transaction, communicating the activation within a certain time window, and thereafter ensuring that the authentication function is automatically deactivated. The specification explains that these features in combination with the other elements of the claim constitute an improvement that increases computer and network security, prevents a third party from fraudulently identifying itself as the user, and is easy to implement and can be carried out even with mobile devices of low complexity.”

Cosmokey, 15 F.4th at 1099.

In contrast, where the patent specification does not support the inventiveness of a claim challenged under Section 101, the Federal Circuit is more prone to look unfavorably upon such a claim.  See BSG Tech, 899 F.3d at 1289.

3)     Other Intrinsic and Extrinsic Evidence Can Help

In a potential positive development for patentees, in its search for “inventiveness” sufficient to carry the day under Section 101, the Federal Circuit is willing to rely on a host of intrinsic and extrinsic evidence. Of late, the Federal Circuit found the necessary evidentiary support to link a prior art problem with a claimed technological advance—or at least enough evidence to create a material issue of fact—not only in patent specifications, but also in the prosecution history (See Ancora, 908 F.3d at 1349), litigation complaints (See Cooperative Ent.’t v. Kollective Tech., 50 F.4th at 133; Aatrix Software, 882 F.3d at 1127; see also Cellspin, 927 F.3d at 1318) and third-party articles attached as exhibits to a litigation complaint. See Data Engine, 906 F.3d at 1008.

4)     So Can a Detailed Preamble

In recent jurisprudence, the Federal Circuit has also highlighted how a detailed preamble, directed to the specific alleged improvement featured in the claim, can aid a patentee in overcoming an Alice challenge. See Weisner, 51 F.4th at 1084 (“In contrast with the preamble of claim 1 of both the ‘202 and ‘910 patents, which focus on creating the location histories, the preamble to claim 1 of the ‘911 patent recites a ‘method of combining enhanced computerized searching for a target business with use of humans as physical encounter links.’”).

Factual Issues Matter

One of the most covered aspects of the Federal Circuit’s recent Alice jurisprudence is its decision in Berkheimer. There, the Federal Circuit highlighted the important role that underlying issues of fact play in determining whether a given claim limitation is “routine and conventional” under Step Two of the Alice analysis. Id. at 1369-70. In Berkheimer, due to genuine factual issues in light of the specification as to whether the alleged inventive concept of certain dependent claims was instead “well-understood, routine and conventional” the Federal Circuit remanded the case back to the district court for further fact finding.  Id. In so doing, the Court provided future patentees with a potential tool to defeat Section 101 eligibility challenges.

On the heels of its Berkheimer decision, in Aatrix Software — another opinion authored by Judge Moore — the Federal Circuit went even further in addressing the fact finding that should occur before some § 101 challenges are ripe for resolution. The Court highlighted the role that claim construction can and should sometimes play as a prerequisite to a district court’s § 101 analysis, particularly at the motion to dismiss stage. Aatrix Software, 882 F.3d at 1125. Like its predecessor decision in Berkheimer, the Federal Circuit in Aatrix Software vacated the district court’s § 101 determination and remanded the case for further fact finding. Of particular import in Aatrix Software were the specific inventive concepts that the patentee alleged in a second amended complaint, and the factual issues those allegations created as to whether the challenged claims were “well-understood, routine and conventional” under Step Two of the Alice test. Id. at 1128.

While certainly good news for patent holders, Berkheimer and Aatrix Software have not proven the “get-out-of-a-motion-to-dismiss-free card” at the Federal Circuit that some had hoped immediately following the decisions. In the years that have passed since Berkheimer, the Federal Circuit has remanded very few Section 101 cases because of factual issues. The Federal Circuit has also cautioned that attempts to create factual issues, divorced from the teachings of the specification, are likely to fail. See IBM v. Zillow Group, 50 F.4th 1371, 1380 (Fed. Cir. 2022).

A Number of Federal Circuit Judges are Dissatisfied with the Court’s Approach to Alice

The goal of any case law survey— this being no exception— should be to synthesize a cohesive framework that will offer a modicum of predictability to practitioners. But perhaps the most common refrain from a number of judges on the Federal Circuit is a disdain for the way the court has come to apply the Alice test. Put simply, the Alice issues remain subjective and very hard to predict.

One of the most significant rebukes of the Alice test came from Judge Plager in his Interval Licensing concurring opinion. Judge Plager laments the “abstract idea” analysis, views Step Two of the Alice test as largely redundant, and pleads with Congress to fix the Section 101 issue. See Interval Licensing, 896 F.3d at 1350-56. Similarly, in the Federal Circuit’s denial of an en banc rehearing in Berkheimer, Judge Lourie, joined by Judge Newman, wrote separately to address his concerns with the Alice framework and to express his hope for a “higher intervention” with respect to the Alice. In Judge Lourie’s opinion, a Section 101 test that now routinely calls for § 102- and § 103-type analyses “require[s] attention beyond the power of [the Federal Circuit].”  Berkheimer II, 890 F.3d at 1374-76.

And to close out 2019, Judge Moore voiced a strong dissent to the majority opinion in American Axle, which found a patented method for manufacturing a drive shaft assembly to be abstract. Judge Moore expressed a strong displeasure with a test that now seems most focused on whether the claim sufficiently teaches “how.”  This framework, Judge Moore stressed, is too subjective and conflates § 112 with § 101:

“Section 101 simply should not be this sweeping and this manipulatable. It should not be used to invalidate claims under standards identical to those clearly articulated in other statutory sections, but not argued by the parties. It should not subsume § 112. It should not convert traditional questions of fact (like undue experimentation) into legal ones. The majority’s validity goulash is troubling and inconsistent with the patent statute and precedent. The majority worries about result-oriented claiming; I am worried about result-oriented judicial action.”

American Axle, 939 F.3d at 1373. See also Judge Moore’s dissent in the Federal Circuit’s opinion denying American Axle a stay pending its petition for certiorari to the Supreme Court. American Axle & Manuf., Inc. v. Neapco Holdings LLC, 2018-1763 (Fed. Cir. October 23, 2020) (“[a]s the nation’s lone patent court, we are at a loss as to how to uniformly apply § 101.”).

The USPTO and Federal Circuit Are Not on The Same Page

As detailed in Part I of this article, the USPTO’s Section 101 guidelines have been the most promising development for patent holders in a very long time. Perhaps the bigger question is the effect that the guidelines will have on the federal judiciary’s treatment of Section 101 issues, both in district courts and the Federal Circuit.  While obviously not binding precedent on Article III courts, will the guidelines nevertheless prove persuasive?

The answer has been no. By strictly interpreting what can qualify as an abstract idea, the USPTO’s guidelines save many patent claims that Federal Circuit jurisprudence likely would not. Unlike the USPTO, the Federal Circuit does not strictly interpret what can qualify as an abstract idea and will continue to invalidate patent claims under Step One of Alice that would not fall within the USPTO’s abstract idea definition. Patent owners should thus beware. Getting a software patent issued from the USPTO is far from a guarantee that the patent will survive an Alice challenge in federal court.

Practitioners, Take Heed

Software is ubiquitous, and so too is the Federal Circuit’s disdain for the manner that many software patents are drafted. While it remains difficult to reconcile some opinions with others, one thing is clear: practitioners need to draft patents with an eye toward satisfying the USPTO and the Federal Circuit. Whereas significantly more software patents will now survive the USPTO’s more forgiving Alice Guidelines, the same cannot be said for the Federal Circuit’s Alice framework.

As its Alice docket demonstrates, the Federal Circuit is keen to limit inventors of all technologies—not just software—to their specific solutions. The hallmark of invalidity under Section 101 at the Federal Circuit is a patent containing “result-oriented” claims devoid of specific detail as to “how.” With Congress unlikely to pass Alice reform anytime soon, and the Supreme Court deciding to stay away, practitioners should take heed, because patents that cannot ultimately make it through the Federal Circuit’s gates may offer little in the way of strategic value.

Be sure not to miss “101 in the District Courts and Federal Circuit: What is Happening with Alice” at IPWatchdog LIVE today at 9:00AM, where the author will discuss these issues in more depth.

You can read the full version of this article with complete quotations from the relevant case law here.

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