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Vedder Thinking | Articles Case Law Review - March 2012

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Dealertrack, Inc. v. Huber
(Fed. Cir. 2012)

The mere recitation in the preamble of a claim that a method is "computer aided" is likely insufficient to satisfy Section 101 of the Patent Act, which defines patentable subject matter.

In Dealertrack, Inc. v. Huber1, the U.S. Court of Appeals for the Federal Circuit issued an opinion clarifying what constitutes patentable subject matter in light of the Supreme Court’s ruling in Bilski v. Kappos2. Patentee Dealertrack, Inc. (Dealertrack) sued David L. Huber, Finance Express, LLC and RoutOne, LLC (Alleged Infringers) in the U.S. District Court for the Central District of California for infringing two of its patents directed to computer-aided methods and systems for processing credit applications over electronic networks. The Alleged Infringers defended on grounds, inter alia, that the claims in one of the asserted patents (i.e., `427 Patent) were invalid for failure to claim patent-eligible subject matter under 35 U.S.C. § 1013. The District Court agreed with the Alleged Infringers’ position and granted summary judgment due to invalidity of all claims of the `427 Patent for failure to claim patent-eligible subject matter under § 101. Dealertrack appealed to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit).

In determining whether the claims of the `427 Patent were indeed invalid under § 101, the Federal Circuit analyzed claim 1 of the `427 Patent, which reads as follows:

1. A computer aided method of managing a credit application, the method comprising the steps of:

[A] receiving credit application data from a remote application entry and display device;

[B] selectively forwarding the credit application data to remote funding source terminal devices;

[C] forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;

[D] wherein the selectively forwarding the credit application data step further comprises:

[D1] sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

[D2] sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic, funding] source returns a positive funding decision;

[D3] sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding [sic, funding] sources returns a positive funding decision or until all funding sources have been exhausted or,

[D4] sending the credit application from a first remote funding source to a second remote finding [sic, funding] source if the first funding source declines to approve the credit application.

In addressing whether the foregoing claim was directed to patent-eligible subject matter, the Federal Circuit began by citing to its 2010 decision in Research Corp. v. Microsoft Corp4. for the proposition that § 101 is generally an inclusive statute that favors a finding of patent-eligible subject matter5 over a finding of patent-ineligible subject matter. Additionally, the Federal Circuit noted a "clear congressional mandate that a very broad swath of inventions be eligible for patent protection." Despite recognizing that § 101 presents a relatively low hurdle for purposes of patentability, the Federal Circuit concluded that the claims of the `427 Patent were "invalid as being directed to an abstract idea pre-emptive of a fundamental concept or idea that would foreclose innovation in this area."

In support of its conclusion of invalidity, the Federal Circuit characterized claim 1 of the `427 Patent as explaining "the basic concept of processing information through a clearinghouse." As such, the Federal Circuit found that the steps of the method did not "impose meaningful limits on the claim’s scope," borrowing a phrase from the holding in In re Bilski6. The Federal Circuit stated that "[n]either Dealertrack nor any other entity is entitled to wholly preempt the clearinghouse concept."

The Federal Circuit then turned its attention to the issue of whether the limitation "computer aided," as used in claim 1, demonstrated that the claim was not, in fact, directed to an unpatentable, abstract idea. Unfortunately for Dealertrack, the Federal Circuit found that "[t]he undefined phrase ‘computer aided’ is no less abstract than the idea of a clearinghouse itself." To this point, the Federal Circuit noted, "[s]imply adding a ‘computer aided’ limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible." In particular, the Federal Circuit found that "the claims here recite only that the method is ‘computer aided’ without specifying any level of involvement or detail." Based on this logic, the Federal Circuit affirmed the determination of the District Court that the claims of the `427 patent were patent-ineligible abstract ideas under § 101.

1 Nos. 2009-1566, 2009-1588 (Fed. Cir. Jan. 20, 2012).
2 130 S. Ct. 3218 (2010).
3 35 U.S.C. § 101 (“[w]hoever 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.”).
4 627 F.3d 859 (Fed. Cir. 2010).
5 See Id. at 868 (noting that for abstractness to invalidate a claim, it must “exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”).
6 545 F.3d 943, 961–62 (Fed. Cir. 2008) (en banc).

HTC Corp. v. IPCom GmbH & Co.
(Fed. Cir. 2012)

The Federal Circuit has again attempted to clarify its jurisprudence surrounding means-plus-function claims in its recent decision in HTC Corp. v. IPCom GmbH & Co1. On appeal from the District Court for the District of Columbia, HTC argued that IPCom’s asserted patent, U.S. Patent No. 6,879,830 (the ‘830 Patent), was invalid, inter alia, for failing to distinctly claim the subject matter which the applicant regards as his invention as required by 35 U.S.C. § 112, second paragraph. While upholding the District Court’s finding that the patent was not invalid for indefiniteness because HTC had waived the argument, the Federal Circuit reiterated its earlier holding that means-plus-function claims can be invalid for indefiniteness in situations where a claim recites structure amounting to a general purpose computer only and does not sufficiently describe an algorithm for accomplishing the claimed functionality.

The subject matter of the ‘830 Patent includes a handover in a cellular telephone network. A handover occurs when a cellular telephone, called a "mobile station" in the patent, switches from one base station to another. The language of IPCom’s asserted claim recites "an arrangement for reactivating the link with the first base station if the handover is unsuccessful." The parties agreed that the language "an arrangement for reactivating the link" invoked treatment as a means-plus-function claim limitation. HTC argued that the claim was rendered indefinite because the specification did not sufficiently describe a structure that accomplished the function as recited. More specifically, HTC argued that the specification did not discuss any hardware or specific circuitry or schematics that accomplished the reactivation of the link.

The Federal Circuit revisited its holding in Aristocrat Techs. Austl. PTY Ltd. v. Int’l Game Tech.2, and stated that the disclosure of a general purpose computer (a processor and transceiver in this case), without more, is insufficient to overcome an indefiniteness challenge to a means-plus-function claim. The disclosure, the Federal Circuit opined, must identify an algorithm that the general purpose computer executes in order for the claim not to be in violation of the requirements of 35 U.S.C. § 112, paragraph 6.

The Federal Circuit stated that the District Court was incorrect in its decision that a processor and transceiver, by themselves, are sufficient structure under an indefiniteness attack. The denial of HTC’s motion for summary judgment on the ground of indefiniteness was not overturned, however, because HTC, even when given the opportunity, failed to raise the lack-of-algorithm argument in the District Court and therefore had constructively waived the argument on appeal.

1 HTC Corp. v. IPCom GmbH & Co., No. 2011-1004 (Fed. Cir. Jan. 30, 2012), available at http://www.cafc.uscourts.gov/images/stories/opinionsorders/ 11-1004.pdf, last viewed Feb. 6, 2012.
2 Aristocrat Techs. Austl. PTY Ltd. v. Int’l Game Tech., 521 F.3d 1328 (Fed. Cir. 2008).

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