Now a year and half removed from the U.S. Supreme Court's seminal ruling in Alice Corp. Party v. CLS Bank International, 134 S. Ct. 2347, 2355 (2014), patent professionals have fallen through the proverbial looking glass, as the number of issued business-method and software patents have declined substantially over similar pre-Alice periods. The two-step test defined in Alice for determining 35 U.S.C. § 101 patent eligibility seemed simple enough: (i) is the claim concept directed to an "abstract idea," and if so, (ii) does the claim contain an "inventive concept" sufficient to transform the claimed abstract idea into a patent-eligible application? Id. at 2355-57. Since Alice, however, the two-step test has proven to be anything but simple as courts have struggled to define exactly what an abstract idea or inventive concept is.
Perhaps more troubling is that no clear Federal Circuit guidance has yet emerged. For example, the Federal Circuit in Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 716(Fed. Cir. 2014) held that claims directed to general-purpose technology (i.e., use of the internet) were not patent-eligible. Three weeks later in DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1257 (Fed. Cir. 2014), and seemingly in tension with Ultramercial, the Federal Circuit held that claims necessarily rooted in computer technology were patent-eligible. While the Federal Circuit in DDR Holdings made some progress in articulating the not-so-bright-line-rule recited in Alice, that progress has likely been wiped out by later Federal Circuit decisions, which have muddied the waters and are not likely to lead to a repeatable test that can be applied in a predictable way.
In a recent non-precedential per curiam decision, the Court of Appeals for the Federal Circuit ("CAFC") held that claims covering only abstract ideas coupled with routine data-gathering steps and conventional computer activity were patent-ineligible under 35 U.S.C. § 101. Vehicle Intelligence and Safety LLC v. Mercedes-Benz USA, LLC, No. 2015-1411, slip op. at 2 (Fed. Cir. Dec. 28, 2015).
Vehicle Intelligence brought suit against Mercedes-Benz USA, LLC and Daimler AG alleging infringement of U.S. Patent No. 7,394,392 ("the '392 Patent"). The '392 Patent claims methods and systems for screening equipment operators for impairment, selectively testing those operators, and controlling the equipment if an impairment is detected. Id. According to the '392 Patent, examples of "equipment" included, automobiles, trains, ships, and planes, while examples of "impairments" included, intoxication, blindness, and heart attacks. Id.
The district court granted Mercedes-Benz's motion for judgment on the pleadings, declaring claims 8, 9, and 11-18 (" the disputed claims") invalid as drawn to patent-ineligible subject matter under 35 U.S.C. § 101 and dismissed the case with prejudice. Id. at 4. Vehicle Intelligence appealed and the CAFC reviewed de novo. Id.
On appeal, the question was whether the disputed claims fell into the judicially created exception of patent-ineligible abstract ideas. Id. at 5. Applying the two-step test, the CAFC agreed with the district court that the disputed claims of the '392 Patent satisfied step one because they were directed to the "abstract idea of testing operators of any kind of moving equipment for any kind of physical or mental impairment." Id. Vehicle Intelligence argued that the disputed claims did not preempt (i.e., block) all equipment operator testing, as evidenced by the eleven prior art references identified in the '392 Patent's specification, which describe non-infringing methods for performing equipment operator testing. Id. at 7. Notably, the CAFC stated that this argument was "meritless" and that the "mere existence of a non-preempted use of an abstract idea does not prove that a claim is drawn to patent-eligible subject matter." Id. The CAFC went on to state that if Vehicle Intelligence's argument was adopted, then "all a patentee would need to do to insulate itself from a § 101 challenge would be to identify a single prior art reference in the specification and state that its invention improves upon that reference." Id.
Regarding step two, the CAFC held that there was nothing in the disputed claims disclosing "an inventive concept sufficient to transform the abstract idea of testing operators of any kind of moving equipment for any kind physical or mental impairment into a patent-eligible application of that idea." Id. at 8. Vehicle Intelligence argued that its methods were embedded in "specialized existing equipment modules," as opposed to generic computers, which rendered them patent-eligible. Id. The CAFC disagreed, stating that "markedly absent from the '392 Patent is any explanation of how the methods at issue can be embedded into these existing modules." Id. Not pulling any punches, the CAFC said that the '392 Patent "is completely devoid of any explanation of what these hardware and software differences are, let alone any explanation of how to implement them using the existing equipment modules." Id. at 9.
Vehicle Intelligence argued that the CAFC's analysis in DDR Holdings applied to the disputed claims because the claims were necessarily rooted in computer technology to satisfy a need for faster, more accurate and reliable impairment testing of vehicle operators. Id. at 10. The CAFC wholly rejected this argument, holding that the disputed claims were not rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks, as in DDR Holdings. Id. Moreover, according to the CAFC, the disputed claims did not recite faster, more accurate, or more reliable impairment testing than what was known in the prior art, and the specification did not explain how any improvements were achieved over the prior art. Id. Thus, the fact that the '392 Patent lacked any specificity made it very easy for the CAFC to affirm the district court ruling and hold the disputed claims patent-ineligible under § 101.
Although the CAFC in Vehicle Intelligence failed to break new ground in interpreting Alice or describing what an abstract idea or inventive concept is, the CAFC made a point to call out vague patents that fail to describe in any specificity how an invention works. Seemingly throwing the book at Vehicle Intelligence, the CAFC went so far as to say that "bald assertions made at such a high level of generality and not tied to any claim language do not provide an 'inventive concept' sufficient to save these claims from patent-ineligibility." Id. Thus, it is fundamental for patent professionals to provide as much detail as possible when drafting software or business-method patents, which have become increasingly ripe for § 101 challenges. Vague and general descriptions will not save the day. While § 101 law remains unsettled after Alice, patentees should attempt to draw analogies between their claims and those of DDR Holdings, while defendants should attempt the same with Ultramercial.