The US Court of Appeals for the Federal Circuit affirmed a district court ruling that claims directed to the specific field of mass transit were directed to patent-ineligible subject matter under 35 USC § 101 because they failed both steps of the Alice inquiry. The Court found that the claims were directed to an abstract idea and otherwise lacked inventive concept. Smart Systems Innovations, LLC v. Chicago Transit Authority, Case No. 16-1233 (Fed. Cir., Oct. 18, 2017) (Wallach, J) (Linn, J, concurring in part and dissenting in part).

The representative claims in issue, taken from four related patents, were directed to either payment systems using a bankcard in connection with accessing mass transit, or data collection and storage systems regarding such payment systems. At the district court, the Chicago Transit Authority filed a motion for judgment on the pleadings, asserting that the claims were subject matter ineligible under 35 USC § 101. After the district court granted the motion, Smart Systems appealed.

The Federal Circuit considered all of the representative claims from the four patents together, and analyzed the claims under the two-part Alice test. In doing so, the Court agreed with the district court that the claims were directed to an abstract idea, namely, “formation of financial transactions in a particular field (i.e., mass transit) and data collection related to such transactions,” or “paying for a subway or bus ride with a credit card.” Smart Systems argued that the patents were not abstract because the claims were directed to a particular, concrete field, i.e., mass transit. The Court rejected this argument as “beside the point.” The Court distinguished Enfish (IP Update, Vol. 19, No. 6) and DDR Holdings (IP Update, Vol. 18, No. 1), noting that Smart Systems did not argue that the claims were directed at an improvement in computer technology. Similarly, the Court distinguished McRO (IP Update, Vol. 19, No. 10) as inapposite, noting that the claims in issue were not directed to specific rules that improve a technological process. Therefore, the Court concluded that all of the representative claims failed step one of the Alice inquiry.

Turning to step two of the Alice inquiry, the Federal Circuit affirmed the district court finding that the representative claims lacked an inventive concept because they merely required generic computer components, which do nothing more than run a “bankcard sale—that is, the performance of an abstract business practice.” The Court went on to reject each of Smart Systems’ arguments of “other indicia” of inventive concept, including the lack of preemption and satisfaction of the machine-or-transformation test, and ultimately concluded that all representative claims failed the “something more” aspect of Alice step two.

In dissent, Judge Linn argued that two of the four patents, which were directed to the payment systems using a bankcard in connection with accessing mass transit, were not directed to an abstract idea. Linn explained that the majority opinion erred by describing the claims at “such a high level of abstraction as to overlook and misstate what the inventors considered to be their invention.” Linn argued that the recited transit system is not merely a generic environment that may be ignored, and that the claims did not cover the kind of basic building blocks that would foreclose or inhibit future innovation.

Judge Linn agreed with the majority that the other two patents were directed at data collection and storage systems and thus failed both steps of the Alice inquiry. In particular, Linn agreed with the majority that these patents were directed at fundamental economic practices not tied to the transit system, and as such fell into a category of patents that are directed towards abstract ideas. Although Linn disagreed with this categorical exclusion, he concluded that he was bound to that finding by controlling precedent.