Echoing the recent decisions that the Alice test did not render specific software patents ineligible in cases such as McRo and DDR Holding, the Federal Circuit found that Amdocs’ software patents covered a technological solution that improved the performance of a computer system and, therefore, were patent eligible. The holding, however, exposed a growing rift between the Federal Circuit judges post-Alice.

Amdocs’ patents claim a system, method, and computer program for enhancing network usage records, which are generated and used by network service providers to bill customers.1 Unlike prior art systems where usage information was communicated directly to a central location causing massive databases and large network bottlenecks, the patents-in-suit employed a distributed network of devices that aggregated and filtered usage information close to the information source while still allowing the data records to be accessible from the central location.2 In turn, the claimed solution provided improvements in load distribution and reduced network congestion.3

In a 61-page ruling, the majority held that the U.S. District Court for the Eastern District of Virginia incorrectly invalidated patents that Amdocs asserted against Openet Telecom.4 Amdocs is the latest in a series of Federal Circuit rulings reversing decisions that found patents invalid under the U.S. Supreme Court’s 2014 Alice ruling.5

Authored by Judge Plager and joined by Judge Newman, the majority in Amdocs emphasized that the concept of an abstract idea has no set meaning.6 According to the majority, there cannot be “a single universal definition of ‘abstract idea’” because “it is difficult to fashion a workable definition to be applied to as-yet-unknown inventions.”7 Instead, the courts must determine whether a patent is directed to an abstract idea by comparing the claims at issue with prior cases involving similar claims.8 9

Using this “flexible approach” of surveying the recently-adjudicated patents, the majority determined that Amdocs’ patents resemble other patents that the Federal Circuit recently found patent eligible.10 Like these other patents, the Amdocs patent “entails an unconventional solution (enhancing data in a distributed fashion) to a technological problem (massive record flows which previously required massive databases).”11 In so ruling, the court seemed to gloss over the first step of the Alice framework.12 “Indeed, even if we were to agree that claim 1 is directed to an ineligible abstract idea under step one, the claim is eligible under step two because it contains a sufficient ‘inventive concept.’”13

Arguing in dissent, Judge Reyna insisted that the court may not overlook the first step in the Alice framework.14 Specifically, the eligibility inquiry requires courts to determine whether the claim is directed to an abstract idea, and, only if doubt remains, the court must then consider whether the claims define an inventive concept.15 Further opposing the majority opinion, Judge Reyna argued that a clear definition of an abstract idea may exist.16 He suggested that an abstract idea is a “desired goal . . . absent structure or procedural means for achieving that goal.”17 18 For the case-at-hand, Judge Reyna concluded that Amdocs’ software claim “recites a software product embodied on a storage medium, but it provides no structural limitation of either the physical medium or the digital software.”19

The majority, in connection with its patent eligibility analysis, also incidentally grappled with the potential necessity of a claim construction to rule on patent eligibility.20 Typically, accused infringers seeking to quickly invalidate the patents argue that claim construction is not necessary for a patent-eligibility ruling, while patent owners argue that courts should construe the claims first. The Amdocs ruling weighs in favor of patent owners on this issue.

In a unique aspect of this case, the majority ruled that Amdocs’ patents survive Alice partly due to a claim construction established during a previous appeal in the case.21 For instance, an asserted claim requires computer code that “enhances” a network accounting record.22 The Federal Circuit affirmed a district court’s construction of “enhance” as being dependent on the invention’s “distributed architecture.”23 The Federal Circuit further adopted the district court’s explanation that “distributed” meant “that the network usage records are processed close to the sources before being transmitted to a centralized manager.”24 On these facts, the Federal Circuit concluded that the claim term “enhanced” incorporated the patent’s touted benefit of load distribution and reduced network congestion.25 Therefore, by way of the term’s construction, the majority deemed the term “enhance” in the patent provided a patent-eligible technological improvement, not an abstract idea.26

Judge Reyna, on the other hand, criticized the majority for importing critical elements, like the use of distributed architecture, from the patent’s specification.27 Judge Reyna emphasized that this “contravenes the fundamental principle” that the focus of patent-eligibility analysis should be the claims.28 Here, regardless if the specification provides sufficient description of the distributed architecture, Judge Reyna indicated that the claims themselves lack the requisite detail.29

In view of this legal development, patentees of software claims may be well served to incorporate the guidance presented in Amdocs. First, Amdocs provides support for including a complete description of the technical problem and solution in the specification. Patentees should also attempt to claim structural elements that, in combination, represent a unique approach that is beneficial over the prior art. Finally, patentees should familiarize themselves with recent patent-eligibility Federal Circuit decisions that are most pertinent to the invention’s technology as these decisions are now critical to securing patentable claim scope.

Patent owners may also revise their litigation strategy in light of Amdocs. While many courts insist that invalidity under § 101 does not require claim construction, the claim construction in Amdocs helped the claims pass patent-eligibility muster. Consequently, patent owners may want to argue that claim construction is necessary before determining patent eligibility because, like Amdocs, the claim construction may affect the court’s patent-eligibility analysis. By leveraging claim construction before the patent eligibility determination, patent owners may attempt to construe claim terms in a way that incorporates concepts demonstrating the patent’s claimed solution to a technical problem.

Possibly an even more fundamental lesson of Amdocs is that the only certainty around patent eligibility under Alice is its uncertainty. But given the majority’s reliance on an analogy-driven approach and the patent’s specification in its § 101 analysis, combined with Judge Reyna’s vehement defense, Amdocs is a strong candidate for rehearing en banc by the Federal Circuit. As seen by this decision, the Federal Circuit remains highly divided on the scope of software patent eligibility under Alice.