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IP Alert: Federal Circuit Holds Computer Software to Define Patent-Eligible Subject Matter

November 2, 2016

Yesterday, the U.S. Court of Appeals for the Federal Circuit issued a significant decision on the subject of patent eligibility. In a 2–1 decision, the court held that a claim to a “computer program product” did define patent-eligible subject matter under 35 U.S.C. § 101. This decision appears to pave the way for patent eligibility for patents drawn to computer software. The decision is also significant in its approach to the eligibility determination; specifically, by construing the claim relatively narrowly in light of the patent specification in determining whether the claims were abstract. The case, Amdocs (Israel) Ltd. v. Openet Telecom, Inc., will likely provide significant future guidance in analyzing software patent claims.

In Alice Corp. v. CLS Bank International, the U.S. Supreme Court enunciated an “abstract idea” test as a judicially created exception to patent eligibility under section 101 of the Patent Act. Since the Alice decision, the lower courts have struggled to understand the metes and bounds of this exception. Amdocs is the latest decision to attempt to explicate this doctrine.

The plaintiff, Amdocs, holds patents directed to parts of a system designed to solve an accounting and billing problem faced by network service providers. The first patent, the ’065 patent, concerns a system, method, and program for merging data in a network-based filtering and aggregating platform, while the second patent, the ’510 patent, concerns a system, method, and computer program for reporting on the collection of network usage information. Claim 1 of the ’065 patent is reproduced below:

1.  A computer program product embodied on a computer readable storage medium for processing network accounting information comprising:

computer code for receiving from a first source a first network accounting record;

computer code for correlating the first network accounting record with accounting information available from a second source; and

computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.

Claim 16 of the ’501 patent is reproduced below:

16. A computer program product stored in a computer readable medium for reporting on a collection of network usage information from a plurality of network devices, comprising:

computer code for collecting network communications usage information in real-time from a plurality of network devices at a plurality of layers;

computer code for filtering and aggregating the network communications usage information;

computer code for completing a plurality of data records from the filtered and aggregated network communications usage information, the plurality of data records corresponding to network usage by a plurality of users;

computer code for storing the plurality of data records in a database;

computer code for submitting queries to the database utilizing predetermined reports for retrieving information on the collection of the network usage information from the network devices; and

computer code for outputting a report based on the queries;

wherein resource consumption queries are submitted to the database utilizing the reports for retrieving information on resource consumption in a network; and

wherein a resource consumption report is outputted based on the resource consumption queries.

Both of these claims are archetypical “software patent” claims. The district court granted the defendants’ motion for summary judgment of invalidity of the asserted claims for patent ineligibility under section 101, leading to an appeal.

In its analysis, the Federal Circuit first focused on claim 1 of the ’065 patent. The court began by restating the basic premise that, at some level, all inventions must embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas. Turning to the challenged claim, the court observed that the claim could be viewed in multiple ways. The claims could be described as focusing on correlating two network counting records to enhance the first record (a fairly abstract notion), but also could be described in other ways, such as a computer program that includes certain computer-implemented functionalities (a fairly concrete and non-abstract notion). The court recognized that it can be difficult to distinguish abstract inventions from those that are not abstract and questioned, “What relative level of abstraction should we employ?”

To answer this question, the court turned to Alice framework. Alice defined a framework under which, in a first step, the court determines whether the claims embody “an abstract idea.” If the claims do embody an abstract idea, the second step is to determine whether the claims define an inventive concept. Reviewing prior post-Alice decisions, the court indicated that patent eligibility had been found where claims are directed to an improvement in computer functionality or recite an inventive technology-based problem, even using conventional and generic components, if combined in an unconventional manner.

Based on this framework, the court concluded that the ’065 claims did not define an abstract idea. Also, the court determined that even if the claims did define an abstraction, the claims contained a sufficient inventive concept to officiate this abstraction. Specifically, claim 1 requires “computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.” In an earlier appeal, the court had construed “‘enhanced’ as being dependent upon the invention’s distributed architecture” [emphasis added]. The court did not view the term “enhanced” as a broad abstract enhancement in an undefined way. The court found that the specific computer architecture represented a “critical advancement” over the prior art. “In other words,” held the court “this claim entails an unconventional technological solution (enhancing data in a distributed fashion) to a technological problem (massive record flows which previously require massive databases).” To be sure, the claims specified generic computer components and not new forms of computing devices. Nonetheless, the claims specify that such generic components must operate in an unconventional manner to achieve an improvement in computer functionality.  

The court applied a similar analysis to claim 16 of the ’510 patent. These claims specify collection, filtering, and aggregating of data, which again are somewhat conventional computing concepts if considered generally. Even so, in the context of this claim, the court determined that in this case these steps again depend upon the invention’s “unique distributed [computer] architecture.” In other words, after construing the claims in context, the court determined that the claimed generic concepts (collection, filtering, aggregating, etc.) did not define an abstract idea. The court went on to uphold the eligibility of two other Amdocs patents on similar grounds.

Judge Reyna dissented. He would have held that “claim 1 discusses only very broad, high-level functionality rather than details about how exactly that functionality is implemented, providing no information about the structure of the software.” He went on to state that “it is apparent that a desired goal (i.e., a ‘result or effect’), absent structural or procedural means for achieving that goal, is an abstract idea.” The panel majority disagreed with Judge Reyna’s approach as contrary to the law.

The Amdocs case appears to be among the first post-Alice cases from the Federal Circuit that upholds the patent eligibility of a computer software claim. This case is likely to be viewed as a seminal case in the law of software patenting.

For more information, please contact Fitch Even partner Allen E. Hoover, author of this alert.

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