Slowdown–Is There Hope for Software-Based Patents?

May 13, 2016

Finally, some good news for software patents! On May 12, 2016, the Federal Circuit in Enfish, LLC v. Microsoft Corp., __ F.3d __ (Fed. Cir. 2016), reversed a district court’s summary judgment that two software-based patents asserted against Microsoft Corp. lack patent eligibility under 35 U.S.C. §101 in view of the patent eligibility tests expressed in Alice Corp. v. CLS Bank Int'lAlice Corp. Pty Ltd. v. CLS Bank Int’l, ___ U.S. ___, 134 S.Ct. 2347 (2014). The Federal Circuit held that the two software-based patents were not directed to mere abstract ideas, but to patent-eligible improvements in computer operations.

The Case: Enfish, LLC v. Microsoft Corp.

In 2012, Enfish, LLC sued Microsoft Corp. and several other parties for infringement of U.S. Patent Nos. 6,151,604 and 6,163,775. The District Court found all the claims invalid under §101 because they were directed to the abstract ideas of “storing, organizing, and retrieving memory in a logical table” or “the concept of organizing information using tabular formats.” 

The two-prong test for patent-eligibility set forth in Alice, which held that abstract ideas implemented using a computer are not patent-eligible under §101 of the Patent Act, has been aggressively utilized by plaintiffs and the USPTO to invalidate whole swaths of computer software-related patents and patent applications, which previously had been presumed to contain patent-eligible subject matter. Under the Alice two-prong test, the claim at issue was initially examined to determine if it is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If the answer to the initial examination was “yes,” then the claim was further examined to determine if any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to something more than the judicial exception. Notably, a generic computer implementation of an otherwise abstract process does not qualify as “something more.”

In a victory for other software-based patent holders, the Enfish court held that the District Court judge's description of the claimed invention described “the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to §101 swallow the rule.” This language echoes the frustration of software-based patent owners who have argued that the post-Alice application of the “abstract idea” portion of the Alice two-pronged test has been transmogrified to a test under which almost any software patent could be found invalid. 

The Enfish court stressed that “we do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two” of the Alice two-pronged test. In determining whether claims are directed to a patent-ineligible concept, the Enfish court emphasized that “the ‘directed to’ inquiry applies a stage-one filter to claims, considered in light of the specification, based upon whether their character as a whole is directed to excluded subject matter.”

In Conclusion

The question now is, does this ruling amount to a reframing of the Alice two-prong test as it has been applied by many district courts, and to numerous reviews at the USPTO, who have found that many software-related inventions are almost always considered invalid subject matter? Positively, the Enfish ruling may now allow a software-based patent to survive the Alice challenge as not merely being an “abstract idea” and in doing so may involve determining whether the invention improves the operation of a computer or technological process. As the Federal Circuit directed here in Enfish, the crucial component in the process is to articulate that the claims are directed to a “specific improvement to computer functionality.”

This decision now gives patent holders another leg to stand on to protect their software inventions. How the district courts and the USPTO react to this recent decision, we optimistically await.

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