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A fuzzy line being drawn by the CAFC to circumscribe “abstract ideas”

January 26, 2012

A trio of recent Court of Appeals for the Federal Circuit (CAFC) cases, including last week’s decision in DealerTrack v. Huber, give some insight into what the Court considers a patentable process versus an unpatentable “abstract idea” in the United States.  Unfortunately, the line between the two is fuzzy at best.

When the United States Supreme Court (USSC) decided Bilski v. Kappos in 2010, the judgment raised more questions than it answered.  Business methods weren’t unpatentable per se, but the Court did not provide a definitive test to determine whether a particular claimed method was patentable.  The Court restated that there were specific long-standing exclusions to patentable subject-matter, and that Bilski’s claims fell afoul of the exclusion for “abstract ideas”.  No test or definition was provided that would help identify if a particular claim was directed to an abstract idea.

Shortly after the USSC decision, the CAFC interpreted Bilski in the Research Corp. v. Microsoft case.  In that decision, the claims in question were directed to methods for halftoning images.  An example claim was:

1. A method for the halftoning of gray scale images by utilizing a pixel-by-pixel comparison of the image against a blue noise mask in which the blue noise mask is comprised of a random non-deterministic, non-white noise single valued function which is designed to produce visually pleasing dot profiles when thresholded at any level of said gray scale images.

The CAFC determined that these claims were not directed to an abstract idea, unlike Bilski’s claims to a process for hedging in energy markets.  In doing so, the CAFC cautioned that a finding that claims are directed to abstract ideas,

“…should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.” (p. 14)

The Court went on to note that the claimed process had application in computer technology (rendering images), addressed a need to accomplish halftone rendering, and some implementations would involve film, memory, printers, display devices, etc.  Finally, the judgment noted that, “inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.”

The CAFC then faced a tougher case in Ultramercial v. Hulu.  In this case, the claims were directed to a method for distributing products over the Internet using a “facilitator”.  The main claim had a lengthy list of eleven steps setting out the acts the facilitator takes in receiving media, selecting a sponsor message to be associated with the media, offering the media for sale, restricting access to it, offering free access on condition that the sponsor message is viewed, etc.  This looked like a claim that was much closer to a pure business method, and far removed from the classic “technical solution” to a “technical problem” (to paraphrase the European test).

Nonetheless, the CAFC found that the Ultramercialclaim was proper subject-matter and was not excluded as an “abstract idea”.  The Court ruled that the patent was an attempt to remedy problems with prior art banner advertising by devising a method of advertising that would force consumers to view an advertisement before accessing a media product.  The court notes that “by its terms” the claim purports to improve existing technology in the marketplace and invokes computers and applications of computer technology (in fact, very little computer technology is recited in the claim).  Although the Court acknowledges that “advertising-as-currency” is an abstract idea, this claim was considered a practical application of that abstract idea and, thus, not excluded as proper subject-matter.  Among the factors considered was the fact that implementation of the idea is “likely to require intricate and complex computer programming”.

After Ultramercial it was not clear where the CAFC would find an “abstract idea”.  The DealerTrack decision provides one example.  DealerTrack’s patent claimed a process for automating the credit application process at a car dealership.  The basic idea was that a central ‘clearinghouse’ would receive the electronic credit application data from a remote device, forward it to credit institutions (remote funding source terminal devices), and forward a funding decision back to the remote device.  Claim 1 included a set of alternative mechanisms for automating the sending of the credit application to more than one credit institution (serially, in parallel, conditionally, etc.).

The CAFC rejects the claims under 35 U.S.C. 101, stating, “we are compelled to conclude that the claims are invalid as being directed to an abstract idea preemptive of a fundamental concept or idea that would foreclose innovation in this area.”  The Court finds that the claims describe the basic function of a clearinghouse (receive data, forward to others selectively, return a reply).  The fact that the preamble of the claim recites “computer-aided” was dismissed as irrelevant, since the computer does not play a significant part in permitting the claimed method to be performed.

The Court distinguished Ultramercial, noting that the claims in that case featured “a practical application with concrete steps requiring an extensive computer interface”.  The fact that DealerTrack’s patent was directed to the car loan application process was also unpersuasive.  Although directed to a particular use, the claim was attempting to cover a broad and abstract idea.

The differences between the claims at issue in Ultramercial and DealerTrack are not readily apparent. The claims in Ultramercial actually make little or no reference to computer hardware or computer implementation details.  It is also not clear that the computer programming involved in implementing DealerTrack’s system would be that much more simple than the programming to implement Ultramercial’s system.  Moreover, why should the complexity of the programming make any difference?

It seems as though the CAFC considered DealerTrack’s claims to be “too broad”, thus raising concerns that they would pre-empt all use of the concept of being a clearinghouse for credit applications, whereas Ultramercial’s tying of access to media products to advertisement viewing was a “practical application” of an abstract concept to remedy a problem with click-through rates in online advertising and, thus, was patent eligible.  Ultimately, it is very difficult to reconcile these cases and see why Ultramerical’s claims are any less “pre-emptive” than DealerTrack’s claims.