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Fed. Cir. Takes a More Permissive Stance on Software Patent Eligibility

In 2014, the Supreme Court ruled that certain software patents were "abstract ideas," ineligible for patent protection, despite requiring the use of a computer for implementation. In the subsequent years, that decision, Alice Corp. v. CLS Bank, and the two-part test it established, has been used to invalidate a host of software patents. Yet, in a handful of decisions, the Federal Circuit has taken a more permissive approach, reversing lower court invalidations and holding that the abstract idea test did not render specific software patents ineligible.

The Federal Circuit did so again this Tuesday, reversing the invalidation of patents that were "parts of a system designed to solve an accounting and billing problem faced by network service providers," and exposing a growing rift between the Federal Circuit judges.

Not Exactly a Straightforward Framework

The case involved a dispute between two telecom software companies, Amdocs (Israel) Ltd. and Openet Telecom Inc. Amdocs accused Openet of violating four of its patents relating to software that helps service providers monitor consumer data usage. (Yes, these are the people you can blame for your cellphone data overages charges.) The district court ruled that those patents were directed at an abstract idea and thus ineligible under the framework established by Alice Corp and its precursor, Mayo Collaborative Services v. Prometheus Labs.

Under step one of Alice/Mayo, courts look at whether a patents claim is "directed to one of those patent-ineligible concepts." Under step two, they look for an "inventive concept" that is "sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself."

But such analysis isn't always so cut and dry, Judge S. Jay Plager wrote:

Whether the more detailed analysis is undertaken at step one or at step two, the analysis presumably would be based on a generally-accepted and understood definition of, or test for, what an 'abstract idea' encompasses. However, a search for a single test or definition in the decided cases concerning § 101 from this court, and indeed from the Supreme Court, reveals that at present there is no such single, succinct, usable definition or test.

And from there, the court, with Judge Plager writing for the two-judge majority and Judge Jimmie V. Reyna dissenting, surveyed the patents that survived Alice/Mayo. The common thread, the court found, was that a patent like Amdocs' "entails an unconventional technological solution (enhancing data in a distributed fashion) to a technological problem (massive record flows which previously required massive databases)."

Call Me Crazy, But Shouldn't Step One Come First?

In so ruling, the court seemed to elide step one of the typical framework. "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,'" the court wrote.

That's not, Judge Reyna argued in his dissent, how the step system is supposed to work. The court should not "avoid determining whether the asserted claims are directed to an abstract idea, or even identifying what the underlying abstract idea is." The first step in the Alice/Mayo framework must come first, Reyna insisted, and only then should the court move on to the question of sufficiency.

With the Federal Circuit finding that the claims are patent eligible, the case now returns to district court to determine whether the patents are actually valid. The growing disagreement in the Federal Circuit, however, remains.

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