Federal Circuit Frames Test for Patent-Eligibility

08 September 2014 Personalized Medicine Bulletin Blog

Personalized medicine relies on diagnostics to analyze a patient for individualized therapy and for monitoring a patient’s health status. Some diagnostic tests use natural products, for example gene sequences, either as the target of the diagnostic test or as a tool to identify a genetic trait or anomaly. Personalized medicine also may rely on the analysis and management of large data sets using computer processes and analytics to identify correlations between a therapy and an individual’s genetic or clinical markers.

The U.S. Supreme Court’s recent decisions regarding patent-eligibility (Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013) (“Myriad“) and Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012) (“Mayo“) and to a lesser extent Alice Corp. Pty. Ltd. v. CLS Bank Intl, 134 S. Ct. 2347 (2014) (“Alice“), have challenged the personalized medicine and pharmaceutical industries by limiting patent protection for important technologies, for example diagnostic tests, isolated natural products, and computer-implement methods for the analysis of large data sets.

On September 3, 2014, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) in Buysafe, Inc. v. Google, Inc., (“Buysafe“) provided an analysis of Mayo, Myriad and Alice in the context of a computer-implemented method for guaranteeing a party’s performance of its online transaction. While the facts of Buysafe are most relevant to analyzing computer-implemented patent claims for patent-eligibility, the decision may hint at a new universally applicable Federal Circuit test for determining patent-eligibility.

Safe Transaction Guaranty

U.S. Patent No. 7,644,019 (“’019 Patent”), entitled Safe Transaction Guaranty issued on January 5, 2010, is assigned to Buysafe, Inc.  The ’019 Patent is directed to systems and methods to provide safe online commercial transactions. As noted in the patent abstract, “[w]hen a safe transaction service provider receives a request from a first party for obtaining a transaction performance guaranty service, the safe transaction service provider processes the request by underwriting the first party. If the underwriting is successful, the transaction performance guaranty service is provided to the first party which binds a transaction performance guaranty to an online commercial transaction involving the first party and guarantees the first party’s performance when the first party and a second party enter the online transaction.”

Buysafe sued Google, Inc. (“Google”) alleging infringement of claims 1, 14, 39, and 44 of the ’019 Patent. Google moved for judgment on the pleadings, arguing that the claims were invalid under 35 U.S.C. Section 101.

Claims 1 and 14 were agreed to control the analysis of claims 39 and 44 that depended upon 1 and 14 respectively. Claims 1 and 14 recite:

1. A method, comprising:

receiving, by at least one computer application program running on a computer of a safe transaction service provider, a request from a first party for obtaining a transaction performance guaranty service with respect to an online commercial transaction following closing of the online commercial transaction;

processing, by at least one computer application program running on the safe transaction service provider computer, the request by underwriting the first party in order to provide the transaction performance guaranty service to the first party,

wherein the computer of the safe transaction service provider offers, via a computer network, the transaction performance guaranty service that binds a transaction performance guaranty to the online commercial transaction involving the first party to guarantee the performance of the first party following closing of the online commercial transaction.

14. The method according to claim 1, wherein the transaction performance guaranty is provided in one form of: a surety bond; a specialized bank guaranty; a specialized insurance policy; and a safe transaction guaranty provided by the safe transaction service provider.

Well-Known and Conventional Technology

The district court granted Google’s motion for judgment on the pleadings, holding that the asserted claims do not satisfy 35 U.S.C. Section 101. The district court determined that the patent claims the well-known and widely understood concept of a third party guarantee of a sales transaction and then applied it using a conventional computer and the Internet. The district court stated that it made no difference that the transaction attaches only when that transaction closes. The district court also noted that the computer was used only for processing a basic process of any general purpose computer. Buysafe appealed to the Federal Circuit.

Inventive Concept and Patent-Eligibility

The Federal Circuit affirmed the district court’s holding that the claims were invalid for falling outside 35 U.S.C. Section 101, noting that the district court’s approach was consistent with the U.S. Supreme Court’s recent decision in Alice Corp. Pty. Ltd. v. CLS Bank Intl, 134 S. Ct. 2347 (2014). Slip Op. at 2. However the Federal Circuit, in its analysis of the issue, drew upon the three recent U.S. Supreme Court decisions addressing patent-eligibility across the three excluded categories: natural phenomena (Myriad); laws of nature (Mayo); and abstract ideas (Alice).

The Federal Circuit stated that the U.S. Supreme Court’s interpretation of Section 101 contains exceptions to patenting, namely laws of nature, natural phenomena, and abstract ideas, no mater how “[g]roundbreaking, innovative, or even brilliant.” Slip Op. at 4, quoting Myriad at page 2117. The Federal Circuit also acknowledged that while the Supreme Court’s recent decisions regarding patent-eligibility noted concerns over patent law’s ability to tie up the future use of technologies, the Supreme Court’s decisions failed to identify what would qualify as a Section 101 exclusion beyond the three categories. The Federal Circuit noted that nevertheless, the Supreme Court has created a framework for identifying claims that fall outside Section 101. The Federal Circuit stated that:

“A claim that directly reads on matter in the three identified categories is outside section 101. But the provision also excludes the subject matter of certain claims that by their terms read on a human-made physical thing (“machine, manufacture, or composition of matter”) or a human-controlled series of physical acts (“process”) rather than laws of nature, natural phenomena, and abstract ideas. Such a claim falls outside section 101 if (a) it is “direct to” matter in one of the three excluded categories and (b) “the additional elements” do not supply an “inventive concept” in the physical realm of things and acts - a “new and useful application” of the ineligible matter in the physical realm – that ensures that the patent is on something “significantly more than” the ineligible matter itself. This two-stage inquiry requires examination of claim elements “both individually and “as an ordered combination”.”

Slip Op. at 6 (internal citations omitted).

The Federal Circuit stated that in applying these principles in the context of a computer-implemented method that could fall within the abstract idea exclusion to patent-eligibility, two aspects of the Supreme Court’s decisions are important: (1) what type of matter the Court has held to come within the category of abstract of idea and (2) what invocations of a computer in a claim are insufficient to pass the test of an inventive concept in the application of the abstract idea.

For the case in hand, the Federal Circuit noted that the relevant Supreme Court cases are Bilski v. Kappos, 561 U.S. 593 (2010) and Alice. The court noted that with respect to the second question, the Supreme Court in Alice made clear that the mere use of a general purpose computer to implement the claimed method does not make the claim patent-eligible under Section 101. The court stated that “the claims’ invocation of computers adds no inventive concept. The computer functionality is generic – indeed, quite limited: a computer receives a request for a guarantee and transmits an offer of guarantee in return. There is no further detail. That a computer receives and sends the information over a network – with no further specification – is not even arguably inventive.” Slip Op. at 9.

An Evolving Analysis

Many in the industry are struggling to identify what criteria identifies a new discovery -however groundbreaking, innovative, or even brilliant – for patent protection under Mayo, Myriad, and Alice. Based on the Federal Circuit’s Buysafe decision, patent applicants should identify the inventive concept of the claimed invention and determine whether the application of that concept in the realm of things and acts, ensures that the claimed invention is something more than the ineligible matter itself.

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