Patentee Content Extraction and Transmission (CET) owns U.S. Patent Nos. 5,258,855 (the '855 patent), 5,369,508 (the '508 patent), 5,625,465 (the '465 patent), and 5,768,416 (the '416 patent). The '508, '465, and '416 patents are continuations of the '855 patent, and in the words of the Federal Circuit, "share substantially the same specification."
CET filed infringement suits against Wells Fargo Bank, PNC Financial Services Group, Inc. (PNC) and various third parties in the United States District Court for the District of New Jersey. Diebold, Inc., supplier of the allegedly infringing equipment used by the defendants, joined the action as a cross-appellant. Diebold contended that CET engaged in tortious interference and violations of the RICO act due CET's infringement claims being baseless.
In the District Court, PNC filed a Rule 12(b)(6) motion to dismiss the case on the grounds that all asserted claims were invalid as patent-ineligible under 35 U.S.C. § 101. The District Court agreed, dismissing CET's complaint, and also dismissing Diebold's counter-claims against CET, because CET's actions were protected under the Noerr-Pennington doctrine (the act of petitioning the government -- including the filing of a lawsuit -- is immune from liability unless the litigation is a "sham").
CET appealed to the Federal Circuit and Diebold cross-appealed. Judges Dyk, Taranto, and Chen heard the case, with Judge Chen authoring the unanimous opinion.
Claim 1 of the '855 patent recites:
A method of processing information from a diversity of types of hard copy documents, said method comprising the steps of:
(a) receiving output representing a diversity of types of hard copy documents from an automated digitizing unit and storing information from said diversity of types of hard copy documents into a memory, said information not fixed from one document to the next, said receiving step not preceded by scanning, via said automated digitizing unit, of a separate document containing format requirements;
(b) recognizing portions of said hard copy documents corresponding to a first data field; and
(c) storing information from said portions of said hard copy documents corresponding to said first data field into memory locations for said first data field.
The Court described the claimed invention (of the '855 patent as well as the other three patents) as "a method of 1) extracting data from hard copy documents using an automated digitizing unit such as a scanner, 2) recognizing specific information from the extracted data, and 3) storing that information in a memory." Further, "[t]his method can be performed by software on an automated teller machine (ATM) that recognizes information written on a scanned check, such as the check's amount, and populates certain data fields with that information in a computer's memory."
In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-prong test for the patent-eligibility of claims under 35 U.S.C. § 101. First, one determines whether a claim is directed to a patent-ineligible law of nature, natural phenomenon, or abstract idea. Then, if the claim appears to be directed to such an exception, one is to determine whether the elements of the claim, considered both individually and as an ordered combination, are sufficient to ensure that the claim as a whole amounts to significantly more than the exception itself.
In applying the Alice test, the Court found that the claims were directed to the abstract idea of "1) collecting data, 2) recognizing certain data within the collected data set, and 3) storing that recognized data in a memory." The Court noted that such activities were "well-known" and have been performed by human beings, and banks, for some time. CET argued that the claims were not abstract because they involve a scanner, and "human minds are unable to process and recognize the stream of bits output by a scanner." Nonetheless, the Court did not find that this point distinguished the claims over those of Alice.
Moving on to the second prong of the test, the Court stated that "the asserted patents contain no limitations -- either individually or as an ordered combination -- that transform the claims into a patent-eligible application." The Court used CET's concession at oral argument "that the use of a scanner or other digitizing device to extract data from a document was well-known at the time of filing, as was the ability of computers to translate the shapes on a physical page into typeface characters" to conclude that "CET's claims merely recite the use of this existing scanning and processing technology to recognize and store data from specific data fields such as amounts, addresses, and dates." As a result, the Court found that there was no inventive concept to CET's use of a generic scanner, and that the claims failed to pass muster under § 101.
CET argued that the District Court erred when it held the claims to be patent-ineligible in the pleading stage of the suit. Invoking Ultramercial, Inc. v. Hulu, LLC, a recent case in which claims were invalidated as patent-ineligible on the pleadings, the Federal Circuit disagreed. In a conclusory fashion, the Court stated that "even when construed in a manner most favorable to CET, none of CET's claims amount to significantly more than the abstract idea of extracting and storing data from hard copy documents using generic scanning and processing technology." Accordingly, the Court found the dismissal of the case proper.
The Court next considered the counts of tortious interference and violations of the RICO act that Diebold brought against CET. Under the Noerr-Pennington doctrine, to overcome a plaintiff's presumptive immunity from liability when bringing a suit, the opposing party must establish that "not only that the litigation was objectively baseless, but also that the defendant subjectively intended to harm the plaintiff through the abuse of a governmental process itself, as opposed to harms flowing from the outcome of that process."
The Court found that CET's acts of filing for patent infringement were not objectively baseless because "the state of the law of § 101 was deeply uncertain at the time CET filed its complaints against Wells Fargo and PNC in 2012." Thus, the suits, though ultimately unsuccessful, were protected by the First Amendment, and Diebold's claims were dismissed.
As the post-Alice jurisprudence of the Federal Circuit continues to grow, some trends are emerging. First, while the Supreme Court found that use of a generic computing device to be insufficient to lift otherwise ineligible claims over the § 101 bar, the Federal Circuit has expanded that reasoning to similar uses of the Internet (Ultramercial) and now generic scanning devices.
Second, this decision illustrates a divide between the Federal Circuit and the USPTO's Patent Trial and Appeal Board (PTAB) regarding application of the Alice test. In U.S. Bancorp v. Solutran, Inc., the PTAB denied Covered Business Method Review (on the basis of alleged patent-ineligibility) of U.S. Patent No. 8,311,945, directed to scanning and processing paper checks.
Claim 1 of that patent recites:
A method for processing paper checks, comprising:
a) electronically receiving a data file containing data captured at a merchant's point of purchase, said data including an amount of a transaction associated with MICR information for each paper check, and said data file not including images of said checks;
b) after step a), crediting an account for the merchant;
c) after step b), receiving said paper checks and scanning said checks with a digital image scanner thereby creating digital images of said checks and, for each said check, associating said digital image with said check's MICR information; and
d) comparing by a computer said digital images, with said data in the data file to find matches.
The PTAB found that this claim was not directed to an abstract idea because the claim was directed to "a method of processing paper checks, which is more akin to a physical process than an abstract idea." Thus, despite claim 1 reciting "some fundamental economic practices . . . such as crediting an account for a merchant," the additional features of "receiving said paper checks and scanning said checks with a digital scanner and comparing by a computer said digital images . . . are not fundamental economic practices, mathematical algorithms, or basic tools of scientific and technological work."
Consequently, applicants need to be cautious -- claims that are found patent-eligible by the USPTO's interpretation of Alice could very well be found the opposite by a reviewing court's interpretation of that case.
Content Extraction and Transmission, LLC vs. Wells Fargo Bank (Fed. Cir. 2014)
Panel: Circuit Judges Dyk, Taranto, and Chen
Opinion by Circuit Judge Chen
