Recently, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion in Beteiro, LLC v. DraftKings Inc.[1] This case is yet another case where the Federal Circuit upheld invalidity under § 101. Here, the patents in question were directed to monitoring gaming / gambling activities at various physical locations, primarily with the idea that a user can be located in one location, but place wagers at a computer in a different location.
In my view, the opinion illustrates what is, at best, a strained § 101 analysis. The court simply could not get past what it viewed as a substantial imbalance of non-technical content to technical content in the specification. Notwithstanding, though, there are certainly ways in which Beteiro could have better structured their claims and specification to withstand § 101 scrutiny. Herein, I'll briefly discuss both of these points.
Case Summary
As a preliminary point, I think it's prudent to at least briefly summarize the procedural posture of the case and the Federal Circuit's decision. The appeal to the CAFC arose based on multiple lawsuits filed by Beteiro against various gaming entities (DraftKings, PointsBet, BetMGM, Betfair, etc.) in the District of New Jersey. In those lawsuits, Beteiro asserted patent infringement of four different patents. Worth noting, despite claiming priority back to applications from 2002, 2003, and 2008, each of the asserted patents was filed in 2016 or later (i.e., each of the asserted patents was prepared and filed after the U.S. Supreme Court's decision in Alice Corp. v. CLS Bank International). Notwithstanding, each of the defendants (now appellees) filed a motion to dismiss alleging that the asserted patents were invalid under § 101. The District Court agreed and Beteiro appealed to the CAFC thereafter.
Claim 2 of U.S. Patent No. 10,255,755 was deemed by the parties, the District Court, and the CAFC as representative of all the asserted claims for purposes of § 101 analysis. This claim recites:
2. A computer-implemented method, comprising:
detecting, with or using a computer which is specially programmed for processing information for providing for a placement of a bet on or regarding a gaming activity, a gambling activity, or a sporting event, a posting of information regarding the gaming activity, the gambling activity, or the sporting event;
generating, with or using the computer, a notification message regarding the gaming activity, the gambling activity, or the sporting event;
initiating, with or using the computer, a communication link with a first communication device and transmitting the notification message to the first communication device as an electronic transmission, or transmitting, from the computer, the notification message as an electronic mail message, wherein the electronic mail message is received by or received at a first communication device, wherein the first communication device is associated with an individual;
receiving, with the computer, a bet message transmitted from the first communication device or from a second communication device, wherein the second communication device is associated with the individual, and further wherein the first communication device or the second communication device comprises a global positioning device, wherein the global positioning device determines a position or location of the first communication device or the second communication device, and further wherein the bet message contains information regarding a bet to be placed on or regarding the gaming activity, the gambling activity, or the sporting event, and information regarding the position or location of the first communication device or the second communication device; and
determining, with or using the computer, whether the bet is allowed or disallowed using the information regarding the position or location of the first communication device or the second communication device and, if the bet is allowed, processing information for placing the bet for or on behalf of the individual, or, if the bet is disallowed, processing information for disallowing the bet [emphases added].
The above-emphasized portions are where the CAFC focused the bulk of its analysis under § 101. After said analysis, the CAFC ultimately affirmed the determination of invalidity.
Court's § 101 Analysis
As is rote at this point, in order to analyze whether a claimed invention is directed to patent-eligible subject matter, the Federal Circuit applied the Alice/Mayo test (i.e., Step 1 -- Is the claim directed to a process, machine, manufacture, or composition of matter; Step 2A -- Is the claim directed to a judicial exception to eligibility, such as an abstract idea; and Step 2B -- Does the claim amount to significantly more than the judicial exception to eligibility).[2] It bears noting that the patent examiner who examined these patent applications explicitly evaluated eligibility for the claims under § 101 and found them patent-eligible based on their recitation of a particular machine or processor.
Step 2A
Under Step 2A of the Alice/Mayo test, the CAFC agreed with the District Court that the claims were directed to the abstract idea of "exchanging information concerning a bet and allowing or disallowing the bet based on where the user is located." In doing so, the CAFC indicated that the claims include many alleged "well-settled indicators of abstractness." Setting aside the fact that that phrase borders on word salad, these so-called "indicators" included: (1) the claims broadly reciting generic steps of detecting information, generating and transmitting a notification based on the information, receiving a message, determining, and processing information; (2) the claims being drafted using largely result-focused functional language, while containing no specificity about how the purported invention achieves the results; (3) the claims being analogous to claims held abstract in other CAFC cases; and (4) the claims being analogous to longstanding "real-world" activities.
Regarding item (1) above -- Like many claims, if you abstract away all the substance and merely recite some gerunds, claims can quickly devolve into sounding rather patent-ineligible. Regarding item (2) above -- Whether something is described overly functionally is rather subjective. Beteiro's claims recite "a computer," "a first communication device," "a second communication device," and "a global positioning device" and also describe communications among those devices. Obviously, more detail can always be provided in a claim, but not without the cost of narrowing the claim. Beteiro did not want to limit their claims to any particular type of communication protocol or type of communication devices, nor did Beteiro want to provide any additional unnecessary details about the "computer" or "communication devices." Further, clearly Beteiro did not need to incorporate such narrowing details (at least in the patent examiner's opinion) in order to demonstrate that the claims were new and non-obvious. Hence, the CAFC demanding that additional technical details be added to the claims for § 101 purposes when Beteiro already recited multiple devices performing different acts seems dubious.
The CAFC's claim in item (3) is questionable, at best. The Federal Circuit referenced Affinity Labs of Tex., LLC v. DIRECTV, LLC and Intell. Ventures I LLC v. Capital One Bank (USA) as allegedly containing analogous claims to Beteiro's. The claims at issue in those cases, however, do not refer to any sort of "global positioning device" and are certainly much less tailored to communication protocols between devices.[3] For example, the claim considered in Affinity Labs was:
1. A broadcast system, comprising:
a network based resource maintaining information associated with a network available representation of a regional broadcasting channel that can be selected by a user of a wireless cellular telephone device; and
a non-transitory storage medium including an application configured for execution by the wireless cellular telephone device that when executed, enables the wireless cellular telephone device:
to present a graphical user interface comprising at least a partial listing of available media sources on a display associated with the wireless cellular telephone device, wherein the listing includes a selectable item that enables user selection of the regional broadcasting channel;
to transmit a request for the regional broadcasting channel from the wireless cellular telephone device; and
to receive a streaming media signal in the wireless cellular telephone device corresponding to the regional broadcasting channel, wherein the wireless cellular telephone device is outside of a broadcast region of the regional broadcasting channel, wherein the wireless cellular telephone device is configured to receive the application via an over the air download.
Likewise, the claim considered in Intell. Ventures recites:
1. A system for providing web pages accessed from a web site in a manner which presents the web pages tailored to an individual user, comprising:
an interactive interface configured to provide dynamic web site navigation data to the user, the interactive interface comprising:
a display depicting portions of the web site visited by the user as a function of the web site navigation data; and
a display depicting portions of the web site visited by the user as a function of the user's personal characteristics.
These claims are only analogous to Beteiro's claims at a relatively high level of abstraction. For example, neither relate to gambling / gaming in any sense. Further, the primary purpose of both claims above is to determine what is displayed to a user, whereas the primary purpose of Beteiro's claims is to determine whether to allow or disallow a bet.
Regarding claim (4) -- Analogizing claim language to "real-world" activities, while sometimes done in § 101 cases, has always struck me as a bit ironic. Namely, if claims are more akin to physical "real-world" activities, those claims are somehow less patent-eligible. The "real-world" is the exact opposite of "abstract." Thus, this flavor of analysis is essentially equivalent to saying "the claimed invention is not abstract, therefore it is an abstract idea and patent-ineligible." It simply strains credulity.
To illustrate the "real-world" nature of Beteiro's claims, the CAFC points to an analogy posited by the District Court of a teller at a casino that straddles state lines. This analogy is absurd. As an initial point, I'm not aware of any real casinos that actually fit this description (i.e., where you can place bets in two different states within the same casion). In fact, I'd assume casinos intentionally avoid this issue so they don't have to simultaneously deal with multiple sets of state laws. Hence, this issue rarely, if ever, comes up in the context of placing physical bets at a teller. Oppositely, with modern technology, the issue of confirming location comes up in >90% of all sports bets placed.[4] Further, even if the scenario proposed by the District Court / CAFC did come up in reality, there would be no "global positioning device" or "communication device(s)" needed or used because the bettor and the teller would be in the same physical location. Hence, any attempted patent claim to this fabricated "real-world" scenario would look totally different than Beteiro's claims.
On behalf of eligibility, Beteiro argued that their claims involved technological improvements and, therefore, are not directed to abstract ideas. According to the CAFC, though, because the claims do not provide an improvement to the way computers operate nor do they solve a technical problem, the claims remain abstract ideas.
Step 2B
Under Step 2B of the Alice/Mayo test, Beteiro argued that the inclusion of a global positioning system (GPS) device in their claims was unconventional, which should provide for a path to patentability. The CAFC attempted to refute this point by referring to the relatively limited discussion of GPS in the specification. In particular, the lengthy specifications of the asserted patents only includes a single sentence concerning a mobile phone with an equipped GPS device. Given this, the CAFC concluded that the inclusion of the GPS device on a mobile phone must have been conventional at the time. This is, at the very least, a dramatic departure from the CAFC's Berkheimer decision.[5] Regardless, in the CAFC's view, because the inclusion of a GPS on a mobile phone was routine, conventional, and well-understood, the inclusion of the GPS cannot convert a claim that is otherwise patent-ineligible into patent-eligible.
This also raises an interesting procedural point. Because this appeal arises from a motion to dismiss, any factual disputes need to be resolved in Beteiro's favor. Further, Beteiro contended in its complaint that the use of GPS for gaming was unconventional in 2002 (their earliest priority date), and provided evidence to support this. In 2002, for example, the iPhone had yet to be created. Even so, the CAFC disregarded this contention based solely on what was (and was not) in the specification. In doing so, the court cited to the recent AI Visualize case:[6]
Conclusory allegations, or those "wholly divorced" from the claims or the specification, cannot defeat a motion to dismiss. And a patentee that emphasizes a claim's use of certain technology, for example, a general-purpose computer, fails at step two when the intrinsic record establishes that the technology is conventional or well-known in the art.
While the Beteiro patents may not have described how one incorporates GPS devices into mobile phones, in detail, I think the court's reliance on the above precedent borders on dubious. Beteiro's claims did specifically recite a "communication device" that "comprises a global positioning device, wherein the global positioning device determines a position or location of the first communication device or the second communication device." Hence, Beteiro's allegations were not "'wholly divorced' from the claims." Still, the court drew a distinction between Beteiro's complaint and the complaint in Cellspin Soft, Inc. v. Fitbit, Inc. where the contentions were purportedly much more rooted in the patent-in-suit.[7]
Lastly, it is perhaps worth mentioning that the CAFC rightly wholly disregarded the patent examiner's previous consideration of § 101 issues under well-established law. Regardless, though, the patent examiner apparently applied pre-Alice caselaw and relied on the existence of one or more physical components in deciding that the claims were patent-eligible. This was clearly an overbroad view by the patent examiner.
Suggested Improvements to Bolster Claims Under § 101
The above clearly highlights, yet again, just how sticky § 101 is for patentees, even when physical devices (e.g., mobile devices and/or GPS sensors) are involved. Perhaps, though, there are some ways that Beteiro could have reframed their specification or claims that would have provided a stronger bulwark for a § 101 analysis. In that vein, let's highlight a few of them.
One step that Beteiro could have taken, and which is explicitly contemplated by the CAFC opinion, would be to bolster the description of the GPS device in the specification. Had the specification dedicated more space to technical details about the inclusion of the GPS device in a mobile device, the court clearly thinks that would help patentability (e.g., by demonstrating how the GPS device is a technical improvement) or, at the very least, would have provided fodder to get over a motion to dismiss under § 101 (i.e., because the additional technical details could raise a genuine question of material fact over whether inclusion of a GPS in a mobile device was truly well-understood, routine, and conventional).
There are likely other technical details besides how a GPS device is integrated into a mobile device that could have been included in the specification to show that the use of a GPS device in the claimed way was unconventional. For example, additional details on the ways in which the mobile device communicates the measured GPS data to the gaming facility computer (e.g., message communication protocols, formats in which the GPS data is communicated, where the GPS data is stored, how the GPS data is accessed / used by the gaming facility computer, etc.) could have been included. Such additional details would not only serve to demonstrate the level to which the inventors had considered the importance of communicating the GPS data, but would also show why the inclusion of GPS data is central to the claimed invention serving its intended purpose. Any of these technical details about the GPS could have been explicitly recited in the claims, as well, if Beteiro wanted to further strengthen their § 101 position.
Additionally, as is sage advice these days in almost any patent application that might need to pass muster under § 101, the specification could have laid out a technical problem to be solved and how the claims provide a technical solution. The claims and specification clearly address what is, in the eyes of the CAFC, non-technical problems (e.g., gambling jurisdiction and legal compliance). This is simply not helpful based on current § 101 jurisprudence. Instead, if the specification had couched the discussion in terms of the gaming facility computer being unable to reliably determine the location of the mobile device based on conventional messaging between the two, and then later provided the GPS device as a means of enabling a reliable determination of location in the invention, the court may have been more inclined to find that the claims amounted to "significantly more" (based on the claims providing an arguably technical solution to a technical problem). While this borders on quibbling about semantic differences, unfortunately, that is the present state of the law under § 101.
In addition to the changes to the specification described above, there are certainly some modifications that could have been made to the claims (many without requiring modification to the specification at all). One that I would suggest, and this is purely psychological, is to remove references to "gaming activity," "gambling activity," "sporting event," etc. from the claims. While these terms shouldn't impact a court's view or an examiner's view eligibility under § 101, they implicitly connote non-technical concepts to some readers. Thus, anecdotally, their inclusion makes patent-eligibility a bit more of an uphill battle. Hence, broadening the claims to only refer to things like "requests" and "confirmations" rather than "bets" could only help (at least in terms of § 101).
Conclusion
Ensuring compliance with jurisdictional regulations is of paramount importance to the gambling industry. Further, Beteiro's claimed invention was, at least in the eyes of the patent examiner, a novel and non-obvious way of doing so using a GPS device. While it may seem pedestrian to use a GPS device for such purposes by modern standards, in 2002, it was likely anything but. Still, the morass that is post-Alice § 101 has claimed yet another victim. If you're hoping to see more clarity in § 101 law soon, I wouldn't bet on it (pun intended).
Beteiro, LLC v. DraftKings, Inc. (Fed. Cir. 2024)
Panel: Circuit Judges Dyk, Prost, and Stark
Opinion by Circuit Judge Stark
[1] https://cafc.uscourts.gov/opinions-orders/22-2275.OPINION.6-21-2024_2337276.pdf
[2] Note that the CAFC opinion basically glosses over Step 1 of the Alice/Mayo test. Hence, what I am calling "Step 2A" is referred to as "Step 1" by the Federal Circuit and what I am calling “Step 2B” is referred to as "Step 2" by the Court. The nomenclature does not matter so much, but I prefer to go with the more traditional naming that contemplates the full eligibility analysis.
[3] Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253 (Fed. Cir. 2016); Intell. Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363 (Fed. Cir. 2015)
[4] https://www.gamingtoday.com/revenue/ (On July 14, 2024 – "In most markets, more than 90% of sports betting is online. For markets where mobile wagering is heavily favored, like New York and New Jersey, more than 90% of betting happens online")
[5] Berkheimer v. HP Inc., 890 F.3d 1369 (Fed. Cir. 2018) ("Whether something is well-understood, routine, and conventional to a skilled artisan at the time of the patent is a factual determination. Whether a particular technology is well-understood, routine, and conventional goes beyond what was simply known in the prior art. The mere fact that something is disclosed in a piece of prior art, for example, does not mean it was well-understood, routine, and conventional.")
[6] AI Visualize, Inc. v. Nuance Commc’ns, Inc., 97 F.4th 1371 (Fed. Cir. 2024)
[7] Cellspin Soft, Inc. v. Fitbit, Inc., 927 F.3d 1306 (Fed. Cir. 2019)
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