Summary

The Federal Circuit Court of Appeals has issued a decision in BASCOM Global Internet Services, Inc., v. AT&T Mobility LLC, No. 2015-1763 (Fed. Cir. June 27, 2016) finding that asserted content-filtering system claims are not ineligible for patent protection, and vacating a district court’s order dismissing a complaint for patent infringement.  The Federal Circuit held that claims directed to “a specific, discrete implementation of the abstract idea of filtering content” are patent-eligible subject matter under 35 U.S.C. § 101 and the framework as set forth in the Supreme Court’s decision in Alice Corp. Pty Ltd. v. CLS Bank Int’l, ___ U.S. ___, 134 S.Ct. 2347, 2355 (2014).  In reaching this decision, the Federal Circuit provided guidance as to how courts and the USPTO should consider whether the claims recite an “ordered combination of limitations” sufficient for eligibility under the second step of the Alice test.  More specifically, the court found that the patent was directed to the abstract idea of filtering content, but that the claims contained an inventive concept that transformed the abstract idea into a patent-eligible invention.

The Technology at Issue

Plaintiff-appellant BASCOM provides individually-customizable filtering at remote Internet Service Provider servers by taking advantage of the technical capability of certain communication networks.  The claimed technology overcame some of the disadvantages of the prior art system by allowing users to customize how requests for Internet content from their own computers are filtered while the filter is located on a remote server to avoid being “modified or thwarted by a computer literate end-user.”

The District Court’s Decision

BASCOM sued AT&T Inc., AT&T Mobility LLC and AT&T Corp. (collectively, AT&T) alleging that AT&T infringed its U.S. Patent No. 5,987,606.  The U.S. District Court for the Northern District of Texas granted AT&T’s motion to dismiss BASCOM’s suit after ruling that each claim of the ‘606 patent was invalid under 35 U.S.C. §101. 

The Federal Circuit’s Analysis of the Abstract Idea Exclusion

Under the Supreme Court’s Alice decision, the Federal Circuit, district courts, and the U.S. Patent and Trademark Office employ a two-step process for assessing whether claims are directed to patentable subject matter under Section 101, namely:

1. “determine whether the claims at issue are directed to a patent-ineligible concept;” and
2. “consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.”

BASCOM at 11, quoting Alice.

In assessing the BASCOM claims, the Federal Circuit first acknowledged that software-related patents may be eligible under “both steps of the test Alice set out.”    The Federal Circuit recognized that there may be “close calls” whether the claims are directed to a patent-ineligible concept.   In such cases, the Federal Circuit stated:

[A]n analysis of whether there are arguably concrete improvements in the recited computer technology could take place under step two.  […]  That is, some inventions’ basic thrust might more easily be understood as directed to an abstract idea, but under step two of the Alice analysis, it might become clear that the specific improvements in the recited computer technology go beyond well-understood, routine, conventional activities and render the invention patent-eligible.

Under step one of the Alice framework, the Federal Circuit found that this case “presents a close call about how to characterize what the claims are directed to”, and proceeded to consider the claims under step two.

Considering step two of the Alice framework, the Federal Circuit stated that “the inventive concept may arise in one or more of the individual claim limitations or in the ordered combination of the limitations.”  The panel agreed with the district court that the limitations of the claims, “taken individually, recite generic computer, network and Internet components, none of which is inventive by itself.”  

However, the Federal Circuit disagreed with the district court in its analysis of “the ordered combination of limitations.”  The panel noted:

The district court’s analysis in this case, however, looks similar to an obviousness analysis under 35 U.S.C. § 103, except lacking an explanation of a reason to combine the limitations as claimed. The inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art. As is the case here, an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.

Reviewing the limited record, the Federal Circuit concluded that the claimed invention “cannot be said, as a matter of law, to have been conventional or generic” and thus is patent-eligible. 

In reaching its decision, the panel noted that the claims “do not merely recite the abstract idea of filtering content along with the requirement to perform it on the Internet, or to perform it on a set of generic computer components.”  The panel further justified its decision by stating that “the claims [do not] preempt all ways of filtering content on the Internet; rather, they recite a specific, discrete implementation of the abstract idea of filtering content.” 

The court buttressed its decision by noting that the district court was considering a motion to dismiss, which is typically filed early in litigation before discovery or claim construction.  The panel noted that, “construed in favor of the nonmovant –BASCOM—the claims are more than a drafting effort designed to monopolize the abstract idea.”  Judge Newman filed a concurring opinion expressing her concerns about the increasingly frequent dispositions of patent suits by district courts at the pleading stage, i.e., on motions to dismiss, based on Section 101 challenges.  Judge Newman stated that “these cumbersome procedures for separate determinations of patent eligibility and patentability have added to the cost and uncertainty of patent-supported commerce, with no balancing benefit.”  She urged district courts to determine “patentability, instead of eligibility based on abstract idea, when the patentability/validity determination would be dispositive of the dispute.” 

Patent-Eligibility for Computer-Implemented Inventions

This decision provides another helpful fact pattern for application of step two of the Alice inquiry that can be used by both patent applicants and patentees.  Additionally, the decision requires a more rigorous explanation of why an ordered combination of limitations is not sufficient to satisfy the Alice test.  The requirement for a more rigorous explanation is similar to the Federal Circuit’s requirement for demonstrating obviousness.  This standard should apply with equal force in the USPTO. 

The BASCOM decision also provides a corollary to the Federal Circuit’s 2014 DDR Holdings decision.  DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014).  In DDR Holdings, the Federal Circuit held that the claims, when taken together as an ordered combination, “recite[d] an invention that is not merely the routine or conventional use of the Internet” and satisfied the step two of Alice inquiry without elaboration and/or instruction, but did not provide explicit guidance on the standard for rejecting a patentee’s assertions regarding an “ordered combination.” The BASCOM decision provides such a standard through the obviousness analysis analogy. 

Moreover, the decision may provide some support for giving the patentee the benefit of the doubt as to patent eligibility in the pleading stage of patent litigation.  Judge Newman went even further, appearing to suggest that the district court should be cautious in granting motions to dismiss based solely on Section 101 challenges.  Time will tell whether district courts will refrain from dismissals based on Section 101. 

In conclusion, the BASCOM decision provides a favorable decision that applicants and patentees can cite in seeking to obtain and defend claims directed to computer-implemented inventions.  The BASCOM and DDR Holdings decisions under step two of the Alice test stand together with the Federal Circuit’s recent Enfish, LLC v. Microsoft Corp. decision under step one of the Alice test, and counterbalance many post-Alice decisions that provided examples of claims that were not patentable under Alice. 

In view of the continuing legal developments regarding the patentability of computer-implemented inventions, applicants and patentees continue to be well-served by developing a patent portfolio that offers compelling narratives behind inventions that provide improvements over, and solutions to disadvantages of, prior art technology.