SAP America, Inc. (SAP) filed a declaratory judgment action in the Northern District of Texas, alleging that U.S. Patent No. 6,349,291 of InvestPic, LLC (InvestPic) was invalid under 35 U.S.C. § 101. The District Court invalidated the '291 patent during the pleadings stage. InvestPic appealed the ruling to the Federal Circuit.
Claim 1 of the '291 patent recites:
A method for calculating, analyzing and displaying investment data comprising the steps of:
(a) selecting a sample space, wherein the sample space includes at least one investment data sample;
(b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in a resampling process; and,
(c) generating a plot of the distribution function.
Other independent claims recite similar subject matter.
According to the Court, "the '291 patent states that 'conventional financial information sites' on the World Wide Web 'perform rudimentary statistical functions' that 'are not useful to investors in forecasting the behavior of financial markets because they rely upon assumptions that the underlying probability distribution function ('PDF') for the financial data follows a normal or Gaussian distribution.'" The Court goes on to observe that "[such an] assumption, the patent says, 'is generally false': 'the PDF for financial market data is heavy tailed (i.e., the histograms of financial market data typically involve many outliers containing important information),' rather than symmetric like a normal distribution." As a consequence, "statistical measures such as the standard deviation provide no meaningful insight into the distribution of financial data," and traditional "analyses understate the true risk and overstate the potential rewards for an investment or trading strategy." In other words, real-world financial data does not fit a so-called bell curve, and any statistics based on the incorrect assumption that it does will be flawed.
As a solution to this problem, the '291 patent "proposes a technique that utilizes resampled statistical methods for the analysis of financial data, which do not assume a normal probability distribution." Accordingly, this technique "estimates the distribution of data in a pool (a sample space) by repeated sampling of the data in the pool," with replacement. A bias parameter is used to "specify the degree of randomness in the resampling process." Doing so purportedly results in a more accurate sample distribution.
The Supreme Court's Alice Corp. v. CLS Bank Int'l case set forth a test to determine whether claims are directed to patent-eligible subject matter under 35 U.S.C. § 101. One must first decide whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If so, then one must further decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to "significantly more" than the judicial exclusion. But generic computer implementation of an otherwise abstract process does not qualify as significantly more. On the other hand, a claimed improvement to a computer or technological process is typically patent-eligible.
From the outset, one can see that InvestPic was fighting an uphill battle. Claim 1 is mainly limited to a mathematical calculation, and the problem domain is that of financial services. Both math and money have been previously viewed as being per se abstract ideas under Alice.
Of course, this observation was not lost on the Court, as it wrote "[t]he focus of the claims, as is plain from their terms, quoted above, is on selecting certain information, analyzing it using mathematical techniques, and reporting or displaying the results of the analysis." According to the Court, all of these aspects have been previously found to be abstract, such as in the Electric Power Group v. Alstom S.A. decision.
The Court also differentiated claim 1 from the patent-eligible claims of McRO, Inc. v. Bandai Namco Games America Inc. In the latter case, the claims "were directed to the creation of something physical – namely, the display of lip synchronization and facial expressions of animated characters on screens for viewing by human eyes." According to the Court, the improvement in McRO was in "how the physical display operated (to produce better quality images), unlike (what is present here) a claimed improvement in a mathematical technique with no improved display mechanism." Furthermore, McRO "had the specificity required to transform a claim from one claiming only a result to one claiming a way of achieving it."
The Court further explained that the broad, mathematically-oriented (but patent-eligible) claims of Thales Visionix Inc. v. U.S. differed from InvestPic's invention because "the improvement was in a physical tracking system," while claim 1 "is not a physical-realm improvement but an improvement in wholly abstract ideas." Ultimately, the Court concluded that "the focus of the claims is not any improved computer or network, but the improved mathematical analysis."
Declaring the claims abstract, the Court moved on the second step of Alice. Here, InvestPic fared no better, as the Court stated "[w]e readily conclude that there is nothing in the claims sufficient to remove them from the class of subject matter ineligible for patenting and transform them into an eligible application," and (subtlety invoking Berkheimer v. HP Inc.) "there are no factual allegations from which one could plausibly infer that they are inventive." Particularly, all additional elements were either abstract themselves or (as recited in other claims) conventional computer components.
The Court therefore concluded:
There is, in short, nothing "inventive" about any claim details, individually or in combination, that are not themselves in the realm of abstract ideas. In the absence of the required "inventive concept" in application, the claims here are legally equivalent to claims simply to the asserted advance in the realm of abstract ideas—an advance in mathematical techniques in finance. Under the principles developed in interpreting § 101, patent law does not protect such claims, without more, no matter how groundbreaking the advance. An innovator who makes such an advance lacks patent protection for the advance itself. If any such protection is to be found, the innovator must look outside patent law in search of it, such as in the law of trade secrets, whose core requirement is that the idea be kept secret from the public.
Or, technical advances are likely patent-eligible, non-technical advances are not. Where one draws that line is critical and it is clear where this particular panel has drawn it.
Even under a generous reading of Alice and its progeny, these claims might be found lacking. But the difficulty with cases like this one is how they are applied. We have seen how the Electric Power Group case has been broadly viewed by the courts and the U.S. Patent and Trademark Office (USPTO) to contend that virtually any invention involving collection, processing, and output of information is ineligible. Clearly, this is improper, it can be rebutted in many situations, but the process for doing so requires time and money -- something that small companies might not have.
When faced with an invalidity contention based on Electric Power Group or this case, one should focus on the specificity of the claims at hand and their ability to solve a technical problem (as opposed to a mathematical or financial problem), and explain how the claims here were significantly broader and vaguer. The crux of the problem is that this strategy still may not win the day, even for clearly technical inventions. The Alice test is ill-defined and has been applied subjectively and inconsistently by the Federal Circuit and USPTO. Until this aspect of the law is fixed, cases like this one may continue to haunt patentees.
SAP America, Inc. v. InvestPic, LLC (Fed. Cir. 2018)
Panel: Circuit Judges Lourie, O'Malley, and Taranto
Opinion by Circuit Judge Taranto
