Legal Alert: Good News for Software Patents?

Federal Circuit’s Enfish Decision and PTO Guidelines Should Give Hope to Patentees

In the last few years, U.S. Courts have drastically changed their interpretation of the law governing patent eligibility, 35 U.S.C. § 101. Although new and useful processes and machines are generally patent eligible, abstract ideas are not. The Supreme Court’s Alice decision in mid-2014 triggered a series of cases finding software-based patents invalid under this exception. Similarly, the U.S. Patent and Trademark Office (USPTO) began rejecting most new applications on software-based inventions. However, the USPTO has now issued a memo instructing patent examiners to follow more rigorous standards when issuing such rejections. Yesterday, the Federal Circuit issued its decision in Enfish LLC v. Microsoft Corp., finding for only the second time in as many years that a software-based invention was not too abstract, and was therefore patent-eligible. The new USPTO memo and theEnfish decision provide some rare good news for those seeking to obtain or defend software patents.

The New USPTO Memo

Despite presenting itself as maintaining the status quo, as a practical matter, the USPTO memo raises the bar for proper § 101 rejections. First, it seems to require, rather than recommend, that examiners identify a specific abstract idea in the claim language and explain why it is considered abstract in order to maintain a § 101 rejection. Second, it requires examiners to justify this reasoning by analogy to previous judicial decisions. In doing so, it cautions examiners to properly account for the context of these decisions, which may dissuade examiners from the vague, broad citations practiced by many since Alice. The USPTO memo also specifically instructs examiners to review and respond to an applicant’s rebuttals of any eligibility rejection—an existing requirement that was frequently ignored. In contrast to common recent practice, the memo also instructs that to attain eligibility, applicants should not be required to model their claims or responses after the examples provided in previous USPTO memos.

On balance, the memo tends to increase the likelihood that USPTO examiners will allow properly eligible patent claims, including those on software-based inventions, potentially relieving the current backlog. This may develop into a trend at the USPTO as a result of the Enfish decision, discussed below.

The Enfish Decision

Enfish LLC v. Microsoft Corp. considered whether patent claims for a “self-referential” database are patent eligible. The district court found all claims ineligible as directed to an abstract idea. The Federal Circuit reversed.

The Alice case and its precursor, Mayo, established a two-stage inquiry for patent eligibility: (1) determine if a patent-ineligible concept (i.e., law of nature, natural phenomena, or abstract idea) is claimed; and if so, (2) determine whether additional claim elements transform the claim into a patent-eligible application. Whereas the Supreme Court in Alice primarily analyzed eligibility of the software invention at issue under the second step of the inquiry, the Federal Circuit in Enfish clarified that the first step of the inquiry is just as important: “[w]e do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two.” The inquiry applies a stage-one filter to claims, considered in light of the specification, based on whether “their character as a whole is directed to excluded subject matter.” Accordingly, software-based patent claims are not inherently abstract. Courts must assess whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice inquiry.

In Enfish, the Federal Circuit determined that the claims focus on a specific asserted improvement in computer capabilities (i.e., the self-referential table for a computer database) and not on economic or other tasks that qualify as “abstract ideas for which computers are invoked merely as a tool.” The Federal Circuit noted that the claims at issue are not simply directed to any form of storing tabular data, but instead are specifically directed to a self-referential table for a computer database. The Federal Circuit was influenced by the language of the claims as well as evidence in the patent’s detailed description that the claimed self-referential table functions differently than, and achieves other benefits over, conventional databases. These benefits include increased flexibility, faster search times, and smaller memory requirements.

In reviewing the district court’s characterization of the claims (“the concept of organizing information using tabular formats”), the Federal Circuit cautioned against oversimplification, explaining that “describing the claims at such a high level of abstraction untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.” The Federal Circuit also rejected the argument that use of general-purpose hardware doomed the claims, emphasizing that “[s]oftware can make non-abstract improvements to computer technology just as hardware improvements can . . .To hold otherwise risks resurrecting a bright-line machine-or-transformation test.”

Conclusion

The Enfish decision and new USPTO memo are a welcome boon to software patent owners and those who seek to protect software innovation through the patent system. Experienced patent advocates can apply the rationale from Enfish to oppose a § 101 challenge to software patent claims, either in a district court motion or covered business method patent review proceeding. Enfishprovides ample support to push-back against the all too common attempt of the patent challenger to over simplify the claims to find them directed to an abstract idea. Enfish also provides the patentee with a framework to demonstrate that the claims are not directed to an abstract idea by focusing on the specific asserted improvement in computer capabilities. Patent applicants will similarly benefit from the Enfish decision, along with the new USPTO guidance. To the extent possible, applicants should disclose and explain the technical benefits of the invention in the specification and draft or amend claims to focus on a specific asserted improvement in computer capabilities in order to prevent or overcome a § 101 rejection.