In the continuing wake of the U.S. Supreme Court’s attempt in Alice v. CLS Bank to define what is eligible to be the subject matter of a patent, two recent decisions have been issued by the Federal Circuit that provide an important piece of the puzzle the Supreme Court left us with more than two years ago. In the Alice decision, which held that abstract ideas merely implemented using a computer are not eligible for patent protection, the Supreme Court created an “inventive concept” requirement in its two-part test, which requires the finding that a claim either is not directed to an abstract idea, or that if it is so directed, the claims recite “something more” than what has been done conventionally. Although Congress had seemingly removed any “inventiveness” requirement from patent law decades ago, its resurrection in Alice has caused confusion as to what exactly is needed to meet this new “inventive concept” standard. Numerous district courts, as well as the Patent Office itself, have equated an “inventive concept” with satisfying the patentability requirements of novelty under 35 U.S.C. § 102 and nonobviousness under 35 U.S.C. § 103. The two recent Federal Circuit decisions help shed light on whether the patent eligibility analysis under § 101 and the Alice decision implicate the novelty determination under § 102 and/or the nonobviousness determination under § 103.

The first of these decisions is Bascom Global Internet Services Inc. v. AT&T Mobility LLC, decided June 27, 2016. The Federal Circuit reversed a Northern District of Texas court’s decision that found patent-ineligible Bascom’s patent claims directed to an internet filtering system located on a remote ISP server that associates each network account with (1) one or more filtering schemes and (2) at least one set of filtering elements. The district court held that “filtering content” is merely an abstract idea, regardless of whether the content being filtered is provided on the internet or through older mediums such as books. However, the Federal Circuit recognized this as yet another reviewing entity overly simplifying a patent’s claims so that it can meet the still-undefined term “abstract idea.” More specifically, the district court had found that the claims at issue did not contain an “inventive concept” under the second step of the Alice analysis.  In so finding, the district court stated that each individual claim element was a well-known, generic computer component or standard filtering mechanism, and that even the combination of these elements was not “inventive” because filtering software and the use of ISP servers to filter content was well known.  In sum, this district court proved once again that most patent reviewing entities still confuse the term “inventive concept” from the Alice decision with “patentability,” which is probably the most glaring problem created by the Supreme Court in the  Alice decision. 

In an analysis that has been asserted by countless patent practitioners since the Alice decision, the Federal Circuit in Bascom condemned the district court’s analysis that it “looks similar to an obviousness analysis under 35 U.S.C. § 103.” This well overdue acknowledgment of the district courts’ (and the Patent Trial and Appeal Board’s) inclusion of an obviousness analysis into step two of the Alice test makes clear that the patent-eligibility inquiry of § 101 does not include the obviousness analysis of § 103.  In elaborating on what is required during an analysis under step two of the Alice test, the Federal Circuit held that step two cannot be satisfied merely by conclusory statements regarding the prior art, explaining that the “inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art.”  The court went on to state that “an inventive concept can still be found in the non-conventional and non-generic arrangement of known, conventional pieces.”  Unfortunately, these statements follow the reasoning of the Supreme Court in KSR v. Teleflex, 550 U.S. 398 (2007), which was a decision under the obviousness standard of § 103 and not § 101.

So unfortunately, after condemning the district court for conducting an obviousness-style analysis under the Alice test, the Federal Circuit used reasoning from a prior holding directed only to an obviousness inquiry.  Thus, what was almost a completely positive decision for patent owners, became another decision conflating the “inventive concept” of the Alice decision with an obviousness type determination. While the Bascom holding at least helps patent owners by making clear that a more thorough analysis under step two of the Alice test is required, the Federal Circuit has proven that even it  does not understand that § 103 is a different section of the patent statute from § 101 and thus not only requires a separate analysis, but  also a recognition that obviousness determinations have no place in a § 101 analysis.

The most basic canons of statutory construction make clear that one statute cannot be interpreted in a way that obviates another statute.  Requiring an obviousness inquiry in a § 101 analysis eliminates the need for § 103 and therefore that interpretation cannot be correct.  It would seem then that the search for an “inventive concept” as required by the Supreme Court in Alice is not the search for a “patentable invention” (which includes satisfying §§ 102, 103 and 112, in addition to 101), but is simply the search for an attempt by an inventor to claim a concept that is more than the implementation of an abstract idea on a computer, but still may later be found obvious or not novel.

After the Bascom decision, the Federal Circuit decided McRO Inc. v. Bandai Namco Games America Inc., on September 13, 2016.  McRO provided the opportunity for the Federal Circuit to clarify that its use of the language from the KSR decision in a § 101 analysis should not be interpreted to mean that such a nonobviousness analysis should be used when determining patent-eligibility. 

In McRO, the Federal Circuit reversed a Central District of California court’s decision that found patent-ineligible McRO’s claims directed to automating the matching of audio to three-dimensional computer animation of mouth movements to provide lip-synchronized animation.  The district court analyzed the claims under a “point-of-novelty” style test, and the judge determined the claims’ “point of novelty here is the idea of using rules, including timing rules, to automate the process of generating key frames.”  But because the claims did not identify what those specific timing rules were, the judge found that “the claim merely states ‘an abstract idea while adding the words ‘apply it.’”  In overturning the district court, the Federal Circuit distinguished between eligible and ineligible types of computer-based automation.  Specifically, if automating a previously manual process simply involves programming a computer with the exact same steps as the manual process, such a process will be considered abstract, and thus such claim(s) would be patent-ineligible.  But if, by automating a process on a computer, new steps must be developed that did not exist before, then the process will be considered new and not abstract so long as those specific, new steps are actually recited in the claims.  “It is the incorporation of the claimed rules, not the use of the computer, that improved the existing technological process by allowing the automation of further tasks,” the court found that it was different from the invention in cases like Alice, “where the claimed computer-automated process and the prior method were carried out in the same way.”  And importantly, this is this case even if the computer being used is a “general-purpose computer.” 

So although the McRO decision provided patent practitioners with a valuable decision regarding software-type patent claims, it also included this novelty-style analysis in reaching that holding.  While this appears at odds with the Federal Circuit’s Bascom admonition not to conduct a § 103 obviousness analysis as part of the § 101 eligibility determination, it appears that the court may have been simply using novelty to show that the invention was not an abstract idea. .  If we assume that Bascom did in fact hold that a § 103 analysis should not be done during an Alice test, then it should follow that a § 102 novelty analysis should also not be part of the § 101 analysis under Alice.  And looking more closely at the court’s reasoning in McRO, it did not actually conduct a full § 102 novelty analysis when determining that the software claims at issue included process steps not included in the previous manual approach to the audio matching process.  Instead, the court simply stated that claims at issue required additional process steps necessary for computer automation that were not shown to be part of the prior manual process.  Therefore, the McRO decision could be read to mean that the identification of additional steps required for computer automation of a process, that was not performed in the original manual process(es),  is evidence that the claims do not simply recite an abstract idea.

This interpretation of both Bascom and McRO would comport with a separation of the analyses under the different sections of the patent statute, and thus that a patent owner need not prove that those additional recited steps not found in the prior manual process are also novel and nonobvious under the requirements of §§ 102 or 103.  As a result, patent owners should at the least proceed with process claims that do not simply recite the use of a computer as a tool to automate the same steps of a conventional activity, and instead recite an automated process that has specific additional (or alternative) steps from what had been manually done before.  And importantly, the flip-side of this interpretation should also hold true – that specific limitations in a claim that distinguish the invention from the prior art not only overcome concerns under §§ 102/103, but can provide the additional benefit of making the claims so specific that they should not be considered abstract.  Thus, if those recited additional or alternative process steps are also novel and nonobvious over the prior art, then the likelihood the claims will be found to satisfy § 101 will be further increased.