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Fresh From the Bench: Precedential Patent Cases From the Federal Circuit

October 20, 2017


In Smart Systems v. Chicago Transit Authority, the Circuit affirms the dismissal of a case based on §101, agreeing with the district court that two patents to a system for using a pre-approved bankcard to enter a transit system are directed to an abstract idea and otherwise lack an inventive concept. Cisco v. ITC shows how deferential the Circuit is to the Commission in formulating exclusionary rules, affirming the exclusion of certain network hardware and software based on infringement of three of five Cisco patents asserted against Arista Networks.

Thanks to another one of my new colleagues, Abdul Abdullahi, for his help with this week’s report. Abdul is part of the expansion in our intellectual property group this past summer. Read the announcement.

Pete Heuser

Smart Systems Innovations, LLC v. Chicago Transit Authority, Fed. Cir. Case 2016-1233 (October 18, 2017)

In a split decision, the Circuit affirms the grant of a motion for judgment on the pleadings of another patent infringement case under §101, agreeing with the district court that two patents asserted against the Chicago Transit Authority are not directed to patentable subject matter. The majority provides a conventional Alice analysis while the dissent proposes that the proper inquiry might be to look at the claims’ “character as a whole” or their “basic thrust.”

The majority starts its analysis with step one from Alice, citing its McRO case from last year: “We look to whether the claims focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.” The district court held that, “stripped of the technical jargon that broadly describes non-inventive elements (e.g., the ‘interfaces’ and ‘processing systems’), and further shorn of the typically obtuse syntax of patents, the patents here really only cover an abstract concept: paying for a subway or bus ride with a credit card.”

The majority notes that the claims of the ’816 patent involve acquiring identification data from a bankcard and funding a transit ride from one of multiple balances associated with that bankcard. The claims of the ’390 patent involve identifying whether a presented bankcard is associated with a monthly transit card and, if such a card is found, charging a different fare. Taken together, the claims are directed to the formation of financial transactions in a particular field (i.e., mass transit) and data collection related to such transactions. They are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes. In response to arguments of SSI, the opinion distinguishes the claims at issue in DDR Holdings and Enfish as being directed to improvements in computer technology, which is not what is recited in the present claims.

The majority criticizes Judge Linn’s dissent, which states that the patents are directed not to financial transactions, but to the identification of a bankcard as authorized for use in accessing a transit system. According to the majority, that characterization ignores what is actually recited in the asserted claims, and the Circuit’s mandate under Alice step one is to ascertain what the claims are “directed to,” not the “thrust,” “heart,” or “focus” of the invention, as the dissent argues.

Applying step two of Alice, the majority holds that when claims are directed to an abstract idea and “merely require generic computer implementation,” they do not move into §101 eligibility territory.

Comments: The dissent discusses some concepts I don’t think we’ve seen expressed in quite this way. Judge Linn cites the Circuit’s 2015 and 2016 Internet Patents and Synopsis v. Mentor cases in support of his contention that we are to examine the claims’ “character as a whole,” and look to “capture the ‘basic thrust’ of the claims,” or the “prominent idea in the mind of the inventor.” He then cites Enfish in support of the statement that this often results in the re-characterization of claims to “a high level of abstraction.”

Re-characterizing claims in a way that is untethered from the language of the claims all but ensures that the exceptions to §101 swallow the rule. But if we are not to re-characterize the claims, what are we supposed to do? Are we not to ignore any limitations? May we ignore some? If so, which ones? Which limitations matter and which do not?

He then appears to suggest that the Supreme Court’s recent §101 cases are overly broad in their invalidity determinations and analyses, which render many valuable inventions unpatentable:

Ultimately, the fundamental question in “abstract idea” cases is whether the claim is directed to such a basic building block of scientific or technological activity as to foreclose or inhibit future innovation or whether the claim instead is directed to a tangible application that serves a “new and useful end.” [Benson and Diehr cited and quoted] Claims directed not merely to basic building blocks of scientific or technological activity but instead to innovative solutions to real problems that result from human activity and are not capable of performance solely in the human mind should be fully eligible for patent protection and not lightly discarded.

Judge Linn did not dissent as to the ruling of invalidity of two of the patents since the claims were similar to patents the Circuit had found invalid in other cases, but still noted that he thought that was an incorrect result. It is clear that he is frustrated with the Supreme Court’s and the Circuit’s §101 recent rulings since he feels the abstract idea exception should be narrowly applied. 

Read the full opinion

Cisco Systems, Inc. v. ITC, Arista v. ITC, Fed. Cir. Case 2016-2563, -2539 (September 27, 2017)

A panel of the Circuit broadly defers to the ITC in affirming an exclusion order as to certain of Arista’s network devices and related software and components covered by three of five asserted Cisco patents.

As to Cisco’s ’537 patent, the panel affirms claim construction, which is based on the terms’ ordinary meaning in combination with the patent specification, and rejects Arista’s prosecution history argument as being too ambiguous to support a disavowal.

Arista also objects to the scope of the exclusion order of “network devices, related software and components thereof that infringe the ’537, ’592 and ’145 patents,” contending that the Commission did not make specific findings that the components of its accused products contribute to or induce infringement of the ’537 patent. However, the Commission found that Arista’s “switch hardware is designed to run the EOS software containing SysDB and is run each time EOS is booted.” Although the Commission opinion does not separately define “switch hardware,” the ALJ’s final initial determination does, and the Commission expressly adopted the ALJ’s final initial determination findings that were consistent with its opinion. Thus, the exclusion order properly bars the importation of components of Arista’s infringing products.

The panel broadly defers to the Commission, noting that the Commission has “broad discretion in selecting the form, scope, and extent of a remedy, and judicial review of its choice of remedy necessarily is limited.” Courts will not interfere in the Commission’s remedy determination except when “the remedy selected has no reasonable relation to the unlawful practices found to exist.” According to the opinion, if the Commission has considered the relevant factors and not made a clear error of judgment, the Circuit will affirm its choice of remedy. Blocking imports of articles that induce patent infringement has a reasonable relationship to stopping unlawful trade acts. Accordingly, the panel sees no error in the Commission’s exclusion order.

Cisco’s cross-appeal challenged whether substantial evidence supports the Commission’s determination that Arista’s accused products do not infringe the asserted claims of the ’597 patent. Those claims require that the accused system “detect” a configuration change. The Commission determined that Arista’s accused products did not “detect” another subsystem’s configuration, but rather “inferred” whether that subsystem was functioning. Cisco argues that inferring is a form of detection, and therefore Arista’s products infringe. The Commission, however, had before it evidence that showed that the accused functionality has no access to a subsystem’s configuration, and thus cannot definitely know whether a configuration has changed. Where, as here, there is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,” the Circuit will affirm the Commission’s determination.

Read the full opinion