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In This Issue
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U.S.
Supreme Court Clarifies that the AIA Did Not Change the Law that a “Secret”
Sale Constitutes Invalidating Prior Art
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Federal
Circuit Further Clarifies Patentable Subject Matter Vis-à-Vis Software
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U.S. Supreme Court Clarifies that the
AIA Did Not Change the Law that a “Secret” Sale Constitutes Invalidating
Prior Art
The U.S. Supreme Court recently held, in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, affirming
the Court of Appeals for the Federal Circuit’s holding that the AIA did not
change the settled pre-AIA law that a sale of a product or method to a third
party by an inventor constituted an invalidating sale even though the sale
was “secret,” i.e., the third party was required to maintain the sale
confidential.
In reaching this unanimous decision, the Supreme Court first cited
its holding in the seminal “on sale” bar case of Pfaff v. Wells Electronics, Inc., and noted that under pre-AIA 35
U.S.C. § 102, it was settled law that an invention was “on sale” for purposes
of Section 102 provided the invention was ready for patenting and the sale
was commercial in nature, e.g., to a third party. The Supreme Court continued that with
respect to AIA-Section 102, “when Congress reenacted the same language in the
AIA, it adopted the earlier judicial construction of that phrase…” in view of
the settled law. The Supreme Court
also observed that the catch all phrase “or otherwise available to the
public” in the statute was “simply not enough of a change… to conclude that
Congress intended to alter the meaning of the reenacted term ‘on sale.’”
Seeing that the Supreme Court relied upon pre-AIA precedent in
clarifying that a “secret” sale still may constitute invalidating prior art
under AIA-Section 102, this decision does not appear to be a sea change in
application of the “on sale” bar of Section 102.
Federal
Circuit Further Clarifies Patentable Subject Matter Vis-à-Vis Software
The Federal Circuit recently held, in Ancora Techs v. HTC, that a patent that describes and claims
methods of limiting a computer’s running of unauthorized software is directed
to patentable subject matter.
Ancora brought suit against HTC America and
HTC Corporation (collectively “HTC”) in December 2016, alleging infringement
of U.S. Patent 6,411,941 (the “‘941 patent”).
The ‘941 patent is directed to a method for assigning certain
functions to particular computer components, which interact in specified
ways. The proposed method relies on
the use of (i) a key, which is “a unique identification code” for the
computer that is embedded in the read-only memory (ROM) of the computer’s
Basic Input Output System (BIOS) module and “cannot be removed or modified…”
and (ii) a “record,” which is a “license record” that “consists of author
name, program name[,] and number of licensed users (for network)” associated
with a particular application.
HTC moved to dismiss alleging invalidity because the claims were directed
to subject matter that is ineligible for patenting under 35 U.S.C § 101. The Western District of Washington District
Court granted HTC’s motion to dismiss, holding that the claims are directed
to, and ultimately claim no more than, an abstract idea.
While that motion to dismiss was pending, HTC filed a petition to
institute a review of the ‘941 patent, on Section 101 and other grounds,
under the provision for review of Covered Business Method patents set forth
in Section 18 of the AIA in May 2017.
On December 1, 2017, the Board rejected HTC’s request, concluding that
the ‘941 patent claims a technical solution to a technical problem that falls
within the “technological inventions” exception of AIA-Section 18(d)(1) for
such reviews.
Shortly thereafter, the District Court granted the motion to dismiss
on December 14, 2017. The District
Court applied the two-step analytic process set forth in Alice Corp. v. CLS Bank International, and held that because the
claims are “not focused on how usage of the BIOS to store the verification
structure leads to an improvement in computer security” and that “the
erasable, non-volatile memory of the BIOS … is typically used to store data,”
the claims’ “focus is on the abstract concept of selecting a program,
verifying whether the program is licensed, and acting on the program
according to the verification.” The
District Court then concluded that the claims contained no “inventive
concept” that makes their subject matter something significantly more than
the abstract idea: in particular, “[s]pecifying that the BIOS be used to
house the verification structure” calls for nothing more than “[s]toring data
in the memory of a computer component that generally stores data.”
On appeal, the Federal Circuit held that the claims were directed to
eligible subject matter because the claimed advance was a concrete assignment
of specified functions among a computer’s components to improve computer
security, and this claimed improvement in computer functionality is eligible
for patenting and are thus patentable subject matter under § 101. By way of explanation, patent-eligible
subject matter includes “any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof;” laws of
nature, natural phenomena, and abstract ideas are not eligible matter. 35
U.S.C. § 101; Mayo Collaborative Servs.
v. Prometheus Labs., Inc., 566 U.S. 66 (2012).
The Federal Circuit specifically concluded that claim 1 was not
directed to an abstract idea observing that improving security—here, against
a computer’s unauthorized use of a program—can be a non-abstract
computer-functionality improvement if done by a specific technique that
departs from earlier approaches to solve a specific computer problem. The Federal
Circuit continued noting that the claimed method specifically identified how
that functionality improvement was effectuated in an assertedly unexpected
way.
That is, claim 1 is directed to a solution to a
computer-functionality problem: an improvement in computer functionality that
has “the specificity required to transform a claim from one claiming only a
result to one claiming a way of achieving it.” The claim therefore passed muster under Alice step one, as it is not directed
to patent ineligible subject matter.
The Federal Circuit then noted that their conclusion that the specific
improvement in this case passes muster at step one is indirectly reinforced
by some of their holdings under step two.
The Federal Circuit continued noting that a similar characterization
should apply to the technical improvement here and, in light of the line of precedent,
justifies the conclusion that claim 1 of the ‘941 patent is not directed to
an abstract idea, but to a computer-functionality improvement.
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