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IP Alert: Federal Circuit Provides Further Guidance Regarding Subject Matter Eligibility

March 10, 2020

On March 6, in Customedia Technologies, LLC v. Dish Network Corporation et al., the Federal Circuit affirmed Patent Trial and Appeal Board (PTAB) decisions finding two patents generally relating to “comprehensive data management and processing systems” patent-ineligible under 35 U.S.C. § 101. Importantly, the case provides further guidance on the “abstractness” doctrine and the Federal Circuit’s analysis under this doctrine.

Customedia’s two patents, U.S. Patent Nos. 8,719,090 and 9,053,494, share the same specification. Each patent discloses systems whose essential purpose is for targeted advertising to consumers watching television. The disclosed systems comprise a “remote Account-Transaction Server (ATS) and a local host Data Management System and Audio/Video Processor Recorder-player (VPR/DMS),” such as a cable set-top box. Data is transmitted via the ATS to the VPR/DMS and then “selectively recorded in programmable storage sections in the VPR/DMS” based on user preferences. The storage sections can be “reserved, rented, leased or purchased from end user[s], content providers, broadcasters, cable/satellite distributor, or other data communications companies administering the data products and services.”

DISH petitioned the PTAB for review of certain claims of each patent pursuant to CBM review, and the PTAB instituted CBM review on claims for both patents. In addition to the section 101 rejections, the PTAB found some claims ineligible under sections 102 and 112, but the court did not reach those rejections on appeal.

In analyzing the subject matter eligibility, the court looked to the two-step analysis set out in the Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l. This framework requires that courts first determine whether the claims are directed to a judicial exception (i.e., an abstract idea, law of nature, or natural phenomena), and then determine whether the claim recites additional elements that supply an inventive concept sufficient to transform the nature of the claim into a patent-eligible application of the exception such that the patent is directed to something significantly more than the ineligible subject matter itself.

For the first step, the court determined the subject matter of the claims to be directed to an abstract idea. Customedia argued that the claims of the patent are directed to an improvement in the functioning of a computer, pointing to language in Alice. The court disagreed, however, reasoning that the claims at issue, rather than being directed to improvements to operations and functionality of a system, are directed to the abstract idea of using a computer to deliver targeted advertising to a user.

Further, the court rejected Customedia’s argument that by reserving memory for advertising data, the system was improved, noting that the “functionality of the computer itself” (emphasis added) is not improved. Rather, the court said the concept of delivering targeted advertising using a computer as a tool is improved. The court found support for this important key difference in a number of previous decisions, including Ancora Techs. Inc. v. HTC America, Inc., where the court held claims non-abstract and patent-eligible because they were directed to storing a verification structure in computer memory, which improved computer security. Thus, here the court found that the claims were directed to an abstract concept, emphasizing the distinction between improving the system itself and improving the abstract concept through use of a system or computer.    

Turning to the second step, the court determined that additional elements of the claims “considered individually and as an ordered combination” did not “recite an inventive concept.” The court reasoned that besides the concept of delivering targeted advertising, the claims did not provide more than generic computer components. The court further rejected Customedia’s argument that the programmable receiver to dedicate a section of memory specifically for identified advertising data was an improvement over the prior art. Specifically, the court cited a prior case and said, “the invocation of ‘already-available computers that are not themselves plausibly asserted to be an advance . . . amounts to a recitation of what is well-understood, routine, and conventional.’”

Thus, because the claims did not disclose an improvement in the computer itself, the additional elements of the claims did not make the abstract concepts claimed patent-eligible, and the court affirmed the decision of the PTAB holding claims of the patents ineligible under section 101.  

 For more information on this case, please contact Fitch Even attorney Vincent R. Meyer, author of this alert.

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