By Joseph Herndon —

In the U.S. District Court for the Eastern District of Texas, in a case captioned Perdiemco, LLC. v. Industrack LLC, the Court found some patents having method claims directed to "conveying user location" to be patent-eligible under 35 U.S.C. § 101.  Much of the reasoning was based on the recent Federal Circuit decision McRO, Inc. v. Bandai Namco Games America Inc., and even though the claims are generally broad and only include basic/generic computer components, the claims survived a § 101 challenge.  This is good for patentees and patent owners, as some Courts are now more willing to allow software patent claims to survive.

The defendants filed motions for judgment on the pleadings that the asserted patents claim ineligible subject matter under 35 U.S.C. § 101, and that the claims of the asserted patents are invalid under 35 U.S.C. § 112 ¶¶ 1 and 2.  The asserted patents include U.S. Patent Nos. 8,223,012; 8,493,207; 8,717,166; 9,003,499; and 9,071,931.  These patents share a common specification, and are generally directed to conveying location information by defining object location events relating object location information to user-defined zones and managing conveyance of object location event information based on user identification codes.  By using access codes, multiple users can collaboratively define and manage events and manage the conveyance of corresponding object location information, user-defined zone information, and/or object location event information among computing devices.  An example use case includes tracking pets, in which a pet has associated with it a location information source and the pet owner defines zones that the pet is supposed to stay in (e.g., a yard) and may define zones in which the pet is not allowed (e.g., a garden).  An object location event for leaving the yard sends an email and dials a phone of the pet owner.  An object location event for entering the garden might cause a siren to go off to scare the pet.  Thus, location information is used to trigger certain events.

Subject Matter Eligibility

Defendants contended that all asserted claims of all asserted patents embody an abstract idea of managing the dissemination of location and/or event information within a community, or at most, they recite different ways of organizing people into groups and managing the dissemination of location/event information through use of conventional computer and GPS technology.

Claim 6 of the '012 patent is representative and is reproduced below.

1.  A method for conveying user location information, comprising:
    interfacing with an administrator that authorizes a first user associated with a first user identification code to access an object location information from a location information source associated with a second user identification code that is different from the first identification code; and
    conveying the object location information to a third user based on an information access code specified by said first user, said information access code being associated with a third user identification code that is different from the first and second user identification codes.

5.  The method of claim 1, wherein the second user identification code is associated with a zone information comprising a coordinate on a map; and wherein at least one of the object location information or zone information is conveyed to the third user based on the information access code.

6.  The method of claim 5, wherein the second user identification code is associated with an object location event information that relates the object location information to the zone information; and wherein at least one of the object location information or the zone information or the object location event information is conveyed to the third user based on the information access code.

Defendants argued that representative claim 6 merely requires (1) interfacing with an administrator who (2) authorizes a first user to (3) access the location/zone/event information of a second user and (4) conveying that information to a third user.

Defendants constructed an analogy between claim 6 and a scenario in which steps of claim 6 could easily be performed by humans without the need for any computer or location tracking technology.  The scenario:  a mother desiring to track the location of her daughter who is traveling on a class field trip from Florida to Washington D.C., and the mother (administrator) may authorize a chaperone (first user) that has traveled with the daughter's (second user) class to supervise and track her daughter as well as have access to and convey the daughter's location (access object location information associated with the second user).  When the class arrives at their hotel in Washington (associating the second user with a zone and/or event), the chaperone is authorized to notify the mother and father (third user) that they have safely arrived at their destination (conveying location, zone and/or event information to a third user).

This example apparently confirms that claim 6 is directed to no more than the abstract idea of "managing the dissemination of location and/or event information within a community" and is therefore patent ineligible.

The Court, however, found a number of fatal problems with Defendants' analysis of claim 6.  First, it is improper to "simply ask whether the claims involve a patent-ineligible concept."  Instead, the analysis turns on "whether the claims in these patents 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."

Here, claim 6 requires a variety of computer-related components, including: "user identification code[s]," "a location information source," and "an information access code."  The claim then recites a specific structure of rules for providing information about the locations of objects to users and for managing user access to this information.  The Court found that it is therefore not apparent that claim 6 recites nothing significantly more than an instruction to apply an abstract idea using some unspecified, generic computer.

Instead, the Court found that claim 6 defines a set of rules for organizing and improving the behavior of a computerized location information system.  Here, as in McRO, the specific structure of the claimed rules would prevent broad preemption of all rules-based means for achieving the desired result.

The second problem with Defendants' argument, as noted by the Court, is the premise that analogizing the method of claim 6 to a class field trip confirms that claim 6 is directed to an abstract idea.  This fact is not necessarily dispositive — "processes that automate tasks that humans are capable of performing are patent eligible if properly claimed," as noted in McRO.

More importantly, the Court found that the field trip analogy omits or glosses over many limitations of the claim, including the aforementioned "location information source" and access codes.  Managing the information provided by the location information source using a set of relationships defined in part by access codes is what the claim is all about.  The Court noted that the analogy also fails to capture another key feature of the claim:  centralization.  In the field trip analogy, a variety of independent actors (mother, father, chaperone) must coordinate with one another and no single actor performs all the claimed steps.  It is also not clear that any actor in the analogy performs the "interfacing" and "conveying" steps.  These deficiencies in the analogy help to illustrate why claim 6 is not merely a computerized version of conventional human activity, it is an improvement to a computer system that administers, manages, and conveys location information in a centralized way.

Accordingly, like the claims in Enfish and McRO, the Court found that claim 6 of the '012 Patent is not directed to an abstract idea and therefore survives step one of the Mayo eligibility analysis, and thus, satisfies section 101.

Written Description

Defendants also moved for judgment on the pleadings that the asserted patents are invalid under § 112(1) for failure to provide adequate written description.  Defendants contended that the common specification and prosecution history of the asserted patents unequivocally establishes that the inventor required user defined zones and user defined events to be essential to his purported invention, and because each of the asserted claims does not include both a user defined zone and user defined event, and are thus broader than the specification disclosure, the asserted claims are invalid for failing to comply with the written description requirement.

The test for the sufficiency of the written description is whether the disclosure of the application relied upon reasonably conveys to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.

In the context of a 12(c) motion, the Court may not consider expert testimony or any other evidence outside the pleadings.  Instead, the Court must draw all reasonable factual inferences in favor of the non-movant.  For this reason, the Court could not conclude that Defendants established their written description defense by clear and convincing evidence.  Even if the claims do not recite every "essential" technological feature discussed in the specification, this does not render them invalid as a matter of law.  Judgment on the pleadings is, therefore, not the proper way to resolve this fact-intensive defense.

Defendants further contended that the asserted patents are invalid under § 112(2) for failing to claim "what the patentee regarded as his invention."  This argument is based on the same premise as Defendants' § 112(1) defense, that "the inventor of the Asserted Patents unequivocally regarded user defined zones and user defined events as required features of his purported invention."

Unlike written description, validity under § 112(2) is a question of law.  However, the party asserting this defense must make a showing of a logical inconsistency or contradiction between the claims and the specification.  The fact that the asserted claims do not encompass every feature, or even every important feature, disclosed in the specification does not imply a logical contradiction.  Defendants cited no authority for the proposition that every feature disclosed in the specification must be claimed, and indeed the converse appears to be true.  The Court found no logical contradiction between the asserted claims and the common specification.

Report and Recommendation by Magistrate Judge Roy S. Payne

By Michael Borella and Eddie Obissi —

Anecdotally, there seems to be a loosening up regarding the application of § 101 by the District Courts.  The 2014 Supreme Court decision in Alice Corp. v. CLS Bank Int'l has been referred to as sounding a death knell for software and business method patents, and (less hyperbolically) as a sea-change in the law of patent-eligibility.  Indeed, for the first two years after Alice came down, decisions rendering challenged patents ineligible under § 101 held around 65-70% in the District Courts.  Hundreds of patents and thousands of claims were invalidated.

But 2016 has brought a trio of § 101 holdings from the Federal Circuit that shored up the eligibility jurisprudence.  Enfish v. Microsoft and McRo v. Bandai, as well as Bascom v. AT&T Mobility to a lesser extent, have made it abundantly clear that software can be patent-eligible if the invention is an improvement to computer technology or another technology, specifically claimed, and does not preempt any abstract ideas encompassed therein.

But have these cases had an impact on the District Courts, and if so, to what extent?  While the data is still preliminary, it seems that these decisions may be making it easier for courts to find that claims are not ineligible at both the pleadings and post-discovery stages.  In fact, September was the best month for patentees in all of 2016.

We collected data on every § 101 decision made in the District Courts from the beginning of the year until the end of September.[1]  In total, we examined 141 distinct cases, of which claims were found eligible 73 times and ineligible 68 times, for an eligibility rate of 51.7%.  Thus, it appears as if, in 2016, patents are being found eligible in a higher percentage of cases than previously.

But, as shown in the chart above, the most striking month was September, in which 78.2% (18 out of 23) of the cases came down in favor of the patentee.  Not only is this the highest monthly success rate in all of 2016 (prior to September, only 46.6% of cases favored the patentee), but it dwarfs the 30-35% rate that followed Alice.

Drilling deeper, of these 23 decisions in September, 20 were decided on the pleadings, and 3 were decided after discovery.  The patentee success rate for § 101 decisions made in the pleadings stage was 75% and after discovery was 100%.  While patentees had a perfect record for decisions made after discovery, the significance of this observation is questionable.  The after-discovery data is sparse, consisting of only 27 cases for all of 2016 so far, and in two other months patentees enjoyed 100% success as well.

The majority of the § 101 decisions in September, and throughout the year, were made on the pleadings.  As shown in the chart above, the month of September was unusually good for patentees.  Prior to September, the patentee success rate on the pleadings was hovering around 44%.  As noted above, this increased to 75% last month.  Thus, the main driver of the high rates of eligibility in September was decisions made on the pleadings.

While we cannot say with certainty why this is the case, there are likely explanations.  First, the Enfish and McRo cases have made it harder for a challenger to invalidate a patent prior to discovery.  Enfish made it clear that improvements to technology are patent-eligible.  When reviewing a 12(b)(6) or 12(c) motion on the pleadings, the court is obliged to draw all inferences in the patentee's favor.  Therefore, if the patent's specification contends that the claimed invention is a technological improvement over the prior art, this will be taken as fact for purposes of deciding the motion (of course, an unsuccessful challenger can attempt to rebut such a contention by introducing contrary evidence during discovery).  In the five months since Enfish came down, it has been heavily cited by the district courts, which suggests that it is having an outsized impact on outcomes in these proceedings.

McRo, on the other hand, was decided in mid-September.  Thus, it is unlikely to have had an impact on many § 101 decisions in that month.  Still, in McRo the Federal Circuit clarified that that automating a process that is not known to have been performed manually can be patent-eligible.  Previously, any process that could be performed manually was almost certainly ineligible.  Thus, the impact of McRo is unclear but may turn out to be significant.

Second, patents being asserted post-Alice may be undergoing a higher level of vetting by their owners.  As Alice wiped out swathes of patents over the last two years, patentees may be becoming more selective in which patents they assert, the result being that the patents litigated now are better equipped to withstand § 101 challenges.

Third, Post Grant Review proceedings in the USPTO may be weeding out some of the weaker patents before district court review has a chance to complete.  This may include patents with claims that could be challenged under § 101 in court but are invalidated under § 102 or § 103 in an Inter Partes Review, as well as those invalidated under § 101 or other grounds in a Covered Business Method Review.

Regardless of the underlying reasons, the month of September 2016 was an outlier.  Whether it is a sign of things to come remains to be seen.

[1] In this data we considered eligibility under § 101 separately from other challenges to the claims.  Thus, if a claim was found eligible under § 101 but unpatentable under §§ 102 or 103, the outcome for our purposes was "eligible."  Several (5) decisions were "split" in that some claims were found eligible and others were not.  We omitted these cases from this analysis.