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Courts and Patent Litigants Continue to Wrestle With Scope of Supreme Court’s Alice Test

The U.S. Supreme Court's 2014 Alice ruling – which established that abstract ideas implemented on a computer are not patent-eligible – has fostered significant confusion regarding what exactly can and cannot be patented. A new case in the U.S. Court of Appeals for the Federal Circuit, Thales Visionix Inc. v. US (case no. 15-5150), perfectly illustrates the potential negative ramifications of overbroad application of the Alice test for patent holders.

In Alice, the Supreme Court set out a two-part test for determining patent-eligibility. First, courts must evaluate whether the claims at issue are directed to an abstract idea. If they are, the next question is whether the claims include something "significantly more" than the abstract idea itself, in which case they are patent-eligible. Since the Alice decision, district court judges and the Patent Trial and Appeal Board have found that numerous patents fail the Alice test and are not patent-eligible under Section 101 of the Patent Act. The Thales Visionix case, which is still currently on appeal, is one such instance.

In July 2015, the U.S. Department of Defense prevailed in a patent infringement suit over a helmet-mounted tracking system used by F-35 fighter pilots. In the U.S. Court of Federal Claims, a judge ruled that Thales cannot patent the mathematical equations used by the helmet device. The U.S. government had authorized Lockheed Martin Corp, a primary contractor on the F-35 project, to obtain helmet-mounted display systems which used the same equations and laws of physics as covered in the Thales patent. The federal claims judge ultimately found that Thales’ mathematical equations did not transform the sensor data into so-called “motion tracking information,” and should be classified as generic. Thales appealed the decision.

In June, 2016, Thales argued before the Federal Circuit that the lower court created an unduly high burden for eligibility that will have a “chilling effect” on the inventing community. The Department of Defense maintains that the lower court correctly determined that Thales’ patent failed the Alice test, and because the patent only describes known natural phenomena using generic computer components and sensors, the alleged invention is patent ineligible under Section 101 of the Patent Act. During oral argument, Thales maintained that "Far from attempting to patent a law of nature or an abstract idea like Newton’s laws of motion, E=mc2, or even equations for hedging risks, the ’159 Patent claims a physical system and discloses a mathematical model specifically derived for the system that was found empirically to be sufficient to solve a real world problem." The litigants await the appellate court’s ruling, as will the patent bar, who will seek clear guidance on the proper application and scope of the Alice test.

The lower court’s decision in Thales Visionix is yet another situation in which the Supreme Court’s Alice test is over-applied. There are dozens of worthwhile and patent eligible inventions being found invalid under Alice, in part due to confusion about the two-step analysis, and in part due to parties testing the metes and bounds of the Alice decision. In the past couple of years since Alice, we have seen an expansion of the Mayo v. Prometheus decision (on analytical chemistry) to business methods utilizing the Internet and servers, cloud-based computing, and software. Now, parties are testing patents directed to technological advances in sensors and data acquisition and processing, among other technologies typically not thought of as “abstract” such as mechanical devices controlled by computers.

District courts have recently begun hearing—and rejecting—Alice challenges. The Federal Circuit recently reversed a district court decision finding claims patent-ineligible under Alice directed to a “self-referential database” in Enfish, LLC v. Microsoft Corp., 56 F. Supp. 3d 1167 (C.D. Cal. 2014). The Federal Circuit, disagreeing with the district court’s broad reading of the claims, found that the claims were directed to a “specific type of data structure designed to improve the way a computer stores and retrieves data in memory.” Other courts have been unwilling to find claims patent-ineligible on a less-than-fully-developed factual record and robust claim construction of the claim terms. See, e.g., Palomar Technologies, Inc. v. MRSI Systems, LLC., (S.D. Ca. Mar. 11, 2016) (denying motion to dismiss due to claim construction issues not fully developed at early stage). These indications should provide some hope for patent owners who have been caught in the miasma of Alice’s unintended consequences, and signals that courts are becoming more sophisticated in their application of the two-part Alice test.

As with other sweeping changes in the patent law, lower courts have been wrestling with the somewhat unclear Alice test while dealing with parties eager to assert an Alice challenge—which may afford the parties a lower burden of proof than other invalidity challenges. The higher courts’ recent rulings denying Section 101 challenges under Alice show that perhaps the tide is turning. It also may indicate that stronger patents with better claims are being challenged as the parties test the boundaries of patent-eligible subject matter.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.