Author: Howard Sheerin, SiliconValleyIP.com
The Supreme Court in Alice Corp. v. CLS Bank International (2014) ruled that abstract ideas, such as mathematical algorithms, are not patentable subject matter under 35 USC § 101, essentially affirming the seminal decision Gottschalk v. Benson (1972). However, the Court in Alice adjudicated a new two step rule in analyzing whether a claim covers patentable subject matter:
Step 1: determine whether the patent claim under examination contains an abstract idea, such as an algorithm, method of computation, or other general principle; and
Step 2: determine whether the patent adds to the idea "something extra" that embodies an "inventive concept."
Step 2 of Alice has created considerable confusion both at the United States Patent Office during prosecution and in the federal courts during litigation, so much so that if a 2014 U.S. District Court decision (discussed below) were upheld by the Supreme Court today, it would effectively overturn Benson.
Gottschalk v. Benson 1972
This is the seminal Supreme Court case where the Court invalidated a patent under 35 USC § 101 for claiming an algorithm that converts binary-coded decimal (BCD) numbers into binary numbers using a general purpose computer. In the follow-on case Parker v. Flook (1978), the Court, in invalidating a patent for claiming a smoothing algorithm, stated the patent claims should be analyzed as if the algorithm were already in the prior art (i.e., the novelty or non-obviousness of the algorithm is irrelevant). The cases following Alice have raised the question: did the Supreme Court in Alice intend to overturn the longstanding rule in Benson that algorithms are unpatentable subject matter?
California Institute of Technology v. Hughes Communications Inc. 2014
Caltech is a case decided by the U.S. District Court for the Central District of California, wherein claim 1 of the patent at issue recites generating a parity bit by accumulating two values: (i) the value of the previous parity bit and (ii) the sum of a number of randomly chosen irregular repeats of message bits (full claim recited below). After a thorough analysis of the precedential Supreme Court cases, the district court declared claim 1 patentable subject matter under § 101 since under Step 2 of Alice the claims recite an "inventive concept." Specifically the district court found:
“Despite being generally directed to abstract concepts, the asserted claims contain meaningful limitations that represent sufficiently inventive concepts, such as the irregular repetition of bits and the use of linear transform operations. Although many of these limitations are mathematical algorithms, these algorithms are narrowly defined, and they are tied to a specific error correction process. These limitations are not necessary or obvious tools for achieving error correction, and they ensure that the claims do not preempt the field of error correction. The continuing eligibility of this patent will not preclude the use of other effective error correction techniques. Therefore, all of the asserted claims are patentable.”
The above paragraph is a literal contradiction to the holding in Benson, and if the decision were affirmed by the Supreme Court today, there could be no other conclusion. The claimed subject matter in Caltech and Benson is exactly technically equivalent since both cover mathematical algorithms for encoding data in a first state into a second state. Short of adjudicating the exact verbatim claim that was adjudicated in Benson, the claims in Caltech are effectively equivalent in every single aspect. The exact same analysis in the above paragraph could be applied to the claims in Benson, such as, "the algorithm elements [in Benson] are not necessary or obvious tools for achieving BCD to binary encoding, and they ensure that the claims do not preempt the field of BCD to binary encoding." The algorithm disclosed by Benson was not the only algorithm capable of encoding BCD to binary. In fact, there were other known techniques for performing the encoding at the time the Benson patent was filed. Benson merely disclosed a faster and more efficient algorithm for performing the encoding, which means the field of BCD to binary encoding was certainly not preempted by the Benson algorithm, in addition to not precluding the use of other effective BCD to binary encoding techniques (exactly as stated in the paragraph above). Again, the court's analysis in Caltech applies exactly to the claims in Benson because the subject matter (data encoding) is literally technically equivalent (i.e., there is no legal distinction between the claimed subject matter).
Although Caltech was decided in 2014, the federal courts have adjudicated other more recent cases using the same legal arguments. In other words, Caltech may have been adjudicated in 2014 but the basic judicial legal analysis and conclusions have not changed in the subsequent case law. Clearly this is one of the most confusing and fragmented areas of patent law, with the best strategy being to traverse a rejection under Alice as if it were a § 103 rejection (obviousness). That is, the argument having the best success against Alice Step 2 is that at least some of the claim elements (alone or in combination) are not "well known" "routine" or "conventional" and therefore embody an inventive concept (i.e., are not obvious) regardless as to whether the claim covers a purely abstract idea as in Caltech.
Claim 8 of Benson patent:
"The method of converting signals from binary coded decimal form into binary which comprises the steps of
"(1) storing the binary coded decimal signals in a reentrant shift register,
"(2) shifting the signals to the right by at least three places, until there is a binary `1' in the second position of said register,
"(3) masking out said binary `1' in said second position of said register,
"(4) adding a binary `1' to the first position of said register,
"(5) shifting the signals to the left by two positions,
"(6) adding a `1' to said first position, and
"(7) shifting the signals to the right by at least three positions in preparation for a succeeding binary `1' in the second position of said register."
Claim 1 of Caltech patent:
1. A method comprising: receiving a collection of message bits having a first sequence in a source data stream; generating a sequence of parity bits, wherein each parity bit “xj” in the sequence is in accordance with the formula xj=xj-1+∑i=1λ v(j-1)λ+i, where “xj−1” is the value of a parity bit “j−1,” and ``∑i=1av(j-1)a+1″ is the value of a sum of “a” randomly chosen irregular repeats of the message bits; and making the sequence of parity bits available for transmission in a transmission data stream.
CALTECH FURTHER ILLUSTRATES THAT § 101 HAS MORPHED INTO § 103
The author of this blog post authored a related blog post on how the courts' decisions post Alice have effectively morphed § 101 into § 103. The full blog post is available here: § 101 has simply morphed into § 103. Caltech is yet another case that supports this assertion since the court found patentable subject matter in an otherwise unpatentable algorithm by asserting the "limitations are not necessary or obvious tools for achieving error correction." This is literally the same as asserting the limitations are not anticipated under 35 USC § 102 or obvious under 35 USC § 103. The court lacks any subtly in their decision, but instead asserts the exact basis for patentability under 35 USC § 102 (anticipation) or 35 USC § 103 (obviousness), whereas in all cases preceding Alice the prior art was considered irrelevant when analyzing claims under 35 USC § 101. That is, prior to Alice the Court rendered the decisions on the face of the claim as if the recited algorithm were already in the prior art (which in the author's opinion is the only sound technique). So the question remains: did the Supreme Court in Alice intend to overturn Benson? No reasonable person would interpret the decision in Caltech other than it must have.
THE SUBJECT MATTER IN CALTECH COULD HAVE BEEN PATENTABLE UNDER § 101
The claims in the Caltech patent (e.g., claim 1 above) are not limited to any particular application or "machine" as required by 35 USC § 101 since the claims recite only the processing of a "data stream." In practice, there are likely only two applications for the algorithm recited in the claims of Caltech: wireless data communication or data storage. Incredibly the Caltech patent failed to describe either of these applications as possible embodiments of the invention, and so the specification of the patent would likely not support a claim to either of these applications. Assuming the Caltech patent would have disclosed the application of the encoding algorithm to wireless communication or data storage, the claims could easily have satisfied 35 USC § 101 under Alice as well as the established precedents. For example, the claims could have recited a "wireless communication channel for transmitting the encoded data stream" or a "non-volatile memory for storing the encoded data stream." This is the main point of Benson; that is, the claimed algorithm needs to improve patentable subject matter, whereas the algorithm alone is unpatentable subject matter. An excellent example of claiming an application of an algorithm to achieve patentable subject matter is discussed on pages 14-16 of the USPTO examples of Subject Matter Eligibility:
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About the Author: Howard Sheerin is a California licensed patent attorney having drafted and prosecuted over 800 complex electrical and computer patent applications, including the successful defense of claim rejections under the Alice two step rule. Mr. Sheerin offers a free review of pending patent applications rejected under § 101, including how the claims might be amended to overcome the rejection, and potential arguments for traversing the rejection. Mr. Sheerin can be contacted by phone at 415-238-4007.