Patent-Eligible Improvements to Computer Functionality Must Be Directed to an Improvement of the Computer or Network Platform

By on March 19, 2020

Applying the US Supreme Court’s Alice v. CLS framework, the US Court of Appeals for the Federal Circuit upheld a Patent Trial and Appeal Board (PTAB) finding patent claims directed to data management and processing systems for merely storing advertising data were not patent eligible under 35 U.S.C. §101. Customedia Techs., LLC v. Dish Network Corp., Case No.18-2239 (Fed. Cir. Mar. 6, 2020) (Moore, J.)

Dish Network filed petitions for Covered Business Method review (CBM review) of claims of two Customedia patents directed to data management and processing systems for merely storing advertising data. The patents, which share a specification, describe 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 to which that broadcasters and content providers transmit advertising data. The advertising data can be selectively recorded in programmable storage sections according to user preferences. The Patent Trial and Appeal Board (PTAB) found most of the patents’ claims ineligible under 35 U.S.C. §101, as being directed to abstract ideas, and certain other claims anticipated under 35 U.S.C. §102 or indefinite under 35 U.S.C. §112. Customedia appealed.

In addition to the explicit statutory requirements of §101 that only new and useful processes, machines, manufactures, compositions, or improvements thereof can be patentable, the US Supreme Court held in Alice v. CLS that laws of nature, natural phenomena and abstract ideas are not patent eligible. (IP Update Vol. 17, No. 7) The two-step Alice framework for determining subject matter eligibility requires (i) determining whether the claims are directed to a “patent-ineligible concept,” such as an abstract idea; and (ii) determining whether the claim elements individually, and in ordered combination “transform the nature of the claim” into a patent-eligible application.

The Federal Circuit found that PTAB correctly found the claims were not subject matter eligible under § 101. Under step one, the Court rejected Customedia’s argument that their claims “improve the functioning of the computer itself” (a previously held exception providing §101-eligibility), and instead found that the claims were directed to the abstract idea of using a computer to deliver targeted advertising to a user, but not to improving the functioning of the computer itself. Customedia also argued that the claimed programmable local receiver units provide a reserved and dedicated section of storage for advertising, thereby improving the system’s ability to store advertising data, transfer data at improved speeds and efficiencies, and prevent system inoperability from insufficient storage. The Court rejected this argument, finding that even if the claimed invention ensured memory was available for advertising data, there was no improvement to the functionality of the computer itself. Instead, any improvement from the claims was to the abstract concept of delivering targeted advertising, and the computer was merely a tool.

Turning to step two, the Federal Circuit found that the claims recited only generic computer components and the specification only referenced generic and functional hardware, and therefore no eligibility saving additional elements were found. To the contrary, the Court noted that the patents’ specification acknowledged that the claimed storage device could be that “any storage device for audio/video information known in the art” or “any digital or analog signal receiver and/or transmitter capable of accepting a signal transmitting any kind of digital or broadcast information.” Because the Court affirmed the finding that the claims were ineligible under § 101, the Court did not reach the issue of whether the claims were unpatentable based on §§ 102 and 112.