E.D. Texas: Digital Product Licensing Not Patent-Eligible

Patent claims directed to “adjusting the number of devices allowed to use a digital product (e.g., software) under a license” are not patent-eligible, says Judge Robert W. Schroeder of the Eastern District of Texas.  Uniloc, USA, Inc. v.  Amazon.com, Inc., Civil Action No. 2:16-CV-00570-RWS (Lead) (E.D. Texas, March 20, 2017).  Thus, Judge Schroeder granted a motion to dismiss brought under FRCP 12(b)(6) for lack of patent-eligible subject matter, finding claims of U.S. Patent No. 8,566,960 invalid under 35 U.S.C. § 101 and the Mayo/Alice test.

Representative independent claim 22 of the ’960 patent recites:

A method for adjusting a license for a digital product over time, the license comprising at least one allowed copy count corresponding to a maximum number of devices authorized for use with the digital product, comprising:

receiving a request for authorization to use the digital product on a given device;

verifying that a license data associated with the digital product is valid based at least in part on a device identity generated by sampling physical parameters of the given device;

in response to the device identity already being on a record, allowing the digital product to be used on the given device;

in response to the device identity not being on the record, setting the allowed copy count to a first upper limit for a first time period, the allowed copy count corresponding to a maximum number of devices authorized to use the digital product;

calculating a device count corresponding to total number of devices already authorized for use with the digital product; and

when the calculated device count is less than the first upper limit, allowing the digital product to be used on the given device.

Turning to step one of the two-part Mayo/Alice test, the plaintiffs argued that “the claims recite a non-abstract, improved technique for effectively mitigating unauthorized or "pirated" use of software, while also accommodating the typical multiple-device and dynamically-changing use patterns of license customers over time.”  The plaintiffs further argued that the claims could be considered abstract only if one “overlook[ed] the fundamental ‘adjusting’ concept of the patent.”

The court rejected this argument, finding that the recited “time-adjustable license is an abstract idea because licensing is a fundamental economic practice and because licenses are abstract exchanges of intangible contractual obligations.”  Even if “a small subset of licenses as a whole,” time-adjustable licensed “are still abstract.”  Moreover, the claims were not directed to “specific improvements in the functioning of a computer.” Therefore, the abstract idea prong of the patent-eligibility test was satisfied.

Turning to step two of the patent-eligibility test, the court rejected the defendants’ argument that the claims failed to recite a patentable innovation because they failed “to recite a mechanism for each of the claimed function.”  Nonetheless, the claims failed the “significantly more” prong because, looking at claim 22 step-by-step, there was no recitation to limit the abstract idea of an adjustable license.  Nor did the steps in combination provide an inventive concept.

Moreover, addressing the plaintiffs’ arguments that dependent claims added inventive concepts, the court rejected the argument “that Defendants' Motion conflates the § 101 eligibility inquiry with the § 103 obviousness inquiry.”  The court agreed that “a determination that a claim is drawn to ineligible subject matter should not turn only on the finding that one or more claim elements are within the prior art.”  Nonetheless, the Section 101 inquiry could look to the intrinsic evidence to see that there was no inventive concept recited in the claims.

Lessons

Novelty is not enough to save claims from patent-eligibility, as this recent Federal Circuit case demonstrates.  But at the same time, the present court’s protestations to the contrary notwithstanding, a lack of novelty – which may be exemplified by claims that are broad/or directed to familiar business methods – will almost always fall under AliceThis recent Federal Circuit case is a good example of that.

Upcoming Webinar

Business Methods and Patent-Eligibility at the USPTO
September 22, 2017 at 12:00 pm EDT
During the webinar, Charles Bieneman will discuss recent trends and current practices with respect to patent-eligibility at the USPTO’s business methods arts units – including a looks at how some cases are surviving Section 101 rejections. Register

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