Improvements in Computer Functioning Concretize the Abstract – A New Way to Look at Alice, But Is It Really Helping?
In Enfish, LLC v. Microsoft Corp., the Court of Appeals for the Federal Circuit held that not all improvements in computer-related technology are inherently abstract. Enfish is only the second Federal Circuit decision after Alice Corp. Pty. Ltd. v. CLS Bank Int’l to uphold the patent-eligibility of software patent claims.
As a result of the Federal Circuit’s Enfish holding, it is appropriate for district courts and the Patent Trial and Appeal Board (PTAB) to look at improvements in hardware functionality as preventing a finding that a software invention is directed to an abstract idea.
Taken with the recent US Patent and Trademark Office (USPTO) updated guidance on patent eligibility, we anticipated a more thoughtful application of the US Supreme Court ruling in Alice, particularly as applied to consideration of whether patent claims represent “nothing more than” an abstract idea. The implications for software patents and patent applications at all phases, from pendency and post-grant proceedings in the USPTO to motions practice in district court, would be significant. Recent decisions from the USPTO Patent Trial and Appeal Board (PTAB), district courts, and even the Federal Circuit indicate that judicial bodies still are treading softly, but there are hopeful signs.
By way of background, Alice put forth a two-step process to determining patent eligibility for claims. First, it is necessary to determine whether the claims at issue are directed to a patent-ineligible concept (e.g. an abstract idea). Second, it is necessary to “consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application”.
Looking at that first Alice step, the Federal Circuit in Enfish stated:
That formulation plainly contemplates that the first step of the inquiry is a meaningful one, i.e., that a substantial class of claims are not directed to a patent-ineligible concept. The “directed to” inquiry, therefore, cannot simply ask whether the claims involve a patent-ineligible concept, because essentially every routinely patent-eligible claim involving physical products and actions involves a law of nature and/or natural phenomenon—after all, they take place in the physical world.
Previously, courts and the USPTO had waited until the second Alice step before looking at whether a patent claim improved computer function, having decided beforehand that the claim was directed to an abstract idea. On all too many occasions, having found claims to be directed to an abstract idea, that was effectively the end of the inquiry. In the great majority of cases, it was found that software running on a computer did not intrinsically make a computer run faster. The abstract idea holding colored the view of patent examiners, PTAB judges, and Federal judges. In the absence of showing some actual improvement in hardware functioning, it has been extremely difficult to show that software is not directed to an abstract idea.
The Federal Circuit provided basis for hope in Enfish when the court stated:
We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two. * * * Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs. Therefore, we find it relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, even at the first step of the Alice analysis.
The Federal Circuit provided a useful contrast between the claims in Enfish and patent-ineligible claims:
Moreover, we are not persuaded that the invention’s ability to run on a general-purpose computer dooms the claims. Unlike the claims at issue in Alice or, more recently in Versata Development Group v. SAP America, Inc., 793 F.3d 1306 (Fed. Cir. 2015), which Microsoft alleges to be especially similar to the present case, Appellee’s Br. 18, see also Oral Argument at 15:40-18:15, the claims here are directed to an improvement in the functioning of a computer. In contrast, the claims at issue in Alice and Versata can readily be understood as simply adding conventional computer components to well-known business practices.
The Federal Circuit went on to state:
Much of the advancement made in computer technology consists of improvements to software that, by their very nature, may not be defined by particular physical features but rather by logical structures and processes. We do not see in Bilski or Alice, or our cases, an exclusion to patenting this large field of technological progress.
Because the Federal Circuit found that the Enfish claims are not directed to an abstract under step one of the Alice analysis, there was no need to proceed to step two of that analysis.
Enfish pushes a critical and potentially patent-saving step earlier in the analysis. The ability to argue that improvements in computer functioning take patent claims out of the realm of being an abstract idea helps to extricate those claims from what otherwise has been an impossible situation. Pretty much any patent claim can look like an abstract idea if viewed at a sufficiently high (dare one say sufficiently abstract?) level. Patent examiners in particular tend to undertake their patent-eligibility analyses at that high level, making software patent claims seem old and known (even though novelty is not supposed to be a criterion for patent-eligibility under section 101).
At a high enough level, even undoubtedly physical things like hybrid engines, electronic circuits, and robots can seem abstract, or at least old. But the details of the claims can tell a very different story. Being able to use improvement in computer functioning to determine whether a patent claim represents an abstract idea, can enable software patent holders and applicants to circumnavigate many of the difficulties that an Alice analysis otherwise has represented.
Within a very few days after the Enfish decision, the USPTO published guidance to Examiners for interpreting the decision. Following closely on the heels of extensive guidance basically instructing Examiners to work harder to provide proper analysis and explanation of bases for finding claims to be patent-ineligible, things appeared to be looking up for software patent holders and applicants.
The results so far are mixed. In four subsequent PTAB decisions, seven district court decisions (all but one from the District of Delaware), a Court of Appeals decision, and even a Federal Circuit decision, all citing Enfish, all eleven decisions found Enfish either distinguishable or irrelevant, and held claims at issue not to be patent-eligible.
There have been two post-Enfish PTAB decisions in which an Enfish analysis contributed to a denial of institution of a covered business method (CBM) proceeding because of an insufficient showing that patent claims at issue were directed to an abstract idea.  There also has been one post-Enfish district court decision in which the Court denied a Fed. R. Civ. P. 12(b)(6) motion to dismiss because of invalidity under section 101, noting that Enfish supported the Court’s analysis.
Maybe these continued predominantly negative outcomes (13 out of 16) mean that Enfish, like DDR, was a blip on the Federal Circuit horizon, and that software patent claims remain at just as great a risk of being declared patent-ineligible as ever. Maybe the 13 negative decisions were the result of insufficient factual development prior to the Court or PTAB rendering its decision.
However, the Federal Circuit’s thoughtful analysis in Enfish still provides some important guidance to software patent holders and patent applicants. The ability to argue the importance of improvement in computer functioning earlier in the Alice two-part analysis, and the ability to analogize patent claims at issue to those in Enfish in demonstrating that improvement, can aid in showing that a patent claim does not represent an abstract idea.
 2016 U.S. App. LEXIS 8699 (Fed. Cir., May 12, 2016).
 ___U.S.___, 134 S. Ct. 2347 (2014).
 DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014) is the other such Federal Circuit decision.
 http://www.uspto.gov/sites/default/files/documents/ieg-may-2016-memo.pdf (May 4, 2016); http://www.uspto.gov/sites/default/files/documents/ieg-may-2016-ex.pdf (May 4, 2016); http://www.uspto.gov/sites/default/files/documents/ieg-may-2016_enfish_memo.pdf (May 16, 2016).
 Alice, 134 S. Ct. at 2355.
 Enfish, 2016 U.S. App. LEXIS 8699, *10.
 Id., *11-12.
 Id., *18-19.
 Id., *20-21.
 Id., *21.
 CBM2015-00021 (May 31, 2016); CBM2015-00030 (June 2, 2016); CBM2016-00021 (June 1, 2016); CBM2016-00022 (June 1, 2016).
 Device Enhancement LLC v. Amazon.com, Inc., 2016 U.S. Dist. LEXIS 64600 (D. Del., May 17, 2016); Yodlee, Inc. v. Plaid Techs. Inc., 2016 U.S. Dist. LEXIS 68223 (D. Del., May 23, 2016); Visual Memory LLC v. NVIDIA Corp., 2016 U.S. Dist. LEXIS 69543 (D. Del., May 27, 2016); GoDaddy.com LLC v. RPost Communications Ltd. et al., 2016 U.S. Dist. LEXIS 73921 (D. Ariz. June 7, 2016); Apollo Fin. v. Cisco Sys., 2016 U.S. Dist. LEXIS 74834 (C.D. Cal., June 7, 2016); Nextpoint, Inc. v. Hewlett-Packard Co., 2016 U.S. Dist. LEXIS 74470 (N.D. Ill., June 8, 2016); Papst Licensing GMBH & Co. v. Xilinx Inc., 2016 U.S. Dist. LEXIS 76061 (N.D. Cal., June, 9, 2016).
 Encyclopedia Britannica v. Dickstein Shapiro, 2016 U.S. App. LEXIS 10647 (D.C. Cir., June 10, 2016).
 In re TLI Communs. LLC Patent Litigation, 2016 U.S. App. LEXIS 8970 (Fed. Cir., May 17, 2016).
 CBM2016-00013 (May 26, 2016) and CBM2016-00019 (May 26, 2016).
 JDS Techs., Inc. v. Exacq Techs., 2016 U.S. Dist. LEXIS 73622 (E.D. Mich., June 7, 2016).
 In CBM2016-00019, in which the PTAB found that Enfish militated against a finding of patent-ineligibility, the PTAB invited and considered further briefing. In Yodlee, supra, an opinion containing a magistrate’s recommendations for finding claims at issue patent-ineligible, the Court did not give the parties an opportunity before providing its recommendations, but did invite the parties to address Enfish in any objections that might be filed. In Visual Memory LLC, supra, the plaintiff submitted a supplemental brief discussing Enfish.