Overcoming a §101 Rejection

Making the Intangible Patentable: Software and Overcoming a §101 Rejection

What is a §101 Rejection & Why does Software Receive it?

Software often presents unique hurdles to obtaining patent protection. One of those hurdles is whether the software is patent-eligible subject matter under 35 U.S.C. §101. Analyzing what courts find patent eligible is important when drafting software patent applications. This article briefly discusses Cosmokey Sols. GMBH & Co. KG v. Duo Sec. LLC, a recent case where the Federal Circuit Court of Appeals found a patent application’s claims for software-related technology patent eligible despite a lower court deeming it patent ineligible under §101.

By way of background, the U.S. Patent Office (“USPTO”) defines patentable inventions in Section 101 of the Patent Act as: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101. In Alice Corp. v. CLS Bank International, the Supreme Court established a two-part test for examining patent eligibility under § 101, now known as the Alice test. Thus, a court must analyze a software related invention’s patent application’s claims using the Alice test to determine whether is patent eligible.

The Alice Two-Step Test

For step one of the Alice test, a court must determine “whether the claims at issue are directed to one of those patent-ineligible concepts.” This step asks a court to analyze if the claims are directed towards an ineligible concept rather than just simply utilizing or applying an abstract idea or natural concept. If a claim is found not to be directed towards an ineligible concept, then it is patent eligible and there is no need to continue to step two of the test. Step one of the Alice test is divided into two prongs – Prong 1 and Prong 2. Only if a claim is found to be directed to an abstract idea after analyzing the claim under both Prong 1 and Prong 2, must the evaluation continue to Alice step two.

For Prong 1 of step one of the Alice test, the procedure for determining whether a claim “recites” an “abstract idea” requires one to identify the specific limitations in the claim under examination recites an abstract idea and determine whether the identified claim falls within at least one of “groupings” of abstracts ideas. The groupings are the following:

• Mathematical concepts-mathematical relationships, mathematical formulas, or equations, mathematical calculations;

• Certain methods of organizing human activity fundamental economic principles or practices (including hedging, insurance, mitigating risk); commercial or legal interactions (including agreements in the form of contracts; legal obligations; advertising, marketing or sales activities or behaviors; business relations); managing personal behavior or relationships or interactions between people (including social activities, teaching, and following rules or instructions); and,

• Mental processes – concepts performed in the human mind (including an observation, evaluation, judgment, opinion).

Claim limitations that do not fall within the enumerated groupings should not be treated as abstract ideas except in rare circumstances. If the identified limitation(s) falls within any of the groupings of abstract ideas enumerated in the 2019 PEG, the analysis should proceed to Prong 2.

Prong 2 requires one to identify whether there are any additional elements recited in the claim and evaluating those additional elements to determine whether they integrate the exception into a practical application of the exception. “Integration into a practical application” requires an additional element or a combination of additional elements in the claim to apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to “monopolize the exception.” Limitations that are indicative of integration into a practical application include the following:

• improvements to the functioning of a computer or to any other technology or technical field;

• applying or using a judicial exception to affect a particular treatment or prophylaxis for a disease or medical condition;

• applying the judicial exception with, or by use of, a particular machine;

• effecting a transformation or reduction of a particular article to a different state or thing; and

• applying or using the judicial exception in some other meaningful way beyond generally linking the use of the judicial exception to a particular technological environment, such that the claim as a whole is more than a drafting effort designed to monopolize the exception.

Only if a claim recites a judicial exception (Prong 1), AND (2) does not integrate that exception into a practical application (Prong 2), does one go to step two of the Alice test. Part 2 looks to whether the claim:

For step two of the Alice test, a court must determine whether an invention contains “an inventive concept” that is sufficient to “transform the claimed abstract idea into a patent-eligible application.” In addition, the Supreme Court stated, “a claim that recites an abstract idea must include “significantly more” than the abstract idea itself to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea. To illustrate these concepts in application, we now turn to Cosmokey Sols. GMBH & Co. KG v. Duo Sec. LLC, 15 F.4th 1091 (Fed. Cir. 2021).

Cosmokey Sols. GMBH & Co. KG v. Duo Sec. LLC

In Cosmokey, the Federal Circuit Court of Appeals (“Federal Circuit”) found the claims in U.S. Patent No. 9,246,903 (“‘903 patent”) patent eligible under 35 U.S.C. §101. The Federal Circuit heard Cosmokey on appeal after the Delaware court found that the ‘903 patent’s claims were directed towards abstract ideas and failed to prove that they contain an inventive concept. Ultimately, the Federal Circuit reversed the Delaware court’s decision and found the ‘903 patent’s claims patent eligible.

The ‘903 patent describes a process for “authenticating the identity of a user performing a transaction at a terminal (e.g., a computer), including activating an authentication function on the user’s mobile device”. Claim 1 of the ’903 patent is included directly below.

  1. A method of authenticating a user to a transaction at a terminal, comprising the steps of:

transmitting a user identification from the terminal to a transaction partner via a first communication channel,

providing an authentication step in which an authentication device uses a second communication channel for checking an authentication function that is implemented in a mobile device of the user,

as a criterion for deciding whether the authentication to the transaction shall be granted or denied, having the authentication device check whether a predetermined time relation exists between the transmission of the user identification and a response from the second communication channel,

ensuring that the authentication function is normally inactive and is activated by the user only preliminarily for the transaction,

ensuring that said response from the second communication channel includes information that the authentication function is active, and

thereafter ensuring that the authentication function is automatically deactivated.

Alice Step One

In Alice step one, the Delaware district court held that the claims were “directed to the abstract idea of authentication—that is, the verification of identity to permit access to transactions.” The district court relied on Prism Tech. LLC v. T-Mobile USA, Inc which stated that the software in question was “the abstract idea of ‘providing restricted access to resources’ because the claims did not cover a “concrete, specific solution.” 696 F. App’x at 1017. The Federal Circuit accepted (albeit begrudgingly) the narrow characterization and continued to the Alice test’s Step Two.

Alice Step Two

In applying Alice step two, the Delaware district stated that Cosmokey’s ‘903 patent failed the second step of the Alice test because it “merely teaches generic computer functionality to perform the abstract concept of authentication”, however on appeal the Federal Circuit disagreed.

In applying Alice step two, the Federal Circuit found that Cosmokey’s ‘903 patent claim was patent eligible because the claim “provides a technical improvement over conventional authentication methods”. Federal Circuit reasoned that the claimed method improves on conventional technology by reducing “the complexity of the authentication function can be reduced significantly” because “the only activity that is required from the user for authentication purposes is to activate the authentication function at a suitable timing for the transaction.” The Federal Circuit found that the inventive concept of the technology transcends an abstract idea by “requiring a specific set of ordered steps” that both reduces the complexity in the conventional process, thus improving it for the user. Stated differently, the Federal Circuit found that the ‘903 patent’s claims included the inventive concept related to the predetermined time relation that went beyond the abstract idea and was an improvement of the prior art.

Interestingly, Judge Jimmie Reyna, in his concurring opinion, noted that under step one of Alice, the claims of the ‘903 patent are directed to patent-eligible subject matter and that it was unnecessary to move to step two of Alice. Judge Reyna noted that the majority opinion’s rational that “[t]he ‘903 patent’s claims and specification recite a specific improvement to authentication that increases security, prevents unauthorized access by a third party, is easily implemented, and can advantageously be carried out with mobile devices of low complexity.” is Alice step one analysis. Judge Reyna noted that it is the incorporation of the claimed rules, not the use of the computer, which improved the existing technological process, which made the ‘903 patent’s claims patent eligible under step one of Alice.

Lessons Learned

Software presents a unique challenge for the patentability. Knowledge about how to effectively circumvent a §101 rejection is critical when drafting the claims and specification of a software patent application. Due to the importance of emphasizing the “inventive nature” of an invention, a patent application’s claims and specification should be tailored to highlight how an invention offers an improvement over the prior art.

If you have any questions about software related inventions, 35 U.S.C. §101 rejections, or would like advice on overcoming a rejection from the USPTO, then please do not hesitate to reach out and schedule a meeting with one of our attorneys. The attorneys at The Plus IP Firm have prosecuted hundreds of patent applications for software related inventions for our clients and we can assist you. This article was authored by Kaylie Garcia and Derek Fahey, Esq.