When “Patented” is False Advertising
Case Information:
CROCS, INC. v. EFFERVESCENT, INC.
Judges: Federal Circuit Judges Reyna (author) and Cunningham, District Judge Albright
Issues: False Advertising, Lanham Act, Patent Marking/Advertising
Overview:
In the mid 00’s, Crocs, Inc. (“Crocs”) started a campaign of suing competitors over for patent infringement. In 2006, Crocs sued Effervescent, Inc., Holey Soles Holdings, Ltd., Double Diamond Distribution, Ltd., and (eventually) U.S.A. Dawgs, Inc. (collectively “Dawgs”) for infringement of U.S. Patent Nos. 6,993,858 and D517,789. Below are example images from each of these patents.
What followed was a complex history of litigation that resulted in an appellate decision about an issue different from patent infringement in 2024. A simplified timeline:
April 3, 2006: Cros sues Dawgs (without U.S.A. Dawgs) for patent infringement
March 31, 2006: Crocs files a complaint in the International Trade Commission ("ITC"). Patent infringement case is stayed pending resolution of ITC complaint.
2012: U.S.A. Dawgs is added as a defendant
2012-2016: Case is stayed pending inter partes review
May 31, 2016: Dawgs files the pending counter-claim against Crocs
January 31, 2018: U.S.A. Dawgs files for Chapter 11 bankruptcy
August 15, 2018, Dawgs assigns all rights, including explicitly the claims asserted by U.S.A. Dawgs, to Mojave Desert Holdings LLC.
October 23, 2018, U.S.A. Dawgs is dissolved, but continues for the limited purpose of, among other things, prosecuting and defending suits
2018-2020: Case is stayed pending the bankruptcy proceeding
In Dawgs’ 2016 counterclaim, Dawgs alleged that Crocs had engaged in a “campaign to mislead its customers” about the characteristics of “Croslite,” the primary material Crocs uses to make its footwear products. Allegedly, Crocs’ website falsely described Croslite as “patented,” “proprietary,” and “exclusive” (collectively, “patented”). Dawgs alleged that this misled customers to believe that “Crocs’ molded footwear is made of a material that is different than any other footwear” and that its competitors’ molded footwear products are “made of inferior material compared to Crocs’ molded footwear.”
The District Court granted Crocs’ motion for summary judgment on the grounds that the terms “patented,” “proprietary,” and “exclusive” were claims of “inventorship” and that Dawgs’ claims were directed to a claim of false designation of authorship of the shoe products rather than the nature, characteristics, or qualities of Crocs’ products. Thus, Dawgs’ counterclaim failed.
Dawgs appealed.
Discussion
Section 43(a)(1) of The Lanham Act establishes a federal cause of action for unfair competition to protect people and companies that are engaged in commerce. Section 43(a)(1)(B) creates a cause of action for a person damaged by false or misleading commercial advertising or promotions that mislead consumers about the nature, characteristics, or qualities of goods or services:
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which… in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities… shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
Crocs conceded that its statements that a Croslite was “patented” were false. The issue in the case was whether such false advertising using the term “patented” was a form of unfair competition, actionable under Section 43(a)(1)(B) of the Lanham Act.
Dawgs had an uphill battle because the district court relied on two previous cases that seemingly precluded such a claim. In Dastar Corp. v. Twentieth Century Fox Film Corp., the Supreme Court Court held that the term “origin” in Section 43(a)(1)(A) of the Lanham Act means “the producer of the tangible goods that are offered for sale, and not . . . the author of any idea, concept, or communication embodied in those goods.” In the case, Crusade in Europe, a television program based on the same-titled book written by General Dwight D. Eisenhower. The copyright over the series expired in the 70s. Through a complicated path, Twentieth Century Fox acquired exclusive rights to distribute the series on video in the late 1980s, notably after the copyright had expired. In the 90s, Dastar edited and released a version of the series with no reference to the original series. Twentieth Century Fox claimed that not acknowledging the source of the original series was a misrepresentation and that Dastar was effectively holding forth that it was the origin of the intellectual property. However, the Court found the Lanham Act claim failed because Dastar was the originator of the products it sold, despite not being the originator of the original series. A Lanham Act claim does not arise for merely claiming that a party is the producer of the video.
In Baden Sports, Inc. v. Molten USA, Inc., the Ninth Circuit Court of Appeals held that Baden had no claim under Section 43(a)(1)(B) because Baden based its false advertising claims on allegations that Molten was improperly asserting itself as the innovator of the technology-at-issue. Both Baden Sports and Molten USA are manufacturers of sporting equipment, such as basketballs. Molten had advertised that its basketballs had a “dual-cushion technology” and that such basketballs were “innovative.” Baden accused Molten of deceiving consumers into believing that Molten was the originator of dual-cushion technology. However, Baden had a patent covering dual-cushion technology and had successfully previously sued Molten USA over it. However, because this was a claim about the “originator” of dual-cushion technology, the Court held that because the claim did not go to the nature, characteristics, or qualities of the goods, Baden could not recover under Section 43(a)(1)(B).
However, the Federal Circuit distinguished Dawgs’ claim from those found in Dastar and Baden. The Court held that “[a] claim that a product is constructed of ‘patented’ material is not solely an expression of innovation and, hence, authorship.” Unlike Baden, Dawgs’ alleged false advertisements about claims to a product’s tangible nature, characteristics, or qualities. Dawgs showed that Crocs advertised that Croslite has numerous tangible benefits found in all of Crocs’ shoe products. Specifically, Dawgs alleged that (a) Crocs’ statements referring to the Croslite as exclusive, proprietary, and/or patented caused customers to believe that “Crocs’ molded footwear is made of a material that is different than any other footwear,” and (b) Crocs’ promotional materials “deceive consumers and potential consumers into believing that all other molded footwear . . . is made of inferior material compared to Crocs’ molded footwear.” The Federal Circuit then remanded for further proceedings to decide whether Crocs’ advertisements arose to unfair competition.
Thoughts
A company should be very careful when claiming that a product is patented. If a physical product is covered by a patent, it should be marked as such (this is called “Patent Marking” and should be discussed with your patent attorney when you receive a patent grant) or consumers should be given reasonable notice. However, you should not advertise your product as “patented” unless it is covered by a valid U.S. Patent if that claim is related to the tangible nature, characteristics, or qualities of the product.
Subject Matter Eligibility: “Directed to a specific means that improves the relevant technology”
Case Information:
CONTOUR IP HOLDING LLC v. GOPRO, INC.
Judges: Federal Circuit Judges Prost, Schall, and Reyna (writing)
Issues: Subject Matter Eligibility,
Overview:
Contour IP Holding LLC (“Contour”) owns U.S. Patent No. 8,890,954 (“’954 patent”) and related U.S. Patent No. 8,896,694 (“’694 patent”). The asserted patents disclose a “hands-free, [point-of-view] action sports video camera” that is “configured for remote image acquisition control and viewing.” The ‘954 patent, column 1, lines 15-17. GoPro Inc. manufactures portable cameras that capture point-of-view videos and images, popular among, for example, sports enthusiasts.
The parties agree that claim 11 of the ’954 patent was a representative claim for purposes of the subject matter eligibility inquiry (emphasis added).
11. A portable, point-of-view digital video camera, comprising:
a lens;
an image sensor configured to capture light propagating through the lens and representing a scene, and produce real time video image data of the scene;
a wireless connection protocol device configured to send real time image content by wireless transmission directly to and receive control signals or data signals by wireless transmission directly from a personal portable computing device executing an application; and
a camera processor configured to:
receive the video image data directly or indirectly from the image sensor,
generate from the video image data a first image data stream and a second image data stream, wherein the second image data stream is a higher quality than the first image data stream,
cause the wireless connection protocol device to send the first image data stream directly to the personal portable computing device for display on a display of the personal portable computing device, wherein the personal portable computing device generates the control signals for the video camera, and wherein the control signals comprise at least one of a frame alignment, multi-camera synchronization, remote file access, and a resolution setting, and at least one of a lighting setting, a color setting, and an audio setting,
receive the control signals from the personal portable computing device, and
adjust one or more settings of the video camera based at least in part on at least a portion of the control signals received from the personal portable computing device.
The district court had granted a summary judgment to GoPro on the basis that claim 11 was not directed to patent-eligible subject matter. The district court based its decision on Yu v. Apple Inc., 1 F.4th 1040 (Fed. Cir. 2021). In Yu, phones manufactured by Apple and Samsung were accused of infringing U.S. Patent No. 6,611,289, entitled “Digital Cameras Using Multiple Sensors with Multiple Lenses.” Claim 1 was a representative claim (emphasis added):
1. An improved digital camera comprising:
a first and a second image sensor closely positioned with respect to a common plane, said second image sensor sensitive to a full region of visible color spectrum;
two lenses, each being mounted in front of one of said two image sensors;
said first image sensor producing a first image and said second image sensor producing a second image;
an analog-to-digital converting circuitry coupled to said first and said second image sensor and digitizing said first and said second intensity images to produce correspondingly a first digital image and a second digital image;
an image memory, coupled to said analog-to-digital converting circuitry, for storing said first digital image and said second digital image; and
a digital image processor, coupled to said image memory and receiving said first digital image and said second digital image, producing a resultant digital image from said first digital image enhanced with said second digital image.
The Federal Circuit held that the claims were directed to the abstract idea of using two images to enhance each other. The claims did not include a specific means or method that improves the relevant technology. The claims did not include anything about “producing a resultant digital image from said first digital image enhanced with said second digital image” that was not already conventional in the art.
Discussion
The Supreme Court's "Alice" test is used to determine whether a patent claim falls into an ineligible category. At step one of this test, courts decide if the claim is directed to an abstract idea. If it is not, the claim is patent-eligible. If it is, the inquiry moves to step two, where the court looks for elements that transform the abstract idea into a patentable invention.
At step one, the Court often examines the “focus of the claimed advance over the prior art.” Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253, 1257 (Fed. Cir. 2016). The Court also determines whether the claims are directed to “a specific means or method that improves the relevant technology” rather than simply being directed to “a result or effect that itself is the abstract idea.” McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299, 1314 (Fed. Cir. 2016). Here, the Court found that “generat[ing] from the video image data a first image data stream and a second image data stream, wherein the second image data stream is a higher quality than the first image data stream” focused on a specific technological improvement to point-of-view camera technology. That is a camera that can simultaneously record high- and low-quality video streams and wirelessly transfer the lower-quality stream to a remote device for real-time viewing and adjustment is an improvement in technology because it addresses bandwidth limitations, enhancing the camera's performance for remote viewing. The Court emphasized that the “written description discloses improving POV camera technology through specific means of generating high- and low-quality video streams in parallel and transferring a low-quality video stream to a remote device, and the claims reflect this improvement.” Thus the claim was patent subject eligible without needing to analyze the second step of the Alice Test.
Thoughts
Honestly, I think this is a borderline case. However, I think two things helped push the claim over the line.
First, the claim was specific about how the improvement in technology was accomplished. “Generat[ing] from the video image data a first image data stream and a second image data stream, wherein the second image data stream is a higher quality than the first image data stream” is more specific than “producing a resultant digital image from said first digital image enhanced with said second digital image.” I think one major weakness of the claim at issue in Yu is that you can append the word “somehow” to the end of the limitation: producing a resultant digital image from said first digital image enhanced with said second digital image somehow. You can’t with the claim at issue in this case: Generat[ing] from the video image data a first image data stream and a second image data stream, wherein the second image data stream is a higher quality than the first image data stream somehow. While I don’t think this is an observation that is guaranteed to be an absolute predictor of patent-eligible subject matter, I think it is a good “sniff” test when reviewing claims.
Second, the specification contained a paragraph that backed up the idea that the claim represented a technical advance. The specification stated that “a user can remotely view and adjust the desired recording in real-time, with the elimination of bandwidth limitations on wireless data transfer.” This reinforced the technical nature of the improvement and that the limitations of the specific claim led to this result.
Are these patent truths really hard?
I recently read an article in Forbes titled “10 Hard Truths About Patents And The Patent System” written by Stephen Key. I thought I would provide my thoughts on these 10 truths. I am not going to copy much of the author’s reasoning. I encourage you to read the article and then return.
My first impression? Stephen would make a great client because he proactively thinks about important issues when working with a patent attorney. These a good points of discussion when you are considering filing for a patent and when talking to your patent attorney.
Truth 1: Patenting an invention doesn’t protect it from being “stolen.”
This is a hard truth that entrepreneurs should think about. There are many reasons that a patent might be a good fit for your business. The business may want protection, prestige, or an asset that can help raise capital. These are all valid reasons. For example, a recent European Patent Office report suggests that patents and trademarks can boost fundraising. The brutal truth is that patent infringement trials are expensive. According to The American Intellectual Property Association (AIPLA) Economic Survey for 2023, it costs $600,000 per patent to take that case through trial and appeal for legal claims that are less than $1 million. The higher the alleged damage, the higher the costs. This does not mean that entrepreneurs should not enforce their patents or should not get one because of the cost of enforcement; however, it does mean that this should be a consideration at the beginning of the patenting process. Patents introduce risk to your competitors. That risk must be viewed in context. How risk-tolerant is the industry? Make sure you research the industry and the attitudes about intellectual property within it.
Truth 2: Different people are going to interpret a patent differently at different times.
A patent has many audiences over its life. Some will be technical (e.g., your competitors, the patent examiner, patent attorneys, etc.). However, some readers will not be technical (e.g., judges, juries, some CEOs, etc.). A patent should both a) be drafted such that a person can pick it up and reasonably know what the invention is about and how it works, and b) provide the technical detail for the fictitious person of ordinary skill in the art to be able to practice the invention. The patent drafting process is the chance to help control and guide those interpretations.
Truth 3: Your patent attorney is only as capable as the information you provide them with — and we’re not giving them enough information.
I might be a little biased but this is true. It is better to provide your attorney with too much information than too little. As an attorney, I am constantly asking for more details. Document your invention! Seriously, stop reading this and go document your invention. Your successes and failures are important data points that can help craft a better application.
I am going to break a myth that I run into all the time with new inventors: Vagueness does not broaden patents. Specificity makes broader patents. “But James,” I hear you say, “won’t including more detail mean that I will get a narrower patent?” The short answer is “No.” The long answer is “Nooooooooooooooo!” Your patent will not be unnecessarily narrowed because you put details in the application. The more specificity and examples you provide, the easier it is for the attorney to argue that you are entitled to more.
Also, from a cost standpoint, the more detailed you provide, the more productive the patent drafting process will be.
Truth 4: Patent examiners will not find all of the prior art on an invention.
Inventors and their attorneys must provide relevant prior art that they are aware of to the Patent Office. However, inventors have no affirmative duty to search for relevant prior art before or during patent prosecution. Examiners perform searches while examining the applications. These searches may not find all the pertinent prior art. For example, in fields where terminology is more fluid or there are multiple ways to describe something, searching for relevant prior art can be difficult (sometimes referred to as the “indexability problem”). Relevant prior art not considered during patent prosecution may be discovered when a patentee tries to enforce that patent. While this risk exists, you can work with your patent professional to take steps to reduce the risk.
Truth 5: It is the responsibility of the inventor to be the expert on the invention, not the patent attorney or patent agent who is hired to draft the patent application.
I think this “truth” is a little too strong. It is the inventor that is the expert on the invention. Patent attorneys and agents rely on the technical expertise of the inventor to help craft the application. The patent attorney/agent is the expert in the patenting process and application drafting. They know the law and language necessary for a successful application process. Patent attorneys are also technical communicators that need to explain complex, and novel ideas, to a wide variety of audiences. More information about the invention and the technical environment helps this process. Both inventors and attorneys need to work together to create a good patent application.
Truth 6: The patent system is far from perfect for all of the reasons outlined above.
The patent system is not perfect. It takes too long and examiners are generally not given enough resources. This imperfection can cause stress and money. Be at peace with this unfortunate situation. Breath in. A patent should not be the ultimate cornerstone on which you pin the hopes and aspirations of your company. Breath out. Remember: a patent is not a substitute for a business plan or execution of that plan.
Truth 7: The party with the greatest access to capital is more likely to persevere in a patent infringement suit.
This is true of a lot of areas of the law. I have, given the budget, scoured the earth for prior art that allowed us to demonstrate to a patent owner that a patent lawsuit against my client would not be in their best interests. A patent litigation attorney can help come up with strategies to mitigate this monied advantage.
Truth 8: If your invention is commercially successful, copycats won’t be far behind, regardless of whether you have a patent or not.
Realistically, having a patent introduces risks to your competitors. However, the deterrent effect is different based on the industry norms, the competitor’s appetite for risk, the competitor’s inventor’s appetite for risk, and the different ways a problem can be solved. The original author gives a lot of great ideas on how to deal with this by suggesting things to add to your business plan to supplement your patent strategies.
Truth 9: Letting your emotions get the best of you results in poor business decisions.
Three emotions I see that negatively impact clients: anger, pride, and stubbornness. While decisions are ultimately yours, your attorney can give you advice to help through tough times in the process. Also, beware of the sunk cost fallacy.
Truth 10: Waiting for patent law to change before taking action isn’t pragmatic.
In my practice, I deal with subject matter eligibility frequently. This is an area of patent law that can be frustrating, arcane, and, confusing. Do not base your patent strategy or business plan on the idea that patent law will change. In my 12 years of experience, two major shockwave changes to the law have altered the patent landscape. These changes are always positive and cannot be counted on. Plan your strategies on the law of today.
Patents can have a place in your business plan. A patent professional can help shape your strategy to put yourself on your best foot for the challenges that you might face.
Subject Mater Eligibility: “We may assume that the techniques claimed are groundbreaking, innovative, or even brilliant, but that is not enough for eligibility.”
Case Information:
MOBILE ACUITY LTD. v. BLIPPAR LTD.
Judges: Federal Circuit Judges Lourie, Bryson, and Stark (Stark Writing for panel)
Issues: Subject Matter Eligibility, Subject Matter Eligibility, and Motions to Dismiss
Summary:
In MOBILE ACUITY LTD. v. BLIPPAR LTD., the Federal Circuit affirmed the dismissal of Mobile Acuity's patent infringement claims against Blippar, ruling that the asserted patents were directed to patent-ineligible subject matter. The court agreed that the patents described an abstract idea without providing specific technical details or improvements. Mobile Acuity's argument that its inventive concept transformed the claims into patent-eligible subject matter was rejected. The court emphasized that merely using result-oriented, functional language does not meet the requirements for patent eligibility.
Overview:
Both Mobile Acuity and Blippar are UK-based companies in the Augmented Reality (AR) space that specialize in generating and experiencing AR content on mobile devices. Both companies seemed to have struggled (Blippar, public information about the current status of Mobile Acuity seems scarce (its URL does not resolve)).
Mobile Acuity sued Blippar for infringement of U.S. Patent Nos. 10,445,618 (“’618 patent”) and 10,776,658 (“’658 patent”) (collectively, the “Asserted Patents”), both entitled “Storing Information for Access Using a Captured Image.” The Asserted Patents described methods to associate information with real-world locations and objects,” ’618 patent at 1:21-28, 4:28-29, 50-51. According to the Asserted Patents, in the prior art the desire to “attach information to locations in the real world” was “achieved by using barcodes or RFID tags attached to real-world objects or by associating information with absolute positions in the world.” Id. The Asserted Patents eschew the prior art methods by describing an originating user using “a mobile imaging device . . . to capture an image of a location,” and then “upload [the captured image] . . . to [a] server.” Id. The original user defines a feature within the image and the server creates a key that associates digital content with that feature. Id. at 4:56-58. Subsequently, the server provides access to the digital content when an uploaded image has that feature. Id. at 4:62-66.
For the appeal, independent claim 9 of the ’618 patent was considered representative (emphasis added):
A method of storing user-defined information for future access by multiple parties comprising, at a server controlled by a third party:
receiving from a first originating party user defined information that is defined by the first originating party and is for access by multiple parties; and
associating the user-defined information received from the first originating party and at least a first portion of a first image in a database, wherein the user-defined information augments first user-defined information already associated at the server with at least the first portion of the first image in the database; and
providing access by a second party to the user defined information and the first user-defined information, when a second image, captured by the second party, includes a portion corresponding to at least the first portion of the first image.
The trial court granted Blippar’s motion to dismiss. The Federal Circuit affirmed the dismissal.
Discussion
Mobile Acuity made several arguments as to why the grant of the motion to dismiss was an error. I will discuss them in a different order than the Court addressed them.
A. Are the Claims of the Asserted Patents Directed to Patentable Subject Matter? (No)
Under the Supreme Court’s subject matter eligibility framework, there are two steps to the subject matter eligibility analysis (sometimes referred to as the “Alice Test”). First, the court considers whether the claims are directed to a patent-ineligible concept. Second, if they are, then the court determines whether the claims contain additional elements that transform the nature of the claim into a patent-eligible claim. (This is a very simplified explanation of the Alice Test.)
The Court provides a straightforward discussion of why the claims are directed to patentable ineligible subject matter. The Court agreed with the district court that the claims were “directed to the abstract idea of receiving information, associating information with images, comparing the images, and presenting information based on that comparison.” The Court points out that the claims were merely “result-oriented, functional language and omit any specific requirements as to how these steps of information manipulation are performed.” The Court emphasized that it has “frequently held [that] claims reciting generalized steps of collecting, analyzing, and presenting information, using nothing other than the conventional operations of generic computer components, are directed to abstract ideas. Looking at the claims of the Asserted Patents, this is not a surprise. Searching for more, the Court provided an example of what was wrong and what possibly could have saved the claims. Namely, the Court pointed out that determining that “a second image… includes a portion corresponding to at least the first portion of the first image” does not provide details as to how the “corresponding” portions of images are determined.
Mobile Acuity argued that its inventive concept that transforms the nature of the claim into a patent-eligible claim is “using [an] object (or location) itself as the trigger for leaving information to be collected in the future.” The Court dismissed this argument by stating that “the abstract idea “cannot supply the inventive concept that renders the invention ‘significantly more’ than that abstract idea at step two.” Simio, LLC v. FlexSim Software Prod., Inc., 983 F.3d 1353, 1364 (Fed. Cir. 2020) (“We may assume that the techniques claimed are groundbreaking, innovative, or even brilliant, but that is not enough for eligibility.”). With that, the Court upholds that the claims are invalid.
B. Is Patent Eligibility an Affirmative Defense (Yes) and Can Affirmative Defenses be Used to Dismiss a Case (Yes)
An affirmative defense is a defense that, even if the plaintiff can prove that the defendant committed the alleged acts, negates criminal liability. For example, if Blippar successfully were to argue that the claims of a patent were ineligible under 35 U.S.C. § 101, it would not matter if Blippar infringed on those claims. The Court had previously ruled that patent eligibility is an affirmative defense. An affirmative defense may be the basis for granting a motion to dismiss when the affirmative defense “clearly appears on the face of the pleading.” The question that the Court asked is whether the lack of patentable subject matter is apparent on the face of the complaint (to which the Asserted Patents are included). This comes with two caveats: (1) sometimes the patent eligibility inquiry may contain underlying issues of fact that need to be evaluated by a finder of fact, see Berkheimer v. HP Inc., 881 F.3d 1360, 1365 (Fed. Cir. 2018), and (2) “[w]hether the claim elements or the claimed combination are well-understood, routine, or conventional is a question of fact.” Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d 1121, 1128 (Fed. Cir. 2018).
Thoughts
I’m going to sound like a broken record: patent claims that use result-oriented, functional language and omit any specific requirements are not going to be patent-eligible. The Court looks for specificity that provides enough detail to show how the claims provide a technical improvement. Computers generally analyze, associate and provide data. Patently speaking, the specific nature of data or how that data comes to be is meaningless. You need a specific algorithm, a specific system, or a specific arrangement of parts to define patentable subject matter.
Subject Matter Eligibility: “Well-settled indicators of abstractness”
Image by macrovector on Freepik
Case Information:
BETEIRO, LLC v. DRAFTKINGS INC.
Judges: Federal Circuit Judges Dyk, Prost, and Stark (Stark Writing for panel)
Date Issued: June 21, 2024
Issues: Subject Matter Eligibility, Subject Matter Eligibility and Motions to Dismiss
Summary:
In BETEIRO, LLC v. DRAFTKINGS INC., the Federal Circuit affirmed the district court’s dismissal of Beteiro’s patent infringement suits, finding the patents ineligible under 35 U.S.C. § 101. The patents in question, related to remote gambling technology using mobile device locations, were deemed to describe abstract ideas without inventive concepts that could transform them into patent-eligible subject matter. The court highlighted that the claims involved generic steps and conventional technology, specifically GPS, which did not meet the requirements for patentability. Beterio’s counterarguments were defeated because, in part, the specification described the invention’s use of technology generically. This decision underscores the importance of demonstrating specific technological improvements in patent applications and, when necessary, detailing how the invention achieves its functional results using technology in unconventional ways.
Overview:
The case revolves around four patents owned by Beteiro (U.S. Patent Nos. 9,965,920, 10,043,341, 10,147,266, and 10,255,755 (collectively, the “Asserted Patents”)). Beteiro’s Asserted Patents dealt with facilitating gambling on a mobile device (i.e., remote gambling). One problem that needed to be overcome was that states may claim jurisdiction over remote gambling if the mobile device is within the jurisdiction of the state when the remote gambling is taking place. The asserted patents, in part, determined the state that has jurisdiction over any instance of remote gambling by using a location provided by the mobile device. When the mobile device is located in a jurisdiction that does not allow remote gambling, for example, the system may prevent remote gambling from taking place on the mobile device. Beteiro filed infringement suits against various competitors for “provid[ing] a plurality of gambling and event wagering services.”
The parties agreed that claim 2 of Patent No. 10,255,755 was representative of the claims at issue for the analysis of subject matter eligibility:
A computer-implemented method, comprising:
detecting, with or using a computer which is specially programmed for processing information for providing for a placement of a bet on or regarding a gaming activity, a gambling activity, or a sporting event, a posting of information regarding the gaming activity, the gambling activity, or the sporting event;
generating, with or using the computer, a notification message regarding the gaming activity, the gambling activity, or the sporting event;
initiating, with or using the computer, a communication link with a first communication device and transmitting the notification message to the first communication device as an electronic transmission, or transmitting, from the computer, the notification message as an electronic mail message, wherein the electronic mail message is received by or received at a first communication device, wherein the first communication device is associated with an individual;
receiving, with the computer, a bet message transmitted from the first communication device or from a second communication device, wherein the second communication device is associated with the individual, and further wherein the first communication device or the second communication device comprises a global positioning device, wherein the global positioning device determines a position or location of the first communication device or the second communication device, and further wherein the bet message contains information regarding a bet to be placed on or regarding the gaming activity, the gambling activity, or the sporting event, and information regarding the position or location of the first communication device or the second communication device; and
determining, with or using the computer, whether the bet is allowed or disallowed using the information regarding the position or location of the first communication device or the second communication device and, if the bet is allowed, processing information for placing the bet for or on behalf of the individual, or, if the bet is disallowed, processing information for disallowing the bet.
The Opinion specifically pointed out that column 80, lines 10-24 of the Patent No. 10,255,755 was the only place in the specification where “the first communication device or the second communication device comprises a global positioning device” feature is discussed.
In another preferred embodiment, wherein the user communication device… is a wireless communication device and/or a mobile communication device (i.e. personal digital assistant, wireless videophone, wireless telephone, or palm-held device, etc., which can be equipped with a global positioning system (GPS) device…), the location of the user communication device… and, therefore, the location from which the gaming activity and/or gambling activity originates and/or from which it takes place can be determined by the user communication device… automatically transmitting position data and/or information to the respective central processing computer… and/or gaming facility computer… at the time of the user’s accessing of the respective central processing computer… and/or gaming facility computer…
During prosecution, the Patent Office expressly evaluated the eligibility of the claims under 35 U.S.C. § 101 and found them eligible based on their requirement of a particular machine or processor. However, the district court dismissed the suits on Rule 12(b)(6) motions because the asserted patents claims were not patentable subject matter under 35 U.S.C. § 101. To foreshadow the conclusion, the Federal Circuit panel described the district court’s opinion as “concise” and “careful.” The Federal Circuit ultimately affirmed the dismissals.
Discussion
A. Are the Claims Directed to a Patent-Ineligible Concept? (Yes)
Under the Supreme Court’s subject matter eligibility framework, there are two steps to the subject matter eligibility analysis (sometimes referred to as the “Alice Test”). First, the court considers whether the claims are directed to a patent-ineligible concept. Second, if they are, then the court determines whether the claims contain additional elements that transform the nature of the claim into a patent-eligible claim.
The Federal Circuit agreed with the District Court that the claims at issue were directed to the abstract idea of “exchanging information concerning a bet and allowing or disallowing the bet based on where the user is located” and that claim 2 above consisted of the following series of abstract steps: (1) detecting information about a gambling activity; (2) generating and transmitting a notification message regarding the activity to a user; (3) receiving a bet message that includes information regarding a bet to be placed and the location of the user; (4) determining whether the bet is allowed or disallowed using the location information; and (5) processing information for placing the bet or disallowing the bet.
The Opinion then lists “several features that are well-settled indicators of abstractness,” which include:
The claims broadly recite generic steps are have been frequently held as abstract (e.g., detecting information, generating and transmitting a notification based on the information, receiving a message, making a decision based on that message (e.g., whether the bet is allowed based on location data), and processing information (e.g., allowing or disallowing the bet)).
The claims use mostly result-focused functional language, containing no specificity about how the purported invention achieves those results.
The Court has already held that broadly analogous claims are abstract (e.g., claims involving methods of providing particularized information to individuals based on their locations).
The claims are analogous to longstanding “real-world” activities. (e.g., a teller at a casino that straddled state lines, who has to ensure patrons are on the correct side of the building before accepting a bet, those accepting bets have always had to confirm that the bettor with whom they were dealing was located in a place where gambling was allowed, etc.).
The Federal Circuit rejected Beteior’s argument that the patent claims were not abstract because the focus of the claimed advance was an improvement in computer technologies, rather than the mere use of computers. The Court, adopting the alleged infringer’s argument, stated that “the issue of remote gambling being uncommon in 2002 [the priority date of the Asserted Patents] was not a technical problem, nor do the Asserted Claims’ invocation of technology developed by others constitute a solution.” The Court states that content regulation and checking legal compliance are rooted in the abstract: they are legal problems, not technical ones. Thus, the Court concludes that the claims were directed towards a patent-ineligible concept
B. Do the Claims Contain Additional Elements that Transform the Nature of the Claim? (No)
The Court agreed with the district court when it characterized the claims as describing a conventional business practice executed by generic computer components. Beterio, like is common when crafting a complaint with claims that are susceptible to a subject matter eligibility-based motion to dismiss, tried to allege that the inclusion of GPS on a mobile phone was not conventional technology in 2002. Using the language from the patent quoted above, the Court states that “[t]he Asserted Patents repeatedly, but briefly, refer to [the] conventional use of GPS in connection with several types of conventional computers, including a central processing computer, user communication device, gaming facility computer, financial institution computer, and escrow agent computer.” Importantly, the Court points out that “[n]owhere does the specification describe any difference between how GPS would be equipped on a mobile phone and how it would be equipped on any of the other described conventional computers” and repeats its holding that where the specification describes the components and features listed in the claims generically, it supports the conclusion that these components and features are conventional. (emphasis added)
C. Did Beteiro’s Assertions of the State of the Art Preclude a Motion to Dismiss? (No)
Generally, a court must accept all of the complainant’s factual allegations as true and draw all reasonable inferences from them. However, such factual allegations, to be accepted as true, must be “well-pleaded.” The Court rejected Beterio’s attempt to raise a factual dispute as to whether the use of GPS in connection with gaming was anything other than conventional, routine, and well-understood at the priority date of the patent. Brutally, the Court states that “[g]iven what is taught in the Asserted Patents themselves – and, most particularly in this case, what is not taught, which in context reinforces that a person of ordinary skill in the art would have recognized the claims to involve nothing more than conventional, routine, and well-understood use of GPS – no amount of creative pleading could have succeeded in transforming the claims into patent-eligible subject matter such” (emphasis added). The Court repeated what it had recently held in AI Visualize, Inc. v. Nuance Commc’ns, Inc., 97 F.4th 1371, 1380 (Fed. Cir. 2024):
Conclusory allegations, or those “wholly divorced” from the claims or the specification, cannot defeat a motion to dismiss. And a patentee that emphasizes a claim’s use of certain technology, for example, a general-purpose computer, fails at step two when the intrinsic record establishes that the technology is conventional or well-known in the art.
The Court reiterated that “generalized assertions that factual considerations about the state of the art” do not prevent a district court from granting a motion to dismiss. See Sanderling Mgmt. Ltd. v. Snap Inc., 65 F.4th 698, 705 (Fed. Cir. 2023).
In contrast to cases where the Court held that the factual allegations of non-conventionality, see e.g. Cellspin Soft, Inc. v. Fitbit, Inc., 927 F.3d 1306 (Fed. Cir. 2019), Beteiro’s allegations were not specifically tied to the claimed invention nor were plausible in light of the specification’s description of generic technology.
Thoughts
The Federal Circuit’s decision is not a surprise. While the patents at issue were drafted and prosecuted before the Alice Test, many inventions are still in danger of falling into the same traps. To make the most of your time, here are a few points to consider when working with a patent professional to draft a patent application:
Be specific about how, using technology, the purported invention achieves any functional result. Arguments based on material included in the patent or patent application are much more persuasive than arguments included in office action responses or briefs for the first time.
If you are unconventionally using technology, provide details on why and how. Describing technology generically will not likely provide a successful argument against an allegation of ineligible subject matter. In contrast, describing the problem and how the specific configuration uses even conventional hardware in unconventional ways will provide at least a basis for raising it as a factual issue. I have worked with many clients that have seen success by providing more detail about aspects of the system that are used in non-conventional ways.
Highlight areas where a technological problem is being solved. Inventors have many motivations when trying to innovate. They may be solving a logistical problem or a legal problem, etc. However, solutions to those problems must be presented as using technology in a particular way to overcome them. This can be a matter of framing. However, you might be surprised how, with a little thought, inventors who are solving, for example, logistical problems, are using their technological tools in unconventional ways.