Subject Matter Eligibility: “Well-settled indicators of abstractness”
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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.
