October 11, 2016

System and Method Claims Directed to Abstract Idea Properly Bounced on 12(b)(6) Motion

In Fairwarning IP, LLC v. Iatric Systems, Inc., [2015-1985] (October 11, 2016), the Federal Circuit affirmed the district court’s dismissal of the complaint because U.S. Patent No. 8,578,500, claimed patent-ineligible subject matter under 35 U.S.C. § 101.

The patent related to ways to detect fraud and misuse by identifying unusual patterns in users’ access of sensitive data.  At step I of the Supreme Court’s two step framework for determining patent eligibility, the Federal Circuit found that the patent was directed to the abstract idea of analyzing records of human activity to detect suspicious behavior.  The Federal Circuit noted that the “realm of abstract ideas” includes “collecting information, including when limited to particular content.”  Furthermore, analyzing information according to the steps people go through in their minds, or by mathematical algorithms, without more, is essentially mental processes within the abstract-idea category.  Finally, “merely presenting the results of abstract processes of collecting and analyzing
information, without more (such as identifying a particular tool for presentation), is abstract as an ancillary part of such collection and analysis.”

The Federal Circuit distinguished McRO where it was the incorporation of the claimed rules, not the use of the computer, that improved the existing technological process.  In contract, the Federal Circuit found the claims in suit to be more like those in Alice, merely implement an old practice in a new environment.  The “rules” in the patents in suit pose the same questions that humans in analogous situations detecting fraud have asked for decades, if not centuries.  The Federal Circuit also distinguished Enfish where the claimed invention was “directed to a specific improvement to the way computers operate.”

Because it found the claims were directed to an abstract idea at step one of the patent-eligibility inquiry, the Federal Circuit proceeded to step two.  After scrutinizing the claim elements more microscopically under step two, the Federal Circuit found nothing sufficient to transform the nature of the claim into a patent eligible application.  The claim limitations, analyzed alone and in combination, fail to add “something more” to “transform” the claimed abstract idea of collecting and analyzing information to detect misuse into “a patent-eligible application.”

The Federal Circuit also found the system claim patent ineligible, noting that while it is not always true that related system claims are patent-ineligible because similar method claims are, when they exist in the same patent and are shown to contain insignificant meaningful limitations, the conclusion of ineligibility is inescapable.

FairWarning tried to save the claims, arguing that they solved the problem of compiling and combining disparate information sources, but the Federal Circuit that these features were not in the claims.  The Federal Circuit concluded:

After closely examining the claims of the ’500 patent in search of “something more” to transform the underlying abstract idea into a patent-eligible application, we conclude that there is nothing claimed in the patent — either by considering the claim limitations individually or as an ordered combination — that makes its claims patent eligible.

FairWarning complained that the district court’s reliance on the finding that “the human mind can perform each step” was improper.  The Federal Circuit dodged the issue, commenting that “the inability for the human mind to perform each claim step does not alone confer patentability.”  Likewise, the Federal Circuit rejected FairWarning’s argument about preemption, noting that while preemption may signal patent ineligible subject matter, the absence of complete preemption does not demonstrate patent eligibility.