Abstract Idea or Invention?
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UPDATED: Feb 23, 2016
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Taiwanese company PricePlay recently attempted to overturn a Delaware District Court decision invalidating its US patent 8,050,982, “Systems and methods for transacting business over a global communications network such as the internet.”
The patent covers the idea of giving consumers a discount on online purchases based on achieving a certain score in an online game. The summary of the invention in the patent states:
Sellers offer a product or service within a specified price range, and buyers enter into a contract to buy the product or service within that price range. The ultimate price (within the range) is determined based upon the buyer’s performance rating, or score, which the buyer receives from participating in a collateral activity. Thus, e.g., if a buyer performs poorly at the activity, the price will be higher, whereas if the buyer does well, the price will be lower.
PricePlay sued AOL for violating its patent. In March, 2015, the Delaware District Court declared the patent was invalid because it covered an “abstract idea,” not an invention.
PricePlay appealed the decision to the Federal Circuit. In January, 2016, the Federal Circuit upheld the lower court’s ruling.
In the Delaware ruling, Judge Richard Andrews said:
In applying the two-step framework outlined in Alice, it is clear that the claims of the ‘982 patent and ‘917 patent are drawn to patent-ineligible subject matter. The patents claim the abstract idea of “a sales transaction,” which is a fundamental economic concept. While additional limitations narrow the scope of the claims, these limitations do not amount to an “inventive concept.” Therefore, the ‘982 and ‘917 claims are invalid.
Who, you may be wondering, is Alice?
Anyone in the software business should be aware of Alice. Whether you have software patents, want software patents, or are on the receiving end of a patent lawsuit, Alice is important.
Alice v. CLS is a US Supreme Court decision that overnight invalidated many thousands of software patents.
It’s always been the rule that “abstract ideas” are not patentable. What the court did in Alice is to say that taking an abstract idea and adding “run it on a computer” does not make it a patentable invention.
Unfortunately, the court did not provide a great deal of clarity in how to tell the difference between an “abstract idea” and an invention. The “two-step framework“ is:
- Does the patent contain an abstract idea?
- If yes, does the patent “add something extra” that makes it an “inventive concept?”
The problem is there is no definition of “something extra.”
And that’s PricePlay’s problem. The court found it patented an idea, not an invention. In its appeal, PricePlay acknowledged that the patent contained an abstract idea, but it claimed to have added enough “extra” to count as invention.
The Federal Circuit disagreed. During oral arguments Judge Kimberly Moore said:
All of these ideas are abstract. It’s like you want a patent because you combined two abstract ideas and say two is better than one.
Alice didn’t kill all software patents. Some patents have survived Alice-based challenges. The problem is that so far there’s no consistency between courts on what is and what isn’t patentable when it comes to software.