Federal Circuit Continues to Strike Down Patents as Abstract Ideas

The Federal Circuit Court of Appeals has again relied on the Supreme Court’s Alice case to invalidate patents on the grounds that they are directed to an abstract idea. Realtime Data LLC v. Fortinet Inc. ( Fed. Cir. 8/2/2023) 2023 U.S. App. LEXIS 19857.

Realtime owned several patents covering systems and methods for digital data compression. In 2017 and 2018, Realtime sued a number of entities in the District of Delaware for infringement of five of its patents. The defendants moved to dismiss Realtime’s complaints on the grounds that the claims in the patents were directed to patent-ineligible subject matter under 35 U.S.C. section 101. In 2019, the district court granted the defendant’s motion and held that all of the claims in the five patents were invalid.

Under section 101, only certain types of inventions are patentable: machines, articles of manufacture, compositions of matter, and processes (methods). These categories are referred to as “patent-eligible subject matter.”  Certain other categories are “patent-ineligible subject matter:” laws of nature, natural phenomena, and abstract ideas. Inventions directed to such subject matter are not patentable, and patents with claims to such subject matter are invalid.

On appeal, the Federal Circuit vacated the judgment and remanded the case to the district court to provide a more thorough analysis under section 101. The court found that the district court’s analysis had been “too cursory to allow for meaningful appellate review.” 

Realtime had by that point added three more patents and several more defendants to its complaints.

In 2021, on remand, the district court again granted the defendants’ motion to dismiss, holding that all eight of Realtime’s patents were invalid under section 101 as directed to an abstract idea. The court applied the two-part test for subject matter eligibility under the Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank International, 573 U.S. 208. In the first step, the court held that the claims of the patents were directed to data compression, a type of data analysis, which the court found to be an abstract idea. In the second step, the court held that the claims did not include any additional element (an “inventive concept”) that transformed the claims into patent-eligible subject matter.

The court granted Realtime leave to amend. Realtime amended its complaints, alleging infringement of seven patents. The defendants again moved to dismiss.

For the third time, the district court granted the defendants’ motion, invalidating all of Realtime’s patents without leave to amend. The court applied the same rationale it had used in its prior decision, holding that under Alice, the claims were directed to an abstract idea, not patent-eligible subject matter.

Realtime appealed again. The federal circuit affirmed.

The appellate court held that the patents were directed to the abstract idea of data compression. The court found that none of the claims specified how the data compression was to be performed; rather, the claims simply required the use of “any conventional” or “well-known” data compression technique.

In explaining the difference between patent-eligible and patent-ineligible subject matter, the court stated:

“As we have repeatedly held, to avoid ineligibility, a claim must have the specificity required to transform the claim from one claiming only a result to one claiming a way of achieving it …. the claim itself …. must go beyond stating a functional result .… The claim must identify how the functional result is achieved by limiting the claim scope to structures specified at some level of concreteness, in the case of a product claim, or to concrete action, in the case of a method claim.”

In step one of the Alice test, the court found that the claims were directed to the generality of data manipulation, an abstract idea. In step two of the Alice test, the court found that the claims utilized generic computers and generic techniques. Failing the Alice test, the claims were invalid.

In concluding its opinion, the court said (as it has said so many times before): “Merely reciting an abstract idea performed on a set of generic computer components, as the claims do here, would not contain an inventive concept.”