And Again, Abstract Ideas are Not Patentable!
Published: February 29, 2024
The Federal Circuit Court of Appeals has struck down many patents on the grounds that they are invalid as directed to an abstract idea, relying on the Supreme Court’s Alice decision. In In re Elbaum (Fed. Cir. 12/20/2023) 2023 U.S. App. LEXIS 33719, the Federal Circuit affirmed the Patent Trial and Appeal Board’s rejection of the claims in a patent application as directed to an abstract idea.
The claims in Elbaum’s patent application were directed to a method of allowing retail “walk-in” stores to compete with online stores by offering the same products, which were not in stock in the walk-in store, at lower prices, for which the walk-in store receives a portion of the payment made to the seller. The patent examiner rejected the claims on the grounds that the claims were directed to patent-ineligible subject matter under 35 U.S.C. section 101. The applicant appealed to the Patent Trial and Appeal Board; the PTAB affirmed the examiner’s decision.
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. Claims in a patent application directed to such subject matter are not patentable, and the patent examiner should reject the claims under section 101. If a patent application with such claims is allowed and issues as a patent, the claims can be invalidated under section 101.
On appeal, the Federal Circuit affirmed the PTAB’s decision, holding that Elbaum’s claims were properly rejected under section 101 as directed to an abstract idea, not patent-eligible subject matter.
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 were directed to patent-ineligible subject matter. The court found that the claims recited “managing sale transaction activity by paying a transaction fee for sales of non-stocked items,” which the court stated was a method of “organizing human activity” or “managing commercial and legal interactions,” an abstract idea.
The court noted that it had previously held that another patent application filed by Elbaum was directed to an abstract idea. There, “the claim recited a method for enabling an internet seller to pay a finder’s fee to a retail store when a customer finds the internet seller’s product through advertising in the retail store.” The court had found that this was “directed to mere formation and manipulation of economic relations.”
In the second Alice step, the court held that the claims did not include any additional element (an “inventive concept”) that transformed the abstract idea into patent-eligible subject matter. Rather, the claims use “generic computer functions to manage commercial sale transaction activities by paying a transaction fee for sales of non-stocked items.” The court held that this is not an inventive concept. Elbaum contended that his claims were directed to patent-eligible subject matter because they had practical steps. The court rejected his argument, stating “the utility of an abstract idea is insufficient to confirm patent eligibility.”