IP Law Daily, PATENT—W.D. Pa.: Three Intellectual Ventures patents were ineligible abstract ideas, (Sep 28, 2015)

By Mark Engstrom, J.D.

Intellectual Ventures I and Intellectual Ventures II could not pursue patent infringement claims against three groups of insurance companies because the patents at issue—patents that described systems and methods of collecting information (about computer devices and their users), retrieving information (from a database), and implementing information (through an “intelligent and mobile menu-interface agent”)—were directed to ineligible abstract ideas, the federal district court in Pittsburgh has ruled (Intellectual Ventures I, LLC v. Erie Indemnity Co., September 25, 2015, Hornak, M.). In addition, the court lacked subject matter jurisdiction over one of the patents because a break in the chain of ownership left Intellectual Ventures without standing to pursue a patent claim with respect to that patent. The defendants’ motions to dismiss were granted.

Background

Intellectual Ventures I and Intellectual Ventures II (collectively, “Intellectual Ventures”) sued three groups of defendants for patent infringement: (1) the Erie Defendants (Erie Indemnity Company, Erie Insurance Exchange, Erie Insurance Property & Casualty Company, Erie Insurance Company, Flagship City Insurance Company, and Erie Family Life Insurance Company); (2) the Highmark Defendants (Highmark, HM Insurance Group, HM Life Insurance Company, Highmark Casualty Insurance Company, and HM Casualty Insurance Company); and (3) the Old Republic Defendants (Old Republic General Insurance Group, Old Republic Insurance Company, Old Republic Title Insurance Group, and Old Republic National Title Insurance Company).

According to Intellectual Ventures, the defendants infringed four patents: (1) U.S. Patent No. 6,519,581 B1, titled “Collection of Information Regarding a Device or a User of a Device Across a Communication Link” (the “collection” patent); (2) U.S. Patent No. 6,510,434 B1, titled “System and Method for Retrieving Information From a Database Using an Index of XML Tags and Metafiles” (the “retrieval” patent); (3) U.S. Patent No. 6,546,002 B1, titled “System and Method for Implementing an Intelligent and Mobile Menu-Interface Agent” (the “implementation” patent) and (4) U.S. Patent No. 7,757,298, titled “Method and Apparatus for Identifying and Characterizing Errant Electronic Files.”

The Erie and Highmark defendants sought dismissal for lack of subject matter jurisdiction over the collection patent and for failure to state a viable claim with respect to the collection and retrieval patents, which allegedly were directed to patent ineligible subject matter. The Old Republic defendants sought the dismissal of all three claims on the ground that they were directed to patent ineligible subject matter.

Subject Matter Jurisdiction over Collection Patent

The relevant patent assignment in the chain of assignments at issue identified 17 patents and patent applications that were owned by AllAdvantage.com. The assignment stated that AllAdvantage assigned to Alset, Inc. “all Right[s], including common law rights, title and interest … in and to said patents together with the goodwill of the business symbolized by said patents and applications and registrations thereof.”

The defendants argued that: (1) the chain of title for the collection patent included six transfers and (2) the fourth transfer in the chain identified specific patents and applications that were subject to that transfer, but omitted the collection patent or its then-pending application.

Intellectual Ventures argued that a presumption of validity applied to the assignment of the collection patent because the assignment agreement was recorded with the U.S. Patent and Trademark Office and the defendants did not disprove ownership.

The plaintiffs further argued that, by its terms, the assignment agreement was sufficient to show a transfer of title because: (1) the collection patent’s parent patent was specifically listed in the assignment agreement; the patent application was a direct continuation of that patent; and the future patent rights in the collection patent were contained within the parent patent, which “automatically” brought the application within the scope of the “said” patents in the assignment agreement”; and (2) the fact that the assignment agreement transferred the “goodwill of the business symbolized by said patents and applications and registrations thereof” indicated an intent to transfer the collection patent’s application because the parent patent was listed, goodwill included the intellectual property itself, and the goodwill of the parent patent included the continuation application.

Finally, Intellectual Ventures argued that: (1) the court was required to provisionally accept extrinsic evidence to determine if the contract was susceptible to either party’s interpretation and (2) the extrinsic evidence revealed the parties’ intent to transfer the collection patent.

Presumption of validity. According to the court, recording (with the PTO) an assignment agreement that identified multiple patents and patent applications “did not create a presumption that a patent omitted from that express list of assigned property was in fact transferred.” It did create a presumption in the plaintiffs favor in the event that the validity of the agreement was challenged, but it had no bearing on the question of “what substantive rights were actually transferred?”

Terms of assignment agreement, extrinsic evidence. The court decided that the assignment agreement was not reasonably susceptible to multiple interpretations—with or without the benefit of extrinsic evidence—because the agreement “clearly and unambiguously” indicated that the collection patent was not among the patents and applications that were transferred, and the extrinsic evidence that was proffered by Intellectual Ventures revealed a “bald effort to add the Patent to a list from which it [wa]s excluded.” The assignment agreement was simply not “reasonably susceptible” to the alternate interpretation by Intellectual Ventures, the court concluded.

Absent a rule of law that implicitly and automatically transferred the continuations of existing patents with their parent applications, the court decided—from the face of the agreement itself—that the chain of title was broken with respect to the collection patent. Continuation or not, the court could not assume that a patent application that was intended to be conveyed would not be expressly identified with the “15 others” that were expressly identified. According to the court, words that would effect a “clear and unmistakable intent to transfer ownership” were needed.

MPEP. Intellectual Ventures cited Sections 201.07 and 306 the Manual of Patent Examining Procedure (MPEP) to support its position that the assignment of a parent patent automatically conferred the rights in direct continuations. The court rejected that argument. The MPEP established PTO procedures, the court observed; it did not establish law. Moreover, MPEP §306 referred to a PTO requirement for issuing a patent from a continuation-in-part application to an assignee; it did not alter the legal ownership rights in patent applications and issued patents.

Although some rights in future interests—such as express grants of “future inventions”—could create an automatic transfer of a patent interest, the court found that a broad rule could not govern the situation in this case, where the agreement: (1) expressly identified each patent and application that was being transferred; (2) transferred only “said” patents; and (3) omitted a patent that was owned by the assignor.

Because no legal rule mandated that “every time a parent patent was assigned, that patent’s continuation application automatically followed,” the court decided that an automatic transfer would have to be based on the parties’ agreement, and would have to include “language that transfer[red] all future rights in an invention or an idea,” not simply the patent itself.

Assignment of goodwill. Intellectual Ventures unsuccessfully argued that the collection patent’s application was encompassed by the phrase “goodwill of the business symbolized by said patents and applications and registrations thereof.” For the court to accept that interpretation, the definition of “goodwill” would have to appear in the collection patent’s application.

The fact that the agreement stated that the goodwill of the business was “symbolized by said patents” was not helpful to Intellectual Ventures, the court explained, because it followed the legal fallacy that, “if only the ‘said,’ or listed, patents [we]re transferred, and there [wa]s no automatic rule of law that transfer[red] child patent applications along with their parent patents, then the ‘goodwill of the business symbolized by said patents’ refer[red] to the goodwill [that was] associated with those said patents only and not unenumerated others.” According to the court, the remaining part of that phrase—“said patents and applications and registrations thereof”—referenced only the applications and registrations of the listed (“said”) patents.

Regarding Intellectual Ventures’ argument that the collection patent’s application was necessarily part of the goodwill of its parent patent—because it was the same intellectual property underlying the parent patent whose goodwill was being transferred—the court failed to discern, and Intellectual Ventures did not identify, any legal authority that treated pending patent applications synonymously with a general notion of goodwill.

Ultimately, the court could not conclude that the assignment agreement was reasonably susceptible to the interpretation that the “goodwill” phrase included the collection patent or its then-pending application.

Conclusion. The Court concluded that the assignment agreement was not reasonably susceptible to any of the interpretations that were proposed by Intellectual Ventures. Because the agreement did not transfer the collection patent or its application, Intellectual Ventures lacked standing to assert infringement claims that were based on the agreement and the court lacked subject matter jurisdiction over those claims. The court thus dismissed, without prejudice, all of the claims that related to the collection patent.

Patent Ineligible Subject Matter: Procedural Issues

Intellectual Venture argued that: (1) claim construction was necessary before the court could resolve any issues under §101 and (2) courts could not rely on representative claims when conducting a §101 analysis, but instead had to review each and every individual claim.

Representative claims. According to the court, the Federal Circuit found that assessing representative claims was indeed permissible when an inquiry was being conducted under §101. In this case, the court concluded that the asserted representative claims were “substantially similar” and were “linked to the same abstract idea.”

Claim construction. The court noted that the Federal Circuit “seem[ed] to have concluded that claim construction [wa]s desirable, unless in reviewing the patents at issue, a district court conclude[d] that it [wa]sn’t.” Nevertheless, if a court concluded that the basic character of the subject matter was “readily ascertainable from the face of the patent,” the court could conduct a §101 inquiry without first construing the claims.

In this case, the court decided that claim construction before its §101 inquiry was not necessary. The terms that were susceptible to construction were largely defined in the patents, and the patent definitions amounted to “little more than synonyms for generic conventional computer processing steps” or for “conventional computer components.”

Further, to the extent that the court would identify a “factual dispute” that was outcome-determinative, the court would resolve that dispute in the plaintiffs’ favor, at this stage of the proceedings.

Finally, Intellectual Ventures had ample time—during its “extensive briefing” and during a “marathon oral argument”—to: (1) identify any claim terms that required claim construction and (2) proffer preferred claim constructions. It failed, however, to do so. Although Intellectual Ventures “generally referenced” terms that might, in their view, require construction, they failed to proffer proposed constructions or explanations as to how the proposed constructions would affect the court’s analysis.

Patent Ineligible Subject Matter: Substantive Issues

Because the court concluded that it was proper to proceed with a §101 analysis without claim construction, and because it resolved the procedural arguments of Intellectual Ventures, the court addressed the defendants’ substantive challenges by applying the analysis that the U.S. Supreme Court established, in Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014), to resolve issues of patent validity.

Under Alice, courts had to ask: (1) whether the claims at issue were directed to a patent-ineligible concept (i.e., a law of nature, natural phenomenon, or abstract idea) and (2) considering the elements of each claim, both individually and as an ordered combination, did “additional elements” present an “inventive concept” that “transform[ed] the nature of the claim into a patent-eligible application” by demonstrating it is "significantly more than a patent upon the ineligible concept itself'?

Claims that yielded a “no” answer to the first question or a “yes” answer to both questions were patent eligible. Claims that yielded a “yes” answer to the first question and a “no” answer to the second question were not patent eligible.

Validity of “collection” patent. The collection patent, titled “Collection of Information Regarding a Device or a User of a Device across a Communication Link,” included two representative claims: claim 1 and claim 11.

Claim one recited a method for collecting information by: (1) transmitting a discovery rule (essentially, any code sequence) across a communication link (essentially, any type of network) and (2) applying the rule to information about a computer system to (3) generate information that was collected by a different code sequence (a “discovery agent”); and (4) receiving the information from the computer system.

Claim 11 recited the complementary method of: (1) receiving a discovery rule, or code sequence, across a communication link, or any network; (2) applying the code sequence to information about a computer system or user to (3) generate information that was collected by a different code sequence (a “discovery agent”) when that code sequence was activated, without prompting by a user, and (4) sending the information back, across the network, to the sender of the discovery rule.

The court concluded that the idea at the “heart” of the patent—what the claimed invention was trying to achieve—was a method for performing the “abstract idea” of gathering, storing, and acting on data based on predetermined rules.

The court noted that the collection patent claimed the use of mathematical formulas and networked computers to “generate information” and to make decisions that were based on that information. Using “unlimited and unspecified” mathematical equations or code sequences called “discovery rules” and “discovery agents”—and implementing them on a generic computer—did not make the underlying idea any less abstract, the court explained.

Consequently, the court applied the second step of Alice to determine whether the representative claims contained an “inventive concept” that would make the claimed material “significantly more” than a patent on the abstract idea itself.

According to the court, the collection patent was “extraordinarily broadly drawn” because it described a method that sought to preempt another’s use of “nearly any code sequence or mathematical equation [that was] transmitted over any communication network and [was] applied to any data set to trigger pretty much any response.” When patent claims were “exceptionally broad” and the computer implementation limitations did “little to limit their scope,” the claims were “simply not patent eligible,” the court explained.

Ultimately, the collection patent was drawn to the abstract idea of gathering, storing, and acting on data that was based on predetermined rules, and its claims for conducting those tasks on generic computers and networks, using mathematical formulas and code sequences, did not transform the claims into patent-eligible subject matter, according to the court.

Validity of “retrieval” patent. The retrieval patent, titled "System and Method for Retrieving Information from a Database Using an Index of XML Tags and Metafiles,” was drawn to methods for creating a database, using tags to identify records, and searching the database. The patent included two representative claims: claim 1 and claim 7.

Claim 1 recited recited a method for creating a database and an index to search that database. The claim specifically claimed the method of: (1) creating an index by picking a number of

XML tags that included “domain tags and category tags”; (2) creating a metafile that added additional identifying information to the tags; and (3) creating a database by compiling records that could relate back to the index.

Claim 7 recited a method for searching a database that was created with the help of an index and tags. The method claims: (1) received a request for information; (2) identified a tag, or some proxy, for the information that was associated with that request; (3) determined whether any other tags were also associated with the request, or whether the request could fall into multiple categories; (4) if multiple tags or other specific information were relevant, combined them; and

(5) used the resulting combination to search the database for a record.

The court concluded that that the “heart” of the patented invention—the true nature of the claims—was drawn to the “abstract idea” of “creating an index and using that index to search for and retrieve data.” That type of activity was undoubtedly longstanding, the court explained, and could be “easily analogized to a great deal of conduct [that had occurred] before computers or the Internet … existed.”

Consequently, the court applied the second step of Alice to determine whether the representative claims contained an “inventive concept” that would make the claimed material “significantly more” than a patent on the abstract idea itself.

According to the court, the claims of the retrieval patent, considered individually and as an ordered combination, failed to provide an additional feature that would transform the abstract idea of “creating an index and using that index to search for and retrieve data” into patent eligible subject matter. In fact, the court concluded that the patent included little more than the abstract idea itself, and to the extent there were additional limitations, they were “little more than synonyms for generic conventional computer processing steps” that were insufficient to convey an inventive concept. A database was a typical data-storage component of a generic computer, the court explained, and the ability of a computer to index and search a database according to identifiers such as XML tags was “simply not inventive.”

The claims of the retrieval patent were stated at “such a high level of generality” that the court had difficulty contemplating any method of creating an index—and using that index to search for and retrieve data on a computer database—that would not be preempted by those claims.

The claims “certainly” sought to preempt the use of XML tags to create, and then search, a database on a generic computer, but they were not limited to the use of XML tags, the court explained. Claim 7, which was representative of the “searching” portion of the patent, identified steps that did nothing more than identify a request for information, narrow the request down to a category (and a subcategory, if necessary), and then search to locate the results. The potential preemptive effect of the representative claims was, in the court’s view, “extreme.” Moreover, limitations that could avoid the preemptive use of that approach “in all fields” were lacking.

Consequently, the court concluded that the retrieval patent: (1) was directed to an abstract idea and (2) did not contain a sufficiently inventive concept to remove it from the abstract realm and render it patent eligible under §101. For those reasons, the defendants’ motions to dismiss was granted.

Validity of “implementation” patent. As with the collection and retrieval patents, the court concluded that the claims of the implementation patent were directed to patent ineligible subject matter. The Old Republic defendants’ motion to dismiss those claims was therefore granted.

The case is Civil Action Nos. 1:14-cv-00220; 2:14-cv-01130; 2:14-cv-01131.

Attorneys: Henry M. Sneath (Picadio, Sneath, Miller & Norton) and Robert Cutler (Nix, Patterson & Roach, LLP) for Intellectual Ventures I LLC and Intellectual Ventures II LLC. David C. Marcus (Wilmer, Cutler, Pickering, Hale and Dorr, LLP) and John G. Ebken (Gordon & Rees, LLP) for Highmark Inc., HM Insurance Group Inc., HM Life Insurance Co., Highmark Casualty Insurance Co., and HM Casualty Insurance Co.

Companies: Intellectual Ventures I, LLC; Intellectual Ventures II, LLC; Highmark, Inc.; HM Insurance Group, Inc.; HM Life Insurance Co.; Highmark Casualty Insurance Co.; HM Casualty Insurance Co.

Cases: Patent PennsylvaniaNews