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A new Federal Circuit decision found the claims of a patent directed to software license verification to be eligible for patenting under Section 101 of the Patent Act.

In Ancora Technologies, Inc. v. HTC America, Inc., the court reviewed the claims of U.S. patent 6,411,941, which involved methods of restricting software operation on a computer to be within a license for that computer. Representative claim 1 of the patent is:

A method of restricting software operation within a license for use with a computerincluding an erasable, non-volatile memory area of a BIOS of the computer, anda volatile memory area; the method comprising the steps of:

selecting a program residing in the volatile memory,

using an agent to set up a verification structure in the erasable, non-volatile memoryof the BIOS, the verification structure accommodating data that includes atleast one license record,

verifying the program using at least the verification structure from the erasable non-volatile memory of the BIOS, and

acting on the program according to the verification.

Thus, the method required storage of a license record in a “verification structure” created in a portion of the computer’s BIOS memory.

In its decision, the court noted that as in its Enfish, Visual Memory, Finjan, Core Wireless and Data Technologies cases, “[i]mproving security — here, against acomputer’s unauthorized use of a program — can be a non-abstract computer-functionality improvement if done by a specific technique that departs from earlier approaches to solve a specific computer problem.” The court also found that because in the representative claim “a license record is stored in a particular, modifiable, non-volatile portion of the computer’s BIOS … the claim addresses a technological problem with computers:  vulnerability of license-authorization software to hacking.”

Quoting its SAP America, Inc. v. InvestPic, LLC decision, the court also noted that the claim has “the specificity required to transform a claim from one claiming only a result to one claiming away of achieving it.” Therefore the court stated that it did not need to consider step two of the Alice analysis.

[1] ____ USPQ2d____ (Fed. Cir. Nov. 16, 2018).

[2] 127 USPQ2d 1597 (Fed. Cir. 2018).

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The Bayh-Dole Act and federal regulations implementing the Act permit government contractors to retain ownership of inventions developed with federal government funding. However, to retain ownership the contractor must take certain actions within certain deadlines. If the contractor misses these deadlines, the government agency can take title to the invention.

These deadlines are about to become even more important when a regulatory change takes effect on May 14, 2018. Significant deadlines to keep in mind include:

1.  Disclose the invention to the government agency within two months of discovery, and elect title within two years of the disclosure.

The first required action is disclosure of the invention to the contracting agency. The Bayh-Dole Act (at 35 U.S.C.  § 202(c)(1)) requires any contractor who receives government funding to “disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for administration of patent matters.” Regulations implementing the Act state that the “reasonable time” is “two months after the inventor discloses it in writing to contractor personnel responsible for patent matters.” 37 C.F.R. § 401.14(c)(1).

The second required action is that if the contractor wants to retain ownership of the invention, the contractor must elect to retain title within two years of the disclosure. 37 C.F.R. § 401.14(c)(2).

If the contractor fails to make the required disclosure to the Federal agency within two months, or if the contractor fails to elect to retain title within two years, the Federal agency may take ownership to the invention.

Currently, a time limit also applies to the Federal agency’s right to take title to the invention. However, that is about to change.

Until May 13, 2018, federal regulations stated that “the agency may only request title within 60 days after learning of the failure of the contractor to disclose or elect within the specified times.” 37 C.F.R. § 401.14(d)(1). This means that when a contractor misses the deadlines, the contractor could resolve the issue and retain ownership) by making the disclosure and waiting until the agency’s 60-day option expired.

Starting May 14, 2018, the 60-day time limit on the agency’s option is removed. This means that if a contractor misses the deadlines listed above, the agency may choose to acquire title to the invention from the contractor at any time.

While Federal government agencies very rarely exercise this right, the elimination of the 60-day period could create a cloud over ownership of any invention that is not properly disclosed or elected within the required time periods.

With the change soon to take effect, government contractors who may have inadvertently missed the deadlines should make a corrective disclosure as soon as possible. In addition, government contractors should ensure that their patent administration personnel are aware of the two-month disclosure and two-year election periods, and that they diligently adhere to those periods for new inventions going forward.

2. Convert provisional applications within 10 months, rather than the usual 12.

The rule changes add a requirement that if the contractor files a provisional application for the invention, the contractor must file a formal application within 10 months of filing the provisional. 37 C.F.R. § 401.14(c)(3).

Contractors may request up to a one-year extension of this time period, which can be useful if the invention is not yet developed enough to support a nonprovisional patent application. However, the Federal agency will have 60 days to decide whether to grant or deny the request. This means that a contractor must either convert a provisional within 10 months or request an extension within no more than 8 months from the provisional’s filing date. If the contractor does not meet this deadline, the Federal agency may elect title and complete the filing before the 12-month life of the provisional application expires.

Although not affected by the change, contractors also should keep in mind that if they elect title to an invention, they must file an initial patent application within one year of electing title.

4.  File foreign applications within 10 months of the priority date.

A carryover from the previous rule is that if the contractor wants to file patent applications outside of the U.S., the contractor must do so within 10 months of the first filed patent application (unless international filing was prohibited by secrecy order). 37 C.F.R. § 401.14(c)(3). The Federal agency may file foreign applications in any country where the contractor does not do so within this time period.

5. Notify the federal agency within 60 days of abandoning any patent or patent application.

If the contractor decides to abandon any patent or patent application (such as by stopping prosecution or not paying a maintenance fee), the contractor must notify the Federal agency before doing so. The new rule increases the notification period to 60 days before the due date for the response or fee.

[Special thanks to my colleagues Jeff Schwartz and Flynn Barrison for the information that led to this post.]

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After issuing two very negative decisions that called the future of software patent-eligbility into question, in January 2018 the Federal Circuit moved its software patent-eligibility pendulum back in the direction of finding eligible subject matter in software patents.

In Core Wireless Licensing S.A.R.L.. v. LG Electronics, Inc. (Jan. 25, 2018), the court affirmed a district court decision that denied a request for summary judgment that the claims of patents 8,713,476 and 8,434,020 were directed to ineligible subject matter.

The patents disclosed and claimed “improved display interfaces, particularly for electronic devices with small screens like mobile telephones…. The improved interfaces allow a user to more quickly access desired data stored in, and functions of applications included in, the electronic devices.”

Claim 1 of the ‘476 patent recited (with emphases added by the court):

1.  A computing device comprising a display screen, the computing device being configured to display on the screen a menu listing one or more applications, and additionally being configured to display on the screen an application summary that can be reached directly from the menu, wherein the application summary displays a limited list of data offered within the one or more applications, each of the data in the list being selectable to launch the respective application and enable the selected data to be seen within the respective application, and wherein the application summary is displayed while the one or more applications are in an un-launched state.

Claim 1 of the ‘020 patent recited (with emphases added by the court):

1.  A computing device comprising a display screen, the computing device being configured to display on the screen a main menu listing at least a first application, and additionally being configured to display on the screen an application summary window that can be reached directly from the main menu, wherein the application summary window displays a limited list of at least one function offered within the first application, each function in the list being selectable to launch the first application and initiate the selected function, and wherein the application summary window is displayed while the application is in an un-launched state.

The court held that “[t]he asserted claims in this case are directed to an improved user interface for computing devices, not to the abstract idea of an index.” The court also noted:

Although the generic idea of summarizing information certainly existed prior to the invention, these claims are directed to a particular manner of summarizing and presenting information in electronic devices. Claim 1 of the ‘476 patent requires ‘an application summary that can be reached directly from the menu,’ specifying a particular manner by which the summary window must be accessed. The claim further requires the application summary window list a limited set of data, ‘each of the data in the list being selectable to launch the respective application and enable the selected data to be seen within the respective application.’ This claim limitation restrains the type of data that can be displayed in the summary window. Finally, the claim recites that the summary window ‘is displayed while the one or more applications are in an un-launched state,’ a requirement that the device applications exist in a particular state. These limitations disclose a specific manner of displaying a limited set of information to the user, rather than using conventional user interface methods to display a generic index on a computer. Like the improved systems claimed in Enfish, Thales, Visual Memory, and Finjan, these claims recite a specific improvement over prior systems, resulting in an improved user interface for electronic devices.

In Core Wireless the court also focused on the technical problems to which the claims provided a technical solution:

The specification … teaches that the prior art interfaces had many deficits relating to the efficient functioning of the computer … [and] required users to drill down through many layers to get to desired data or functionality. That process could ‘seem slow, complex and difficult to learn, particularly to novice users.’ The disclosed invention improves the efficiency of using the electronic device. … The speed of a user’s navigation through various views and windows can be improved because it ‘saves the user from navigating to the required application, opening it up, and then navigating within that application to enable the data of interest to be seen or a function of interest to be activated.’ Rather than paging through multiple screens of options, ‘only three steps may be needed from start up to reaching the required data/functionality.’ This language clearly indicates that the claims are directed to an improvement in the functioning of computers, particularly those with small screens.

In Finjan, Inc. v. Blue Coat Systems, Inc. (Jan. 10, 2018), the Federal Circuit upheld a finding that U.S. patent 6,154,844 was patent-eligibile and not directed to an abstract idea. Claim 1 of the ‘844 patent is:

1.  A method comprising:  receiving by an inspector a Downloadable; generating by the inspector a first Downloadable security profile that identifies suspicious code in the received Downloadable; and linking by the inspector the first Doanloadable security profile to the Downloadable before a web server makes the downloadable available to web clients.

The court noted: “Starting at step one, we must first examine the ‘844 patent’s ‘claimed advance’ to determine whether the claims are directed to an abstract idea.” After noting that at claim construction the parties agreed that “‘Downloadable’ should be construed to mean ‘an executable application program,” the court found the claim to be eligible:

By itself, virus screening is well-known and constitutes an abstract idea…. Here, the claimed method does a good deal more. Claim 1 of the ‘844 patent scans a downloadable and attaches the virus scan results to the downloadable in the form of a newly generated file…. This operation is distinguished from traditional, ‘code-matching’ virus scans that are limited to recognizing the presence of previously-identified viruses, typically by comparing the code of the downloadble to a database of known suspicious code. The question, then, is whether this behavior-based virus scan in the ‘844 patent constitutes an improvement in computer functionality. We think it does.

The court also explained that “a result, even an innovative result, is not patentable…. Here, the claims recite more than a mere result. Instead, they recite specific steps – generating a security code that identifies suspicious code and linking it to a downloadable – that accomplish the desired result.”

The Finjan and Core Wireless decisions were issued too late to make it into the USPTO’s January 2018 Subject Matter Eligbility Quick Reference Sheet, and as of the date of this writing several USPTO examiners with whom I have spoken were not yet familiar with the cases. In January the court also issued a decision that found inligible an invention relating to a method of using a computer to locate real estate properties in a database. However, the Finjan and Core Wireless cases provide new opportunities to find subject matter eligibility in situations where the claims recite specific steps of accomplishing a result.

For a complete summary of all of the Federal Circuit decisions that found software inventions to be patent-eligible (along with many District Court and PTAB decisions), see this previous IP Spotlight post.

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More and more companies who offer blockchain and other next generation cybersecurity technologies are seeking patents to help protect their competitive position. The U.S. Patent and Trademark Office’s (USPTO’s) Technology Center 2400, which covers networking, multiplexing, cable and security technologies, includes over 200 Patent Examiners who focus on security technologies. TC 2400 issued over 33,000 patents in 2017. During this period, the USPTO’s overall allowance rate was 59.4%.

Despite this apparent boom, patent applications covering cybersecurity technologies have faced increasing scrutiny since the June 2014 U.S. Supreme Court decision in Alice Corporation Pty Ltd. v. CLS Bank Int’l. In Alice, the Court found that a software implementation of an escrow arrangement was not eligible for patenting in the U.S. because it merely involved implementing an “abstract idea” on a computer. The Court did not define the term “abstract idea” other than to describe it as a building block of human ingenuity, or a fundamental concept, including concepts that involve a “fundamental economic practice.”

Since then, the USPTO has issued several guidance documents, and lower courts have issued several opinions, describing when software is and (more often) is not eligible for patenting under Section 101 of the Patent Act. The USPTO typically denies, and courts often strike down, patent applications and patents covering methods of manipulating data, completing financial transactions, and algorithms that do not require any particular hardware other than a general-purpose computer.

Patent applications that focus on financial applications of blockchain technologies often face patent-eligibility hurdles. A search of the USPTO’s Patent Application Information Retrieval (PIR) system indicated that as of January 2018, over 90% of the published applications and issued patents having the term “blockchain” and any combination of “cryptocurrency,” “coin,” or “currency” in the claims were assigned to the USPTO’s Technology Center 3600. (TC 3600 includes the USPTO’s business methods examining unit.) Over 80% of these patents and patents applications received a Section 101 rejection on first action. In addition, the allowance rate in TC 3600 remains far below that of the USPTO’s overall statistics.

Claim Drafting Strategies

Despite the challenges that software patent applications currently face, the USPTO continues to grant, and courts continue to uphold, patents for innovations in cybersecurity technologies. To help improve a patent application’s chances of success, both before a court and if challenged, patent applicants should consider some or all of the following:

(1) Technical problem / technical solution: The patent application’s narrative should not focus on the business problem that the invention solves (such as allowing a financial transaction to be completed). Instead, the narrative should focus on the technical problem, as well as the technical solution that the problem solves. Examples of technical solutions include inventions that improve network security, that reduce bandwidth or data storage needs, that improve processing speed, or that help defend against cyberattacks, bots and other malicious systems.

By way of example, U.S. patent 9,836,908 contains the following claim:

1. A voting system comprising:
one or more voting machines connected to each other by network connections to form a distributed network;
wherein each of said one or more voting machines comprises:
a computer processor;
a non-volatile computer-readable memory;
a scanner configured to read data from barcodes and/or voting ballots; and
a network interface;
wherein the non-volatile computer-readable memory is configured with computer instructions configured to:
receive a private key and public key pair from a voter,
receive voting data comprising one or more votes for one or more candidates in an election,
use said private key to digitally sign said voting data to produce signed voting data,
broadcast said signed voting data with said public key to a distributed network,
store said signed voting data with said public key on a blockchain database managed by the one or more voting machines forming said distributed network,
store, in a voter block which is a fork block of a slidechain, voter data identifying the voter and elections in which said voter is allowed to cast votes,
store voting data from said voter in a voting block which is a slidechain root block storing a voter hash of said voter block,
wherein said voter block also stores a voting hash computed from data in said voting block, and
accept the longest chain on said slidechain as a valid chain and accept as valid a chain where any voter block stores a voting hash of a voting block which, in turn, stores a voter hash of said any voter block.

In a first Office Action, the USPTO Examiner (in Technology Center 3600) rejected this claim under Section 101 of the Patent Act as being directed to the abstract idea of “using categories to organize, store and transmit information” and/or “data recognition and storage.”

In response, the applicant argued that the claims covered a solution to the technical problem of preventing the circumvention of anti-privacy measures. Therefore, the applicant also argued that the claims were not directed to a long-prevalent and fundamental practice, nor were they related to commerce or finance. The applicant also amended the claim to include the text printed in bold above, and the applicant argued that even if the claim included an abstract idea the amendments represented significantly more. The Examiner withdrew the Section 101 rejection and allowed the case.

(2) Hardware: Patent applications that claim unique hardware configurations, rather than a general purpose computer, may have a better chance of success.

By way of example, U.S. patent 9,862,222 contains the following claim:

1. A seal application device comprising:
a scanner;
an applicator;
at least one processor; and
a memory storing instructions which, when executed by the at least one processor, cause the at least one processor to perform operations comprising:
receiving at least one image of a document, the at least one image generated by the scanner;
determining, based on the at least one image, data associated with the document;
instructing the applicator to generate a seal that encodes the data associated with the document, the seal being applicable to a tangible version of the document;
based on a scan of the seal applied to the tangible version of the document, the scan performed by the scanner, determining the data that is encoded in the seal;
employing the data to verify at least one characteristic of the tangible version of the document;
employing the data to determine an address on a blockchain network; and
accessing funds associated with the address.

The USPTO examined this patent application in TC2800 (Semiconductors, Electrical and Optical Systems and Components) and allowed it on first action.

(3) Improvements to the underlying technology: Patent applications that expressly claim features that could only happen with blockchain technologies or distributed networks, and which could not occur in the abstract or be implemented by humans alone, may have a better chance of success. While this may end up with a narrower claim, the claim can be more likely to withstand challenges.

Examples include the following claim from U.S. Patent 9,825,931:

1. A system for tracking and validating instances of a user, the system comprising:
a memory device with computer-readable program code stored thereon;
a communication device;
a processing device operatively coupled to the memory device and the communication device, wherein the processing device is configured to execute the computer-readable program code to:
receive an initial identification for the user at one or more nodes of the block chain distributed network;
update a distributed ledger with the initial identification via transmission of data from the one or more nodes to the distributed ledger associated with the block chain distributed network;
receive one or more subsequent identifications for the user at the one or more nodes of the block chain distributed network, wherein the received one or more identifications identify morphs in the user identification over a time period;
confirm, via communication with third party systems, the received one or more subsequent identifications are associated with the user;
link the one or more subsequent identifications for the user to the initial identification to generate a timeline illustrating morphing of user identification over time, wherein the timeline illustrates changes in user identification including changes in signatures, physical attributes of the user, and geographic relocations of the user;
correlate user facts received from the one or more nodes of the block chain distributed network and third party systems to the timeline, wherein user facts include a signature the user has previously used, locations where and when the user lived, and physical attributes of the user at various previous times;
generate one or more authentication questions based on the user facts and timeline; and
present the generated one or more authentication questions to the user via a user device for user access into third party secure locations.

The USPTO examined this claim in TC2400 and allowed it on first action.

As another example, U.S. patent 9,824,031 contains the following claim:

1. A method implemented by at least one hardware processor of coalescing transactions between trusted and un-trusted parties, the method comprising:
receiving first transaction data from a computing device associated with a first trusted party, the first transaction data comprising a first pending transaction between the first trusted party and a second trusted party and a second pending transaction between the first trusted party and an un-trusted party;
receiving second transaction data from a computing device associated with the second trusted party, the second transaction data comprising a third pending transaction between the second trusted party and the un-trusted party;
analyzing the first and second transaction data to determine whether more than one trusted party has a pending transaction with the same un-trusted party, wherein the analyzing comprises generating a transaction graph, the transaction graph comprising an identification of the first trusted party, second trusted party, un-trusted party, first pending transaction, second pending transaction, and third pending transaction;
determining based on the analysis that the first trusted party and the second trusted party each have a pending transaction with the un-trusted party, wherein the determination is based on the transaction graph;
modifying the first pending transaction, the second pending transaction, and the third pending transaction based on the determination, the modification comprising removing the third pending transaction.

During prosecution the Examiner (in USPTO TC2400) originally rejected the claim as ineligible under Section 101. However, the Examiner also indicated that the claim would be allowable if the applicant amended the claim to include the text that is presented in bold above. The applicant made the amendment, and the USPTO issued the patent.

For more examples of patent claims in which the U.S. Court of Appeals for the Federal Circuit, U.S. District courts and the Patent Trial and Appeals Board have upheld patent-eligibility of software inventions, see this post on IP Spotlight.

Procedural strategies

A common feature of many of the patents granted on blockchain technologies is that the applicant sought expedited review under the USPTO’s Track One prioritized examination program. Under this program, for an additional fee of $4000 (less for small entities), the USPTO will issue a final determination (allowance or final rejection) within twelve months. This typically means that the USPTO will issue a first action in less than four months. Although USPTO statistics indicate that the allowance rate is just under 50% for cases in Track One, anecdotal evidence indicates that USPTO Examiners are often more willing to working with the applicant early in the process to find allowable subject matter.

In addition, cases that are allowed under Track One receive an allowance within an average of six months after filing. An early allowance in the U.S. can help applicants implement a cost-effective global filing strategy in counties that offer a “Patent Prosecution Highway” (PPH) program with the U.S. A common feature of PPH programs is that if a patent application is allowed in one participating country, other countries’ patent offices will more quickly review the application — and often will allow it — based on the allowance in one participating country. Using PPH treatment, cases allowed in the U.S. often can quickly receive allowance in other PPH-participating jurisdictions such as Australia, Israel, South Korea, China, and the United Kingdom.

Another strategy for getting early allowance of a patent application directed to cybersecurity technologies is to request an interview with the USPTO Examiner prior to first action. The USPTO’s First Action Interview Pilot gives applicants a chance to discuss the patent application with the Examiner before the Examiner issues a first formal Office Action. As of January 2018 USPTO statistics indicate that over 29% of cases in the First Action Interview Pilot had a first action that allowed at least some claims, while only 13.4% of standard track cases were allowed on first action.

For other posts in this four-part series, see:
Intellectual Property Strategies For Next Generation Cybersecurity Technologies
Trends in Patenting Blockchain Technologies
Defensive Patent Strategies For Blockchain and Distributed Ledger Technologies

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