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PersonalWeb Techs, patent eligibility, and what it means for startups
A recent court decision confirming limits around patent (in)eligibility also reveals how this area of the law can more quickly resolve cases where weak patent claims are broadly asserted against companies—including startups and small businesses. In PersonalWeb Techs. LLC v. Google LLC, the Federal Circuit applied § 101 of the Patent Act to cancel patent claims which should not have issued in the first place—but were part of a patent that had been asserted in nearly 170 lawsuits against numerous defendants.
Section 101 sets out the threshold of what is—and what is not—eligible for patent protection, preventing people from obtaining and enforcing patents on abstract ideas, laws of nature, and natural phenomena. For example, a patent cannot claim the idea of collecting, analyzing, and organizing certain sorts of data. By keeping such basic concepts and business activities free for everyone to use, the law promotes innovation and entrepreneurship. Conversely, if one person (who had contributed nothing truly inventive) could instead “own” basic concepts and business activities, that one person could block all types of startups and small businesses across the country. So when the patent office refuses to grant or a court agrees to cancel a patent claiming an abstract idea, it ensures companies can continue to operate using those basic (sometimes essential) concepts.
Last month’s unanimous decision in PersonalWeb, and its surrounding context, are a helpful reminder of these values of § 101 and patent eligibility thresholds. It is also a timely reminder, as the U.S. Patent and Trademark Office (PTO) is currently studying the law and accepting public input to understand how it impacts innovation in the U.S.
A brief primer on patent eligibility and § 101 of the Patent Act.
To understand PersonalWeb, you need a basic understanding of patent eligibility. 35 U.S.C. § 101 defines what is (and is not) eligible for patent protection—namely that abstract ideas, laws of nature, and natural phenomena cannot be patented. For example, under § 101 a company cannot patent, or seek to own, naturally occurring human genes or the idea of scheduling medical appointments using a computer.
Most recently in Alice v. CLS Bank, the Supreme Court added to over 150 years of precedent by confirming that abstract ideas are not patent eligible. The Alice decision, and the others since, have clarified the standard for determining whether a patent impermissibly claims an abstract idea. When considering the eligibility of a patent, courts and patent examiners determine whether the claims at issue are directed to an abstract idea. If not, the claims clear the § 101 threshold. But if the claims are directed to an abstract idea, then courts and examiners consider whether the claims articulate an “inventive concept.” Put another way, they look at whether there are additional elements of the claim that are “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [abstract idea] itself.” If a claim is directed to an abstract idea and lacks that inventive concept, i.e., lacks that “something more,” then it falls outside the scope of eligibility. By contrast, if an invention relates to an abstract idea, but the patent claims a technology-based solution to a technological problem, then it may be eligible.
Patent eligibility, unlike other areas of patent law, involves a legal question that judges can decide early in a lawsuit. Courts cannot resolve other patent invalidity arguments and infringement disputes without reviewing facts and evidence, and hearing expert testimony. For example, determining whether a patent claims a truly new invention involves factual issues that a court cannot resolve early in a case. Because patent eligibility can be resolved early in a lawsuit, it reduces the costs of challenging weak patents.
PersonalWeb Technologies LLC v. Google LLC et al.
This case concerns the eligibility of claims in three patents. All three patents “relate to data-processing systems that assign each data item a substantially unique name that depends on the item’s content—a content-based identifier. . . . [And] [t]he patents claim using such identifiers to perform various data-management functions.” A district court had concluded the claims in question were patent ineligible, and PersonalWeb appealed.
First, as in all cases where § 101 comes up, the Federal Circuit considered whether PersonalWeb’s claims were directed to an abstract idea and held that they were. The court looked at the claim language, reviewed the district court’s assessment of the claims, and weighed the patent owner’s description of its claims. Each of those sources confirmed the claims were directed to abstract ideas: looking at a content-based identifier (for example, generated through a common-place hash function), comparing that identifier to another data identifier, and then based on the comparison deciding what to do with the data. Both the claims, themselves, and the patent owner’s description to the court used this sort of generic language to describe what the patent purportedly covered. And, as the Federal Circuit stated, the claims focused on “mere automation of manual processes using generic computers.”
To help illustrate the abstractness of using identifiers and comparisons in data management, the court pointed to age-old practices that people can do—and have done—manually. Libraries, for example, have long assigned unique numbers to books, and used those numbers to find books, authorize and monitor borrowing, restore books to the right shelves, or replace old books with new copies. Merely doing that on a computer is just as abstract.
Likewise, the court compared PersonalWeb’s asserted claims to numerous other cases it has decided over the years. The court has routinely and consistently confirmed that patent claims directed to merely categorizing and organizing digital data are too abstract to warrant protection. Importantly, in those prior cases and in PersonalWeb’s case, the patent claims at issue were not about improving technology; they merely addressed automating routine processes for data management (and tended to be described in vague terms).
Second, and common in all of these § 101 cases, the court considered whether the claims—with an abstract idea at their core—constituted something more, something really inventive. But here, with PersonalWeb’s claims, the court determined there was nothing beyond the underlying abstract idea. The patents just pointed to the use of generic hash functions, computers, and servers. There was nothing specific in the claims about improving how those features of a computer network work.
What PersonalWeb and § 101 mean for startups.
By prohibiting patents on abstract ideas, the law frees up space for innovation and entrepreneurship. As the Supreme Court has described, these abstract ideas are “building blocks of human ingenuity,” and allowing one person or one company to own them would improperly prevent everyone else in the U.S. from using those same building blocks in their own research, in their own businesses.
In addition, because § 101 can be raised as a defense early in litigation over vague, broad, low-quality patents, it puts these types of challenges within reach for more startups and other small businesses. Any patent litigation is expensive—easily reaching millions of dollars—but eligibility challenges can be decided before discovery, lengthy motions practice, and full trials, meaning companies with fewer resources might be able to afford a defense. That makes abusive patent assertion more difficult and less profitable. It used to be that patent owners claiming abstract ideas could leverage the high costs of a full lawsuit to force startups and small businesses to pay costly settlements in cases over abstract idea patents. Now, with a viable defense within reach, those smaller or younger companies can avoid or curtail such abuse. As a former chief judge of the Federal Circuit has explained, addressing § 101 early in a case “not only conserves scarce judicial resources and spares litigants the staggering costs associated with discovery and protracted claim construction litigation, it also works to stem the tide of vexatious suits brought by the owners of vague and overbroad business method patents.”
Likewise, one feature of patent eligibility baked into the law is that § 101 restricts weak, overbroad patents that could stand in the way of numerous innovators and small businesses. Today, almost every company does things like budgeting, data analysis, or data recognition and storage. Previously, companies tried to patent those ideas, without claiming or disclosing technological advances, giving them the ability to accuse essentially anyone of infringement. Those types of patents also have the power to stand in the way of innovators who wanted to make better technology for budgeting, data analysis, or storage. When the Supreme Court decided Alice, it confirmed that those sorts of basic ideas (without something more, some technical improvement to how we, e.g., budget, analyze, or store) could not be owned with a patent.
PersonalWeb shows us how widespread patent assertion can be when there’s an ineligible, abstract idea patent involved. As IP Recap readers may recall, from a post last year (about a different legal issue), PersonalWeb is a very frequent litigant and it has filed nearly 170 patent lawsuits asserting the same three patents addressed in the present case. Its claimed ownership of using conventional hash algorithms in data management understandably cuts quite broadly across the domestic innovation ecosystem, opening numerous avenues for its litigation campaign. The Federal Circuit’s recent decision confirming those ideas or claims are patent ineligible will save future companies from litigation.
Disclaimer: This post provides general information related to the law. It does not, and is not intended to, provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
