Ever since the U.S. Supreme Court’s 2014 ruling in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, the road for would-be patent holders of software and business methods has been a rough one, littered with uncertainty and unfavorable rulings. Some observers have even suggested that Alice, and its progeny issued by the U.S. Court of Appeals for the Federal Circuit (which hears all patent case appeals), represent the death knell for software patents.
Late last year, however, came a ruling from the Federal Circuit, DDR Holdings LLC v. Hotels.com. It’s the first such decision since Alice and actually offers some encouragement to software and business method patent holders.
DDR Holdings holds a patent on an invention designed to solve a problem experienced by many e-commerce websites: the loss of visitor traffic when visitors click on a third-party ad and are taken to that party’s site. The patented invention creates a new webpage that permits a visitor to essentially be in two places at the same time.
When the visitor clicks on an ad, the system generates and sends the visitor to a hybrid webpage that displays product information for the third party but retains the host website’s “look and feel.” The host can display a third party’s products but keep its visitor traffic by displaying the information from within a webpage that gives visitors the impression that they’re viewing pages served by the host.
DDR sued several defendants for patent infringement. After a jury found infringement, one of the defendants asked the trial court to grant a “judgment as a matter of law” because the patent covered a patent-ineligible invention and was therefore invalid. The trial court denied the request, and the defendant appealed to the Federal Circuit.
A concrete solution
The U.S. Supreme Court has long held that laws of nature, natural phenomena and abstract ideas aren’t patentable under Section 101 of the Patent Act. Yet the Court hasn’t precisely defined the contours of the “abstract ideas” category. According to the Federal Circuit, many of the software and business method patent claims previously found invalid covered nothing more than the performance of an abstract business practice on the Internet or using a conventional computer — and such claims aren’t patent-eligible.
The appeals court acknowledged that DDR’s patent claims were similar to previously rejected claims in that they involved both a computer and the Internet. But, the court said, DDR’s patent claims addressed a business challenge (retaining visitors) particular to the Internet. Rather than just reciting the performance of some business practice known from the pre-Internet world along with the requirement that it be performed online, the claimed invention is “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”
The court cautioned that not every claim purporting to address Internet-centric challenges is patent-eligible. DDR’s claims specified how interactions with the Internet are manipulated to yield a desired result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink. The visitor is directed to a hybrid webpage, not a third-party webpage. The claims, therefore, described an invention that’s more than the routine or conventional use of the Internet.
The appeals court also found that the claims didn’t unlawfully attempt to preempt every application of the idea of increasing sales by making two webpages look alike. The court said they described a specific way to automate the creation of a hybrid webpage by an “outsource provider” that incorporates elements from multiple sources to solve a problem faced by websites.
Thus, the claims included “additional features” that ensure the claims are, as required by the Supreme Court in Alice, “more than a drafting effort designed to monopolize” the abstract idea. In short, the appeals court found the invention amounted to an inventive concept for resolving a particular Internet-centric problem — making the claims patent-eligible.
Roadmap for success
The DDR Holdings ruling sends a clear message that, even in a post-Alice world, software and business method claims can be patent-eligible. To wit, patentee-hopefuls should ensure that their claims are either: 1) rooted in technology designed to overcome a problem specific to computer networks, or 2) written to describe interactions with the Internet or computers that are manipulated to yield a result different from a routine or conventional result.