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Amdocs (Israel) Ltd. v. Openet Telecom, Inc.

United States Court of Appeals, Federal Circuit

November 1, 2016

AMDOCS (ISRAEL) LIMITED, Plaintiff-Appellant

         Appeal from the United States District Court for the Eastern District of Virginia in No. l:10-cv-00910-LMB-TRJ, Judge Leonie M. Brinkema.

          S. CALVIN Walden, Wilmer Cutler Pickering Hale and Dorr LLP, New York, NY, argued for plaintiff-appellant. Also represented by Brittany Blueitt Amadi, Gregory H. Lantier, James Quarles III, Washington, DC.

          BRIAN Pandya, Wiley Rein, LLP, Washington, DC, argued for defendants-appellees. Also represented by Scott A. Felder, James Harold Wallace, Jr., Eric Harold Weisblatt.

          Before NEWMAN, Plager, and REYNA, Circuit Judges.

          REYNA. Plager, Circuit Judge.

         This is a patent case, in which the outcome turns on the application of the 'abstract idea' test, a judicially-created limitation on patent eligibility under § 101 of the Patent Act, 35 U.S.C. § 101.

         Plaintiff-Appellant Amdocs (Israel) Limited ("Amdocs") sued Defendants-Appellees Openet Telecom, Inc. and Openet Telecom Ltd. (collectively, "Openet") for infringing four U.S. Patents, Nos. 7, 631, 065 ("'065 patent"); 7, 412, 510 ("'510 patent"); 6, 947, 984 ("'984 patent"); and 6, 836, 797 ("'797 patent"). In the wake of Alice Corp. v. CLS Bank International, 134 S.Ct. 2347 (2014), the district court granted Openet's motion for judgment on the pleadings, finding that the patents were not directed to patent eligible subject matter under § 101. Amdocs appeals.

         For the reasons we shall explain, we reverse and remand for further proceedings.


         Prosecution History and Technology

         Although we need not recapitulate every detail of these patents, we describe them sufficiently for purposes of this opinion. Additional background is available in our opinion from the prior appeal in this case. See Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 761 F.3d 1329, 1331-36 (Fed. Cir. 2014) (Amdocs 7").

         The patents in suit concern, inter alia, parts of a system designed to solve an accounting and billing problem faced by network service providers. Each patent descends from U.S. Patent Application No. 09/442, 876, which issued as U.S. Patent No. 6, 418, 467. One of the patents in suit, the '797 patent, issued as a result of a continuation-in-part application, while the other three patents issued as a result of continuation applications.

         The '065 patent concerns a system, method, and computer program for merging data in a network-based filtering and aggregating platform as well as a related apparatus for enhancing networking accounting data records. The '510 patent concerns a system, method, and computer program for reporting on the collection of network usage information. The '984 patent concerns a system and accompanying method and computer program for reporting on the collection of network usage information from a plurality of network devices. The '797 patent concerns a system, method, and computer program for generating a single record reflecting multiple services for accounting purposes.

         Each patent's written description describes the same system, which allows network service providers to account for and bill for internet protocol ("IP") network communications. The system includes network devices; information source modules ("ISMs"); gatherers; a central event manager ("CEM"); a central database; a user interface server; and terminals or clients. See, e.g., '065 patent at 4:29-33, 43-54.

         Network devices represent any devices that could be included on a network, including application servers, and also represent the source of information accessed by the ISMs. Id. at 5:10-26. The ISMs act as an interface between the gatherers and the network devices and enable the gatherers to collect data from the network devices. Id. at 5:33-35. The ISMs represent modular interfaces that send IP usage data in real time from network devices to gatherers. Id. at 5:35-39. Gatherers can be hardware and software installed on the same network segment as a network device or on an application server itself to minimize the data traffic impact on a network; gatherers "gather the information from the ISMs." Id. at 6:54, 58-64. Gatherers also normalize data from the various types of ISMs and serve as a distributed filtering and aggregation system. Id. at 7:5-8. The CEM provides management and control of the ISMs and gatherers, and the CEM can perform several functions including performing data merges to remove redundant data. Id. at 8:13-67. The central database is the optional central repository of the information collected by the system and is one example of a sink for the data generated by the system. Id. at 9:1-5. The user interface server allows multiple clients or terminals to access the system, and its primary purpose is to provide remote and local platform independent control for the system. Id. at 10:5- 12.

         Importantly, these components are arrayed in a distributed architecture that minimizes the impact on network and system resources. Id. at 3:56-65. Through this distributed architecture, the system minimizes network impact by collecting and processing data close to its source. Id. The system includes distributed data gathering, filtering, and enhancements that enable load distribution. Id. at 4:33-42. This allows data to reside close to the information sources, thereby reducing congestion in network bottlenecks, while still allowing data to be accessible from a central location. Id. at 4:35-39. Each patent explains that this is an advantage over prior art systems that stored information in one location, which made it difficult to keep up with massive record flows from the network devices and which required huge databases. See, e.g., id. at 4:39-42.

         Procedural History

         In 2010, Amdocs sued Openet for patent infringement in the United States District Court for the Eastern District of Virginia. Amdocs asserted that Openet infringed claims 1, 4, 7, 13, and 17 of the '065 patent; claims 16, 17, and 19 of the '510 patent; claims 1, 2, 7, 8, and 13 of the '984 patent; and claims 1, 2, 7, 8, and 19 of the '797 patent.

         In its answer and counterclaim, Openet alleged invalidity, unenforceability, and non-infringement. The parties filed motions addressing claim construction and summary judgment. The district court granted Openet's motion for summary judgment of non-infringement and Amdocs's motion for summary judgment of no inequitable conduct. Upon motions of the parties, which the court granted, certain claim constructions were made. However, the court denied the parties' motions for summary judgment with respect to validity. The court later issued an opinion explaining its bases for its non-infringement and inequitable conduct summary judgment rulings, while also providing its claim constructions. Am docs appealed the trial court's judgment to this court.

         On appeal, we affirmed two claim constructions and vacated and modified another construction. We approved of the district court's construction of "enhance" to mean "to apply a number of field enhancements in a distributed fashion." Amdocs I, 761 F.3d at 1338-40. In so doing, we approved of the district court's "reading the 'in a distributed fashion' and the 'close to the source' of network information requirements into the term 'enhance.'" Id. at 1340. We also approved of the construction of "completing" to mean "enhance a record until all required fields have been populated." Id.

         However, we vacated the district court's construction of "single record represents each of the plurality of services" as "one record that includes customer usage data for each of the plurality of services used by the customer on the network" but not including records that aggregated usage data. Id. We substituted a plain meaning interpretation that allowed for the inclusion of a plurality of services by aggregation. Id. at 1340-41. As a result, we reversed the grant of summary judgment with respect to the '065 patent, the '510 patent, and the '984 patent and vacated the grant of summary judgment with respect to the '797 patent. Id. at 1341-43.

         During the time the case was before us on appeal from the district court, the Supreme Court issued its opinion in Alice. Following the remand from this court in Amdocs I, Openet moved for judgment on the pleadings by arguing that, pursuant to Alice, all asserted claims were ineligible under § 101. In response, Amdocs argued that Openet's motion was procedurally barred and contrary to the law of the case.

         The district court permitted the motion because it had not resolved whether the patents were directed to ineligible subject matter under § 101 and because, even if the issue had been addressed, the court stated that Alice "represented a change, or a significant clarification, of the law." Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 56 F.Supp.3d 813, 819 (E.D. Va. 2014).

         In due course, the district court granted Openet's motion and invalidated the asserted claims of all four patents as ineligible under § 101. Amdocs appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).


         We review a grant of judgment on the pleadings under the procedural law of the regional circuit. Allergan, Inc. v. Athena Cosmetics, Inc., 640 F.3d 1377, 1380 (Fed. Cir. 2011). The Fourth Circuit reviews a grant of judgment on the pleadings without deference, applying the same standard as a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). Therefore, we assume the facts alleged in the complaint are true and draw all reasonable factual inferences in favor of the nonmovant. Id. We review the district court's determination of patent eligibility under § 101 without deference, as a question of law. DDR Holdings, LLC v., L.P., 773 F.3d 1245, 1255 (Fed. Cir. 2014).


         The Doctrine: The statutory rule governing patent eligibility-that is, the criteria for identifying inventions that are eligible to be patented-is found in § 101 of the Patent Act. As recodified by Congress in 1952, § 101 provides that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title."

         It is obvious that the subject matter described in § 101 is expansive. As the Supreme Court has observed, the "subject-matter provisions of the patent law have been cast in broad terms to fulfill the constitutional and statutory goal of promoting 'the Progress of Science and the useful Arts.'" Diamond v. Chakrabarty, 447 U.S. 303, 315 (1980) (quoting U.S. Const, art. I, § 8, cl. 8).

         Despite this broad mandate, judicial gloss on the law of patent eligibility has long recognized that certain fundamental principles are not included in that broad statutory grant. Though over the years these principles have been described in differing terms, in today's vernacular these exceptions are called "[T]aws of nature, natural phenomena, and abstract ideas." Alice, 134 S.Ct. at 2354 (quotation marks and citation omitted); see also Le Roy v. Tatham, 55 U.S. 156, 183 (1853) (Nelson, J., dissenting) (tracing the "proper subject-matter of a patent" to at least the British case oiBoulton v. Bull, 2 H. Bl. 463, 126 Eng. Rep. 651 (C.P. 1795)).

         The two-step framework, set out by the Supreme Court for distinguishing patents that claim so-called laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts, is now familiar law. See Alice, 134 S.Ct. at 2355 (following Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S.Ct. 1289 (2012)). This framework is sometimes collectively referred to as Alice/Mayo.

         First, we determine whether "the claims at issue are directed to one of those patent-ineligible concepts." Id. If so, we next consider elements of each claim both individually and "as an ordered combination" to determine whether the additional elements "'transform the nature of the claim' into a patent-eligible application." Id. (quoting Mayo, 132 S.Ct. at 1298, 1297).

         The Court describes step two of this analysis as a search for an "inventive concept"-i.e., an element or ordered combination of elements that is "sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself." Id. (quoting Mayo, 132 S.Ct. at 1294).


         The Cases: Our cases generally follow the step one/step two Supreme Court format, reserving step two for the more comprehensive analysis in search of the 'inventive concept.' Recent cases, however, suggest that there is considerable overlap between step one and step two, and in some situations this analysis could be accomplished without going beyond step one. See Enfish, LLC, v. Microsoft Corp., 822 F.3d 1327, 1334-36 (Fed. Cir. 2016); see also Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1353 (Fed. Cir. 2016) ("the two stages involve overlapping scrutiny of the content of the claims . . . [and] there can be close questions about when the inquiry should proceed from the first stage to the second); BASCOM Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1349 (Fed. Cir. 2016) ("[T]he claims and their specific limitations do not readily lend themselves to a step-one finding that they are directed to a nonabstract idea. We therefore defer our consideration of the specific claim limitations' narrowing effect for step two.").

         Whether the more detailed analysis is undertaken at step one or at step two, the analysis presumably would be based on a generally-accepted and understood definition of, or test for, what an 'abstract idea' encompasses. However, a search for a single test or definition in the decided cases concerning § 101 from this court, and indeed from the Supreme Court, reveals that at present there is no such single, succinct, usable definition or test. The problem with articulating a single, universal definition of 'abstract idea' is that it is difficult to fashion a workable definition to be applied to as-yet-unknown cases with as-yet-unknown inventions. That is not for want of trying; to the extent the efforts so far have been unsuccessful it is because they often end up using alternative but equally abstract terms or are overly narrow.[1]

         Instead of a definition, then, the decisional mechanism courts now apply is to examine earlier cases in which a similar or parallel descriptive nature can be seen-what prior cases were about, and which way they were decided. See, e.g., Elec. Power Grp., 830 F.3d at 1353-54.[2] That is the classic common law methodology for creating law when a single governing definitional context is not available. See generally Karl N. Llewellyn, The Common Law Tradition: Deciding Appeals (1960). This more flexible approach is also the approach employed by the Supreme Court. See Alice, 134 S.Ct. at 2355-57. We shall follow that approach here.

         The dissent, in its discussion of the majority opinion's approach, states that the analysis in which the majority engages involves a comparison "of the asserted claims in this case to the claims at issue in some, but not all, of the cases where we have addressed patent eligibility." Dissent at 1. As earlier noted, applying prior precedents of the court to the current case is indeed the common law approach for deciding cases, including patent cases-i.e., applying the law to comparable facts. See, e.g., Alice, 134 S.Ct. at 2355-60 (relying on precedent with respect to step one and step two); Elec. Power Grp., 830 F.3d at 1353-56 (same). Furthermore, discussing in an opinion only the most relevant prior opinions, rather than every prior opinion in an actively-litigated field, is a necessary discipline if opinions are to be read, rather than just written.

         The dissent offers a different paradigm for identifying an abstract idea: "it is apparent that a desired goal (i.e., a 'result or effect'), absent structural or procedural means for achieving that goal, is an abstract idea." Dissent at 6-7. The dissent focuses on the difference between 'means' and 'ends.' Id. at 6. We note that, though not in terms of 'abstract idea' but rather adequacy of definition, years ago the Supreme Court outlawed such broad 'ends' or function claiming as inconsistent with the purposes of the Patent Statute.[3] Congress, however, a few years later softened the rule. Patentees could write claim language to broadly describe the purpose or function of their invention, and when they did the claim would not cover the bare function or goal, however performed, but only as limited to the particular means (and equivalents) for implementing that function or goal as described by the patentee in the patent's "specification."

         This, of course, is the "means-plus-function" practice codified in 35 U.S.C. § 112 ¶6 (now § 112(f)). The dissent's paradigm would seem similar, but differs in significant respects. Though § 112 ¶ 6 permits the 'means' to be found in the patentee's "specification, " meaning the written description and the claims of the patent, the dissent would save the patent's eligibility under § 101 only if the claim at issue itself explicitly states the necessary 'means.' In the dissent's step two, we must find "a particular means for accomplishing an underlying goal" through careful "limitation-by-limitation analysis" of the claim. Id. at 9. We commend the dissent for seeking a creative way of incorporating aspects of well-known doctrine in the search for what is an 'abstract idea, ' but that is not now the law, either in statute or in court decision.[4] At best, as this court has previously stated, the dissent's analysis may be "one helpful way of double-checking the application of the Supreme Court's framework to particular claims-specifically, when determining whether the claims meet the requirement of an inventive concept in application." Elec. Power Grp., 830 F.3d at 1356.


         We begin, then, with an examination of eligible and ineligible claims of a similar nature from past cases. For example, in Digitech, one of the representative claims described a process of organizing information through mathematical correlations with merely generic gathering and processing activities. See Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344, 1350 (Fed. Cir. 2014). The claim at issue:

A method of generating a device profile that describes properties of a device in a digital image reproduction system for capturing, transforming or rendering an image, said method comprising:
generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;
generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and combining said first and second data into the device profile.

Id. at 1351 (quoting patent at issue).

         While the court did not parse the analysis into discrete step one and step two stages, it found that this claim recited an "ineligible abstract process of gathering and combining data that does not require input from a physical device" and that "the two data sets and the resulting device profile are ineligible subject matter." Id. The court observed that "[w]ithout additional limitations, a process that employs mathematical algorithms to manipulate existing information to generate additional information is not patent eligible." Id. The court determined that the claim was ineligible.

         Similarly, in Content Extraction, the court examined a representative claim reciting:

A method of processing information from a diversity of types of hard copy documents, said method comprising the steps of:
(a) receiving output representing a diversity of types of hard copy documents from an automated digitizing unit and storing information from said diversity of types of hard copy documents into a memory, said information not fixed from one document to the next, said receiving step not preceded by scanning, via said automated digitizing unit, of a separate document containing format requirements; (b) recognizing portions of said hard copy documents corresponding to a first data field; and
(c) storing information from said portions of said hard copy documents corresponding to said first data field into memory locations for said first data field.

Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat'lAss'n, 776 F.3d 1343, 1345 (Fed. Cir. 2014).

         Under step one, the court characterized all of the claims at issue (which were similar to the representative claim) as being directed to the abstract idea of "1) collecting data, 2) recognizing certain data within the collected data set, and 3) storing that recognized data in a memory." Id. at 1347. The court commented that data collection, recognition, and storage were "undisputedly well-known." Id. Under step two, the court found no limitations[5] that, considered alone and in an ordered combination, transformed the claim into a patent-eligible application of an abstract idea. Id. at 1347-48. The court observed that the role of a computer in a computer-implemented invention would only be meaningful in a § 101 analysis if it involved more than the performance of "well-understood, routine, [and] conventional activities previously known to the industry." Id. (quoting Alice, 134 S.Ct. at 2359). The court noted that all of the limitations at issue involved well-known, routine, and conventional functions of computers and scanners. Id. at 1348-49. The claims were ineligible.

         More recently, in In re TLI, the court examined a representative claim that recited:

A method for recording and administering digital images, comprising the steps of:
recording images using a digital pick up unit in a telephone unit,
storing the images recorded by the digital pick up unit in a digital form as digital images,
transmitting data including at least the digital images and classification information to a server, wherein said classification information is prescribable by a user of the telephone unit for allocation to the digital images,
receiving the data by the server,
extracting classification information which characterizes the digital images from the received data, and
storing the digital images in the server, said step of storing taking into consideration the classification information.

In re TLI Commc'ns LLC Patent Litig., 823 F.3d 607, 610 (Fed. Cir. 2016).

         Under step one, the court found that the claims were directed to the abstract idea of "classifying and storing digital images in an organized manner." Id. at 613. Also under step one, the court found that the claims were not directed to a specific improvement in computer functionality, but instead were directed to the "use of conventional or generic technology in a nascent, but well-known environment, without any claim that the invention reflect[ed] an inventive solution to any problem presented by combining the two." Id. at 612. Under step two, the court found that the claims did not recite any limitations that when considered individually and as an ordered combination transformed the abstract idea into a patent-eligible application of that idea. Instead, the recited components and functions were well-understood, routine, conventional activities previously known in the industry. See id. at 613-14. The components were described in "vague, functional" terms that were insufficient to confer eligibility and failed to provide the requisite details to implement the claimed abstract idea. Id. at 615.

         The ineligible claims in the preceding cases[6] may be contrasted with eligible claims in other cases. For example, in DDR Holdings, the court found that the asserted claims did not recite a step or function performed by a computerized mathematical algorithm but were instead focused on a challenge particular to the Internet. DDR Holdings, 773 F.3d at 1257. The representative claim recited:

         A system useful in an outsource provider serving web pages offering commercial opportunities, the system comprising:

(a) a computer store containing data, for each of a plurality of first web pages, defining a plurality of visually perceptible elements, which visually perceptible elements correspond to the plurality of first web pages;
(i) wherein each of the first web pages belongs to one of a plurality of web page owners;
(ii) wherein each of the first web pages displays at least one active link associated with a commerce object associated with a buying opportunity of a selected one of a plurality of merchants; and
(iii) wherein the selected merchant, the out-source provider, and the owner of the first web page displaying the associated link are each third parties with respect to one other;
(b) a computer server at the outsource provider, which computer server is coupled to the computer store and programmed to:
(i) receive from the web browser of a computer user a signal indicating activation of one of the links displayed by one of the first web pages;
(ii) automatically identify as the source page the one of the first web pages on which the link has been activated;
(iii) in response to identification of the source page, automatically retrieve the stored data corresponding to the source page; and
(iv) using the data retrieved, automatically generate and transmit to the web browser a second web page that displays: (A) information associated with the commerce object associated with the link that has been activated, and (B) the plurality of visually perceptible elements visually corresponding to the source page.

Id. at 1249-50.

         The court observed that the "claimed solution [was] necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks." Id. at 1257. Analyzing the claims under step two, the court noted when the claim limitations were taken together as an ordered combination, they recited an invention that was not merely "the routine or conventional use of the Internet." Id. at 1259.

         More recently, in BASCOM, the court examined several claims including the following claim:

1. A content filtering system for filtering content retrieved from an Internet computer network by individual controlled access network accounts, said filtering system comprising:
a local client computer generating network access requests for said individual controlled access network accounts;
at least one filtering scheme;
a plurality of sets of logical filtering elements; and
a remote ISP server coupled to said client computer and said Internet computer network, said ISP server associating each said network account to at least one filtering scheme and at least one set of filtering elements, said ISP server further receiving said network access requests from said client computer and executing said ...

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