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The Problem with Patent Eligibility: District Court and PTAB Split over Intellectual Ventures Patent

Source: Grill IP patents news

PTAB-District Court-SplitThe Patent Trial and Appeal Board (PTAB) and the Eastern District Court of Texas just issued conflicting decisions over the same patent, highlighting the problems of the Alice framework when it comes to distinguishing patent-eligible from non-patent eligible subject matter under 35 U.S.C. § 101.


Intellectual Ventures I LLC (IV) sued J. Crew Group, Inc. for patent infringement. The case concerns three U.S. Patents: RE43,725, 6,782,370, and 5,969,324. The defendant filed a Motion to Dismiss, arguing that the asserted patents involve patent-ineligible subject matter, according to 35 U.S.C. § 101. The District Court determined that the claims of ‘715 and ‘370 were directed to patent-ineligible matter, whereas ‘324 is patentable. In August, the PTAB reached a rival decision concerning ‘324, determining that it’s likely the claims in ‘324 are unpatentable under § 101. This came within a decision to commence a covered business method (CBM) trial reviewing the ‘324 patent between Sally Beauty Holdings, Inc. and IV. It found that IV had asserted ‘324 against a number of defendants, with at least one defendant successfully raising the issue of § 101.

The Patents

The ‘715 patent features a system allowing Internet users to develop web pages that simultaneously display public and private data as integrated data on a single digital screen. The District Court deemed ‘715 as being directed at the abstract idea of combining data from two sources for delivery to an Internet user. The Court found no meaningful limitations to any of the generic steps in the patent that render it any less abstract. Using the example provided by the patentee,, whose website can display public data (promotional information) alongside private data (account balances) at the same time, the Court determined that ‘715 simply incorporates generic computer network technology to attain an online adaptation of a well-established, real-world exercise. For instance, the existence of printed account statements readily featured public and private information, predating the development of online credit billing and IV’s system.

    The ‘370 patent develops a method for using a network to recommend goods and services to potential customers, drawing from a database of the customer’s purchase history and a potential customer’s selection of goods and services. The District Court also deemed ‘370 as principally concerned with an abstract idea: recommending products to customers according to their purchase history, a task that, according to the court, sales clerks have been performing for decades.

The patent dividing the Court and the PTAB focuses on a method for storing and retrieving transaction information through a nonpredictable barcode. The claims of ‘324 include a point-of-sale transaction system that uses nonpredictable barcodes when generating information concerning the transaction, storing that information, and retrieving it from a remote computer system. The purpose of the nontraditional barcode is to aid in the prevention of unauthorized access to transaction data. J. Crew argued that ‘324 targets the abstract idea of retrieving transaction records. According to the District Court, the defendants did not reach a burden of proof under the Alice framework, since J. Crew’s view of the claim language was too general, impairing the meaningful limitations provided in ‘324. J. Crew’s presentation of the claims shirked the “nonpredictable barcode” elements and “transaction information associated with a nonpredictable barcode.” The Court held that ‘324’s claims are far from conventional, combining transaction information with nonpredictable barcodes. A result of this combination has been a massive improvement over the accounting software of the mid-1990s, which involved the manual entry of transaction information. In sum, the Court determined that ‘324 was in fact directed to patent-eligible matter.

The PTAB arrived at a much different decision, finding that ‘324 involves the abstract idea of “storing and retrieving transaction information through the use of a well-known security feature.” Indeed, the patent admits its intention to automate a manual process, and its claims involve the automation of the economic concept of recording and retrieving information through generic computer functions. Concerning the “barcode,” the PTAB regards the claims as receiving transaction information associated with a nonpredictable barcode, rather than the direct use of a barcode. Since there is no scanning of barcodes in ‘324, the independent claims solely deal with the associated information to comply with steps enumerated in the claims, making the consideration of nonpredictable barcodes unnecessary for the patent’s method. The divide between the PTAB and District Court exposes the problem of having to rely on the Alice framework when it comes to determining patent eligibility, namely that there is no objective standard for the judgment of eligibility where claims relate to data management methods. Where the Alice test stands in future decisions remains to be seen.  

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Author: grill-ip

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