Section 101 Update: Federal Circuit Upholds eCommerce Patents Under Section 101

by Stephanie Holmes | Mar 23, 2015

In DDR Holdings, LLC v. Hotels.com, LP, No. 2013-1505 (Fed. Cir. 2014), the Federal Circuit upheld the patent eligibility of an eCommerce patent:  the first case to do so since the Supreme Court issued Alice Corp. Pty. Ltd. v. CLS Bank Int’l et al., 134 S.Ct. 2347 (2014).

DDR is the assignee of patents directed to displaying third-party website images on a host website.  A representative claim recites:

13. An e-commerce outsourcing system comprising:

a) a data store including a look and feel description associated with a host web page having a link correlated with a commerce object; and

b) a computer processor coupled to the data store and in communication through the Internet with the host web page and programmed, upon receiving an indication that the link has been activated by a visitor computer in Internet communication with the host web page, to serve a composite web page to the visitor computer wit[h] a look and feel based on the look and feel description in the data store and with content based on the commerce object associated wit[h] the link.

DDR alleged that several defendants infringed on several asserted claims in these patents.  A jury found defendants liable for infringing asserted claims of DDR’s patents.  The district court denied defendants’ motion for renewed judgment as a matter of law, which challenged the asserted claims’ validity under a variety of theories, including that the claims were patent ineligible abstract ideas under Alice and Section 101. 

On appeal, the Federal Circuit applied the two-step Alice test.  It followed the general rubric set forth in Alice to first “determine whether the claims at issue are directed to a patent-ineligible abstract idea,” and if so, then “consider the 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 of that abstract idea.”  While the machine-or-transformation test could help determine whether a claim is patent-eligible, “it is clear today that not all machine implementations are created equal.”  Namely, “generic computer limitations” cannot solely impart patent eligibility to an otherwise ineligible claim. 

Some categories are almost always abstract ideas, including mathematical algorithms as well as fundamental economic and conventional business practices.  In addition, the Federal Circuit noted that claims which merely instruct a practitioner to perform conventional steps on a computer are also patent ineligible.

Here, the court held that the claim was not directed to an abstract idea.  The claim was not directed to a familiar category like a mathematical algorithm or a conventional business practice.  Rather, the claims address a business challenge “particular to the Internet.”

Even if the claims were directed to an abstract idea, the claims also overcome the second step of the test.  They do not merely apply a well-known business practice “known from the pre-Internet world” to the Internet.  Rather, “the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”  While similar concepts may have been well known prior to the invention of the Internet,

[T]he ephemeral nature of an Internet ‘location’ or the near-instantaneous transport between these locations made possible by standard Internet communication protocols…introduces a problem that does not arise in the ‘brick and mortar’ context.

That is, the claimed invention depended on the unique delineation of structures and data through the Internet.  The inherently unique structure of the Internet separated the claims at issue from conventional business practices.

Judge Mayer dissented from the opinion.  He characterized the claims as “describ[ing] a goal—confusing consumers by making two web pages look alike—but disclos[ing] no new technology or ‘inventive concept.’”  He also pointed out that the claims had vast scopes “disproportionate to their minimal technological disclosure.”

While the court distinguished this case from Alice and Ultramercial v. Hulu, LLC et al., No. 2010-1544 (Fed. Cir. 2014), it certainly stands out against the federal judiciary’s trend of invalidating eCommerce patents in light of Alice.  The entire Federal Circuit may be inclined to rehear the case en banc if the other judges feel as though the case may conflict with Alice and the rest of the Federal Circuit’s post-Alice jurisprudence.

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