We will be discussing two recent, relevant opinions in our weekly SoCal IP Institute meeting on Monday, March 28, 2011.  The first case is the Federal Circuit’s first exposition on “analogous art” in an obviousness determination since KSR.  The second case is a district court determination that the software-based methods directed to financial transactions claimed in four patents were “abstract” and therefore, not directed to statutory subject matter under 35 U.S.C. § 101.  A brief synopsis of the two cases is presented below.

Innovention Toys, LLC v. MGA Entertainment, Inc. et al., 2010-1290 (Fed. Cir. March 21, 2011) (attached).  Innovention Toys sued MGA, Wal-Mart and Toys “R” Us for infringement of a patent on a “laser chess” game.  The district court granted summary judgment of infringement and of nonobviousness.  In so doing, the district court excluded two articles on an Atari and Amiga “laser chess” video games originally available in the late 1980s as not analogous art.  The district court also found, based upon MGA’s failure to present evidence of the level of ordinary skill in the art, that the level of ordinary skill in the art was that of a layperson.

On review, the Federal Circuit affirmed the finding of literal infringement.  However, the obviousness determination was vacated and remanded for further consideration.  In particular, the court questioned the district court’s finding that the laser chess articles were not analogous art given that they discussed a very similar game and the unique elements not present in anther prior art reference.  In view of this, the court reasoned that a no reasonable jury could find that the two laser chess articles were not analogous art.  The Federal Circuit also concluded that the district court’s determination that the skill of a layperson was that of one of ordinary skill in the art was incorrect.

The district court’s opinion was affirmed in part, vacated in part and remanded for further consideration of the laser chess articles and the level of skill in the art.

CLS International v. Alice Corp. Pty. Ltd., CV 07-974 (D.D.C. Mar. 9, 2011) (attached).  CLS sued Alice for a declaratory judgment of noninfringement of four patents (1, 2, 3, 4) generally directed to exchanging risk of financial derivatives.  The elements of each patent may be automated and implemented using a computer.  CLS moved for summary judgment that the patents could not be patent-eligible subject matter under 35 U.S.C. § 101.  After briefing, rebriefing in view of the Bilski decision and oral argument, the court concluded that the claims of these patents could not be patent-eligible subject matter and, therefore, found each patent invalid.

The district court discussed the Diamond, Flook and Deihr cases at length and concluded with a short discussion of Bilski and Reaserch Corp. culminating in an acknowledgement that the Federal Circuit has not defined “abstract” beyond “the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.”

The district court then set forth a very detailed opinion stating that the method claims of the patents failed to perform a transformation or claim a machine as envisioned by the “machine-or-transformation” test.  Alice argued that these claims require a computer performing the recited steps and were therefore proper subject matter.  The district court disagreed finding that “nominal recitation of a general-purpose computer in a method claim does not tie the claim to a particular machine or apparatus or save the claim from being found unpatentable under § 101.”  The district court asserted that a computer must be for a “particular” purpose before it can be statutory subject matter, citing to various district court opinions, and found that this computer was not.  The district court also found that these same claims covered an abstract idea because it would preempt the use of mental processes associated with the methods disclosed.

With regard to the computer system and product claims, the district court found that they were also directed to an abstract idea primarily because they would preempt the application of the abstract concept claimed by the patents.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, March 28, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.