DDR Holdings’ Ruling Provides Much Needed Guidance on Software and Business Method Patents

Alice Corp.: Are Software and Business Methods Still Patentable?
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April 2, 2015

By Nelson T. Rivera

2014’s landmark Supreme Court case, Alice Corp. v. CLS Bank International, made two things clear: that some software is eligible for patent protection and that some software isn’t. How to tell the difference between the two was a question left for another day. Fortunately, a new decision by the U.S. Court of Appeals for the Federal Circuit provides some welcome insight.

On December 5, 2014, the Federal Circuit in DDR Holdings, LLC v. Hotels.com, L.P., affirmed the district court’s decision that DDR Holdings’ system for generating composite webpages is patent eligible under Section 101. The patent claims at issue are directed to a system that combines visual elements of a host webpage with content from a third-party merchant’s webpage to create a hybrid webpage that preserves the “look and feel” of the host. This system allows websites to offer its customers products from outside sources, without forcing those customers to leave.

The Federal Circuit was required to apply the Supreme Court test set forth in Alice Corp. to determine whether, in a post-Alice Corp. world, the claims were directed to patent-eligible subject matter under § 101. This test clarifies that implementing an abstract idea on a generic computer does not make that abstract idea patent-eligible. To be patent-eligible under Alice Corp. (and the Federal Circuit’s post-Alice Corp. decision in Ultramercial, Inc. v. Hulu, LLC) an abstract idea must include an “inventive concept” that is embodied by something more than generic-computer implementation.

Applying these legal principles, the Federal Circuit upheld DDR’s patent as directed to patent-eligible subject matter. The court acknowledged that the claims addressed a business challenge but also recognized that it was a business challenge specific to the Internet, as opposed to the computerized performance of a business practice known prior to the ‘pre-Internet world’. The claims addressed the problem of retaining website visitors who would otherwise be instantly transported away from a host’s website after clicking on an advertisement link if adhering to the conventional functioning of Internet hyperlink protocols. Therefore, the claimed solution was necessarily rooted in computer technology to overcome a problem specifically arising in the realm of computer networks.

For patent practitioners, the DDR decision provides a much needed roadmap that may be used when faced with a 35 U.S.C. § 101 concern. For example, practitioners should carefully analyze their claims to ensure that:

  • The claimed solution is necessarily rooted in computer technology in order to overcome a problem “specifically arising in the realm of computer networks.”
  • The claims do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.
  • The claims specify interactions with the Internet or computer that are manipulated to yield a result that is different than the conventional result.
  • The claims do not preempt every application of the abstract idea and provide a specific way to solve the problem that specifically arises in the realm of computer networks.

Patent claims that meet the above-denoted factors are arguably patent eligible under 35 U.S.C. § 101, as articulated by the DDR decision, thus providing some hope to patent owners and applicants that software and business method claims are not dead.

LaRiviere Grubman frequently counsels clients with respect to the patentability of their software innovations. If you have questions about protecting your technology, contact us at (831)-649-8800 or patents@lgpatlaw.com.

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