Federal Circuit provides additional insight into § 101 eligibilityFebruary 10, 2021

On February 8, 2021, in cxLoyalty, Inc. v. Maritz Holdings Inc., the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) dismissed-in-part, affirmed-in-part, and reversed-in-part a decision by the Patent Trial and Appeal Board (“PTAB”) dealing with covered business method (“CBM”) review and subject matter eligibility under 35 U.S.C. § 101. This is a significant decision because it may help to shed light on the state of subject matter eligibility under § 101, which many patent practitioners have found to be murky in recent years.

Upon petition by cxLoyalty, Inc. (“cxLoyalty”), the PTAB instituted a CBM review of claims 1-15 of U.S. Patent No. 7,134,087 (“the ‘087 patent”), which is owned by Maritz Holdings Inc. (“Maritz”). After instituting the CBM review, the PTAB held that claims 1-15 were directed to patent-ineligible subject matter, but that substitute claims 16-23 were patent eligible. cxLoyalty appealed the PTAB’s decision regarding claims 16-23. Maritz cross-appealed the PTAB’s decision that the claims were eligible for CBM review, and also cross-appealed the PTAB’s ruling as to claims 1-15. The Federal Circuit dismissed the appeal related to whether the claims are eligible for CBM review because the Federal Circuit does not have authority to decide that issue. The Federal Circuit went on to affirm the PTAB’s decision as to original claims 1-15 and reverse as to substitute claims 16-23, holding that both sets of claims were directed to patent-ineligible subject matter.

The ‘087 patent is directed toward a computerized system and method for allowing a user to redeem reward points related to a customer loyalty program that eliminates the need for human intervention. The system includes a graphical user interface (“GUI”), which allows a user to communicate directly with a third-party vendor. The system facilitates communication between the GUI and the vendor via the use of an application programming interface (“API”). The Federal Circuit first evaluated the subject matter eligibility of claims 1-15 under the Alice/Mayo two-step framework in which the court first decides whether the claimed invention is directed toward an unpatentable law of nature, natural phenomenon, or abstract idea, and, if it is, then decides whether the claims contain an inventive concept that transforms the nature of the claim into a patent-eligible application. Under step 1 of the framework, the Federal Circuit agreed with the PTAB that claims 1-15 were directed to an abstract idea in part because representative claim 1 was directed to “transfers of information relating to a longstanding commercial practice”. The Federal Circuit further held that claims 1-15 did not meet the requirement of step 2, noting that the claimed invention does nothing more than apply an abstract idea using techniques that are well-understood, routine, and conventional. The court also noted that the claims are not directed to a technological solution to a technological problem. Thus, the Federal Circuit affirmed the PTAB’s determination that claims 1-15 were directed to ineligible subject matter.

However, the Federal Circuit reversed the PTAB’s decision regarding substitute claims 16-23. The Federal Circuit held claims 16-23 to also be directed to ineligible subject matter under § 101 for the same reasons as claim 1. Maritz contended that the limitation provided in representative claim 16 that the GUI “is able to convert vendor-related information into information formatted for the GUI, which GUI-formatted information may then be provided to the claimed participants” is a technological solution to a technological problem. However, the Federal Circuit disagreed. The court also noted that the expert testimony offered by Maritz, at best, “describes the claimed subject matter as not conventional only in the sense that the subject matter as a whole was novel.” The court further stated that “a patent claim is not eligible under § 101 merely because it recites novel subject matter.” The court went on to state that claims 16-23 “are directed to the application of longstanding commercial practices using well-understood, routine, and conventional activities.” The Federal Circuit also concluded that claim 22 was representative and was ineligible for the same reasons as claim 1.

This decision from the Federal Circuit represents additional case law concerning subject matter eligibility under § 101 relating to software/computerized inventions. Eligibility under § 101 is an area that has frustrated patent practitioners in recent years. Hopefully, this decision can help to clarify what does or does not render a patent claim eligible under § 101, especially in terms of claims related to software.

Joseph M. Hallman is a Patent Attorney in the Mechanical and Electrical Patent Practice Groups at McKee, Voorhees & Sease, PLC. For additional information please visit www.ipmvs.com or contact Joseph directly via email at joseph.hallman@ipmvs.com