Reyna Concurs in CAFC Reversal of Ineligibility Holding, But Blasts Majority’s Approach to Alice

Judge Jimmie Reyna

The U.S. Court of Appeals for the Federal Circuit (CAFC) today reversed a district court decision that patent claims directed to an “authentication method” were ineligible as abstract under Section 101. The CAFC said that the claims at issue satisfied Alice step two because they “recite a specific improvement to a particular computer-implemented authentication technique” and were thus eligible for patenting. The opinion was authored by Judge Stoll and a concurring opinion was filed by Judge Reyna.

CosmoKey’s U.S. Patent No. 9,246,903 covers “a method of authenticating a user to a transaction at a terminal,” including using a mobile device to activate an authentication function. The specification explains that the patent improves on existing authentication methods by improving security and reducing complexity by eliminating the need for multi-factor manual authentication.

CosmoKey sued Duo Security, Inc. for patent infringement in the U.S. District Court for the District of Delaware in 2018, and Duo Security moved for judgment on the pleadings that all claims were patent ineligible because they were “directed to the abstract idea of authentication and do not recite any patent-eligible inventive concept.” The district court agreed at Alice step one that all of the asserted claims were abstract. Specifically, the district court said the claims broadly covered “the verification of identity to permit access to transactions.” And at step two, the court said “the [’]903 patent merely teaches generic computer functionality to perform the abstract concept of authentication; and it therefore fails Alice’s step two inquiry.”

As a refresher, the two-step inquiry under Alice v. CLS Bank is:

1. “Determine whether the claims at issue are directed to a patent-ineligible concept[,]” such as an abstract idea”; and 
2. “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.”

Straight to Step Two

In its analysis, the CAFC dodged the question of whether the claims were actually abstract, saying that “[w]e are not convinced that [the district court’s] broad characterization of the focus of the claimed advance is correct,” but concluding that “[w]e need not answer this question, however, because even if we accept the district court’s narrow characterization of the ’903 patent claims, the claims satisfy Alice step two.”

At step two, the CAFC said that “[c]ontrary to the district court’s conclusion, the ’903 patent discloses a technical solution to a security problem in networks and computers.” The district court’s conclusion that the specification admitted that “detection of activation of an authentication function’s activity and the activation by users of an authentication function within a pre-determined time relation were ‘well-understood and routine, conventional activities previously known in the authentication technology field” was “misplaced,” said the CAFC. The section of the specification on which the district court relied to reach that conclusion was misinterpreted; the prior art references mentioned in the relevant section did not teach the recited claim steps, but were instead included to demonstrated the claims’ advantages over them.

Duo attempted to argue that “using a second communication channel in a timing mechanism and an authentication function that is normally inactive, activated only preliminarily, and automatically deactivated” is itself abstract and cannot be used to prove an inventive concept. Duo here cited ChargePoint, Inc. v. SemaConnect, Inc., in which the CAFC court held “claims directed to network-controlled charging stations for electric vehicles abstract, including a dependent claim reciting a component ‘that can activate or deactivate charging at the connection.’” But the CAFC said that each case must be evaluated individually and distinguished Chargepoint:

While prior cases can be helpful in analyzing eligibility, whether particular claim limitations are abstract or, as an ordered combination, involve an inventive concept that transforms the claim into patent eligible subject matter, must be decided on a case-by-case basis in light of the particular claim limitations, patent specification, and invention at issue. Here, the claim limitations are more specific and recite an improved method for overcoming hacking by ensuring that the authentication function is normally inactive, activating only for a transaction, communicating the activation within a certain time window, and thereafter ensuring that the authentication function is automatically deactivated.

Reyna: Right Conclusion, Wrong Reasoning

In his concurring opinion, Judge Reyna disagreed with the majority’s analysis and application of the law. He found the claims directed to patent eligible subject matter at Alice step one for the same reasons the majority found them to be eligible at step two, and criticized the majority for essentially skipping step one and treating step two as if it operates independently. He wrote: “In sum, the majority skips step one of the Alice inquiry and bases its decision on what it claims is step two. I believe this approach is extraordinary and contrary to Supreme Court precedent. It turns the Alice inquiry on its head.”