Federal Circuit Affirms PTAB Decision Finding Information Exchange Patent Application Claim Ineligible Under Section 101

The U.S. Court of Appeals for the Federal Circuit (CAFC) issued a decision Tuesday in In re Brian McFadden affirming a decision of the United States Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board (PTAB). The CAFC determined that the PTAB correctly found claim 14 of Brian David McFadden’s patent application directed to ineligible subject matter under 35 U.S.C. § 101. The court agreed that “claim 14 does not contain an inventive concept sufficient to transform this abstract idea into a patent-eligible application.” Since the court affirmed the ineligibility determination, it concluded that it “need not reach anticipation” under 35 U.S.C. § 102.

McFadden, who represented himself pro se, filed patent application No. 15/891,363 in February 2018. The application, titled “System and Methods for Operating an Information Exchange,” was generally directed toward methods and systems designed to operate, regulate, and manage an information exchange. The specification stated that an information exchange may take the form of a social network, advertising network, digest, or any service that enables the transmission of information from producers to consumers. Claim 14 recited an information exchange apparatus for determining an exchange value, including “a first distribution of information items, a specific point, a means for generating a second distribution using the first distribution and the specific point, and a means for computing a distribution difference between the two distributions.” During prosecution, the examiner rejected claim 14 as both anticipated under Section 102 by Mr. McFadden’s previous patent application publication No. 2015/0088879 and directed to ineligible subject matter under Section 101.

At Alice step one, the PTAB determined that claim 14 “recites a method of organizing human activity, i.e., an abstract idea,” and that “the claim does not include additional elements or a combination of elements that integrates the recited abstract idea into a practical application.” McFadden argued that the claim was not directed toward an abstract idea but rather a specialized system. The Federal Circuit agreed with the PTAB, finding that “the limitations of claim 14, at base, recite generating one distribution of information items, then comparing it to a previous distribution of information items, to determine how information should be presented to a consumer.” The court noted that the specification stated an information item “is to be understood broadly as encompassing embodiments such as ‘message,’ ‘audio clip,’ ‘news’ and ‘advertisement.”’ The Federal Circuit affirmed that the claim was directed to advertising, sales, and marketing activities, or at least closely related to organizing and presenting information. The court cited its own precedent confirming that claims describing broad steps of gathering, evaluating, and displaying information, using only standard functions of generic computer components, are considered directed to abstract ideas.

The Federal Circuit also held that the claim was not directed toward a specialized computer system or an improvement in technology. The PTAB found that “the ‘363 application only recited generic computer systems in the specification” and that claim 14 “does not claim any improvements in technology, instead only claiming mathematical operations and determinations implemented via computer.” The court concluded that “merely ‘reciting use of an abstract mathematical formula on any general purpose computer,’ or ‘a purely conventional computer implementation of a mathematical formula,’ is abstract and does not constitute an improvement to technology.”

McFadden argued that the PTAB could not have made a meaningful finding on patent eligibility because it failed to properly construe certain limitations of claim 14 as means-plus-function limitations and disregarded the structure disclosed in the specification. The Federal Circuit disagreed, explaining that the PTAB explicitly credited the examiner’s treatment of certain claim limitations as means-plus-function limitations and correctly concluded that the only structure disclosed in the specification supporting these terms was “software running on generic computer elements.” The court noted that “’nothing in the Specification or elsewhere of record,’ compelled a contrary conclusion,” and “Mr. McFadden did not direct the Board to any other structures potentially disclosed that could controvert this finding.”

Furthermore, McFadden also alleged that the PTAB erred by identifying a combination of generic computing elements as the structure for the means-plus-function limitations rather than algorithms described in the specification. The Federal Circuit was unpersuaded, finding that “each of these ‘algorithms’ merely describes computing differences between information distributions at a high level of generality.” For instance, “one such ‘algorithm’ sets forth four mathematical formulas for calculating distribution difference.” The court concluded that “[t]hese general instructions for how a standard computer is to manipulate, transform, and compare data fare no better in the abstract idea analysis than generic software or computing components.” Even if the PTAB misidentified structures in the specification, the court found “any error was harmless.”

At Alice step two, McFadden argued that the algorithms disclosed in the application improved information-exchange functionality and thus provided an inventive concept. The Federal Circuit found that this argument was “only raised on reply” and was therefore “not properly before this court.” Even on the merits, the court concluded that McFadden’s broad and generic algorithms amounted to nothing more than an advance within ineligible subject matter. It explained that enhancing abstract, general calculations on a standard computer, without any additional hardware, remains abstract, and that the claim essentially involved entering information into a generic computer and performing computations and transformations on that data. The court noted that “our precedent is clear that computer-mediated implementation of routine or conventional activity is not enough to provide an inventive concept.” The Federal Circuit therefore affirmed the PTAB’s rejection of claim 14 on Section 101 grounds.