CAFC Distinguishes ‘Results-Oriented’ Claims from Claims with ‘Specificity and Structure’ in Eligibility Analysis

The U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision today in Constellation Designs, LLC v. LG Electronics Inc., vacating in part and affirming in part a decision of the United States District Court for the Eastern District of Texas. The CAFC determined that the district court incorrectly found the “optimization claims” of Constellation Designs, LLC’s patents directed to eligible subject matter under 35 U.S.C. § 101, but correctly found the “constellation claims” eligible. The court agreed that the optimization claims lack an inventive concept sufficient to transform the abstract idea into a patent-eligible application, whereas the constellation claims are directed to a concrete implementation of a technological improvement to solve a technological problem.

Constellation Designs, LLC filed a lawsuit against LG Electronics Inc. for patent infringement of claims 17, 21, 24, and 28 of U.S. Patent Nos. 8,842,761; claim 5 of  10,693,700; claims 21 and 23 of 11,019,509; and claims 24 and 44 of 11,018,922. The patents concerned digital communication technology employing non-uniform constellations designed to deliver greater capacity than traditional, evenly spaced constellations at comparable signal-to-noise ratios. The asserted claims were divided into two groups, the optimization claims of ‘761 and ‘700 patents, which broadly claimed constellations shaped to maximize capacity as measured by parallel decode (PD) capacity, and the constellation claims of ‘509 and ‘922 patents, which recited specific non-uniform constellations. At the district court level, Constellation obtained summary judgment that all asserted claims were patent eligible, with the court reasoning that they addressed a technical problem with a technical solution. The case proceeded to a jury trial, where the jury determined that none of the asserted claims were invalid and that LG’s televisions infringed. As a result, the jury awarded Constellation $1,684,469.00 for past damages based on a per-television royalty of $6.75, and found that LG’s infringement was willful.

At Alice step one, the CAFC determined that the optimization claims are directed to a patent-ineligible concept. The court found that claim 17 of ‘761, which is representative of the optimization claims, recited a quadrature amplitude modulation (QAM) symbol constellation that is “optimized” for PD capacity to reach a desired outcome. The court noted that claim 17 does not specify the method for achieving such an “optimized” constellation and instead frames the distinguishing element in terms of a result. It additionally concluded that the claim is patent-ineligible as a broad, result-oriented claim that effectively encompasses every approach to reaching the recited result. The court cited the Supreme Court’s reasoning in O’Reilly v. Morse, drawing a parallel to the concern that an overly broad claim could preempt all methods for optimizing a constellation’s PD capacity.

The CAFC also held that the optimization claims do not recite an inventive concept at Alice step two. Constellation contended that its claims reflect a novel approach to boosting digital communication performance by using non-uniform constellations optimized according to PD capacity. It also found, however, that what Constellation identified as the inventive concept was indistinguishable from the abstract idea itself and that an inventive concept must be significantly more than the abstract idea. The court therefore vacated the district court’s summary judgment of eligibility for the optimization claims.

Turning to the constellation claims, the CAFC reached a different conclusion at Alice’s step one. It found that “instead of claiming the abstract idea of ‘optimizing’ a constellation for capacity without limiting the optimization to any meaningful process or any constraints, the constellation claims are directed to ‘specific constellations’ that the inventors developed using the techniques described in the specifications.” The court concluded that claim 21 of ‘509, which is representative of the constellation claims, represents a specific technological solution to a technological problem and thus provide “enough specificity and structure to satisfy Alice step one.” The court also noted that claim 21 applies the disclosed optimization process with defined parameters, requiring that constellation point locations be unequally spaced, that each point carry a unique label, and that at least two constellation points share the same location. “We conclude that this distinction between the result-oriented optimization claims and constellation claims makes all the difference,” wrote the CAFC.

The CAFC also addressed LG’s appeal of the district court’s denial of its motion for judgment as a matter of law of non-infringement. LG contended that a patent holder can use an industry standard to demonstrate infringement only when the standard satisfies every element of the asserted claim, not merely some of them. Moreover, the CAFC agreed with Constellation and the district court that infringement may be shown through a combination of standard-based evidence for certain claim elements and product-specific evidence for others.

Finally, the CAFC addressed LG’s appeal of the district court’s denial of its motion for judgment as a matter of law of no damages or denial of LG’s motion to exclude the testimony of Constellation’s damages expert. LG argued that the expert lacked a proper foundation for his built-in apportionment theory because the third-party licenses he relied upon were not adequately comparable. The CAFC agreed with the district court that the expert relied on sufficient facts to opine that the licenses were sufficiently comparable to rely on built-in apportionment, and the court affirmed the district court’s denial of LG’s motions regarding damages.