Written by Bridget Smith and Damien Howard

For the third time in two months, the Federal Circuit took on patent subject-matter eligibility in Amdocs (ISRAEL) Ltd. v. Openet Telecom, Inc. In a divided opinion, the Federal Circuit reversed the district court and held Amdocs patent on “a system designed to solve an accounting and billing problem faced by network providers” to be patent-eligible.

The majority applied the Alice/Mayo framework. This framework follows a two-step test that first determines whether “the claims at issue are directed to [an abstract idea]” (step one), and if they are, then determines whether there is an inventive concept that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [abstract idea] itself” (step two).

This case fits several important pieces in the subject-matter-eligibility puzzle. In its analysis of the state of the law, the majority endorsed the United States Patent and Trademark Office’s guidance to examiners in determining what qualifies as an abstract idea under step one. Further, the majority clarified the importance of claim construction in the eligibility analysis and provided ammunition for patent holders to argue that determining eligibility before claim construction may be premature.

Step One of the Alice/Mayo Framework

In Amdocs, the Federal Circuit reviewed claim 1 of U.S. Patent No. 7,631,065. Claim 1 recites:

A computer program product embodied on a computer readable storage medium for processing network accounting information comprising:

computer code for receiving from a first source a first network accounting record;

computer code for correlating the first network accounting record with accounting information available from a second source; and

computer code for using the accounting information with which the first network accounting record is correlated to enhance the first network accounting record.

The majority remarked that Supreme Court and Federal Circuit jurisprudence presently lacks a “single, succinct, usable definition or test” for identifying an abstract idea and noted that prior attempts to identify a test or definition have been unsuccessful “because they often end up using alternative but equally abstract terms or are overly narrow.”

Faced with no workable definition of “abstract idea,” district courts are forced analogize to “similar or parallel” cases. The USPTO’s guidance to examiners follows the same approach. Recent Subject Matter Eligibility Decisions (Enfish, LLC v. Microsoft Corp. and TLI Communications LLC v. A. V Automotive, LLC). In Amdocs, the majority condoned this analogizing approach and purported to take the same tack. Notably, however, the majority did not complete the step one analysis and did not determine the specific abstract idea because, in its view, the claim was eligible under step two of the Alice/Mayo framework. However, in rebutting the dissent’s criticism that the majority failed to identify the abstract idea, the majority stated that it had adopted the district court’s identification of the abstract idea of “correlating two network accounting records to enhance the first record” to reach this conclusion.

Step Two of the Alice/Mayo Framework

In analyzing claim 1 under step two of the Alice/Mayo framework, the majority relied heavily on an earlier claim construction, focusing on the term “enhance” in the last limitation. In a previous appeal to the Federal Circuit (Amdocs (Israel) Ltd. v. Openet Telecom, Inc.), the court construed the term “enhance” as meaning “to apply a number of field enhancements in a distributed fashion.” Further, the court noted and adopted the district court’s explanation of the term “distributed” as meaning “that the network usage records are processed close to their sources before being transmitted to a centralized manager,” and approved of reading these definitions into the term “enhance.”

Citing to portions of the patent that tout improvements in load distribution and reduced network congestion attributed to the “distributed enhancement,” the majority noted that the “distributed enhancement was a critical advancement over the prior art.” Further, relying on the construction of the term “enhance,” the majority held that claim 1 entailed an unconventional technological solution to a technological problem resulting in an improvement in computer functionality despite the claim only including generic computing components.

To support its decision to uphold the eligibility of claim 1 of the patent, the majority contrasted claim 1 to a pair of previous Federal Circuit decisions, Digitech Image Technologies, LLC v. Electronics for Imaging, Inc. and Content Extraction and Transmission LLC v. Wells Fargo Bank, Nat’l Ass’n, each holding claims patent ineligible. The claim in Digitech related to “’an improved device profile’ that describes spatial and color properties of a device within a digital image processing system.” The claim in Content Extraction related to extracting data from hard copy documents and storing the data in a memory. In both Digitech and Content Extraction, the court held that the claims involved processing data in a generic manner. Further, the court in Digitech held that the claim was not tied to a particular structure and would unfairly preempt related technologies. In distinguishing claim 1 from both Digitech and Content Extraction, the majority held that claim 1 is tied to a specific structure that is purposefully arranged in a distributed manner that achieves a technological solution to a technological problem specific to computer networks. Further, in contrast to the claim in Digitech, the majority held that the claim does not preempt all enhancement of data in a similar system. Each of these rationales contrasting other cases relied on reading the distributed concept into the term “enhance.”

After distinguishing claim 1 from the representative claim in Digitech and Content Extraction, the majority analogized claim 1 to the patent eligible claims of DDR Holdings, LLC v. Hotels.com, L.P. and BASCOM Global Internet Servs., Inc., v. AT&T Mobility LLC. The claims in DDR Holdings related to generating a composite web page that combines elements of a host website with elements of a third-party merchant. The claims in BASCOM related to filtering content at a remote ISP server. In likening claim 1 of the patent to DDR Holdings and BASCOM, the court stated that, although claim 1 involves some arguably conventional components, as in DDR Holdings and BASCOM, the claim at issue “also involves limitations that when considered individually and as an ordered combination recite an inventive concept through the system’s distributed architecture.”

Conclusion

With Amdocs, the Federal Circuit articulated what some practitioners already recognized—there is no clear rule for determining what constitutes an abstract idea. In recognizing the lack of such a rule, the Federal Circuit endorsed the USPTO’s guidance to examiners to analogize to similar concepts addressed by the courts.

Further, the Federal Circuit relied heavily on claim construction to find the representative claim eligible, demonstrating the potential importance of claim construction in performing an analysis of claims under the Alice/Mayo framework. Thus, this case may be of use to a patent owner defending against a pre-claim construction motion on subject-matter ineligibility. Conversely, a potential infringer of a patent should consider how claim construction arguments may affect strategy when attempting to invalidate a patent for this reason.