Smart Systems Innovations, LLC (“SSI”) v. Chicago Transit Authority, et al. (“CTA”)

Docket No. 2016-1233

October 18, 2017

Brief summary: DC finding that SSI’s claims are ineligible under § 101 affirmed (e.g., not directed to “a new type of bankcard, turnstile, or database”).

Summary: SSI appealed DC finding that US 7,566,003; 7,568,617; 8,505,816; and 8,662,390 (“the Patents-in-Suit”, all belonging to the same family) relating to “open-payment fare systems in mass transit networks” (e.g., using debit/credit cards) are patent ineligible under § 101. The DC’s decision was reached on CTA’s motion on the pleadings after SSI filed suit. The FC reviews such motions under the law of the regional circuit (the Seventh Circuit) and was therefore reviewed de novo “taking the facts alleged in the complaint as true and drawing all reasonable inferences in favor of the plaintiff”. Issues “unique to patent law” (eligibility under § 101) is reviewed in light of FC precedent (Madey, FC 2002). Section 101 questions are issues of law reviewed de novo (Int. Ventures, FC 2017). The FC panel explained that under Alice (US 2014), “[a] patent claim falls outside § 101 where (1) it is ‘directed to’ a patent-ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2) [] if so, the particular elements of the claim, considered ‘both individually and ‘as an ordered combination,’’ do not add enough to ‘transform the nature of the claim’ into a patent-eligible application” (Elec. Power Grp. FC 2016). Representative claims of each of the Patents-in-Suit are presented in the opinion and reviewed under Alice step one “in their entirety to ascertain whether their character as a whole is directed to excluded subject matter” (Internet Patents, US 2015; McRO, FC 2016 (“whether the claims…focus on a specific means or method that improves the technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery; Enfish, FC 2016 (e.g., claims improving “the functioning of the computer itself” not abstract)). The DC summarized the claims, “[s]tripped of the technical jargon that broadly describes non-inventive elements (e.g., the ‘interfaces’ and ‘processing systems’)”, as covering “paying for a subway or bus ride with a credit card.” The DC stated that “recent case law has reiterated that whatever bells and whistles may be added, when reduced to their core, claims directed to the performance of certain financial transactions…must be categorized as involving abstract ideas.” The FC panel determined the claims “are directed to the collection, storage, and recognition of data” and not “a new type of bankcard, turnstile, or database”, and are therefore “directed to an abstract idea” (the opinion was corrected to remove “not”). Further, the FC panel explained, “merely limiting the field of use of the abstract idea to a particular…environment” (e.g., rapid transit) “does not render the claims any less abstract” (Affinity Labs, FC 2016). Regarding Alice step two, the FC panel also agreed that the claims “offer no inventive concept” (e.g., “use of a ‘processor’ and ‘memory’”) “that transforms them into patent-eligible subject matter”. The FC panel was not persuaded by SSI’s arguments that the claims “do not preempt any field or allegedly abstract idea” (Ariosa, FC 2015 (preemption is moot where claims are to patent ineligible subject matter)) and “satisfy the machine-or[-]-transformation test” (Ultramercial, FC 2014 (“patent must disclose the use of an apparatus specific to the claimed invention”)). Thus, the DC decision was affirmed. Judge Linn’s dissent argued “[t]he majority commits the same error as the [DC] in engaging in a reductionist exercise of ignoring the limitations of the claims in question” which the majority addressed by explaining the analysis considers what the claims are “directed to” and not the general “thrust” of the same.

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