Clients in the software space now have stronger arguments for subject matter eligibility, following the Federal Circuit decision in Enfish LLC v. Microsoft Corp. (May 12, 2016).  The decision also touches on novelty, indefiniteness, and non-infringement, but the focus is on § 101, where the District Court is overturned on invalidity under the “abstractness” exception of Alice Corp. v. CLS Bank Int'l.

Abstractness has been a hot-button issue since 2014, when the Alice Court broadly implemented a two-step test initially directed to claims involving natural phenomena (specifically, the efficacy of drug administration in human subjects), in Mayo Collaborative Services v. Prometheus Laboratories, Inc.  (2012).  Under the Alice/Mayo​ test, the claims are first examined to determine whether they are directed to an “abstract idea” such as a law of nature, or other patent-ineligible concept.  If so, the claims are then examined for an “inventive concept” that can transform the abstract idea into patentable subject matter.

The first “abstractness” prong has drawn substantial attention, because (as the Alice Court itself states) “[a]t some level, all inventions embody, use, reflect, rest upon or apply laws of nature, natural phenomena, or abstract ideas.”  Hardware-based improvements have had success at “transforming” such abstract ideas into patentable subject matter under the second step of the analysis, but this has been much more difficult in the software arena, where patents are regularly found ineligible despite detailed novel and non-obvious recitations in the claims.

In Enfish, the Federal Circuit takes a step back from this position, unequivocally stating that claims do not fail the test for abstractness merely for invoking software per se (“Software can make non-abstract improvements to computer technology just as hardware improvements can”).   The Federal Circuit also holds (with understated irony) that the District Court analysis was too abstract to show abstractness under Alice, and would all but ensure that the exception swallowed the rule under § 101 (“However, describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.”).

Based on web archives dating back to the 1990s, the name “Enfish” is derived from the different ways people can work with computer-based information; specifically, “ENtering, FInding, and SHaring.”  In November 2005, Enfish announced that it would no longer sell its own products, but would instead license patents.  Two of these patents (US 6,151,604 and US 6,163,775) are directed to a database model using a self-referential table, the subject of the Enfish decision.

Following the Alice opinion by less than four months, the District Court (C.D. California) found the Enfish claims were directed to the abstract idea of organizing memory in a logical table, holding “for millennia, humans have used tables to store information,” and “[a] patent on the pervasive concept of tables would preempt too much future inventive activity.”  The District Court also found that the database table was “a logical data structure, as opposed to a physical data structure,” and step two of the test failed because “[e]fficient location of data is an unremarkable feature of a data storage system, especially in the computing age.”  Summary judgment was then granted on invalidity.

This type of opinion has been a bugaboo in the software industry, where improvements in data storage efficiency are not considered “unremarkable” or routine; instead, they drive economic growth, just as surely as improvements to the conversion efficiency of a solar cell, or in the thrust-to-weight ratio of a rocket motor.   Alice-based decisions like this nonetheless threaten to swallow up entire segments of the industry, by drawing arbitrary distinctions between physical and software-based data structures under the newly expanded § 101 exception.

The Federal Circuit’s holding in Enfish limits on this practice.  While nominally directed to database structures, Enfish also invokes broader principles of patentability that should interest anyone in the software and computing industries, and it addresses the most commonly-invoked “blanket” grounds for invalidity directly on its face: “Moreover, we are not persuaded that the invention’s ability to run on a general-purpose computer dooms the claims.”

Departing substantially from the District Court analysis, the first seven pages of the Enfish slip opinion are dedicated to advantages of the self-referential table, including faster searching, more effective storage, easer setup, and on-the-fly configuration.  The Federal Circuit then overturns the District Court on patentability, holding the claims “are directed to a specific improvement to the way computers operate, embodied in the self-referential table.”

Of particular note, the Enfish decision is made at the first step of the Alice analysis, rather than requiring “something more” to transform an allegedly abstract idea into patentable subject matter at step two.  The Federal Circuit does not read Alice “to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two,” nor does the Federal Circuit “think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis.”

Instead, the Federal Circuit holds “the claims are not simply directed to any form of storing tabular data” (as suggested by the District Court), but “are specifically directed to a self-referential table for a computer database.”  The Federal Circuit also distinguishes from the types of fundamental economic activity at issue in Alice, based on the plain language of the claims.  Then, once a specific, patentable solution is identified, that is all that is required under § 101, whether the solution can be implemented on a general-purpose computer notwithstanding:

. . . we are not faced with a situation where general-purpose computer components are added post-hoc to a fundamental economic practice or mathematical equation. Rather, the claims are directed to a specific implementation of a solution to a problem in the software arts.  Accordingly, we find the claims at issue are not directed to an abstract idea.

Enfish will not be the last word on subject matter eligibility, and one Federal Circuit case does not define a new status quo.   But it is evidence of a high water mark, at least for software claims.  In this sense Enfish tracks the USPTO’s May 2016 update on Subject Matter Eligibility, which also cautions against abstracting claims at too high a level, requires a specific, judicially recognized exception to be identified, tethered to the claim language (see Dorsey e-Update, U.S. Patent Office Releases Further Guidance on Patent Subject Matter Eligibility).  On a more concrete level, Enfish provides a long-awaited authoritative holding that both hardware and software structures are in fact patent eligible under § 101, and it reminds everyone from the Patent Office to the District Courts to tread carefully in construing this new exclusionary principle, “lest it swallow all of patent law.”

Thanks also to Bridget Hayden, partner, Minneapolis Office.