e-Commerce Website Methods Are Patent Eligible

Federal Circuit's Analysis

The court reiterated the framework for distinguishing patent-ineligible claims from patent-eligible applications of those concepts, set forth in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), and Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014). The first step is to determine whether the claims are directed to a patent-ineligible abstract idea. If so, the next step is to consider the elements of each claim to determine whether the additional elements transform the nature of the claim into a patent-eligible application of that abstract idea. The Federal Circuit explained that this second step is the search for an “inventive concept” sufficient to ensure that the claim in practice amounts to “significantly more” than a patent on an ineligible concept.

The court noted that, in light of Alice, mere recitation of generic computer limitations does not make an otherwise ineligible claim patent-eligible. Surveying its own relevant precedent, including Ultramercial, Inc. v. Hulu, LLC, ___ F.3d ___, 2014 WL 5904902, at 1 (Fed. Cir. Nov. 14, 2014), the court recognized that, “in some instances, patent-ineligible abstract ideas are plainly identifiable and divisible from the generic computer limitations recited by the remainder of the claim.” The Federal Circuit said, “these [earlier] claims in substance were directed to nothing more than the performance of an abstract business practice on the Internet or using a conventional computer.” The court distinguished the claims at issue, finding that they did not recite a mathematical algorithm, nor a fundamental economic or longstanding commercial practice. “Although the claims address a business challenge (retaining website visitors), it is a challenge particular to the Internet.”

The court admitted that identifying the precise nature of the abstract idea was not simple. Appellant characterized it as “making two Web pages look the same,” “syndicated commerce on the computer using the Internet,” and “making two e-commerce Web pages look alike by using licensed trademarks, logos, color schemes and layouts.” And Judge Mayer, dissenting, characterized the patent as describing the entrepreneurial goal “that an online merchant's sales can be increased if two Web pages have the same 'look and feel.'” The court said that under any of these characterizations, the claims satisfy Mayo/Alice step two.

The Federal Circuit distinguished the claims at issue from its precedent, including Ultramercial. Although the claims in all cases involved a computer and the Internet, the court said that the solution provided by the claims here: “is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” The claims address the problem of retaining website visitors that, if adhering to conventional functioning of Internet hyperlink protocol, would be instantly transported away from a host's website after “clicking” on an advertisement and activating a hyperlink. To solve this problem, the claims call for an “outsource provider” having a Web server that directs the visitor to an automatically-generated hybrid Web page combining visual “look and feel” elements from the host website and product information from the third-party merchant's website related to the clicked advertisement.

The court discounted the dissent's suggestion that the “store within a store” concept, such as a warehouse store with a kiosk for selling a third-party partner's vacation packages, is the pre-Internet analog of the asserted claims. Per the court, that practice did not have to account for the ephemeral nature of an Internet “location” or the near-instantaneous transport between such locations made possible by standard Internet communication protocols, which introduces a problem that does not arise in the “brick and mortar” context.

The Federal Circuit cautioned that not all claims purporting to address Internet-centric challenges are patent-eligible. In Ultramercial, the court held that claims “directed to a specific method of advertising and content distribution that was previously unknown and never employed on the Internet before” were not patent-eligible, as merely reciting the abstract idea of “offering media content in exchange for viewing an advertisement,” along with “routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet.”

The court held that the claims at issue “are different enough in substance” because they specified how Internet interactions are manipulated to yield a desired result, one that overrides the conventional sequence of events ordinarily triggered by the click of a hyperlink.

The court further found that the claims do not attempt to preempt every application of the idea of increasing sales by making two Web pages look the same, but recite a specific way to automate the creation of a composite Web page by an “outsource provider” that incorporates elements from multiple sources in order to solve a problem faced by websites on the Internet. The court held that the claimed solution amounts to an inventive concept for resolving this particular Internet-centric problem, rendering the claims patent-eligible.

Judge Mayer's Dissent

Judge Mayer argued that the claims simply describe an abstract concept ' that an online merchant's sales can be increased if two Web pages have the same “look and feel” ' and apply that concept using a generic computer. Reviewing the specification, Judge Mayer argued that the patent fails to satisfy '101 because it describes a goal but does not disclose any new technology, or “inventive concept,” for achieving that goal.

Judge Mayer disagreed with the court's conclusion that the claims “do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.” Per Judge Mayer, the claims take a well-known and widely-applied business practice ' the idea of a “store within a store,” in widespread use before e-commerce ' and apply it using a generic computer and the Internet.

Judge Mayer argued that the solution provided by the claims here is not rooted in any new computer technology, but is an entrepreneurial solution addressing the problem of preventing online merchants from losing visitor traffic. Judge Mayer noted that, at the time of the claimed invention, the use of hyperlinks to divert consumers to particular Web pages was a well-understood and widely-used technique. Further, he found that the patent did not disclose any non-conventional technology for capturing the “look and feel” of a host website or for giving two Web pages a similar appearance. Judge Mayer concluded that the patent fell outside '101 because it simply “tak[es] existing information” ' the visual appearance of a host merchant's website ' and uses conventional technology to “organiz[e] this information into a new form.”

Judge Mayer disagreed with the majority's focus on the fact that the claims “recite a specific way to automate the creation of a composite web page '”, noting that the Supreme Court has rejected the idea that claims become patent eligible simply because they disclose a specific solution to a particular problem, citing Alice. He also rejected the idea that the claims' addressing an “Internet-centric problem” is sufficient to render them patent eligible, citing Alice and Mayo.

Judge Mayer noted that the patent potentially covers a large swath of Internet commerce. Per Judge Mayer, the claims are patent ineligible because their broad reach is disproportionate to their minimal technological disclosure.

Conclusion

Per the Federal Circuit, while not all Internet-centric claims are patent-eligible, those “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks” are patent-eligible. However, per the dissent, the specification must recite some technology-based inventive step in order for even such claims to satisfy '101. We expect further decisions will clarify this issue. In the meantime, drafters should include sufficient technological detail to avoid an argument like Judge Mayer's.

Clyde Shuman is a partner in the Litigation Group of Pearl Cohen Zedek Latzer Baratz LLP in New York City. He can be reached at [email protected].

On Dec. 5, 2014, a divided Federal Circuit panel held that claims directed to systems and methods of generating a composite Web page combining certain visual elements of a “host” website with content of a third-party merchant were “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks,” and, therefore, were patent-eligible under 35 U.S.C. '101. DDR Holdings, LLC v. Hotels.com, L.P., Docket No. 13-1505. However, the court cautioned that not all claims addressing Internet-centric challenges are patent-eligible. Further, Judge Mayer, dissenting, argued that the claims “simply describe an abstract concept ' that an online merchant's sales can be increased if two Web pages have the same 'look and feel' ' and apply that concept using a generic computer.” Accordingly, the patent-eligibility of Internet-centric claims remains unsettled.

Technology At Issue

Prior art systems allow third-party merchants to “lure the [host website's] visitor traffic away” from the host website because visitors would be taken to the third-party website when they clicked on an advertisement on the host site. The patents-in-suit provided the following solution: On activating a hyperlink on a host website ' e.g., an advertisement for a third-party merchant ' instead of taking the visitor to the merchant's website, the system generates and directs the visitor to a composite Web page displaying product information from the merchant, but retaining the host website's “look and feel.” This allows the host website to display a third-party's products, but retains its visitor traffic by displaying this product information from within a generated Web page that “gives the viewer of the page the impression that she is viewing pages served by the host” website.

Federal Circuit's Analysis

The court reiterated the framework for distinguishing patent-ineligible claims from patent-eligible applications of those concepts, set forth in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), and Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014). The first step is to determine whether the claims are directed to a patent-ineligible abstract idea. If so, the next step is to consider the elements of each claim to determine whether the additional elements transform the nature of the claim into a patent-eligible application of that abstract idea. The Federal Circuit explained that this second step is the search for an “inventive concept” sufficient to ensure that the claim in practice amounts to “significantly more” than a patent on an ineligible concept.

The court noted that, in light of Alice, mere recitation of generic computer limitations does not make an otherwise ineligible claim patent-eligible. Surveying its own relevant precedent, including Ultramercial, Inc. v. Hulu, LLC, ___ F.3d ___, 2014 WL 5904902, at 1 (Fed. Cir. Nov. 14, 2014), the court recognized that, “in some instances, patent-ineligible abstract ideas are plainly identifiable and divisible from the generic computer limitations recited by the remainder of the claim.” The Federal Circuit said, “these [earlier] claims in substance were directed to nothing more than the performance of an abstract business practice on the Internet or using a conventional computer.” The court distinguished the claims at issue, finding that they did not recite a mathematical algorithm, nor a fundamental economic or longstanding commercial practice. “Although the claims address a business challenge (retaining website visitors), it is a challenge particular to the Internet.”

The court admitted that identifying the precise nature of the abstract idea was not simple. Appellant characterized it as “making two Web pages look the same,” “syndicated commerce on the computer using the Internet,” and “making two e-commerce Web pages look alike by using licensed trademarks, logos, color schemes and layouts.” And Judge Mayer, dissenting, characterized the patent as describing the entrepreneurial goal “that an online merchant's sales can be increased if two Web pages have the same 'look and feel.'” The court said that under any of these characterizations, the claims satisfy Mayo/Alice step two.

The Federal Circuit distinguished the claims at issue from its precedent, including Ultramercial. Although the claims in all cases involved a computer and the Internet, the court said that the solution provided by the claims here: “is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” The claims address the problem of retaining website visitors that, if adhering to conventional functioning of Internet hyperlink protocol, would be instantly transported away from a host's website after “clicking” on an advertisement and activating a hyperlink. To solve this problem, the claims call for an “outsource provider” having a Web server that directs the visitor to an automatically-generated hybrid Web page combining visual “look and feel” elements from the host website and product information from the third-party merchant's website related to the clicked advertisement.

The court discounted the dissent's suggestion that the “store within a store” concept, such as a warehouse store with a kiosk for selling a third-party partner's vacation packages, is the pre-Internet analog of the asserted claims. Per the court, that practice did not have to account for the ephemeral nature of an Internet “location” or the near-instantaneous transport between such locations made possible by standard Internet communication protocols, which introduces a problem that does not arise in the “brick and mortar” context.

The Federal Circuit cautioned that not all claims purporting to address Internet-centric challenges are patent-eligible. In Ultramercial, the court held that claims “directed to a specific method of advertising and content distribution that was previously unknown and never employed on the Internet before” were not patent-eligible, as merely reciting the abstract idea of “offering media content in exchange for viewing an advertisement,” along with “routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet.”

The court held that the claims at issue “are different enough in substance” because they specified how Internet interactions are manipulated to yield a desired result, one that overrides the conventional sequence of events ordinarily triggered by the click of a hyperlink.

The court further found that the claims do not attempt to preempt every application of the idea of increasing sales by making two Web pages look the same, but recite a specific way to automate the creation of a composite Web page by an “outsource provider” that incorporates elements from multiple sources in order to solve a problem faced by websites on the Internet. The court held that the claimed solution amounts to an inventive concept for resolving this particular Internet-centric problem, rendering the claims patent-eligible.

Judge Mayer's Dissent

Judge Mayer argued that the claims simply describe an abstract concept ' that an online merchant's sales can be increased if two Web pages have the same “look and feel” ' and apply that concept using a generic computer. Reviewing the specification, Judge Mayer argued that the patent fails to satisfy '101 because it describes a goal but does not disclose any new technology, or “inventive concept,” for achieving that goal.

Judge Mayer disagreed with the court's conclusion that the claims “do not merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet.” Per Judge Mayer, the claims take a well-known and widely-applied business practice ' the idea of a “store within a store,” in widespread use before e-commerce ' and apply it using a generic computer and the Internet.

Judge Mayer argued that the solution provided by the claims here is not rooted in any new computer technology, but is an entrepreneurial solution addressing the problem of preventing online merchants from losing visitor traffic. Judge Mayer noted that, at the time of the claimed invention, the use of hyperlinks to divert consumers to particular Web pages was a well-understood and widely-used technique. Further, he found that the patent did not disclose any non-conventional technology for capturing the “look and feel” of a host website or for giving two Web pages a similar appearance. Judge Mayer concluded that the patent fell outside '101 because it simply “tak[es] existing information” ' the visual appearance of a host merchant's website ' and uses conventional technology to “organiz[e] this information into a new form.”

Judge Mayer disagreed with the majority's focus on the fact that the claims “recite a specific way to automate the creation of a composite web page '”, noting that the Supreme Court has rejected the idea that claims become patent eligible simply because they disclose a specific solution to a particular problem, citing Alice. He also rejected the idea that the claims' addressing an “Internet-centric problem” is sufficient to render them patent eligible, citing Alice and Mayo.

Judge Mayer noted that the patent potentially covers a large swath of Internet commerce. Per Judge Mayer, the claims are patent ineligible because their broad reach is disproportionate to their minimal technological disclosure.

Conclusion

Per the Federal Circuit, while not all Internet-centric claims are patent-eligible, those “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks” are patent-eligible. However, per the dissent, the specification must recite some technology-based inventive step in order for even such claims to satisfy '101. We expect further decisions will clarify this issue. In the meantime, drafters should include sufficient technological detail to avoid an argument like Judge Mayer's.

Clyde Shuman is a partner in the Litigation Group of Pearl Cohen Zedek Latzer Baratz LLP in New York City. He can be reached at [email protected].