Federal Circuit: Info Exchange Patent Fails Section 101, and Michigan Won the National Championship

The U.S. Court of Appeals for the Federal Circuit recently affirmed the Patent Trial and Appeal Board's (Board) rejection of a patent application directed to an "information exchange apparatus for determining an exchange value." The case is In re Brian McFadden. And while it offers a clean (unsurprising) application of the Alice framework, there are a couple of wrinkles worth discussing.

The Patent Application

McFadden filed patent application No. 15/891,363 in February 2018. The application describes an information exchange apparatus that compares multiple information distribution scenarios to determine how information should best be presented to a consumer. The "exchange value" at the heart of the invention is calculated from a "distribution difference" between a specified distribution and second distribution generated by an "incremental transformation" of the first.

The specification explains that this incremental transformation may be accomplished by adding or removing information items from a distribution stream while maintaining the distribution volume. In other words, the exchange value compares scenarios to figure out the best way to present information – for instance, based on the order of items in the distribution stream.

The examiner rejected claim 14 on two grounds: anticipation under Section 102 and ineligible subject matter under Section 101. The Board affirmed on both. Because the Federal Circuit agreed on ineligibility, it did not reach anticipation.

Alice Step One

At step one, the Board concluded that claim 14 "recites a method of organizing human activity, i.e., an abstract idea," and that "the claim does not include additional elements or a combination of elements that integrates the recited abstract idea into a practical application." The Federal Circuit agreed.

McFadden argued that the Board failed to properly construe certain claim limitations as means-plus-function limitations and that the Board disregarded the structure disclosed in the specification. The Federal Circuit was unpersuaded. The Board had explicitly credited the examiner's treatment of certain claim limitations as means-plus-function limitations and agreed that the only structure disclosed in the specification was "software running on generic computer elements."

McFadden pointed to alleged algorithmic structures associated with the means-plus-function limitations, but the court found that each of these "algorithms" merely describes computing differences between information distributions at a high level of generality. One such "algorithm" set forth four mathematical formulas for calculating distribution difference. The court held that these "general instructions for how a standard computer is to manipulate, transform, and compare data fare no better in the abstract idea analysis than generic software or computing components."

And then the kicker: Even if the Board misidentified the structures associated with the means-plus-function limitations, any error was harmless. That is notable because even under McFadden's preferred claim construction, the algorithms he relied on were themselves abstract. Getting the means-plus-function analysis "right" would not have changed the outcome. As the court put it, merely "reciting 'use of an abstract mathematical formula on any general purpose computer'" is abstract and does not constitute an improvement to technology.

Alice Step Two

At step two, McFadden raised only one discernible argument: that the algorithms disclosed in the application improve information exchange functioning and thus supply an inventive concept. He raised this argument, however, for the first time in his reply brief.

The Federal Circuit has been clear on this point: "Arguments raised for the first time in a reply brief are not properly before this court." And that was that.

But the court did not stop there. Even on the merits, the court found that McFadden's "broad and generic algorithms are merely 'an innovation in ineligible subject matter.'" Improving abstract and generic calculations on a standard computer, without more, is still abstract. The claim amounts to inputting information into a generic computer and running computations and transformations, which the Federal Circuit said is insufficient to supply an inventive concept.

Two Notes

This decision follows a familiar pattern, but two points are worth noting.

The interplay between means-plus-function claim construction and Section 101 is interesting, even though it didn't save the patent here. That outcome should depend on what's disclosed.

And don't waive your best arguments. The Federal Circuit declined to consider McFadden's step two argument because it was raised for the first time on reply. The court suggested the outcome may have been the same regardless – but it's a worthwhile reminder.

Michigan Basketball Won the National Championship

Momentum is one of those things people like to pretend isn't real until it very obviously is. You see it in sports, litigation or anywhere people start reacting instead of deciding. A couple breaks go one way, and it can feel like you're not really in control anymore. My 4-year-old son and I talk about "Big Mo" when we play soccer. (He typically thinks I'm talking about Elmo, so I score a few more quick goals to drive home my point.)

If the other team has the momentum, you need to stop it. That's the whole strategy.

What stood out about the Michigan Wolverines men's basketball run is how little they let that dynamic actually matter. There were stretches where it felt like things might flip. A quick 6-0, a bad turnover, a building starting to wake up. And then it just … stopped. Not with anything dramatic – but a normal possession, a defensive stop. It quickly and quietly kills what might've become a problem.

I'm a big believer in riding momentum. Michigan basically refused to participate in that, at least when it came to the opponent. (It is, admittedly, a little easier to shut down momentum when you continuously blow out the competition, but this was even true against UConn and its late-game surges.) But even before games got out of hand, the pattern was the same: Show no panic and shut down the snowball effect.

"Big Mo" would show up for the opponent, look around and then get swatted into the fifth row by a 7-foot-3 center with a 7-foot-7 wingspan. Credit to the Michigan players and coaches for not letting Big Mo play spoiler.

Michigan, meanwhile, was happy to ride its own momentum – it just wasn't sharing. Which, as it turns out, is a pretty good way to win six straight games in March and April.

As always, thanks for reading, and please email with any thoughts or comments, or just to say "Go Blue!"