ELECTRONIC

& COMPUTER

LAW

COMMITTEE

P.1ECLC Newsletter

N E W S & E V E N T S

Chair’s NotesThank you for your interest and involvement in the Electronic and Computer Law Committee (ECLC) of the AIPLA! These are interesting and challenging times for practitioners in the electronic and computer arts and our committee has been active trying to keep up!

Since the Alice decision was handed down in June, 2014, we have had to reconsider how we draft and litigate patents and how we counsel our clients. Members of our committee have been trying to make sense of the changes. It has not been easy! As chair of the ECLC, I have been involved in a 101 Task Force within the AIPLA exploring what legislative options there may be to address the Alice decision. Of course, this a long-range and long-shot option. Meanwhile, the ECLC has formed a 101 Subcommittee (headed by Nandu Talwalkar, Manav Das, Jason Vick, and Richard Gollhofer) that is coordinating with the Patent Law Committee of the AIPLA to provide feedback to the USPTO regarding its 101 Guidelines. Going forward, the 101 subcommittee also intends to interface with the USPTO on issues related to subject matter eligibility.

We also hope that you can find time to attend the AIPLA Mid-Winter Meeting at the end of January, 2016. We will be holding a meeting to discuss current and planned activities of the committee and opportunities for others to get involved.

By way of example, recent activities of the ECLC having included the annual Partnering in Patents program held on October 21, 2015 at the USPTO. This year, we teamed with the Electronic and Computer Technology Centers of the USPTO to provide a Focus Session on “enhanced patent quality” and teamed with the USPTO’s Software Partnership to provide a program including an update on USPTO initiatives and joint USPTO/bar presentations on patent eligible subject matter and functional claiming. On October 22, the leadership of the ECLC held its annual Brown Bag Luncheon with the leadership of the Electronic

and Computer Technology Centers of the USPTO to exchange ideas and anecdotes about improving the examination process, particularly with respect to examination for patent eligibility under the new 101 Guidelines. If you would like to attend this luncheon in the future, get involved as a subcommittee chair! Also on October 22, the ECLC teamed with the IP in Japan Committee to hold a Round Table discussion on how to maneuver the patentable subject matter guidelines for computer implemented inventions in the US, Japan, China, and the EPO.

Separately, the ECLC is in the early planning stages of the 2016 Patent Law Summit tentatively scheduled for June, 2016 in Portland, Oregon. Our committee has also prepared a first draft of a “101 White Paper” that we plan to revisit soon. The “101 White Paper” is intended to provide the underlying rationale for maintaining strong patent protection for software despite strong countercurrents and outspoken adversaries. Our committee has also been asked to provide feedback on recent cases of interest, such as the ClearCorrect v. ITC case.

As you can see, there are many opportunities for volunteers! Please get involved. We could use your help!

Written by Members of the Electronic and Computer Law Committee of the American Intellectual Property Law Association

Chair: Mike Dunnam

Vice Chair: John Salazar

Board Liaison: Nick Godici

Contribute to the ECLC Newsletter!

Please send submissions to Mike Dunnam MDunnam@bakerlaw,

Francisco Castro francisco.castro.@arentfox.com, or

Per Larsen PHLarsen@hollandhart.com

J A N U A R Y 2 0 1 6

ContentsNews & Events

Chair’s Notes Section 101 Sub-Committee P.1

The Aftermath of the Alice Storm P.2

Pulling Out all the Stops – Patenting Computer Implemented

Inventions in Canada Despite Unprecedented Obstacles P.8

Akamai Technologies, Inc. v. Limelight Networks, Inc.:

Federal Circuit Defines Liability For “Joint Enterprises” or

“Conditional Participation” P.11

Trending P.12

SECTION 101 SUB-COMMITTEE The Electrical and Computer Law Committee is happy to announce the formation of the Section 101 Sub-committee. The Section 101 Sub-Committee intends to interface with the PTO on issues related to subject matter eligibility. Current projects include providing panelists for USPTO and AIPLA programs relating to subject matter eligibility, participating in the October 21 Software Partnership/Partnering in Patents meeting, and assisting the AIPLA in formulating its comments on the July 2015 Update to the Subject Matter Eligibility Examination Guidelines. The Sub-Committee is seeking new members. If you would like to participate, please contact Co-Chair Nandu Talwalkar at talwalkar@bmtpatent.com.

P.2ECLC Newsletter

The Aftermath of the Alice Storm

Robert Sachs1

On its face the Supreme Court’s opinion in Alice Corp. v. CLS Bank Int’l was relatively conservative, cautioning courts to “tread carefully” before invalidating patents, and emphasizing that the primary concern was to avoid preemption of “the building blocks of human ingenuity.”2 The Court specifically avoided any suggestion that software or business methods were presumptively invalid.3 But those concerns seem to have gone unheeded. The Court’s attempt to sidestep the tricky problem of defining the boundary of an exception to patent eligibility—“we need not labor to delimit the precise contours of the ‘abstract ideas category in this case’”4—has turned into the very mechanism that is quickly “swallow[ing] all of patent law.”5 The federal courts, the Patent Trial and Appeal Board, and the USPTO are using the very lack of a definition to liberally expand the contours of abstract ideas to cover everything from computer animation to database architecture to digital photograph management to safety systems for automobiles and even thermometers.

Let’s look at the numbers to present an accurate picture of the implications of the Supreme Court’s decision. My analysis is a data-driven attempt to assess the implications of Alice one year out. It is with an understanding of how the Supreme Court’s decision is actually playing out in the theater of innovation that we can better project and position ourselves for what the future holds.

Alice at Court

As of November 30, 2015 there have been 185 Federal Circuit and district court decisions on § 101 grounds, with 135 decisions (73%) invalidating the patents at issue in whole or in part. In terms of patents and claims, 68.2% of challenged patents have been found invalid, along with 60.2% of the challenged claims.

The success rate of motions on the pleadings (including motions to dismiss and judgments on the pleadings) is extremely impressive: 72.2% of defense motions granted (invalidating 66.4% of the challenged patents; not shown in table). There has never been a Supreme Court ruling that the presumption of validity does not apply to § 101—only the Court’s use of the originally metaphorical notion that eligibility is a “threshold” condition. Given that, and the general rule that to survive a motion to dismiss the patentee (historically) need only show that there was a plausible basis that the complaint states a cause of action—there is a plausible basis that the patent claim is not directed to an abstract idea, law of nature, or natural phenomena. One would be forgiven for thinking, as did former Chief Judge Rader in Ultramercial, LLC v. Hulu, LLC, that a “Rule 12(b)(6) dismissal for lack of eligible subject matter will be the exception, not the rule.”6 Apparently the rules change in the middle of the game.

Turning specifically to the Federal Circuit, the numbers are stark:

Of the 19 decisions, 14 are in software or e-commerce and only four are in biotech. The one case where the court held in favor of the patentee, DDR Holdings, LLC v. Hotels.com, appeared to offer a narrow avenue for patentees to avoid invalidation.7 Of 157 District Court decisions since DDR Holding was decided, only 11 district court opinions (7%) have relied upon it to find patent eligibility, with 54 court opinions distinguishing DDR Holdings as inapplicable. Even more interesting is the fact that in DDR Holdings the Federal Circuit essentially held that creating a website that copies the look and feel of another website is patent eligible. In Silicon Valley, that’s called phishing, and it’s not a technology in which most reputable companies invest.

While patent trolls asserting business method patents get the most attention, it turns out that business method patents make up only 24% of patents challenged and invalidated since Alice, being invalided 70.3% of the time. Instead, software patent account for 47% of the challenged patents, with 45% of such patents being invalidated.

TOTALTOTAL INVALID

UNDER §101% INVALID

Fed. Ct. Decisions 185 135 73.0%

Federal Circuit 19 18 94.7%

District Courts 166 117 70.5%

Patents 377 257 68.2%

Claims 11,333 6,937 61.2%

Motions on Pleadings 97 70 72.2%

PTAB CBM Institutions 104 88 84.6%

PTAB CBM Final 35 35 100.0%

TOTALTOTAL INVALID

UNDER §101% INVALID

Fed. Circuit Decisions 19 18 94.7%

Patents 23 22 95.7%

Claims 546 519 95.1%

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The remaining patents are distributed across a wide range of technologies, as shown here:

Patents Challenged in Federal Courts, by Class (n=377)

Business Methods

Data Processing

Communications

Databases

User Interfaces

Information Security

Measuring and Testing

Data Storage

Telecommunications

Molecular Biology and Microbiology

Interactive Video

Amusement Devices

Image Analysis

Control Systems

Printing

Error Detection

Drug and Therapeutics

Surgery

Software Development

Vehicle Navigation

Simulation and Modeling

Education and Demonstration

Computer Aided Design

Television

Computer Graphics

Speech and Language

Glass Manufacturing

Metal Working

Wells

Illumination

Artificial Intelligence

Digital Communications

Mining and Excavation

Immunology

Prosthesis

0% 10% 20% 30% 40% 50%

Invalid

Not Invalid

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Alice at the OfficeAlice is similarly impacting practitioners before the USPTO. In December 2014 the Office issued its Interim Guidance on Patent Subject Matter Eligibility, providing guidance to patent examiners as to how to apply the Alice, Mayo, and Myriad decisions along with various Federal Circuit decisions, to claims during prosecution.8 Importantly, the Guidance noted that “the Supreme Court did not create a per se excluded category of subject matter, such as software or business methods, nor did it impose any special requirements for eligibility of software or business methods,”9 and it reminded examiners that “[c]ourts tread carefully in scrutinizing such claims because at some level all inventions embody, use, reflect, rest upon, or apply a law of nature, natural phenomenon, or abstract idea.”10 Alas, most patent examiners are acting as if the patent applications before them are the exceptions to these cautionary instructions.

With the assistance of Patent Advisor, I analyzed a data set including about 1,000,000 office actions notices of allowance sampled between 2012 and September 2015. Each office action was coded as to whether it included rejections under §§ 101, 102 and 103. The following chart shows the percentage of actions in four different period that received a § 101 rejection, considering both rejections issued and notices of allowances. The periods are Before Alice, the Preliminary Guidance period, after Alice and until December 14, 2014, the Interim Guidance period from December 15, 2014 to July 30, 2015, and the July Update period after July 30, 2015. The data is aggregated according to the USPTO’s Tech Centers:

Overall, data shows that prior to Alice, subject matter rejections were mainly in the computer related Technology Centers (2100, 2400). After Alice, the subject matter rejection rates jumped dramatically

in TC 3600 which includes business methods, and in TC 1600 covering biotech. Other Technology Centers such as semiconductors and mechanical engineering had essentially constant and even falling Section 101 rejection rates. But that’s not because there are no software patents in these Technology Centers: you find plenty of software patents in these groups. Rather, my view is that it is because examiners in these groups treat software patents as they do any other technology.

The rejection rates in TC 3600 in the 30% range are higher than any other group, but they also mask what’s really going on, since TC 3600 covers more than business methods. TC 3600 has nine work groups:

In TC 3600 most of the work groups handle good old-fashioned machines and processes, such as transportation (3610), structures like chairs and ladders (3630), airplanes, agriculture, and weapons (3640), wells and earth moving equipment (3670), etc. Three work groups handle e-commerce applications: specifically, 3620, 3680 and 3690. Here we see that these groups have significantly higher § 101 rejections than the rest of TC 3600, between 80% and 97%. But let’s drill down further.

Each of work groups 3620, 3680 and 3690 have between five and 10 individual art units that handle specific types of e-commerce technologies, but they are not all under the same work group. For example business related cryptography is handed by both art units 3621 and 3685;

healthcare and insurance is handled by art units 3626 and 3686; operations research is handled in 3623, 3624, 3682 and 3684. If we consolidate the data according to technology type and then

BEFORE ALICE PRELIMINARY INTERIM UPDATE

1600 Biotech 10% 15% 14% 13%

1700 Chem. Eng. 2% 2% 2% 2%

2100 Comp. Arch. 20% 15% 16% 14%

2400 Networks 14% 11% 14% 14%

2600 Commun. 10% 7% 9% 9%

2800 Semicon. 3% 3% 4% 3%

3600 Trans. & Ecomm. 11% 28% 30% 28%

3700 Mech. Eng. 4% 7% 8% 8%

BEFORE ALICE PRELIMINARY INTERIM UPDATE

3610 Transport. 1% 1% 2% 1%

3620 Ecommerce 34% 90% 88% 90%

3630 Structures 2% 1% 1% 1%

3640 Aero & Agri. 6% 6% 8% 9%

3650 Materials 3% 1% 2% 2%

3660 Veh. Control 15% 19% 14% 13%

3670 Wells, Construct. 2% 1% 2% 2%

3680 Ecommerce 29% 85% 82% 87%

3690 Ecommerce 30% 91% 94% 97%

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look at rates of § 101 rejections we get the above.

What’s going on? In the pre-Alice period after Bilski11 in 2010, the § 101 rejections were running between 11% and 50%. Not great but tolerable since these were mostly formal and were overcome with amendments adding hardware elements (“processor,” “memory”) to method claims or inserting “non-transitory” into Beauregard claims.

But after Alice, everything changed and § 101 rejections started issuing like paper money in a hyperinflation economy. If your perception as a patent prosecutor was that the every application was getting rejected under § 101, this explains your pain.

Patents issued in the business methods art units typically are classified in Class 705 for “Data Processing.” I identified all patents with a primary classification in Class 705 between January, 2011 and June 2015 on a month by month basis, to identify year over year trends. The black line separates pre-Alice from post-Alice data.

This table shows a precipitous decline in the number of business method patents issued following Alice, especially year over year. The lag between the June, 2014 Alice decision and the drop off in October 2014 is an artifact of the delay between allowance and issuance, as well as the USPTO’s unprecedented decision to withdraw an unknown number of applications for which the issue fee

had already been paid, and issue § 101 rejections. It’s an interesting artifact, as well, that the number of Class 705 patents issued peaked in the month after Alice: you have to remember that these patents were allowed at least three months, and as much as a year, before the Alice decision; it just took a long time to actually get printed as a patent.

Next, we’ll consider abandonment rates, on a comparative basis, looking at the percentages of applications that were ultimately abandoned in relationship to whether or not they received a § 101 rejection. We’ll compare the data from January 2012 to July 2014. Again, consider the entire patent corps:

Here we see that of the applications that were abandoned during the respective sample periods, the vast majority did not have a prior § 101 rejection. Only in TC 3600 did the majority shift after Alice with 51.83% applications that received § 101 rejections in July 2014

Business Crypto 41% 42% 39% 62% 71% 64% 74%

Business Processing 41% 48% 50% 94% 96% 92% 97%

Cost/Price, Reservations 32% 38% 33% 82% 71% 84% 94%

E-Shopping 35% 11% 30% 95% 87% 86% 83%

Finance & Banking 39% 22% 21% 91% 92% 94% 97%

Health Care 19% 30% 24% 86% 84% 89% 96%

Incentive Programs 33% 38% 24% 94% 92% 90% 94%

Operations Research 38% 37% 31% 94% 93% 95% 92%

POS, Inventory, Acctg. 28% 13% 15% 80% 75% 66% 60%

2012 2013 2014 2015

BEFORE ALICE PRELIMINARY INTERIM UPDATE

Year of Issuance Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

2011 11 15 13 9 11 9 13 29 22 18 31 23 204

2012 25 29 25 31 44 47 65 76 89 121 89 116 757

2013 129 154 147 178 146 174 198 202 211 276 253 309 2,377

2014 254 248 253 345 303 309 347 228 127 78 53 104 2,649

2015 73 56 88 71 81 369

JAN. 2012 JULY 2014

§ 101 REJECTION § 101 REJECTION

TECH CENTER YES NO YES NO

1600 Bio, Genes & O. Chem 8.8% 91.2% 20.7% 79.3%

1700 Chemical, Material. Eng. 3.3% 96.7% 2.0% 98.0%

2100 Computer, Architecture 25.6% 74.4% 20.8% 79.3%

2400 Networks, Video 22.8% 77.2% 13.0% 87.0%

2600 Communications 13.2% 86.8% 9.4% 90.6%

2800 Semicon., Elect., Opt. 4.2% 95.8% 4.2% 95.8%

3600 Trans, Const., Biz Methods 16.7% 83.3% 51.8% 48.2%

3700 Mechanical Eng. & Manuf. 6.2% 93.8% 5.8% 94.2%

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being subsequently abandoned by May 31, 2015. Again, let's drill down into the business method art units in TC 3600:

First, prior to Alice, abandonments in the business method units appeared to result more frequently from other than § 101 rejections, typically prior art rejections. This is shown by the fact that the Jan. 2012 “No” column (no prior 101 rejection) is greater than the Jan. 2012 “Yes” column. Then after Alice, there is a huge shift with the vast majority of applications that were abandoned having § 101 rejections, as shown by the July, 2014 “Yes” column. The vast majority of abandonments, upwards of 90%, followed a § 101 rejection. That’s applicants essentially giving up over what only a few years ago was a relatively minor hurdle. That’s what happens when you change the rules in the middle of the game. Second, there is also significant differential behavior in the business method areas as compared to the rest of the technology centers after Alice.

Alice at the BoardThe Patent Trial and Appeal Board has been even more hostile to software and business methods patents under the Covered Business Method review program (data through 11/30/2015).

Covered Business Method review is available for patents that claim “a method, apparatus, or operation used in the practice, administration, or management of a financial product or service.”12 The Board takes a very broad view of what constitutes a financial

product or service: if the patent specification happens to mention that the invention may be used in a financial context such as banking, finance, shopping or the like, then that's sufficient. The Board has found CBM standing in about 53% of petitions, and instituted trial in 84.6% of petitions asserting § 101 invalidity. Once a CBM trial has been instituted, the odds are heavily in the petitioner’s favor: of the 35 final CBM decisions addressing § 101, the Board has found for the petitioner 100% of the time.

Finally, we look at the Board's activity in handling ex parte appeals from § 101 rejections for the period of January 1, 2015 to August 30, 2015:

�� 98 Ex parte decisions on § 101, with 35 in TC 3600.

�� 86 affirmances overall, 13 in TC 3600

�� 12 reversals on § 101, both in TC 3600

�� 26 decisions with new grounds of rejection for § 101

Following suit with how the Board is handling CBMs, they are also heavily supporting examiners in affirming § 101 rejections. More disconcerting is the trend of new grounds of rejection under § 101. In this situation, the applicant has appealed, for example, a § 103 rejection. The Board can reverse the examiner on that rejection, but then sua sponte reject all of the claims under § 101. What are the odds that the examiner will ever allow the case? Close to zero. What are the odds that an appeal back to the Board on the examiner's next § 101 rejection will be reversed? If the Board's 100% rate of affirming its CBM institution decisions on § 101 is any indication, then you know the answer.

ConclusionsLooking at the overall context of the Alice decision, it's my view that Supreme Court did not intend this landslide effect. While they were certainly aware of the concerns over patent trolls and bad patents, they framed their decision not as a broadside against these perceived evils, but as simple extension of Bilski and the question of whether computer implementation of an abstract idea imparts eligibility. At oral argument, the members of the Court specifically asked if they needed to rule on the eligibility of software and they were told by CLS and the Solicitor General that they did not.13 To the extent that there is broad language in that opinion, it is the cautionary instructions to the courts to avoid disemboweling the patent law from the inside, and the emphasis on preemption of fundamental ideas—not just any ideas—as the core concern of the exclusionary rule. The evidence above shows that these guideposts have been rushed past quite quickly on the way to some goal other than the preservation of intellectual property rights.

If the present trends hold, and I see no reason to suggest that they will not, we will continue to see the zone of patent eligibility curtailed in software (not to mention bio-technology after Mayo and Myriad). Indeed, the more advanced the software technology—the more it

JAN. 2012 JULY 2014

§ 101 REJECTION § 101 REJECTION

E-COMMERCE TYPE YES NO YES NO

Business Crypto 33.33% 66.67% 88.24% 11.76%

Business Processing & Modeling 46.67% 53.33% 100.00% 0.00%

Cost/Price, Reservations 44.00% 56.00% 76.19% 23.81%

E-Shopping 61.54% 38.46% 100.00% 0.00%

Health Care, Insurance 31.25% 68.75% 94.74% 5.26%

Incentive Programs 44.00% 56.00% 90.91% 9.09%

Operations Research 48.53% 51.47% 93.75% 6.25%

Finance & Banking 41.82% 58.18% 95.00% 5.00%

POS, Inventory, Accounting 39.29% 60.71% 100.00% 0.00%

TOTAL PETITIONS

PETITIONS GRANTED

% INVALID

PTAB CBM Institution on § 101 104 88 84.6%

PTAB Final Decisions on § 101 35 35 100.0%

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takes over the cognitive work once done exclusively by humans, the more seamless it becomes in the fabric of our daily lives—the less patent eligible it is deemed to be by the courts and the USPTO. What technologies will not be funded, what discoveries will not be made,

what products will never come to market we do not know. What we do know is this: there is only one law that governs human affairs and that is the law of unintended consequences.

1 Robert Sachs is a partner in the San Francisco office of Fenwick & West LLP. Bob concentrates his practice on strategic patent counseling and prosecution for software technologies and has extensive experience in developing patent portfolios for companies of all sizes, from startups to multi-nationals. He is the primary evaluator for standards essential patents on today's most important audio, video, and communications technologies, including 3GPP-LTE, IEEE 802.11, MPEG-4 AAC, DVB-MHP, OCAP, Digital Radio Mondiale, AMR-NB, AMR-WB, AMR-WB+, G.711, G.729, AGORA-C, and NFC-IP. He conducts and supervises patent evaluations in US, as well as Europe, Japan, China, South Korea, Mexico and Canada. One of Bob’s areas of expertise is patentable subject matter: the question of what kinds of inventions are eligible for patent protection, and particularly whether software and life sciences related inventions are patentable. This issue has become the new battleground in the development of the patent law, with several important cases having been recently decided by the Supreme Court and the Court of Appeals for the Federal Circuit. While most authors and scholars take a results-oriented approach to this question, Bob instead starts with the first principles of creativity and innovation that drive humans to solve functional problems. From that understanding, software and life sciences inventions are squarely in the domain of what the patent law is designed to protect. Follow Bob’s commentary on patent eligibility and related patent issues on Bilski Blog (http://www.bilskiblog.com/). The opinions of this article are those of the author and do not necessarily reflect the opinions of Fenwick & West LLP.

2 Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347, 2353 (2014) (internal quotations omitted). 3 See id. at 2358. 4 Id. at 2357. 5 Id. at 2354.6 722 F.3d 1335, 1339 (Fed. Cir. 2013) aff’d, 772 F.3d 709 (Fed. Cir. 2014), cert. denied, Ultramercial, Inc., v. WildTangent, Inc., 135 S. Ct. 2907 (2015).7 773 F.3d 1245 (Fed. Cir. 2014).8 2014 Interim Guidance on Patent Subject Matter Eligibility, 79 Fed. Reg. 74,618 (Dec. 16, 2014).9 Id. at 74,629.10 Id. at 74,622.11 Bilski v. Kappos, 130 S. Ct. 3218 (2010).12 35 U.S.C. § 329(d).13 See Transcript of Oral Argument at 29-31 & 46, Alice, 134 S. Ct. 2347 (No. 13-298), available at http://www.supremecourt.gov/oral_arguments/argument_transcripts/13-298_d18k.pdf.

P.8ECLC Newsletter

Pulling Out all the Stops – Patenting Computer Implemented Inventions in Canada Despite Unprecedented Obstacles

Isi Caulder1 and Nicholas Aitken2

Patent practitioners are facing unprecedented obstacles to patenting computer implemented inventions in Canada. The primary challenge rests in overcoming widespread rejections based on unpatentable subject matter raised by Canadian patent Examiners. Patent examination at the Canadian Intellectual Property Office (CIPO) is governed by the self-published Manual of Patent Office Practice (MOPOP)3 and supplementary Practice Notices.4 Generally speaking, CIPO issues Practice Notices and revisions to the MOPOP to bring their examination practice into compliance with the latest jurisprudence and legislation.

Two such Practice Notices5 directed to purposive construction and computer-implemented inventions were issued in 2013 in response to the decision of the Canadian Federal Court of Appeal in Amazon.6 These Practice Notices (the “2013 Practice Notices”) have been the subject of much criticism by the Canadian patent bar for their apparent inconsistency with the decisions of the Supreme Court in Free World Trust 7 and Whirlpool,8 especially with regard to the identification of essential claim elements by purposive construction.

This article explores and details several response strategies which have been successful at overcoming patentable subject matter rejections made under the 2013 Practice Notices. Although it is helpful to understand the inconsistency between the 2013 Practice Notices and the current state of the law, arguments on this basis appear to be largely ineffective. Instead, an in-depth survey of recently allowed Canadian patent applications reveals that arguments that are strategically aligned with the framework of the 2013 Practice Notices are most effective in achieving allowance.

Identification of Essential Claim ElementsPurposive construction dictates that the language of a claim must be read in an informed and purposive way. More specifically, claim language must be given the meaning as would be understood by a person skilled in the art, as of the publication date, having regard to the specification. In one aspect, purposive construction identifies claim elements as essential or inessential. Statutory requirements of subject matter, novelty, and inventiveness are assessed based on the essential claim elements without regard to the inessential claim elements.

The Canadian Supreme Court in Free World Trust and Whirlpool established a presumption that all claim elements are essential, and stated that a claim element is inessential if:

(i) it was obvious to a skilled person at the time of publication that a variant of the claim element would not make a material difference to the way the invention works, and

(ii) the language of the claim, expressly or by inference, did not suggest that the patentee intended the claim element to be essential, irrespective of practical effect.

In contrast, the 2013 Practice Notices establish a very different test for essentiality, which can be summarized as follows:

(i) identify the “problem” to which the application is directed by reference to the description and common general knowledge, and

(ii) identify the elements necessary for the successful resolution of that problem as being essential.9

This test has been criticised as lacking any clear basis at law. More importantly, the 2013 Practice Notices appear to lead Canadian Examiners to apply the CIPO’s version of the essentiality test in a manner that is decidedly hostile to software inventions.

Assessment of Whether Claimed Subject Matter is StatutoryTo be valid and enforceable, a patent claim must be directed to an invention within the meaning of the Patent Act.10 Section 2 of the Canadian Patent Act defines an invention “as any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter.”11 The court in Amazon further pronounced that “patentable subject matter must be something with physical existence, or something that manifests a discernible effect or change.”12

In the context of patent applications for software inventions, computer components, such as processors, are often recited in the claims to ground the software in tangible hardware which satisfies the physicality requirement set out in Amazon. However, the 2013

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Practice Notices attack such computer hardware as being unnecessary to satisfying the identified problem and thus inessential and ignored in assessing whether the claimed subject matter is statutory. For example, the 2013 Practice Notices state that if the claimed software steps can be performed by pen and paper, no matter the inconvenience or impracticality, then the recited computer hardware is inessential.13 A claim without a tangible essential element is typically rejected as being abstract, a mental process, or a scheme which does not fall into a statutory category of invention.

The analysis established by the 2013 Practice Notices determines whether an element is essential based on whether the same result can be obtained without that element. This is very different from the test pronounced in Free World Trust, which asks whether an element is essential based on whether omitting or substituting an element would affect the way the invention works.

For most software inventions, performing the software steps with pen and paper would dramatically affect the way the invention works. Indeed, many software inventions would lose all practical utility if performed by hand. Moreover, the analysis of the 2013 Practice Notices completely ignores whether the patentee intended a claim element to be essential irrespective of practical effect.

Lessons Learned from Recent Patent ProsecutionAnecdotally, Canadian patent Examiners have taken up a practice of rejecting software inventions by first determining that all of the tangible computer hardware is inessential as being unnecessary to solve the problem (e.g. capable of substitution by pen and paper), and then finding the remaining essential elements to be abstract, a mental process, or a scheme which does not fall into a statutory category of invention.

Although such rejections have proven difficult to overcome, a survey of recently allowed applications has shown some success in applying the following response strategies:

#1: Emphasize that the problem can only be solved through the use of a computer.

As mentioned previously, the analysis of the 2013 Practice Notices determines an element to be essential if that claim element is necessary for the successful resolution of the problem to which the application is directed. In some cases, applicants have been successful in arguing that the successful resolution of the problem requires the recited computer hardware.

�� In CA 2,735,585, the applicant argued that the invention had to be responsive to the user’s inputs at the time of making a food choice decision as claimed, and that this required a large amount of nutrition data to be crunched in “real-time,” which necessitated the use of a computer.14

�� CA 2,702,827, the applicant argued that training a neural network model required the use of a computer, and that the kind of neural network that could be trained by pen and paper would be trivially small, and thus unsuitable for adjusting the operation of a wellsite as claimed.15

In practice, the efficiency of a computer in performing certain tasks is what will make it indispensable to certain inventions. However, arguing on the basis of efficiency alone is usually not enough. The efficiency of executing the task must itself be essential to successful resolution of the problem.

It is worth noting that Canadian patent applicants have also been successful in arguing that the computer hardware is necessary to successfully resolve the problem for reasons other than just computational efficiency. For example:

�� In CA 2,412,184, the applicant argued that the use of the computer was essential because it resulted in vastly improved security that could not be obtained using a mere administrative scheme.16

�� In CA 2,398,508, the applicant argued that the computer was essential because serving a multitude of customers from all parts of the world with accuracy was otherwise impossible.17

#2: Emphasize that, by the language of the patent, the inventor intended for the computer elements to be essential.

The 2013 Practices Notices are silent on the effect of the patentee’s intent in assessing whether an element is essential. Even so, some applicants successful in overcoming rejections for unpatentable subject matter have included arguments that under Free World Trust an element is essential where language of the patent, as purposively construed, suggests that that the patentee intended the element to be essential. The argument is usually accompanied by claim amendments that tie computer hardware into the operation of the invention. Of note, the Canadian Patent Appeal Board in Commissioners Decision 1373 (Re Application 2,312,726), held that the intent of the patentee is not a determining factor in assessing whether an element is essential.18

The success of this strategy seems to depend, in some part, on the quality of the specification. Generally, it helps to have a specification

P.10ECLC Newsletter

that is “replete with technical data explaining how to implement the solution” with the computer elements (see, e.g., CA 2,469,29719 response dated 2013-11-19), or one that uses numerous drawings and detailed descriptions of flowcharts to describe the computer-implemented processes (see, e.g., CA 2,506,51720 response dated 2013-11-12).

#3: Amend the preamble to repurpose the claim.

Some applicants have amended the preamble of a claim to bolster their arguments that the recited computer hardware is essential to the successful resolution of the problem, and that the patentee intended the recited computer hardware to be essential. For example:

�� In CA 2,398,508,21 the preamble which recited a “method of providing auxiliary services or goods in a computer network marketplace…” was amended to recite a “method of providing, via a computer network marketplace, auxiliary services or goods…”

�� In CA 2,702,827,22 the preamble which recited a “system for predicting subterranean formation properties of a wellsite…” was amended to recite a “system for adjusting an operation of a wellsite.”

Final WordsCanadian Examiners rarely, if ever, provide reasons for withdrawing claim objections. The preceding examples and discussion are provided on the assumption that the amendments and arguments made by the applicant persuaded the Examiner. Further, issued patents and Patent Appeal Board decisions are not binding sources of precedent. Examiners at CIPO may act inconsistently with each other. For that reason, it may be expeditious to assess a prospective response strategy by conducting an Examiner interview. Finally, in deciding whether to file a new application for a computer implemented invention, one should appreciate the possibility that patent office practice may change before substantive examination of that application begins.

1 Isi Caulder is a Partner in the Toronto office of Bereskin & Parr LLP. Isi's practice focuses primarily on helping high technology clients secure and license patent rights for a wide variety of electrical, computer and mechanical related inventions including video image processing software, video streaming technology, audio signal processing hardware, satellite spaceflight hardware, satellite data processing technology, wireless communications hardware and software, data encryption and compression software, integrated circuit devices, biometric devices, wearable technology, solar power equipment, wind power equipment, wireless sensor networks for environmental applications, carbon monitoring technology, and electronic consumer products. She also works with clients to obtain and license trademarks, copyrights and industrial designs and advises on strategic intellectual property portfolio development and management. The views expressed herein are those of the authors.2 Nicholas Aitken is an Associate, Bereskin & Parr LLP. Nick has years of experience helping clients with their patent and industrial design needs. His practice includes drafting and prosecuting Canadian, US, and international patent applications to grant, and advising clients on international filing strategies, patent validity, and patent infringement. Nick has worked with startup companies to identify cost-effective IP strategies to protect their core intellectual property assets. He has also helped large corporations to manage and strategically develop their international IP portfolios. With a degree in mechanical engineering, Nick has expertly assisted clients in a variety of technological fields, including food processing systems, confectionaries, household consumer products, office furniture solutions, consumer cleaning equipment, renewable energy systems, oil and gas equipment, medical devices and medical imaging software, mobile communications devices and software, gaming devices and software. The views expressed herein are those of the authors.3 Canadian Intellectual Property Office, Manual of Patent Office Practice, available at http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr00720.html4 Canadian Intellectual Property Office, Practice Notices, available at http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr00292.html?Open&wt_src=cipo-patent-main5 Canadian Intellectual Property Office, Practice Guidance Following the Amazon FCA Decision (Mar. 8, 2013), available at http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr03628.html 6 Canada (AG) v. Amazon.com, Inc., [2012] 2 F.C. 459, 2011 FCA 328 (Can.).7 Free World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024, 2000 SCC 66 (Can.).

8 Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067, 2000 SCC 67 (Can.).9 Canadian Intellectual Property Office, Examination Practice Respecting Purposive Construction, PN2013-02 (Mar. 8, 2013), available at http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr03626.html10 Patent Act, R.S.C., ch. P-4 (1985), available at http://www.laws-lois.justice.gc.ca/eng/acts/P-4/ 11 Id.12 Amazon, [2012] 2 F.C. at 487.13 Canadian Intellectual Property Office, Examination Practice Respecting Computer-Implemented Inventions, PN 2013-03 (Mar. 8, 2013), available at http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr03627.html14 Canadian Patent Application Serial No. 2,735,585, Response to Office Action, pp. 2-3 (Dec. 5, 2013), available at http://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2735585/summary.html 15 Canadian Patent Application Serial No. 2,702,827, Amendments/Remarks Following Examiner’s Report, pp. 2-7 (June 5, 2014), available at http://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2702827/summary.html 16 Canadian Patent Application Serial No. 2,412,184, Response to Office Action, pp. 2-4 (Oct. 4, 2013), available at http://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2412184/summary.html 17 Canadian Patent Application Serial No. 2,398,508, Response to Requisition, pp. 1-2 (Mar. 17, 2014), available at http://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2398508/summary.html 18 Canadian Patent Application No. 2,312,726, Decision of the Commissioner of Patents, C.D. 1373 (Oct. 10, 2014), available at http://www.ic.gc.ca/opic-cipo/comdec/eng/decision/1373/summary.html19 File History available online at http://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2469297/summary.html20 File History available online at http://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2506517/summary.html 21 Response to Requisition, supra note 17 at 1.22 Amendments/Remarks Following Examiner’s Report supra note 15 at 36.

P.11ECLC Newsletter

Akamai Technologies, Inc. v. Limelight Networks, Inc.: Federal Circuit Defines Liability For “Joint Enterprises” or “Conditional Participation”

Domenico Ippolito1

In Akamai v. Limelight, Inc. v. Limelight Networks, Inc.,2 the Federal Circuit updated and clarified the standards for determining if direct infringement has occurred in cases where the actions of multiple parties must be combined in order for all elements of a claim to be performed. It had been considered well-established that the “whoever” in the “whoever without authority makes, uses, offers to sell, or sells any patented invention … infringes the patent” of 35 U.S.C. § 271(a) must be a single entity, or an entity in combination with its agents, in order for direct infringement to occur.3 Additionally, since inducement under 35 U.S.C. § 271(b) requires that the induced party be liable for direct infringement,4 it is often the case that when multiple parties divide the elements of a claim between them, damages are not available for either direct infringement or for inducement. While the breadth of Akamai is not yet known, this case will change the result in at least some client-server software patent cases.

According to previous cases, an entity can be held accountable for the actions of others for the purpose of finding direct infringement when the others are agents of the entity or when the others are contractually obligated to perform the actions for the entity.5 Akamai provides two additional tests:

�� “where two or more actors form a joint enterprise, all can be charged with the acts of the other, rendering each liable for the steps performed by the other as if each is a single actor”6 and

�� “liability under § 271(a) can also be found when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.”7

Each of these new tests contains multiple elements that must be shown by the patentee to establish the infringer’s liability.

Joint enterprise liability was not at issue in Akamai, but the court outlined the four elements that must be shown to establish liability for a joint enterprise:

�� an agreement, express or implied, among the members of the group;

�� a common purpose to be carried out by the group;

�� a community of pecuniary interest in that purpose, among the members; and

�� an equal right to a voice in the direction of the enterprise, which gives an equal right of control.8

With respect to conditional participation liability, both of the listed elements must be shown:

�� “condition[ing of] participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method,” and

�� “establish[ing] the manner or timing of that performance.”

For many commercial products, the “conditioning” element will be easy to show. For example, consider the following hypothetical claim:

In this example, the client will not receive the response unless the client generates and transmits the request. Accordingly, the client will not realize the benefits of the method from the entity providing the server unless the client performs the method steps, and the “conditioning” element is met.

CLIENTSERVER –

DATA STORAGE

REQUEST FOR DATA

TRANSMITTING RESPONSE

A method comprising:- at a server, storing data;- at a client, generating a request for the data and transmitting

the request to the server; and- responsive to receiving the request at the server, transmitting

a response from the server to the client.

P.12ECLC Newsletter

Showing the “establishing” element may be more difficult. Akamai does not address the minimum requirements of this element. The court found that evidence showed that Limelight provided a Technical Account Manager to “lead the implementation of Limelight’s services,” and thus “Limelight establishes the manner and timing of its customers’ performance so that customers can only avail themselves of the service upon their performance of the method steps.”10 However, the general rule established by the court is that the manner or timing of the performance must be established by the accused infringer.11

Potentially, establishing the manner or timing of the performance will encompass many commercial activities. In the hypothetical example

claim above, if the entity providing the server also provides a client application including a user interface to generate the request, the use of that application by a user to perform the “generating a request” step is in a manner established by the entity, even when the entity does not control the timing of the user’s action. Similarly, if the action on the client can only be performed while the server is running (e.g., to respond to the request), then the entity controlling the server at least arguably controls the timing of the performance.

Thus, while ideal claims will still read directly on a competitor, claims requiring actions by both a competitor and its clients are no longer dead on arrival, after Akamai.

1 Domenico Ippolito is a patent attorney with Schwegman Lundberg & Woessner. Domenic’s practice focuses on patent prosecution and analysis, with an emphasis on electronics and software. Prior to joining Schwegman Lundberg & Woessner, Domenic was a patent litigator with Arnold & Porter LLP, representing both patentees and accused infringers in cases involving electronics, software, and medical devices. In addition, Domenic has extensive software development experience ranging from Windows applications to Internet applications to Android apps. The opinions of this article are those of the author and do not necessarily reflect the opinions of Schwegman Lundberg & Woessner.2 797 F.3d 1020 (Fed. Cir. 2015) (en banc).3 See, e.g., Chisum on Patents § 16.02.

4 Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111 (2014).5 Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1358 (Fed. Cir. 2008).6 Akamai, 797 F.3d at 1023.7 Id.8 Id.9 Id.10 Id. at 1025.11 Id. at 1023.

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