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19 October 2017Patents

Federal Circuit sticks to Alice in Chicago transport row

The US Court of Appeals for the Federal Circuit has followed the Supreme Court’s landmark Alice v CLS Bank judgment to affirm a lower court ruling that had invalidated four patents allegedly infringed by Chicago’s transport authority.

In a decision handed down yesterday, October 18, the court said it backed a ruling by the US District Court for the Northern District of Illinois that the patents claimed only abstract ideas and non-inventive elements.

The 2014 Alice decision set out a two-step analysis of patentability, the first determining whether the idea is abstract, while the second was labelled the “inventive concept” analysis, which should determine whether there is genuine, human contribution to the claimed subject matter.

In the current case, technology company Smart Systems Innovation accused the Chicago Transit Authority (CTA) of infringing four patents: US numbers 7,566,003; 7,568,617; 8,505,816; and 8,662,390. The patents all related to paying a fare with a bank card.

Smart Systems said that CTA’s Ventra programme, an electronic payment system for the “Chicago L” metro system, infringed its patents. Ventra was developed in 2013 by the CTA with Cubic Corporation, which was named as a co-defendant in the suit.

But in 2015 the Illinois court said the patents could not be protected.

Judge Edmond Chang ruled that “when reduced to their core, claims directed to the performance of certain financial transactions—and paying a fare is a financial transaction—must be categorised as involving abstract ideas”.

In yesterday’s judgment the Federal Circuit backed that view.

The lower court had noted that despite Smart Systems claiming the patents described ways to save time on transactions, and that they were not just related to payments, “in substance, the claims are still directed to nothing more than running a bank card sale—that is, the performance of an abstract business practice”.

“We agree,” Judge Evan Wallach, writing the majority judgment, noted.

“We have considered SSI’s [remaining] arguments and find them unpersuasive. Accordingly, the final judgment of the US District Court for the Northern District of Illinois is affirmed,” he added.

Judge Richard Linn, who agreed with the majority but wrote a dissenting judgment, bemoaned the fact that because of Alice he would have to find some of the patents’ claims abstract.

Linn said the ‘816 and ‘390 patents were directed to the processing of data related to the funding of transit rides using a bank card. He noted that Smart Systems had asserted that the claims were not abstract because they “solved real world problems”.

“I agree,” Linn wrote. “The inventions recited in the asserted claims of both of these patents are the result of human activity and facilitate the use of bank cards for a new purpose heretofore considered practically foreclosed. Regrettably, however, and for the reasons set forth in the majority opinion, our precedent leaves no room for such an argument.”

He said that under Alice the patents’ claims would be considered “fundamental economic practice” and abstract as a result.

“While I disagree with such a categorical exclusion, I am bound by the precedent cited and relied on by the majority and, for that reason, am constrained to concur,” he wrote.

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