Federal Circuit Finds Video Signal Conversion Claims Patent Ineligible
On December 14, 2020, the Court of Appeals for the Federal Circuit (CAFC) affirmed a decision by the United States District Court for the Central District of California holding all asserted claims of appellant’s ’305 patent ineligible under 35 U.S.C. § 101. Adaptive Streaming Inc. v. Netflix, Inc., __ F.3d __ (Fed. Cir. December 14, 2020). The CAFC concluded that the district court correctly found that the claims were directed to an abstract idea and lacked any inventive concept, and that dismissal of appellant’s complaint under Rule 12(b)(6) was proper.
Section 101 provides that any new and useful process, machine, manufacture, or composition of matter, or improvement thereof, may be patented subject to an important implicit exception: “Laws of nature, natural phenomena, and abstract ideas are not patentable.” Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 216 (2014). Under the two-part Alice test, “[a] claim falls outside § 101 where (1) it is directed to a patent ineligible concept, i.e., a law of nature, natural phenomenon, or abstract idea, and (2), if so, the particular elements of the claim, considered both individually and as an ordered combination, do not add enough to transform the nature of the claim into a patent-eligible application.” SAP America, Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166-67 (Fed. Cir. 2018).
On appeal, appellant patent owner argued that the asserted claims of the ’305 patent, titled “Personal Broadcasting System for Audio and Video Data Using a Wide Area Network,” are not directed to an abstract idea and that, in any event, they include inventive concepts that render them patent eligible. The ’305 patent specification states that digital communication between devices of different types is hindered by the fact that different devices use different digital signal formats. To allegedly address this deficiency, the ’305 patent describes and claims systems that can receive a digital video signal in one format and broadcast it to at least one device calling for a different format.
The CAFC began its analysis by first affirming that subject-matter eligibility under Section 101 is a question of law based on underlying facts, which may be resolved on a Rule 12(b)(6) motion. The CAFC next analyzed the asserted claims of the ’305 patent and concluded, as did the district court, that they are directed to the abstract idea of collecting information and transcoding it into multiple formats. In support, the CAFC observed that the claims and written description of the ’305 patent make clear that the claimed advance over the prior art is the abstract idea of signal format conversion, and not any specific advance in coding or other techniques for implementing that idea. The CAFC further noted that the written description itself explains the translation of content as a fundamental communication practice in both the electronic and pre-electronic worlds. The CAFC cited its prior decisions holding that such ideas governing basic communication practices are directed to abstract ideas.
According to the CAFC, the asserted claims also “flunk the second step of the Alice inquiry: They … recite only generic computer hardware, such as a ‘processor’ and a ‘broadcasting server’ with an ‘image retrieval portion,’ ‘a data structure,’ and a ‘transcoding module,’ as performing the claimed functions, which the ’305 patent’s specification states were conventional.”
Appellant argued that the Patent and Trademark Office’s novelty and non-obviousness determinations, rendered in issuing the ’305 patent, undermine a finding of ineligibility under § 101. The CAFC disagreed, explaining that satisfying the requirements of novelty and non-obviousness does not imply eligibility under § 101, including under the second step of the Alice inquiry, because “what may be novel and non-obvious may still be abstract.”
Appellant also made two arguments in its reply brief that it did not raise and develop as challenges in the argument section of its opening brief to the CAFC, merely mentioning each point in passing in the statement-of-the-case portion of the opening brief. One argument was that the district court erred by not construing certain claim terms before deciding the § 101 issue. The other was that industry recognition and commercial success establish that the asserted claims are to patent-eligible subject matter. The CAFC concluded that both arguments were forfeited, because neither argument was developed in the argument section of Appellant’s opening brief.