Cryptography Claims Survive Patent-Eligibility Challenge

Here is further evidence that claims directed to processing data are not per se patent-ineligible: patent claims directed to cryptography applications have survived a motion to dismiss alleging invalidity under 35 U.S.C. § 101 and the Alice/Mayo test.  Crypto Research, LLC v. Assa Abloy, Inc., No. 16 Civ. 1718 (AMD) (RER) (E.D.N.Y. Feb 17, 2017).  The plaintiff alleged that the defendants infringed claims of three patents, U.S. Patent Nos. 8,086,866, 8,516,262, and 8,990,576.  The defendants brought a motion to disimiss under FRCP 12(b)(6), alleging both patent-ineligibility and a failure to meet the notice-pleadings standards of the Iqbal and Twombley cases.  The motion failed on all grounds (the defendants’ notice pleading arguments are discussed in this post).

According to the court, “the Patents-in-Suit address a technique for reducing the computation difficulty and storage capacity demands in using one-way chains [in encryption applications] on ‘lightweight’ processing devices, like mobile telephones and smartcards.”  Claim 1 of the ’866 patent was discussed as representative:

A method implemented by a processor, the processor being coupled to a memory, the memory having a designated amount of storage available for storing values of a one-way chain, the designated amount of available storage being less than that required to store simultaneously all of the values of the one-way chain, the method comprising the steps of:

storing in the memory a subset of the values of the one-way chain as helper values for facilitating computation of other values of the one-way chain not in the subset, the subset of values of the one-way chain comprising a plurality of designated nonconsecutive values of the one-way chain;

utilizing one of the values in the sub-set of values to compute one of the other values of the one-way chain not in the subset;

generating a cryptographic output determined by the computed value not in the subset; and

updating the stored subset of values of the one-way chain so as to replace at least one of the helper values with a new helper value not previously part of the subset.

Turning to the first step (the “abstract idea” prong) of the Alice test, the defendants argued that “the Patents-in-Suit were directed to the abstract ideas of ‘(1) storing values, (2) computing additional values and data, and (3) storing a new value in the place of one of the previously stored values.’”  But the court found this to be too high a level of abstraction.  The plaintiff was able to point to an alleged improvement over prior art: “the use of ‘helper values’ or ‘pegs’ to reduce computation demands, and a process to move the pegs to various positions in the one-way chain, so that the efficiency gains are repeated for each chain output value.”  In light of cases such as Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016), and DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), “instructing that patents directed to improvements in computer functionality do not fail under Section 101,” the court concluded that the claims were not directed to an unpatentable abstract idea.

Further, the court considered the second prong of the Alice test (significant innovation rendering an abstract idea patentable) “because there is not yet a developed evidentiary record, and because some of the cases to consider the patent eligibility of computer-related technology focus on Alice step two.”  The court rejected the defendants’ argument “that the Patents-in-Suit are categorically abstract because they are directed to the field of cryptography.”  Remember this the next time a patent examiner tells you that software is “per se” ineligible under Section 101.

Indeed, the court found this cases to be like two prior cases that had found encryption software to be patent-eligible.  Here, the court explained:

the Patents-in-Suit describe a method for placing and relocating pegs in a one-way chain, in order to reduce the computation or storage required for computing the values in a one-way chain. This additional limitation on the process of computing values in a one-way chain is not simply a “trivial appendix to the underlying abstract idea.” CLS Bank Int’l, 717 F.3d at 1283.

It should be added that the court noted it was considering “the facts in the light most favorable to the plaintiff,” and that its denial of the motion because “the defendants have not established that the claims are patent-ineligible under Section 101” was predicated on “the present procedural posture.”  That is, this case was at the pleadings stage.  One wonders whether the result really would have been different at a later stage of litigation.  Perhaps we’ll find out.

Lessons for Practice

First, it is always nice to have a reminder that claims drawn solely to software, or processing data, are not, as some patent examiners would have it, per se patent ineligible.  Second, invalidity under Section 101, on the one hand, and Sections 102 and 103 on the other, may, technically and logically, be different questions.  Nonetheless, novel and non-obvious features distinguishing from prior art matter to the Alice patent-eligibility analysis, sometimes quite a bit.  Third, while defendants often are well-advised to bring Section 101 invalidity arguments at the pleadings stage, many judges, as here, will be cautious in considering, and conservative in granting, such motions.

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