January 10, 2018

Software Innovations Make Non-Abstract Improvements to Computer Technology

By Bryan K. Wheelock, Principal

In Finjan, Inc., v. Blue Coat Systems, Inc., [2016-2520] (January 10, 2018), the Federal Circuit affirmed subject matter eligibility of U.S. Patent No. 6,154,844; affirmed infringement of the U.S. Patent Nos. 6,154,844 and 7,418,731; affirmed the award of damages of $6 million for U.S. Patent No. 7,418,731 and $1.6 million for U.S. Patent No. 7,647,633; reversed the denial of JMOL of non-infringement of U.S. Patent No. 6,965,968; and vacated the corresponding damage award.

Regarding subject matter eligibility of U.S. Patent No. 6,154,844, the Federal Circuit started at Step 1 of the Alice test, finding that the ’844 patent is directed to a method of providing computer security by scanning a downloadable and attaching the results of that scan to the downloadable itself in the form of a “security profile.”

While the Federal Circuit noted that in Intellectual Ventures I LLC v. Symantec Corp. it held that virus screening is well-known and constitutes an abstract idea, the Federal Circuit said that in the present case “the claimed method does a good deal more.”  The Federal Circuit framed the question as “whether this behavior-based virus scan in the ’844 patent constitutes an improvement in computer functionality,” and found that it does.  The Federal Circuit said that its cases confirm that software-based innovations can make “non-abstract improvements to computer technology” and be deemed patent-eligible subject matter at Step 1.

The Federal Circuit also rejected the challenge that even if the claimed idea is new, it is still abstract, noting that the claims recite more than a mere result. Instead, the Federal Circuit found that they recite specific steps—generating a security profile that identifies suspicious code and linking it to a downloadable—that accomplish the desired result.

Regarding infringement of the ’844 and ’731 patents, the Federal Circuit found that the JMOL of non-infringement for the first time raised issues of claim construction, which it cannot do: “it is too late at the JMOL stage to argue for or adopt a new and more detailed interpretation of the claim language and test the jury verdict by that new and more detailed interpretation.”  The Federal Circuit found the verdict of infringement of these patents were supported by substantial evidence.

Regarding the ‘968 patent, the Federal Circuit agreed with the defendant that the patentee failed to introduce substantial evidence of infringement.

Regarding damages for infringement of the ’844 patent, the Federal Circuit agreed that the patentee failed to apportion damages to the infringing functionality, stating that “[w]hen the accused technology does not make up the whole of the accused product, apportionment is required.”  The Federal Circuit said that the patentee must give evidence tending to separate or apportion the infringer’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative.  The patentee argued that it based the royalty on the “smallest, identifiable technical component” but the Federal Circuit held that this does not insulate them from the essential requirement that the ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.

Noting that reversal of the denial of JMOL could result in a situation in which Finjan receives no compensation for Blue Coat’s infringement of the ’844 patent, the Federal Circuit remanded to the district court to determine whether Finjan has waived the right to establish reasonable royalty damages under a new theory and whether to order a new trial on damages.

This aspect of the decision caused the district judge in the middle of a trial relating to the same patent to declare a mistrial, and reschedule the infringement and damages cases.

Regarding damages for infringement of the ’731 and ’633 patents, the Federal Circuit held that the awards were supported by substantial, if conflicting, evidence.

This is a rare Step 1 victory for a software inventor, and although the decision will no doubt be cited by hopeful applicants and patent owners, it does not bring any clarity to what it means to claim an abstract idea.