In a Section 101 analysis under Alice Corp. Pty. Ltd. v. CLS Bank Intl., “[a]n inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces”—even if individual claim limitations recite non-inventive features.
On June 27, the US Court of Appeals for the Federal Circuit held in BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC that BASCOM’s patent claims were valid under 35 U.S.C. § 101. The three judge panel of Judges Newman, O’Malley, and Chen held that “an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.” In so holding, the Federal Circuit vacated and remanded the district court’s order granting AT&T Mobility LLC’s and AT&T Corp.’s (collectively, “AT&T’s”) motion to dismiss under Fed. R. Civ. P. 12(b)(6).
BASCOM owns US Patent No. 5,987,606 (the “‘606 Patent”), which encompasses a system to filter internet content. Although prior art filtering systems existed before the filing date of the ‘606 Patent, they were susceptible to hacking and dependent on local hardware and software. In contrast, the ‘606 Patent places its filtering system on a remote ISP server (as opposed to local computers) and is capable of customizing the filter to a particular user.
BASCOM sued AT&T in the US District Court for the Northern District of Texas for infringing the ‘606 Patent. AT&T subsequently filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6) alleging that each claim of the ‘606 Patent was invalid under 35 U.S.C. § 101.
In ruling for AT&T, the district court applied the two-step test in Alice:
Applying this test, the district court held that the ‘606 Patent’s claims were directed to a patent-ineligible concept—the abstract idea of “filtering content.” The court then held that neither the individual limitations nor the limitations in combination were inventive. Accordingly, the court held that the ‘606 Patent was invalid under 35 U.S.C. § 101 and granted AT&T’s motion to dismiss.
The Federal Circuit also applied the two-step test in Alice when analyzing the claims of the ‘606 Patent. Like the district court, the Federal Circuit held that under step one of Alice, the claims encompassed the abstract idea of filtering content, as “it is a long-standing, well-known method of organizing human behavior.” 
In analyzing the claims under step two of Alice, the Federal Circuit also agreed with the district court that the claim limitations taken individually recite generic computer, network, and internet components. However, the Federal Circuit disagreed with the district court’s holding that the ordered combination of limitations was non-inventive. The Federal Circuit recognized that courts commonly consider whether various claim elements simply recite “well-understood, routine, conventional activities.” But the Federal Circuit further stated that “[t]he inventive concept inquiry requires more than recognizing that each claim element, by itself, was known in the art. . . an inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces.”
According to the Federal Circuit, “[t]he inventive concept described and claimed in the ‘606 patent is the installation of a filtering tool at a specific location, remote from the end-users, with customizable filtering features specific to each end user.” The claims therefore describe a specific, discrete implementation of the abstract idea of filtering content that provides a technical improvement over the prior art method of filtering internet content. This technical improvement transforms the abstract idea of filtering content into a patent-eligible application under step two of the Alice test.
The Federal Circuit analogized the ‘606 Patent to the claims in DDR Holdings, LLC v. Hotels.com, L.P, which the court had found valid under Section 101. Similar to the patent in DDR that claimed a technical way to satisfy an existing problem, the ‘606 Patent claims a technology-based filtering system that overcomes existing problems with the prior art filtering systems.
Accordingly, the Federal Circuit held that the district court improperly analyzed the ‘606 Patent claims under step two of Alice. It held that the claims were valid under Section 101 and agreed with BASCOM that “an inventive concept can be found in the ordered combination of claim limitations that transform the abstract idea of filtering content into a particular, practical application of that abstract idea.”
In her concurring opinion, Judge Newman agreed that the ‘606 Patent was valid under Section 101, but also urged the adoption of a more flexible approach to ascertain patent eligibility. She argued that the separate determination of patent eligibility and patentability is time-consuming and usually unnecessary. She proposed that courts “return to the letter of Section 101, where eligibility is recognized for ‘any new and useful process, machine, manufacture, or composition of matter.’”
Judge Newman’s proposed approach is intended to provide flexibility to the district courts and the parties to resolve patentability issues along with eligibility issues when, as here, evidence of patentability is necessary to resolve the question of patent eligibility. Therefore, according to Judge Newman, the district courts should be allowed to determine if the claims are patentable since “[i]f the claims are unpatentable, any issue of abstractness, however defined, is mooted. And if the subject matter is patentable, it is not an abstract idea.” In her view, this approach would increase efficiency and save both time and cost.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact Michael Abernathy, Sanjay Murthy, and Maria Doukas in our Chicago office, or any member of Morgan Lewis’s IP Disputes Practice:
Joshua M. Dalton
David W. Marston Jr.
 BASCOM, 2015-1763 (Fed. Cir. Jun. 27, 2016).
 BASCOM at 16.
 Id. at 4-5.
 Id. at 8.
 134 S. Ct. at 2355 (internal citations omitted).
 BASCOM at 9.
 Id. at 9-10.
 Id. at 2.
 BASCOM at 12.
 BASCOM at 14-15.
 Id. at 15.
 Alice, 134 S. Ct. at 2359.
 BASCOM at 15.
 Id. at 16.
 See DDR, 773 F.3d 1245 (Fed. Cir. 2014).
 BASCOM at 18.
 Id. at 20.
 BASCOM at 1-2.
 Id. at 3.
 Id. at 6.