AT&T Corp. v. Excel Communications, Inc.

Last updated

AT&T Corp. v. Excel Communications, Inc.
Court United States Court of Appeals for the Federal Circuit
Full case nameAT&T Corporation v. Excel Communications Marketing, Inc.
DecidedApril 14 1999
Citations172 F.3d 1352; 50 U.S.P.Q.2d 1447
Case history
Prior historyNo. CIV.A.96-434-SLR, 1998 WL 175878 (D. Dela. 1998) (finding U.S. Patent No. 5,333,184 invalid for lack of statutory subject matter)
Holding
The claims are eligible for protection by a patent in the United States if it involved some practical application and it produces a useful, concrete and tangible result. The Federal Court reversed the district court's judgment of invalidity and remanded the case for further proceedings.
Court membership
Judges sitting S. Jay Plager, Raymond Charles Clevenger III, Randall Ray Rader
Case opinions
MajorityPlager
Laws applied
35 U.S.C.   § 101

AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999) [1] was a case in which the United States Court of Appeals for the Federal Circuit reversed the decision of the United States District Court for the District of Delaware, which had granted summary judgment to Excel Communications, Inc. and decided that AT&T Corp. had failed to claim statutory subject matter with U.S. Patent No. 5,333,184 (the '184 patent) [2] under 35 U.S.C.   § 101. The United States Court of Appeals for the Federal Circuit remanded the case for further proceedings.

Contents

Along with State Street Bank v. Signature Financial Group , [3] this case was the most referred case on business method patent with a "useful, concrete and tangible result" test by U.S. courts until Bilski v. Kappos [4] authoritatively overruled it.

Background

The Two Sides

AT&T Corp., originally the American Telephone & Telegraph, is an American telecommunications company that provides voice, video, data, and Internet telecommunications and professional services to businesses, consumers, and government agencies. This company is a subsidiary of AT&T Inc. and its subsidiary AT&T Communications still provides long-distance service across the United States.

Excel Communications was founded in 1988 by Dallas entrepreneur Kenny Troutt as a long-distance reseller in the US telecom sector at the birth of telecom deregulation. It started its business by selling franchises through the business model of network marketing or multi-level marketing (MLM).

Event History

In 1992, the '184 patent was filed and in 1994, the patent status was granted by the U.S. Patent and Trademark Office (USPTO).

In 1996, AT&T filed a patent infringement suit against Excel, including some specific method or process claims related to the step of "generating a message record for an interexchange call between an originating subscriber and a terminating subscriber," and the use of primary interexchange carrier (PIC) indicator in the message record.

On March 27, 1998, the District Court of Delaware concluded [5] that the invention was not patentable subject matter because the claims implicitly recite a mathematical algorithm. [6] The trial court, on summary judgment, held all of the method claims at issue invalid for failure to qualify as statutory subject matter.

On April 14, 1999, the U.S. Court of Appeals for the Federal Circuit found that the claimed subject matter was properly within the statutory scope of 35 U.S.C.   § 101, and reversed the district court's judgment of invalidity on this ground and remanded the case for further proceedings.

Summary of the U.S. Patent No. 5,333,184

The U.S. Patent No. 5,333,184 (or the '184 patent), [2] entitled 'Message Recording for Telephone Systems', described a method to take advantage of adding more data into a message record in order to provide appropriate billing for subscribers, based on whether or not the subscriber and call recipient subscribe to the same long-distance carrier. This data is called Primary interexchange carrier indicator (PIC).

If the caller (subscriber) belongs to the carrier's (AT&T's) "family" the value of the PIC is 1. Otherwise it would be 0. If the call recipient also belongs to the AT&T family, its PIC is 1. Otherwise it is 0. In the billing process, the logical product of the two PICs is taken—this process is also known as ANDing. [7] Since the time of George Boole it has been well known that if and , then their logical product ; and if one or both is 0, . Under this patent, when the logical product of the PICs is 1, the call is billed at a discounted ("family plan") rate; if the product is 0, the undiscounted rate applies. Therefore, if and only if the caller and called person belong to the carrier's family, the discounted rate applies. [8]

In a direct-dialed long-distance call, a call-related data and message record, named "automatic message account" (AMA), was generated. It includes further information, such as the originating and terminating telephone numbers, and the length of time of the call. The records with AMAs are stored in an electronic format that can be transmitted between computers and reformatted for processing and billing, which later comes to customer in form of hard copy via mails.

Opinion of the Federal Circuit Court

In their analysis, the Federal Court first refers to the definition of patentable invention in the language of 35 U.S.C.   § 101, and found that AT&T's business method fell in the "process" category and the patent claims fell within the judicially created "mathematical algorithm" exception to statutory subject matter. In addition, because the system takes data representing discrete dollar amounts through a series of mathematical calculations to determine a final share price – a useful, concrete, and tangible result, the Court affirmed that the processing system proposed by AT&T was patentable subject matter and should be protected.

Process is defined in 35 U.S.C.   § 100(b) as: "a process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or any new and useful improvement thereof." However, the courts consider the scope of 35 U.S.C.   § 101 to be the same regardless of the form – machine or process - in which a particular claim is drafted.

Excel then argued that "method claims containing mathematical algorithms are patentable subject matter only if there is a "physical transformation" or conversion of subject matter from one state into another." In response, the Court explained that physical transformation can be considered as long as it results in a "useful, concrete and tangible outcome/application". The court relied on the Supreme Court's opinion in Diamond v. Diehr , [9] which said:

(...)"when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e. g., transforming or reducing an article to a different state or thing), then the claim satisfies the requirements of 101."

Although the District Court of Delaware held the patent [2] invalid under the "mathematical algorithm" exception, the Federal Circuit referred to several now limited or overruled cases including In re Alappat [10] and State Street Bank v. Signature Financial Group , [3] and reversed the District Court's opinion, stating that "at the time of the trial court, the District court did not know these referred cases of the mathematical algorithm issue."[ citation needed ]

Impact

As a result of the decisions of the Supreme Court in the Bilski, Mayo, and Alice cases, [11] the AT&T v. Excel decision is substantially overruled. [12] The ideas of giving loyal customers a discount and that the logical product of (i.e., ANDing) p and q is 1 when both p and q are 1 but is otherwise 0 are well known for many years, and there is no suggestion of anything but a conventional computer circuitry implementation. Therefore, under the Mayo and Alice "two-step" tests, this process is patent ineligible.

Related Research Articles

Neither software nor computer programs are explicitly mentioned in statutory United States patent law. Patent law has changed to address new technologies, and decisions of the United States Supreme Court and United States Court of Appeals for the Federal Circuit (CAFC) beginning in the latter part of the 20th century have sought to clarify the boundary between patent-eligible and patent-ineligible subject matter for a number of new technologies including computers and software. The first computer software case in the Supreme Court was Gottschalk v. Benson in 1972. Since then, the Supreme Court has decided about a half dozen cases touching on the patent eligibility of software-related inventions.

State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368, also referred to as State Street or State Street Bank, was a 1998 decision of the United States Court of Appeals for the Federal Circuit concerning the patentability of business methods. State Street for a time established the principle that a claimed invention was eligible for protection by a patent in the United States if it involved some practical application and, in the words of the State Street opinion, "it produces a useful, concrete and tangible result."

Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking and tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the appropriateness of patenting business methods. Nonetheless, they have become important assets for both independent inventors and major corporations.

Diamond v. Diehr, 450 U.S. 175 (1981), was a United States Supreme Court decision which held that controlling the execution of a physical process, by running a computer program did not preclude patentability of the invention as a whole. The high court reiterated its earlier holdings that mathematical formulas in the abstract could not be patented, but it held that the mere presence of a software element did not make an otherwise patent-eligible machine or process patent ineligible. Diehr was the third member of a trilogy of Supreme Court decisions on the patent-eligibility of computer software related inventions.

Parker v. Flook, 437 U.S. 584 (1978), was a 1978 United States Supreme Court decision that ruled that an invention that departs from the prior art only in its use of a mathematical algorithm is patent eligible only if there is some other "inventive concept in its application." The algorithm itself must be considered as if it were part of the prior art, and the claim must be considered as a whole. The exact quotation from the majority opinion is: "Respondent’s process is unpatentable under §101, not because it contains a mathematical algorithm as one component, but because once that algorithm is assumed to be within the prior art, the application, considered as a whole, contains no patentable invention." "The fact that the algorithm may not have actually been known previously and that, when taken in combination with other claim elements, it might produce an invention that is novel and nonobvious, plays no part in the analysis."

Gottschalk v. Benson, 409 U.S. 63 (1972), was a United States Supreme Court case in which the Court ruled that a process claim directed to a numerical algorithm, as such, was not patentable because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." That would be tantamount to allowing a patent on an abstract idea, contrary to precedent dating back to the middle of the 19th century. The ruling stated "Direct attempts to patent programs have been rejected [and] indirect attempts to obtain patents and avoid the rejection ... have confused the issue further and should not be permitted." The case was argued on October 16, 1972, and was decided November 20, 1972.

Freeman-Walter-Abele is a now outdated judicial test in United States patent law. It came from three decisions of the United States Court of Customs and Patent Appeals—In re Freeman, 573 F.2d 1237, In re Walter, 618 F.2d 758 ; and In re Abele, 684 F.2d 902 —which attempted to comply with then-recent decisions of the Supreme Court concerning software-related patent claims.

<i>In re Bilski</i>

In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385, was an en banc decision of the United States Court of Appeals for the Federal Circuit (CAFC) on the patenting of method claims, particularly business methods. The court affirmed the rejection of the patent claims involving a method of hedging risks in commodities trading, as non-patentable subject matter. Most importantly, the Court concluded, that machine-or-transformation test "was proper test to apply to determine patent-eligibility of process", and that the “useful, concrete and tangible result” of State Street Bank v. Signature Financial Group and AT&T Corp. v. Excel Communications, Inc. should no longer be relied upon.

Dann v. Johnston, 425 U.S. 219 (1976), is a decision of the United States Supreme Court on the patentability of a claim for a business method patent.

In United States patent law, the machine-or-transformation test is a test of patent eligibility under which a claim to a process qualifies for consideration if (1) the process is implemented by a particular machine in a non-conventional and non-trivial manner or (2) the process transforms an article from one state to another.

<i>In re Ferguson</i>

In re Ferguson, 558 F.3d 1359 is an early 2009 decision of the United States Court of Appeals for the Federal Circuit, affirming a rejection of business method claims by the United States Patent and Trademark Office (USPTO). One of the first post-Bilski decisions by a Federal Circuit panel, Ferguson confirms the breadth of the en banc Bilski opinion's rejection of the core holdings in State Street Bank & Trust Co. v. Signature Financial Group, Inc.

Bilski v. Kappos, 561 U.S. 593 (2010), was a case decided by the Supreme Court of the United States holding that the machine-or-transformation test is not the sole test for determining the patent eligibility of a process, but rather "a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101." In so doing, the Supreme Court affirmed the rejection of an application for a patent on a method of hedging losses in one segment of the energy industry by making investments in other segments of that industry, on the basis that the abstract investment strategy set forth in the application was not patentable subject matter.

Mayo v. Prometheus, 566 U.S. 66 (2012), was a case decided by the Supreme Court of the United States that unanimously held that claims directed to a method of giving a drug to a patient, measuring metabolites of that drug, and with a known threshold for efficacy in mind, deciding whether to increase or decrease the dosage of the drug, were not patent-eligible subject matter.

CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, is a United States Court of Appeals for the Federal Circuit case that disputed patent eligibility for the '154 patent, which describes a method and system for detecting fraud of credit card transactions through the internet. This court affirmed the decision of United States District Court for the Northern District of California which ruled that the patent is actually unpatentable.

Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), was a 2014 United States Supreme Court decision about patent eligibility of business method patents. The issue in the case was whether certain patent claims for a computer-implemented, electronic escrow service covered abstract ideas, which would make the claims ineligible for patent protection. The patents were held to be invalid, because the claims were drawn to an abstract idea, and implementing those claims on a computer was not enough to transform that abstract idea into patentable subject matter.

<i>In re Lowry</i>

In re Lowry, 32 F.3d 1579 was a 1994 decision of the United States Court of Appeals for the Federal Circuit on the patent eligibility of data structures. The decision, which reversed a PTO rejection of data structure claims, was followed by a significant change in PTO policy as to granting software related patents, a cessation of PTO appeals to the Supreme Court from reversals of PTO rejections of software patent applications, an increasing lenity at the Federal Circuit toward such patents and patent applications, and a great increase in the number of software patents issued by the PTO.

<i>In re Alappat</i>

In re Alappat, 33 F.3d 1526, along with In re Lowry and the State Street Bank case, form an important mid-to-late-1990s trilogy of Federal Circuit opinions because in these cases, that court changed course by abandoning the Freeman-Walter-Abele Test that it had previously used to determine patent eligibility of software patents and patent applications. The result was to open a floodgate of software and business-method patent applications, many or most of which later became invalid patents as a result of Supreme Court opinions in the early part of the following century in Bilski v. Kappos and Alice v. CLS Bank.

<i>In re Schrader</i>

In re Schrader, 22 F.3d 290 is a 1994 decision of the United States Court of Appeals for the Federal Circuit in which the court summarized and synthesized its precedents under the Freeman-Walter-Abele Test of patent eligibility. Under this test a key element is that the claimed invention is implemented with some type of hardware—that is, a particular machine. This was one of the last Federal Circuit decisions using that test.

Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, is a 2016 decision of the United States Court of Appeals for the Federal Circuit in which the court, for the second time since the United States Supreme Court decision in Alice Corp. v. CLS Bank upheld the patent–eligibility of software patent claims. The Federal Circuit reversed the district court's summary judgment ruling that all claims were patent–ineligible abstract ideas under Alice. Instead, the claims were directed to a specific improvement to the way computers operate, embodied in the claimed "self-referential table" for a database, which the relevant prior art did not contain.

<span class="mw-page-title-main">Patentable subject matter in the United States</span>

Patentable subject matter in the United States is governed by 35 U.S.C. 101. The current patentable subject matter practice in the U.S. is very different from the corresponding practices by WIPO/Patent Cooperation Treaty and by the European Patent Office, and it is considered to be broader in general.

References

  1. ↑ AT&T Corp. v. Excel Communications, Inc., 172F.3d1352 (Fed. Cir.1999).
  2. 1 2 3 Doherty, Gerard P., Lanzillotti, Nicholas J. and Paulus, Conrad J. Call, AT&T Bell Laboratories, 'Message Recording for Telephone Systems', U.S. Patent No. 5,333,184 Archived June 12, 2011, at the Wayback Machine , (1992)
  3. 1 2 State Street Bank v. Signature Financial Group , 149F.3d1368 , 1374-75(Fed. Cir.1998).
  4. ↑ Bilski v. Kappos , 561 U.S. 593 (2010).
  5. ↑ AT&T Corp. v. Excel Communications, Inc., No. CIV.A.96-434-SLR, 1998 WL 175878 (D. Del. Mar. 27, 1998).
  6. ↑ Excel Communications Receives Summary Judgment in AT&T Patent Case, Business Wire Article (Mar. 1998), HighBeam Research (Sep. 2010)
  7. ↑ See Boolean algebra.
  8. ↑ Diagrams and further explanation are presented in the Wikipedia article Logical conjunction.
  9. ↑ Diamond v. Diehr , 450 U.S. 175 (1981).
  10. ↑ In re Alappat , 33F.3d1526 (Fed. Cir.1994).
  11. ↑ Bilski v. Kappos ; Mayo Collaborative Services v. Prometheus Laboratories, Inc. ; Alice Corp. v. CLS Bank International .
  12. ↑ In a concurring opinion in Bilski v. Kappos , Justice Breyer pointed out that the Court was unanimous in regarding this body of precedent as overruled.

See more

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.