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Forecast Unfavorable for Inventory Software Patent

Ever since the Supreme Court’s decision in Alice Corp. v. CLS Bank shifted the contours of patent-eligible subject matter, district courts have wielded the two-part test set forth in that decision to dispatch scores of business method patents as being directed to unpatentable abstract ideas.  In a recent example, the Massachusetts district court invalidated a patent relating to inventory forecasting software using the Alice test.

Software, Technology

In November 2015, Plaintiff Smart Software sued defendant PlanningEdge, alleging that PlanningEdge’s forecasting software infringed U.S. Patent No. 6,205,431 (the “’431 patent”), owned by Smart Software and directed to a system and method for forecasting intermittent demand to help manage inventory. Shortly thereafter, PlanningEdge filed a motion to dismiss arguing that the ’431 patent claimed patent-ineligible subject matter under § 101 of the Patent Act.

The only claims at issue were three independent claims: Claim 1 (“computerized method”), Claim 10 (“program product” with means-plus-function elements), and Claim 17 (“computer system”). The parties disputed two issues: (1) whether claim construction of Claim 10 is necessary to decide the motion to dismiss due to its means-plus-function limitations, and (2) whether the patent is invalid under the Alice jurisprudence.

On the first issue, although resolving claim construction disputes is often desirable prior to undertaking a § 101 analysis, the Court pointed to guidance from the Federal Circuit that claim construction is “not an inviolable prerequisite to a validity determination under §101.” Importantly, Judge Saris noted that the mere fact that Claim 10 is a means-plus-function claim is not enough by itself to deny the motion to dismiss.  Because the plaintiff failed to offer any specific claim construction issues that would affect the § 101 analysis, the Court proceeded to examine validity of the ’431 patent claims using the two-part Alice test.

Although the plaintiff argued that the ’431 patent “merely involves, but is not directed to, an abstract concept,” the Court disagreed. In deciding step one of Alice, Judge Saris determined that that the claims were directed to the abstract idea of “forecasting intermitted demand,” which is “analogous to the risk hedging in Bilski and intermediated settlement in Alice,” which were deemed patent ineligible concepts by the Supreme Court.

Under step two of Alice, the plaintiff’s argument that the patent “applies a statistical method in a novel manner to solve a persistent problem within the field of inventory management” did not convince the Court that the asserted claims were patent eligible.  Instead, Judge Saris found that the ’431 patent claims “involve a generic computer that performs calculations based on standard statistical methods that could be performed by a human.”  Judge Saris deftly distinguished the two cases relied on by the plaintiff—Diamond v. Diehr and DDR Holdings v. Hotels.com—by concluding that the claims at issue neither “transform an article into a different state or thing” (as required by Diehr) nor do they “purport to improve the functioning of the computer itself” (as required by DDR).  As such, the ’431 patent does not contain an inventive concept sufficient to confer patent eligibility to the otherwise abstract idea embodied in the claims.

Lastly, Judge Saris concluded that the means-plus-function elements contained in Claim 10 had no effect on her analysis, primarily because the plaintiff simply failed to identify any structures in the specification that would meaningfully limit the claim and thus render the claim patent-eligible.

In light of the above, the Court granted PlanningEdge’s motion to dismiss. The Court’s decision in this case is a textbook example of how such motions brought under § 101 are resolved.  As such, plaintiffs should closely examine their to-be-asserted patent claims—even means-plus-function claims—to forecast a potential risk of invalidation under Alice prior to filing suit.  Otherwise, a lack of planning may result in the unexpected surprise of an empty patent.

The case is Smart Software, Inc. v. PlanningEdge, LLC, Civil Action No. 15-13814-PBS (D. Mass. June 16, 2016), before Chief Judge Patti B. Saris.   A copy of the opinion can be found here.

© 2019 Proskauer Rose LLP.

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About this Author

Patrick J. Niedermeier, Proskauer, Litigation, Intellectual Property
Patent Counsel

Patrick J. Niedermeier is an attorney in the Litigation Department and Intellectual Property Group. Patrick assists clients in obtaining and enforcing intellectual property rights both in the U.S. and abroad. He represents corporate clients throughout the complex patent litigation process, including pre-suit investigations and client counseling; negotiating discovery disputes; drafting claim construction, summary judgment, expert, and pre- and post-trial briefs; assisting with trial preparation; and participating at trial. He also has assisted with preparing appellate...

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