CAFC Finds Multiple Beteiro, LLC Patents Ineligible under 35 U.S.C. §101

A recent decision of the U.S. Court of Appeals for the Federal Circuit (CAFC) illustrates the CAFC’s limits of patent eligible subject matter under 35 U.S.C. § 101. Beteiro, LLC vs DraftKings, Inc.[1] The present case also reminds applicants and practitioners of the importance of ensuring that the claims satisfy the Alice/Mayo test of subject matter eligibility when disclosing and claiming technologies incorporating abstract ideas to comply with requirements therein without relying on inadequately supported recitations in the claims that relate to mere physicality. It is also important to be mindful of a very wide degree of variability in applying the test that still prevails. 

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Beteiro, LLC owns four patents that share a common specification and the title “Apparatus and Method for Facilitating Gaming Activity and/or Gambling Activity.” Beteiro’s patents disclose an invention that “facilitate[s] gaming activity and/or gambling activity at a gaming venue remote from the user’s or individual’s physical location” such that the user can “participate in live gaming activity and/or gambling activity via a user communication device” even if the user is not in the same location as the gaming venue.”

A claim that all parties agreed was representative for the invention at issue recited a computer-implemented method defined in part by “receiving, with [a] computer, a bet message transmitted from [a] first communication device or from a second communication device, wherein the second communication device is associated with [an] individual, and further wherein the first communication device or the second communication device comprises a global positioning device….”

Beteiro filed at least six patent infringement cases in the U.S. District Court for the District of New Jersey, asserting that DraftKings infringed Beteiro’s patents. Beteiro appealed to the CAFC after the district court decided that Beteiro’s patent claims were directed to ineligible subject matter under Section 101, granted Appellee’s (that is, DraftKings’) motions to dismiss the suits, and denied Beteiro’s requests for reconsideration.

The CAFC acknowledged that, during prosecution of some of the asserted patents, the U.S. Patent and Trademark Office examiner expressly evaluated the eligibility of the claims under 35 U.S.C. § 101 and determined that they were eligible based on the recitation of a machine or processor (i.e., the global positioning device). However, the CAFC critically reviewed the patent issues governed by 35 U.S.C. § 101 in accordance with Federal Circuit precedent and agreed with the district court’s use of the now well-known and familiar Alice/Mayo test[2], which found that Beteiro’s patent claims are directed to abstract ideas and do not include an inventive concept.

When applying the Alice/Mayo test at step 1 (“’whether the claims at issue are directed to [a] patent-ineligible concept’ such as an abstract idea”), the CAFC found that Beteiro’s claims are directed to “exchanging information concerning a bet and allowing or disallowing the bet based on where the user is located.” The CAFC held that Beteiro’s claims include several features that are well-settled indicators of abstractness. For example, the CAFC indicated that the claims at issue broadly recite generic steps that have frequently been held to be abstract, such as detecting information, generating and transmitting a notification based on the information, receiving a message (bet request), determining (whether the bet is allowed based on location data), and processing information (allowing or disallowing the bet).  The CAFC noted that such result-focused functional steps, while merely claiming a computer receiving and sending information over a network, constituted abstract concepts.

In then applying an additional lens of scrutiny to step 1 of the Alice/Mayo test, the CAFC determined that "broadly analogous" claims addressed in other cases, including "those involving methods of providing particularized information to individuals based on their locations," clearly fall within the definition of "abstract."  

Additionally, the CAFC pointed out that the district court drew a parallel with “the actions of a teller at a casino that straddled state lines, who ‘had to ensure patrons were on the Nevada side of the building . . . before accepting a bet.’” Thus, the CAFC similarly affirmed that the claimed method involved an ordinary, fundamental, everyday practice or “economic activity” to which Beteiro’s claimed technology presumably added no appreciable level of sophistication. 

Beteiro had disputed the district court’s characterization of an "abstract idea" by arguing that "patent claims may be non-abstract at Alice/Mayo step one if the focus of the claimed advance is on an improvement in computer technologies, rather than the mere use of computers.” However, the CAFC agreed with the district court's characterization that Beteiro indeed failed to transcend "the mere use of computers as tools" and did not "claim any improvement in the computer-related technology itself."

The CAFC then reviewed the district court's analysis of step two of the Alice/Mayo test (i.e., whether “the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application").   The CAFC agreed with the district court that "the representative claim failed to provide an inventive concept because it achieved the abstract steps 'using several generic computers...'."

In this connection, the district court had deemed the claimed "global positioning device" (GPS) to be a “generic computer.” Beteiro contended that the inclusion of a GPS on a mobile phone did not amount to conventional technology in 2002, the earliest effective filing date of the four asserted patents. However, the CAFC was unconvinced in light of what they deemed an insubstantial discussion of such technology in the asserted patents, where "only 15 lines out of a specification that runs to no less than 98 columns are addressed to what Beteiro now insists is unconventional technology," involving “nothing more than conventional, routine, and well-understood use of GPS." 

Furthermore, the CAFC determined that “a patent examiner’s consideration of Section 101 issues does not ‘in any way shield the patent’s claims from Article III review for patent eligibility.’” Additionally, they deemed the examiner to have “applied pre-Alice caselaw… and did not distinguish our many post-Alice cases holding that the ‘physicality’ of what is claimed ‘is not by itself enough to exempt the claims from being directed to an abstract idea’.” In sum, the CAFC determined that Beteiro’s asserted claims amounted to “nothing more than the practice of an abstract idea using conventional (even as of 2002) computer equipment, including GPS on a mobile phone.”

Among some key takeaways that can be derived, the CAFC’s classification of GPS as a “generic computer” and of geolocation as a “real world” activity may prove surprising.  Certainly, it may not have been fully intuitive for Beteiro’s representatives to foresee this outcome as of the earliest effective filing date (i.e., May 31, 2002) of the four asserted patents. However, in committing no more than “15 lines out of a specification” to a discussion of supportive GPS technology, a more nuanced discussion of its integration with other key features still may have provided a stronger shield against future attempts to reject or invalidate the claims.  Thus, current practitioners are now reminded to be at least as vigilant in drafting an application.

The present case also reminds us that an individual Examiner’s approach to applying the Alice/Mayo test for Section 101 issues may well be unpredictable and seemingly arbitrary, even offering a “false dawn” upon allowance that may provide no reliable assurance of a litigation-proof patent.  Notably, it was only at the allowance stage in the ‘920 patent, and only shortly after the decision in Alice, that an examiner-initiated interview resulted in amendments to independent claims to recite aspects of a GPS.  Here, its incorporation into a cohesive system of interdependent features was clearly viewed by the examiner as amounting to “significantly more.”  Yet both the district court and CAFC unforeseeably took another view.

In this vein, there does remain a high level of inconsistency in the CAFC’s conclusions, and between the CAFC and examiners, over what is interpreted as “patent eligible subject matter” among apparently similar or analogous cases and based on previously held understandings of the Alice/Mayo test. For example, based on prior understanding of the Alice/Mayo test, a practitioner may have assumed that the CAFC’s conclusion would fall in line with the examiner’s conclusion in Beteiro’s case. However, the CAFC clearly diverged from the examiner by assessing the GPS feature in isolation and not in the greater context of each claim.  Thus, Beteiro’s case reminds us that certain claimed features may still be viewed in isolation when the Alice/Mayo test is applied rather than read with the claim as a whole.  

In that connection, the present case also reminds the reader of continually shifting trends in assessing “physicality” in a claim in applying the Alice/Mayo test.  Put another way, mere “physicality” inherent in a claim, such as the mere recitation of GPS technology, may well be insufficient if care is not taken to ensure that such “physicality” meets the requirement for amounting to something “significantly more” at least via thorough support in the specification. Such feature(s), indeed, may be deemed “generic” without a clearer description or appreciation of its impact on other features in the claim.

In conclusion, the present case aptly reminds practitioners of continually shifting trends both in patent examiners’ approaches to Section 101 eligibility (regardless of specific guidance on the subject) and in CAFC decisions relating to Section 101. Thus, it is always best to draft a specification and claims that offer a heightened likelihood of success among a large cohort of examiners and judicial panels. This can amount to erring on the side of caution via detailed descriptions of any supportive components that a highly discerning examiner or judge might deem “generic” or “merely physical,” and fully clarifying how such components integrate and interact with those considered “novel” or “inventive.” Thus, such a strongly constructed “shield” from the outset would represent the applicant’s safest bet to reduce a likelihood of future patent invalidation.