International Internet Technologies, LLC and Red Rock Investments, LLC v. Sweepstakes Patent Company, LLC

In two related decisions, the Patent Trial and Appeal Board (PTAB or Board) determined that patents directed to a personal computer interactive lottery/casino type game that allows players to purchase game tickets in the form of data storage media were eligible for covered business method (CBM) review under § 18 of the America Invents Act (AIA) and were more likely than not directed to patent ineligible subject matter under 35 U.S.C. §101. International Internet Technologies, LLC and Red Rock Investments, LLC v. Sweepstakes Patent Company, LLC, CBM2015-00105 (PTAB, July 29, 2015) (Pollock, APJ); CBM 2015-00106 (PTAB, July 29, 2015) (Ward, APJ).

The challenged patents are directed to “administering, operating and playing a game in which a player acquires a chance to win and the outcome of that chance is displayed in an interesting, fun, and exciting fashion.” In the game, a player acquires a gaming piece with a predetermined “destiny” code having data (unrecognizable to the player) indicating whether the player will win or lose the game. The code is entered by the player into a computer processor, and the processor then presents a game of chance (e.g., lottery tickets, a hand of cards, etc.) for interactive play with the user. Although the user inputs game parameters to the computer processor, the processor actually controls the outcome of the game based upon the data concealed in the destiny code.

Since the subject patents are expired, rather than affording the claims their broadest interpretation in light of the specification, as in the case of an unexpired patent, the Board applied a Phillips construction, by giving claim terms their ordinary and customary meaning as would be understood by a person of ordinary skill in the art at the time of the invention.

The Board then proceeded to determine whether the patents were eligible for CBM review. To be eligible for CBM review, the patent must be used in the operation of a “financial product or service” and not qualify for the “technological invention” exception. (See “Covered Business Patents Jurisdiction Continues to Develop,” IP Update, Vol. 18, No. 7.) A challenged patent need have only one claim directed to a covered business method for all of the patent’s claims to be eligible for review. The Board determined that the patents in issue here satisfied the “financial product or service requirement” because, as read in light of the specification, each contained at least one claim applicable to the situation where players would pay to acquire a game piece and receive a monetary payout when the computer displayed a winning ticket. The Board, in reaching its determination, considered the legislative intent and history of the AIA’s definition of a “covered business method patent” and a recent Federal Circuit decision in Versata Dev. Grp. v. SAP Am (IP Update, Vol. 18, No. 8), explaining that covered business method patents may “[cover] a wide range of finance-related activities” and are “not limited to products and services of only the financial industry”

The Board also determined that the asserted patents were not directed to a “technological invention” since the patents recite a generic computer system and processor to implement a well-known game of chance, and according to the specification, address non-technical problems associated with traditional lotteries.

The Board then turned to the question of subject matter eligibility by following the two-step analysis applied by the Supreme Court in Alice (IP Update, Vol. 17, No. 7), namely, whether the patents were drawn to a patent-ineligible concept, such as an abstract idea, and if so, whether the claims recited an “inventive concept” sufficient to ensure that the patent claims amounted to significantly more than the abstract idea. In considering the first step, the Board relied upon historical examples in which lotteries had been used for raising money, to determine that the patents were directed to the abstract concept of using an amusing game to reveal the results of a lottery. Next, the Board determined that the patents likely did not contain an inventive concept, and likened the claimed steps attributed to the processor as analogous to actions performed by a carnival pitchman. The Board therefore preliminarily concluded that the patent claims were more likely than not directed to patent ineligible subject matter under §101 and instituted CBM review.

Practice Note: A CBM patent may only to be challenged under the CBM review program by a party sued for, or threatened with, infringement. Very few of the CBM trials instituted to date have resulted in a finding that all of the challenged claims remained patentable or patent eligible. Thus careful consideration of such a risk should be given by patent owners prior to asserting a patent likely subject to CBM review.