The US Court of Appeals for the Federal Circuit overturned a district court dismissal of a patent case for errors in analyzing the claims’ patent eligibility under Alice. The Court found that regardless of whether the claimed invention was abstract under step 1, the invention claimed specific improvements rendering it patent eligible under step 2. Cooperative Entertainment, Inc. v. Kollective Technology, Inc., Case No. 21-2167 (Fed. Cir. Sept. 28, 2022) (Moore, C.J.; Lourie, Stark, JJ.)

Cooperative Entertainment sued Kollective Technology for infringement of several claims of Cooperative’s patent directed to structuring a peer-to-peer (P2P) dynamic network for distributing large files. After Kollective filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6) arguing that all of the patent claims were ineligible under 35 U.S.C. § 101, Cooperative filed an amended complaint. Kollective refiled its motion to dismiss, and the district court granted the motion, holding the challenged claims ineligible under § 101. Cooperative appealed.

The patent relates to systems and methods of structuring a P2P dynamic network for distributing large files, specifically videos and video games. The patent specification explains that in prior art systems, video streaming was controlled by content distribution networks (CDNs), with content “distributed directly from the CDN server originating the content.” In contrast, the challenged claims recite methods and systems for a network in which content distribution occurs “outside controlled networks and/or [CDNs]” (emphasis added), and therefore outside a “static network of controlled systems.” Dynamic P2P networks comprising “peer nodes,” which consume the same content contemporaneously, transmit content directly to each other instead of receiving content from the CDN. The claimed P2P networks use “content segmentation” to segment a video file into smaller clips and distribute it piecemeal. Viewers can obtain individual segments as needed, preferably from other viewers. The disclosed segmentation techniques include “CDN address resolution, trace route to CDN and the P2P server manager, dynamic feedback from peers reporting traffic rates between individual peer and its neighbors, round-robin, other server side scheduling/resource allocation techniques, and combinations thereof” (emphasis in original).

The Federal Circuit applied the two-step Alice framework: (1) determining whether the claim is “directed to” a “patent-ineligible concept,” such as an abstract idea, and if it is, (2) examining “the elements of the claim to determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.” Step 2 examines whether the claim elements, individually and as an ordered combination, contain an inventive concept that more than merely implements an abstract idea using “well-understood, routine, [and] conventional activities previously known to the industry.”

Under Alice step 1, the district court had held that the “focus of the [] patent” is the abstract idea of “the preparation and transmission of content to peers through a computer network.” The Federal Circuit disagreed, concluding that regardless of whether the invention could be reduced to an abstract concept, under step 2 the claims contained several alleged inventive concepts that the specification touted as specific improvements in the distribution of data compared to the prior art. Since the amended complaint plausibly alleged these inventive concepts, the Court found the district court’s holding on ineligibility to be erroneous. In particular, the Court identified at least two inventive concepts that were supported by the specification and discussed as beneficial in the amended complaint:

• The required dynamic P2P network wherein multiple peer nodes consume the same content and are configured to communicate outside the CDNs

• The requirement that trace routes be used in content segmentation.

Kollective attempted to argue that the patent was not inventive because P2P networks and CDNs are conventional. However, the Federal Circuit rebuffed the argument as missing the point, and cited its past precedent (e.g., Thales quoting Enfish), reiterating that “useful improvements to computer networks are patentable regardless of whether the network is comprised of standard computing equipment.” The Court also found it significant that Kollective did not argue that using trace routes to segment content in the claimed dynamic P2P network structure is not inventive and relied on statements in the record from the complaint and patent specification that the segmentation limitation was not well-understood, routine or conventional. As in BASCOM, the Court found sufficient evidence in the claim language, patent specification and the amended complaint of technical improvements over prior art that should have been weighed in favor of Cooperative. In contrast to the district court, the Federal Circuit stated that while supporting evidence (e.g., an expert declaration or research articles) would have been helpful, such evidence is not always necessary to defeat a Rule 12 motion.

The Federal Circuit further commented that the district court should have denied the motion to dismiss because Cooperative’s allegations in the complaint regarding the claims and written description created a plausible factual issue regarding the inventiveness of the dynamic P2P configuration. Under Berkheimer, such a material dispute of fact regarding inventiveness created by alleged improvements, efficiency, functionality or costs also precludes summary judgment.

The Federal Circuit remanded for further proceedings.

Practice Note: Whether for a patent application, claims or complaint, consider the state of the art and whether to explicitly memorialize or refute any advancements presented by the inventive technology.