Exceptions to Patent-Eligibility Requirements Create Uncertainty in the Value of Patents

The Arcade 2.0™: Video Game Law Blog

Ronika Carter
Tuesday, 10 January 2017

You played your cards right, so to speak. After developing your cutting-edge technology, you took the precaution of filing for, and obtaining a patent to protect your asset. Initially, everything seemed to be going according to plan, but then someone decided to infringe upon your company's patented technology. While the infringement is somewhat unsettling, you don't lose any sleep over it because you invested the resources necessary to obtain legal protection for your work, but what would you do if you later discovered that your technology was deemed ineligible for patent protection, and your patents were thus essentially valueless?

The aforementioned scenario is not as far-fetched as it may seem. Generally speaking, USPTO-issued patents afford significant protection for inventions, but occasionally, courts have rendered patents essentially valueless because of the nature of the protected technology. Consequently, it behooves you, the patent-owner, to become knowledgeable about the scope of the Patent Act and its requirements, to ensure that your work can be adequately protected.

When The Invention Isn't Enough: The Ineligibility of Abstract Ideas

In Alice Corp. v. CLS Bank, the United States Supreme Court held that under section 101 of the Patent Act, abstract ideas are patent-ineligible. Using this rationale, the Supreme Court deemed patent-ineligible, a computer system designed to facilitate the transfer of monetary commitments, as such concepts are essential and longstanding in our economic system.

In late 2016, a Nevada federal judge cited the Alice Corp. ruling in the case of CG Technology Development LLC et al v. DraftKings Inc. In that case, DraftKings, Inc. was accused of infringing upon several patents owned by CG Technology Development, including patents designed to protect the use of a computer used to perform abstract functions which could have been achieved in the mind of any individual with reasonable intellectual capabilities.

The Big Deal: The Effect of Patent-Ineligible Abstract Ideas on Your Bottom Line

These cases teach us many lessons, but of prime importance is understanding that the plaintiffs had been issued several patents that were essentially rendered valueless by these rulings. In other words, just because a patent has been issued, doesn't necessarily mean that your technology is protected. Under section 101 of the Patent Act, the following concepts are patent ineligible:

  • Laws of Nature
  • Natural Phenomena
  • Abstract Ideas

Using this framework, courts seek to determine whether the technology simply uses the basic building blocks of human ingenuity, or transforms those building blocks into something more substantive. This analysis affects your bottom line, because it has the potential to significantly decrease the value of some of your existing patents, thus reducing the value of the assets on your balance sheet.

Although you may not be able to definitively predict the way a court will rule on the facts of your case, you can become knowledgeable about the nuances of patent-eligibility, to better prepare yourself for any potential challenges in the future. If you believe the eligibility of your patented technology may be challenged, or if you would like to receive more information about the ways in which we can work with you to develop a holistic strategy to protect your intellectual property, please Contact Us.



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Watson LLP is a United States based law firm practicing in the areas of intellectual property, entertainment law, litigation, government investigations, and eDiscovery. The firm has offices in Atlanta, Los Angeles, New York, and Orlando. For more information, please visit www.watsonllp.com.

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