3 Challenges For Internet-Of-Things Patents

 

Law360, New York (June 10, 2016, 11:49 AM EDT) --  The "internet of things" (IoT), sometimes known as the "intelligence of things," is a network of interconnected physical objects, each embedded with sensors that collect and upload data to the internet for analysis or control. Examples include IoT-enabled smart homes, smart-city traffic systems, and smart waste-management systems.

The IoT will likely become the battlefront for the next industry patent war because of the amount of money at stake and broad competitive field. For example, some analysts predict the IoT market will grow from nearly $2 trillion to $7 trillion between 2013 and 2020. Additionally, the IoT spans many different industries and players with many competing technologies and standards emerging. While the usual suspects like Google Inc., Microsoft Corp., IBM Corp. andQualcomm Inc., among others, are investing heavily into IoT technology, a clear leader has yet to emerge. Further, many startups are entering the IoT space with their own innovative solutions. Virtually all players, large and small, have built, or are building, big patent stockpiles. These factors will likely set off a “perfect storm” of patent disputes in the IoT space.

With rapid growth comes new challenges for companies trying to protect, enforce, and license their patent rights, especially so for the IoT. Three issues of particular concern for IoT inventions include (1) divided infringement, (2) subject matter eligibility, and (3) claim scope.

Divided Infringement

As its ultimate goal, the IoT seeks to create new solutions and value for consumers by connecting disparate devices in creative ways. For example, in an IoT smart home, entertainment systems, lighting, security systems, appliances, climate control, and power meters may work together to optimize the home environment and reduce power consumption. An IoT patent covering these technologies might require these devices to work in some innovative way. In the real world, each of these devices might be made, sold, or used by different entities. This leads to an issue of divided infringement and potentially poses a problem for the patentee trying to prove direct infringement.

As any good patent attorney knows, one way that companies can mitigate or avoid the divided-infringement issue is to draft patent claims from the perspective of only one device in the IoT system. These claims would capture the entity that makes, uses, or sells that device. In the smart-home example above, that device might be a novel data-management control system or server on the internet that receives data from the different home IoT devices, analyzes it, and provides instructions to the devices to control the home environment (i.e., the “brain”).

Depending on the IoT invention, however, it may not be possible to draft a patentable claim focusing on just one device. For example, such a claim might be anticipated or obviated by prior art, or it may have other patentability issues. For these types of inventions, a company might be able to obtain only a patent on the way that a user, such as a customer, “controls the system and obtains benefit from it.” Centillion Data Sys. LLC. v. Qwest Communs. Int’l Inc., 631 F.3d 1279, 1285 (Fed. Cir. 2011) (finding that a customer can directly infringe a system claim that required both a “front-end” system maintained by the customer and a “back-end” system maintained by a service provider). After establishing that the user directly infringes the patent, the patentee can then try to assert infringement against another entity — such as a service provider — under a theory of induced infringement, i.e., where the service provider is liable for inducing its customers to directly infringe the patent.

Subject Matter Eligibility

Subject matter eligibility might stand in the way of IoT patents because many IoT inventions are computer related. As we know, a computer-related invention is not patent-eligible if (1) it is directed to an “abstract idea” and (2) does not add “significantly more” to that abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). In the Alice case, the Court found that a computer-implemented method for mitigating settlement risk was patent-ineligible because it “add[ed] nothing of substance to the underlying abstract idea [of mitigating settlement risk].” Id. at 2360. As a result of this decision, courts and the U.S. Patent and Trademark Office have increasingly found computer-implemented inventions ineligible for failing to add “significantly more” to a claimed abstract idea.

Alice poses a hurdle to IoT patents because some techniques or uses of IoT inventions can, at a high level, seem abstract. For example, one might view as abstract the notions of collecting data from, and controlling settings of, devices in a smart home, or of collecting data from self-driving vehicles and other transportation devices to control traffic flow. But this does not mean that these types of inventions are necessarily ineligible for patenting because, “[a]t some level, all inventions ... embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Alice at 2354.

For instance, following Alice, the Federal Circuit found patent eligibility in two cases involving computer-related inventions. Companies might use them to try to show, at step one of the Alice test, that its IoT invention is patent-eligible and that step two is unnecessary. In the first case, DDR Holdings LLC v. Hotels.com LP, the Federal Circuit found that patent claims to a system for generating composite webpages were not directed to an abstract idea because the claimed invention was “necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” 773 F.3d 1245, 1265 (Fed. Cir. 2014).

In the second case, the Federal Circuit found that patent claims directed to a relational logical model for a database were not abstract because “they are directed to a specific improvement to the way computers operate, embodied in the self-referential table.” Enfish LLC v. Microsoft Corp. et al., No. 15-1244, slip op. at 12 (Fed. Cir. 2016). The Federal Circuit explained that “[it] do[es] not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two.” Id. at 11.

By demonstrating that an IoT invention is “rooted in computer technology” or “directed to a specific improvement to the way computers operate,” patentees may be able show at the outset of an Alice analysis that the invention is not abstract and thus patent-eligible. To support the validity of their IoT patents, companies should consider preparing their patents in a way that highlights the technological root of the invention or the improvement the invention makes to existing computing technology.

Claim Scope

Another challenge for IoT patentees is claim scope. As discussed above, IoT systems are often heterogeneous, containing different types of devices that work together to accomplish a particular task. An IoT traffic-management system may include interconnected vehicles, transportation infrastructure (e.g., traffic signals and signs), buildings, parking lots, gas stations, service stations, etc. Patentees will want their IoT patent claims to be broad in the sense that they do not exclude from infringement a system containing a particular type of node or entity that practices the invention.

But if the elements of the claim are too broad, they may be construed as means-plus-function limitations and limited to only those structures — i.e., the “means” — disclosed in the patent specification and their equivalents. 35 U.S.C. § 112(f). If the patent specification is limited in its examples for the claimed structure, a narrow construction may result and an accused system may escape infringement. Depending on the type of invention, if the specification’s description of the “means” is deficient, the claim may even be found indefinite and invalid.

For IoT patents, the breadth of potential devices poses a challenge. There used to be a strong presumption against interpreting a claim term as a means-plus-function term unless it expressly used the word “means.” Inventio AG v. Thyssenkrupp Elevator Americas Corp., 649 F. 3d. 1350, 1360 (Fed. Cir. 2011). But last year the Federal Circuit changed the strong presumption to a more inclusive “standard [of] whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.” Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed. Cir. 2015) (en banc in relevant part). Under this relaxed standard, more terms qualify as means-plus-function limitations than under the old regime.

In light of this change in the law, practitioners drafting IoT patent applications should provide sufficient description and examples for the different claim elements that could potentially be viewed as means-plus-function limitations. That way, if the elements are construed as means-plus-function limitations, the claims will not be found indefinite and invalid. Rather, the constructions will be as broad as possible and capture different types of systems practicing the invention.

Conclusion

IoT is already a hot area. It will only get hotter. Companies working in this space need to ensure that their IoT patents are as strong as possible to provide the best protection for their valuable intellectual property. This includes devoting the time and expense to address the three areas discussed above.

—By James Stein and Kenie Ho, Finnegan Henderson Farabow Garrett & Dunner LLP 

James Stein is an associate in Finnegan's Atlanta office. Kenie Ho is a partner in the firm's Washington, D.C., office.