Echoes of Acacia: Dismissed Patent Lawsuit has a Familiar Ring

WASHINGTON – In a brief order which offered no explanation for the court’s judgment, the U.S. Court of Appeals for the Federal Circuit affirmed today the ruling of a Florida district court which dismissed a patent lawsuit filed by a company called Digital Media Technologies Inc. (“DMT”) against Netflix, Amazon and Hulu.

For those who recall a patent lawsuit filed by a company called Acacia Media Technologies against a variety of adult industry defendants, some of what I’m about to relate here may ring familiar.

In both instances, the plaintiffs alleged the defendants had infringed on patents built upon rather vague claims. In Acacia’s case, the company claimed its portfolio of patents covered a spate of digital media transmission technologies, including the streaming of video and audio over the internet. DMT’s claims pertain to a “Multimedia Network System with Content Importation, Content Exportation, and Integrated Content Management,” to quote from the patent itself.

While the appellate court didn’t remark on why it upheld the ruling of District Court Judge Mark E. Walker issued in July 2017, at the time he issued the decision, Walker had plenty to say about why he granted the defendants’ motion to dismiss.

“One could say this case is about a patent that claims too much and a legal test that provides too little,” Walker wrote in a footnote in his opinion – a line which underscored the judge’s frustration with both the vagueness of DMT’s claims and the legal test called for under the relevant legal precedent.

The legal test at issue is called the “Alice test,” a two-step process for evaluating patent claims. As Walker put it in his 2017 ruling, in the first step of the Alice test, “the reviewing court must ‘determine whether the claims at issue are directed to [an abstract idea]’… In other words, the court must look at the ‘focus of the claimed advance over the prior art’ to determine if the claim’s ‘character as a whole’ is directed to [an abstract idea].”

In step two of the Alice test, the court “must examine 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… If the patent claims are directed to an abstract idea at step one and contain no inventive concept at step two, then the patent is ineligible for protection.”

In applying the steps to DMT’s claims, Walker found DMT’s patent ineligible for protection, noting the weakness of each aspect of the claims along the way.

“Considered individually, each step in the ‘764 patent is well-understood, routine, and conventional,” Walker wrote. “For instance, it is nothing new for servers and clients to send requests to each other… Similarly, it is not inventive to require authentications to access content. Nor is it any more inventive to incorporate asymmetric/public-key encryption into an authentication system. Finally, even the application of licenses or rules to control content usage is not novel. Accordingly, the only real issue is whether the ordered combination of claim elements supplies an inventive concept.”

When he explored the “only real issue” identified above, Walker held “even that analysis does not save the ‘764 patent.”

“The only possible ‘non-conventional and non-generic arrangement’ in the ‘764 patent is the combination of asymmetric encryption with content licenses,” Walker wrote. “But combining those two concepts is not new. Indeed, the ‘764 patent references two earlier patents that both consider combining asymmetric encryption with licenses to enforce usage restrictions.”

The fact the Federal Circuit has now upheld Walker’s ruling will likely come as no surprise to Walker himself, considering the conclusion of his decision quotes the Federal Circuit in a way which was squarely on-point in the case.

“In deciding whether a patent claims an abstract idea, the Federal Circuit has distinguished between claims that ‘merely recite the performance of some business practice known from the pre-Internet world along with the requirement to perform it on the Internet’ and claims that are ‘necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks,” Walker wrote. “Here, the ‘764 patent seeks to solve a problem that has existed for many years… Indeed, as long as content has existed, people have sought to secure who may access it and how it may be used.”

Walker’s final observation reflected his belief that to uphold patent clams like those DMT sought to assert was counter to the original purpose of patent law.

“Finally, this Court notes that its ultimate conclusion conforms with the underlying principles of patent law,” Walker wrote. “The Constitution makes plain that the purpose of granting patents is ‘[t]o promote the Progress of Science and useful Arts.’ However, the Supreme Court has explained that ‘monopolization of [abstract ideas] through the grant of a patent might tend to impede innovation more than it would tend to promote it.’ Accordingly, the Alice test is designed to ensure that a patent is ‘more than a drafting effort designed to monopolize [an abstract idea] itself.’ Ultimately, this Court is concerned that the ‘764 patent would undermine that goal by ‘improperly tying up the future use of’ the invention it seeks to claim.”

So long as courts continue to apply Walker’s kind of legal reasoning to patent claims, they will serve as a bulwark against companies which assert questionable patent claims – and who use those claims as a bludgeon in seeking quick settlements from their litigation targets, as Acacia did with quite a few adult industry defendants, back in the day.

Defending a patent lawsuit isn’t cheap, though, even when the trial court dismisses the complaint relatively early in the process. Hopefully, rulings like Walker’s – and the appellate courts’ upholding thereof – will serve as a deterrent against such cases being filed in the first place.

It is not yet clear whether DMT will seek further reconsideration of its claims against Neftlix and the other defendants.