The Software IP Report

NantWorks, LLC v. Niantic, Inc.: Reconciling Transactions Between Players of an Online Video Game is not Patent-Eligible

In Nantworks v Niantic., the Northern District of California held that peer-to-peer online transaction reconciliation that uses a physical location of one of the participants is an abstract idea that is not patent-eligible subject matter under 35 U.S.C. § 101. No. 20-cv-06262 (N.D. Cal. Jan. 4, 2021).

Plaintiff NantWorks asserted U.S. Patent No. 10,614,477 against Niantic. The ‘477 patent is directed to reconciling transactions between two players of a computer-based video game based on the first player’s physical location. Niantic’s Pokemon Go and Harry Potter: Wizards Unite augmented reality mobile games allow for player-to-player exchange of in-game currency and items, and NantWorks alleged that this exchange feature infringed claim 20 of the ‘477 patent:

A reconciliation system, comprising:

at least one processor communicatively coupled with at least one memory storing instructions that, when executed by the at least one processor, cause the at least one processor to:

determine, within a computer game, at least one object attribute based on physical location data associated with a first player whose physical location has been acquired by a location sensor;

determine transaction amounts of game points for a first account of the first player and a second account of a second player, the transaction amounts being determined based on a reconciliation matrix and the at least one object attribute based on the physical location data; and

cause reconciliation of a game transaction, when a criterion based on the physical location data of the first player is met within the computer game, among the first account and the second account in accordance with the determined transaction amounts, wherein the game transaction comprises a first transfer of at least a first amount of game points associated with the first account based on at least a portion of the transaction attributed to a first entity associated with the first account and a second transfer of at least a second amount of game points associated with the second account based on at least a portion of the transaction attributed to a second entity associated with the second account.

Niantic filed a motion under Rule 12(b)(6) alleging that that claim 20 is invalid under 35 U.S.C. § 101 for failing to recite patent-eligible subject matter.

For the first step of the Alice/Mayo Section 101 eligibility test, the Court considered whether reconciling transactions based on a user’s location was an abstract idea. The Court noted that claims that “are directed to a fundamental economic practice” have been consistently held by courts as abstract ideas, most famously in the Alice decision and its eponymous legal test. In particular, the Court notes several decisions that showed other automated notification systems that were not very effective against Section 101 scrutiny, including price optimization and contract performance steps. The Court also noted that courts have held location-based software processes as abstract, including customized webpage content. The Court held that the combination of these abstract ideas is still an abstract idea.

NantWorks alleged, in the complaint, that the ‘477 patent “change[s] how the computer itself functions…[and] provide[s] faster and more efficient transaction reconciliation….” The Court did not appreciate the brevity of NantWorks’ arguments and the paucity of support in the patent itself for such technical improvements. The Court held that “claim 20 does not assert specific improvements in computer capabilities,” and that no factual issue remains to dispute that claim 20 recites an abstract idea.

For the second step, NantWorks argued that claim 20 recited an unconventional and practical application of transaction reconciliation directed to the inventive concept of using a player’s location as criterion. The Court once again noted that “[t]he ‘477 patent’s claims and specification[] do not recite any similarly inventive concept” to those held by other courts. The Court held that claim 20 recited no inventive concept and granted the motion to dismiss.

Lessons for Practice

Not even a Master Ball can capture an economic practice in a patent. The ultimate parent of the ‘477 patent was drafted in 2011, before Alice laid its super-effective knockout of abstract ideas but after Bilski raised doubts on the patentability of methods and processes. Looking to opinions like these can help patent practitioners draft claims to align with potential changes in the law. Patent prosecutors can heed the Court’s concerns that NantWorks argued the technical improvements of the ‘477 patent only in arguments to draft applications that frame a technological environment to implement an otherwise abstract idea.