The Software IP Report

Software Claims to Demand Forecasting and Inventory Management, Predictably, Not Patent-Eligible

By Charles Bieneman

Categories: Patent Eligibility, The Software IP Report

The Supreme Court has refused to implement a rule that business methods claims are per se patent-ineligible.  Nonetheless, courts now routinely invalidate business method patent claims under 35 U.S.C. § 101, as exemplified in the recent case of Smart Software, Inc. v. PlanningEdge, LLC, No. 15-13814-PBS (D. Mass. June 17, 2016).  In this case, it can have been no surprise to either party that claims of U.S. Patent No. 6,205,431, entitled “System and Method for Forecasting Intermittent Demand,” were invalidated on the defendants Rule 12(b)(6) motion to dismiss.

Here, the claims of the ’431 patent recited steps of analyzing data to forecast demand and/or inventory requirements.  The court here was able to make short work of the Mayo/Alice two-part patent-eligibility test, concluding

at step one that the ’431 Patent claims are directed at forecasting intermittent demand, an abstract idea, analogous to the risk hedging in Bilski and intermediated settlement in Alice. At step two, the ’431 Patent describes a method for implementing an abstract idea (Claim 1), claims a software product with means to perform the necessary calculations (Claim 10), and describes a generic computer system to carry out the entire process (Claim 16).

The court acknowledged that “the Supreme Court did not create a categorical exclusion for business method patents, see Bilski, 561 U.S. at 607,” but at the same time “the patent must still provide some inventive concept sufficient to transform the claimed abstract idea into patentable subject matter.”  The patent claims here “neither control a physical device nor improve the functioning of the claimed computer.”  Therefore, neither Diamond v. Diehr, 450 U.S. 175, 184 (1981), nor DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), could save the present claims.  Rather than improving the functioning of a machine, “the ’431 Patent claims involve a generic computer that performs calculations based on standard statistical methods that could be performed by a human.”

Uncited in this opinion were the recent Federal Circuit Enfish and TLI Communications decisions (the district court opinion in TLI was cited), which further clarified that claims that can be cast as providing a technical improvement are likely to survive Section 101 invalidity challenges.  Here, there was no such improvement; a big red flag was that the recited claims elements could have been performed manually and not in a computer.  Cases like this one raise the thought that, at some point, complaints to enforce at least some business methods patents (e.g., ones that truly do no more than automate existing manual processes) will be easy targets for sanctions.