ALJ Shaw Issues Final Initial Determination Under ITC’s 100-Day Pilot Program, Finding That The Asserted Patent Does Not Recite Patent-Eligible Subject Matter Under 35 U.S.C. § 101.

Key Points 

• The United States International Trade Commission (“ITC”) has implemented its Pilot Program, which is a proceeding launched in 2013 to resolve potentially dispositive issues in 100 days, in four investigations to date.
• By placing Investigation No. 337-TA-994 (“994 investigation”) into the Pilot Program, the ITC provided a vehicle for early resolution of investigations that involve Section 101 disputes.
• The 994 investigation is the first instance in which the Final Initial Determination of the Administrative Law Judge (“ALJ”) in an investigation assigned to the Pilot Program was decided in favor of Respondents.

The ITC’s 100-day Pilot Program provides for early resolution of investigations by limiting their scope to potentially dispositive issues (e.g., standing and domestic industry) and requiring the ALJ to issue an initial determination within 100 days of institution. To date, the ITC has directed four investigations into the Pilot Program, and ALJs of the ITC have now issued final written decisions in three of these investigations.

On August 19, 2016, ALJ David P. Shaw issued a Final Initial Determination (“Final ID”) in Certain Portable Electronic Devices and Components Thereof, 337-TA-994, finding that the asserted claims of U.S. Patent No. 6,928,433 (the “’433 Patent”), entitled “Automatic Hierarchical Categorization of Music by Metadata,” do not recite patent-eligible subject matter under 35 U.S.C. § 101. This decision is noteworthy because the investigation is the first instance in which the Pilot Program was used to resolve address patent eligibility under Section 101, as well as the first investigation in the Pilot Program to be decided in favor of Respondents.

The Complainants in the 994 investigation, Creative Technology Ltd. and Creative Labs, Inc., filed their complaint on March 24, 2016, alleging infringement of the ’433 Patent by numerous Respondents, including smartphone and tablet manufacturers. The Complainant’s infringement allegations primarily focused on the organizational structure utilized in the Google Play Music application, and also included infringement allegations relating to manufacturer-specific music applications.

The ’433 Patent purported to provide “an efficient user interface for a small portable music player” by categorizing musical tracks through a three-level series of hierarchical screens. For example, the ’433 Patent disclosed selecting the “Artists” category (i.e., the first level), an album listed under the selected artist (i.e., the second level), and one of the tracks on that album (i.e., the third level).

Prior to institution, the Respondents requested the ITC utilize the Pilot Program to determine whether the ’433 Patent recites patent-eligible subject matter under 35 U.S.C. § 101. Although not named as a Respondent, Google submitted a letter requesting entry into the Pilot Program, stating that it would likely seek to intervene in the investigation. The ITC instituted the investigation on May 11, 2016, and ordered:

Notwithstanding any [ITC] Rules that would otherwise apply, the presiding [ALJ] shall hold an early evidentiary hearing, find facts, and issue an early decision, as to whether the asserted claims of the ’433 patent recite patent-eligible subject matter under 35 U.S.C. 101. Any such decision shall be in the form of an initial determination (ID). . . . The [ITC] expects the issuance of an early ID relating to Section 101 within 100 days of institution, except that the presiding ALJ may grant a limited extension of the ID for good cause shown. The issuance of an early ID finding that the asserted claims of the ’433 patent do not recite patent-eligible subject matter under 35 U.S.C. 101 shall stay the investigation unless the [ITC] orders otherwise; any other decision shall not stay the investigation or delay the issuance of a final ID covering the other issues of the investigation.

Pursuant to the ITC’s instructions, the parties developed a substantial record in the 994 investigation, including the exchange of proposed constructions for claim terms relevant to Section 101; fact and expert discovery and depositions; witness statements; and a two-day hearing, including pre-hearing motions and pre- and post-hearing briefing.

In the Final ID, the ALJ analyzed the patentability of the ’433 Patent under the two-step test set forth by the United States Supreme Court in CLS Bank Int’l v. Alice Corp Pty., 134 S. Ct. 2347 (2014). Under the Alice test, the ALJ is required to determine: (1) whether the ’433 Patent claims cover an abstract idea, and (2) whether the asserted claims identify an inventive concept sufficient to transform the abstract idea into a patent-eligible application.

With respect to the first step, the ALJ agreed with Respondents and Staff that “claim 1 is directed to the abstract idea of three-leveled organizational hierarchy.” The ALJ further found that the asserted dependent claims are directed to abstract ideas because they “contain additional limitations relating to the claimed organizational method, and simply recite functional limitations.” In addition, the ALJ held that the Federal Circuit’s decision in Enfish LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016), which was relied upon by the Complainants, was not applicable in this instance because the “[t]here is no specific asserted improvement, such as in the structure or implementation, of the three-leveled hierarchy described in claim 1 of the ’433 patent,” unlike the “particular, unconventional type of data structure” recited in Enfish.

Having determined that the ’433 Patent claims cover an abstract idea under the first step of the Alice test, the ALJ again agreed with the Respondents that “accessing a track” using the three-level hierarchy is not inventive and does not depart from the routine and conventional use of an organizational hierarchy. The ALJ reached the same conclusion for the asserted dependent claims, finding, for example, that “using well-known musical categories such as “artist,” “album,” and “genre,” in the organizational hierarchy does not disclose a limiting inventive concept. . . .” The ALJ therefore disagreed with the Complainants that the asserted claims provide a technological solution to a problem arising in computers that departs from the routine and conventional use of the technology. Therefore, the ALJ determined that the asserted claims of the ’433 Patent did not recite patentable subject matter under either step of the Alice test, and was invalid under Section 101.

Accordingly, the 994 investigation is the first instance of the ITC providing an opportunity for early resolution of Section 101 disputes via the Pilot Program, and was also the first decision by an ALJ finding for the respondents in the Pilot Program. Respondents should therefore consider whether to request the investigation be entered into the Pilot Program based on patent ineligibility under 35 U.S.C. § 101 in view of the ALJ’s Final ID in the 994 investigation.