DDR Holdings, LLC v. Hotels.com et al. – Federal Circuit Holds Software Patent Claims Eligible

Craig R. Smith Matthew H. Grady William Seymour

Today’s decision in DDR Holdings, LLC. v. Hotels.com et al. is the first Federal Circuit decision that upholds patentability of a software based invention under §101 since the Supreme Court decided Alice Corp. v. CLS Bank, earlier this year. This case provides additional clarity on the issue of subject matter eligibility of software- implemented patent claims. The court considered claims directed to methods of serving web pages offering commercial opportunities by an “outsource provider.” In general, the claims allowed for multiple, unrelated web stores to offer a single product while allowing an “outsource provider” to supply a standard web page format for the product. The district court had determined that the claims were patent-eligible back in 2013, prior to the Supreme Court’s decision in Alice Corp.

The Federal Circuit held that the claims are patentable “because they do not merely recite the performance of some business practice known from the pre- Internet world along with the requirement to perform it on the Internet. Instead, the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.” Id. (emphasis added). Specifically, the Court found that the claims addressed a problem specific to online marketing by allowing product merchandisers to control the “look and feel” of their products even when they are presented on multiple, unrelated merchant websites.

When applying the Supreme Court’s Alice Corp. decision, the Federal Circuit did not directly address whether the claims covered an abstract idea. Instead, the Court held the claims patentable because they specify a combination of specific patentable steps and do not seek to implement any abstract concepts. The Federal Circuit distinguished the claims recently held ineligible in Ultramercial, finding that:

Unlike the claims in Ultramercial, the claims at issue here specify how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink. … When the limitations of the ’399 patent’s asserted claims are taken together as an ordered combination, the claims recite an invention that is not merely the routine or conventional use of the Internet.

Id. at 22-23 (emphasis added).

The Federal Circuit’s analysis in DDR Holdings reveals a clear split of opinion among the Federal Circuit judges. On one side, Judges Lourie, Mayer, and O’Malley, who joined in the Ultramercial opinion, favor reduced patent eligibility for software inventions. On the other side, Judges Chen and Wallach, who formed the majority in DDR Holdings, appear to favor a more nuanced approach to software eligibility. This split of opinion may warrant en banc consideration by the Federal Circuit.

For now, DDR Holdings provides some guidance for drafting patent claims in the wake of the Supreme Court’s decision in Alice Corp. Patent practitioners should ensure that their patent claims specify how interactions of computer elements and/or communication networks are manipulated to yield a desired result that is more than a routine or conventional use of the Internet.