Source: https://www.patentdocs.org/2018/11/ancora-technologies-inc-v-htc-america-inc-fed-cir-2018.html
Timestamp: 2019-04-18 10:35:42+00:00

Document:
Ancora sued HTC in the Western District of Washington alleging infringement of U.S. Patent No. 6,411,941. HTC moved to dismiss the case, contending that the claims of the patent were ineligible under 35 U.S.C. § 101. The District Court granted HTC's motion. Ancora appealed to the Federal Circuit.
The '941 patent is directed to mechanisms for preventing a computer from running unlicensed software. While using license keys to control software was well-known at the time of the patent's earliest priority date (1998), the patent purports to do so in a rather unusual fashion (for that time).
Particularly, a key that uniquely identifies the computer that the software is installed upon is stored in read-only memory (ROM) of the computer's basic input / output system (BIOS). Thus, the key cannot be modified, removed, or hacked by users or applications without significant effort. Further, a record that is associated with the licensed software contains the names of the software, its vendor, and a number of licenses thereof. The record is stored in volatile BIOS memory, encrypted by the key. The software contains an unencrypted copy of the license record.
When the software is run, it is loaded into main memory, obtains a copy of the key, and performs encryption of its copy of the license record. If this matches the encrypted license record stored in the BIOS, the program is permitted to continue executing. Otherwise, the program is considered "unlicensed" and is either halted or run with reduced functionality.
This technique is different from how software licensing was previously enforced. Software-based licensing required storing licensing information on the computer's main non-volatile storage device (e.g., a hard drive). But this device was easily accessed and susceptible to hacking. Hardware-based licensing required use of a pluggable dongle, which was poorly suited to software that was downloaded rather than sold in stores.
Further, BIOS memory was typically used to store low-level bootstrapping code that assisted startup of the hardware and initiation of the operating system, not license verification data. Thus, the use of BIOS is unusual.
In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101. One must first decide whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If so, then one must further decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion. But generic computer implementation of an otherwise abstract process does not qualify as "significantly more," nor will elements that are well-understood, routine, and conventional lift the claim over the § 101 hurdle.
The District Court viewed the claim as focused on "the abstract concept of selecting a program, verifying whether the program is licensed, and acting on the program according to the verification." The District Court was led to this conclusion because of the claim's breadth and that it did not recite "how usage of the BIOS to store the verification structure leads to an improvement in computer security." With part one of Alice complete, the District Court found the claim lacking under part two as well, writing: "specifying that the BIOS be used to house the verification structure [calls for nothing more than] storing data in the memory of a computer component that generally stores data." Since the District Court found the claim abstract and without an inventive concept, it entered judgment in favor of HTC.
On appeal, the Federal Circuit rapidly answered the patent-eligibility question in the positive. Relying on recent precedent, such as Finjan, Inc. v. Blue Coat System, Inc., the Court stated that "[i]mproving security—here, against a computer's unauthorized use of a program—can be a non-abstract computer-functionality improvement if done by a specific technique that departs from earlier approaches to solve a specific computer problem."
The Court went on to disagree with the District Court, noting that the claim does recite storing the verification structure in a section of BIOS with certain beneficial characteristics, which was asserted to be an unexpected technique at the time of invention. Thus, in the view of the Federal Circuit, the claim does not recite a mere desired outcome, but how to achieve this outcome. Further, the claim addressed a technological problem associated with computers -- software license verification -- rather than a business, mathematical, or financial problem.
Oddly, while still considering the claim under the first part of Alice, the Court made an analogy to BASCOM Global Internet Services v. AT&T Mobility. The latter case stands for the principle that an unconventional combination of well-known additional elements can make a claim patent-eligible under part two of the test. The Court seemed to do so in order to support its conclusion that the claim was directed to a technical improvement in computer functionality.
With claim 1 found to be non-abstract, the Court did not need to explicitly move on to part two. Thus, the Federal Circuit reversed the District Court, and found that the '941 patent met the requirements of § 101.
Makes the HP petition look like the joke that it is.

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