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<img class="alignright wp-image-2472 size-medium" src="https://ipintelligencereport.bakerhostetlerblogs.com/wp-content/uploads/sites/11/2016/03/Cards-royal-flush-26062085-BW-300x234.jpg" alt="Cards royal flush 26062085 BW" width="300" height="234" />The recent decision in In re Smith (<a href="http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/15-1664.Opinion.3-8-2016.1.PDF">Fed. Cir. 2016</a>), in which the Federal Circuit affirmed the rejection of claims 1-18 as being ineligible for patent under 35 USC § 101, represents another example of the shrinking scope of patent-eligibility since the Supreme Court’s Alice decision.[1] As discussed below, this case concerned the patent-eligibility of method claims directed to the rules for a new wagering card game.

By way of background, the examiner rejected claims 1-18 as being directed to patent-ineligible subject matter under § 101, applying the machine-or-transformation test described in Bilski.[2] The examiner concluded that the claims represented “an attempt to claim a new set of rules for playing a card game,” which “qualifies as an abstract idea.” On appeal, the Board affirmed the rejection, applying the two-step test outlined in Alice, which had been decided in the interim. Applying step one, the Board determined that “independent claim 1 is directed to a set of rules for conducting a wagering game which . . . constitutes a patent-ineligible abstract idea.” Applying the second step, the Board concluded that “shuffling and dealing cards are conventional in the gambling art,” and as such, “do not add enough to the claims” to render them patent-eligible.

Claim 1 was considered representative. Despite the length of claim 1, the Board and later the court disregarded the specific limitations in holding that the claims were directed to an abstract idea:
<ol>
	<li>A method of conducting a wagering game comprising:</li>
</ol>
[a]) a dealer providing at least one deck of . . . physical playing cards and shuffling the physical playing cards to form a random set of physical playing cards;
[b]) the dealer accepting at least one first wager from each participating player on a player game hand against a banker’s/dealer’s hand;
[c]) the dealer dealing only two cards from the random set of physical playing cards to each designated player and two cards to the banker/dealer such that the designated player and the banker/dealer receive the same number of exactly two random physical playing cards;
[d]) the dealer examining respective hands to determine if any hand has a Natural 0 count from totaling count from cards, defined as the first two random physical playing cards in a hand being a pair of 5’s, 10’s, jacks, queens or kings;
[e]) the dealer resolving any player versus dealer wagers between each individual player hand that has a Natural 0 count and between the dealer hand and all player hands where a Natural 0 is present in the dealer hand, while the dealer exposes only a single card to the players;
[f]) as between each player and the dealer where neither hand has a Natural 0, the dealer allowing each player to elect to take a maximum of one additional card or standing pat on the initial two card player hand, while still having seen only one dealer card;
[g]) the dealer/banker remaining pat within a first certain predetermined total counts and being required to take a single hit within a second predetermined total counts, where the first total counts range does not overlap the second total counts range;
[h]) after all possible additional random physical playing cards have been dealt, the dealer comparing a value of each designated player’s hand to a final value of the banker’s/dealer’s hand wherein said value of the designated player’s hand and the banker’s/dealer’s hand is in a range of zero to nine points based on a pre-established scoring system wherein aces count as one point, tens and face cards count as zero points and all other cards count as their face value and wherein a two-digit hand total is deemed to have a value corresponding to the one’s digit of the two-digit total;
[i]) the dealer resolving the wagers based on whether the designated player’s hand or the banker’s/dealer’s hand is nearest to a value of 0.
The court’s decision affirming the rejection has attracted attention as possibly having a far-reaching effect. For example, Prof. Dennis Crouch’s article <a href="http://patentlyo.com/patent/2016/03/federal-circuit-patents.html?utm_target/=dlvr.it&amp;utm_medium=twitter">Federal Circuit: No New Card Game Patents Unless you Also Invent a New Deck</a> observed that the Federal Circuit affirmed the rejection of claims 1-18 as being directed to an unpatentable abstract idea, holding that a wagering game is roughly identical to fundamental economic practices that the Supreme Court held to be abstract ideas in Alice and Bilski. The court found that the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept.” Moreover, in dicta, the court wrote that some card games will still be patent-eligible – perhaps those claiming “a new or original deck of cards.”

Greg Stark’s article <a href="http://www.patents4software.com/2016/03/in-re-ray-smith-gaming-art-patents-now-a-bad-bet/">In re Ray Smith: Gaming art patents now a bad bet</a> similarly observes that the court appears to have invalidated all patents directed to the gaming arts that do not utilize some form of new material objects (e.g., new type of cards or new physical playing board). The author comments: “Until this decision, it was my understanding that game rules, such as embodied in these claims, were patent-eligible subject matter and it was the ‘process’ or rules that were evaluated to determine patentability.”

Claims 20 and 21 were allowed by the examiner and thus not part of the appeal. Claim 20 was directed to the same method, with the exception that it required a video gaming system that used a processor rather than physical cards and a dealer to carry out the game.[3] Moreover, the examiner’s statement of reasons for allowance addressed the § 101 issue as well as how the allowed claims were distinguished over the closest prior art.[4] Claim 20 provided as follows:
<ol start="20">
	<li>(ALLOWED) A method of conducting a wagering game on a video gaming system comprising a processor, a video display and a player input controls comprising:</li>
</ol>
a) a processor acting as a dealer providing at least one virtual deck of playing cards</strong&gt;;
b) the processor recognizing at least one first wager from a player input position participating in a player game hand against a banker's/dealer's hand;
c) the processor dealing only two virtual cards from the virtual set of playing cards to the player input position where a first wager has been recognized and two cards from the virtual set of playing cards to the banker/dealer such that the player input position and the banker/dealer receive the same number of exactly two cards;
d) the processor examining respective hands to determine if any hand has a Natural 0 count from totaling count of the virtual cards, defined as the first two cards in a hand being a pair of 5's, 10's, jacks, queens or kings;
e) the processor resolving any player versus dealer wagers between each individual player input position hand that has a Natural 0 count from total ing the virtual cards and between the dealer hand and all player input position hands where a Natural 0 i s present in the dealer hand from totaling the virtual cards, while the dealer exposes only a single virtual card to the player input position, wherein the each player input position not having a Natural 0 loses the first wager against a dealer Natural 0, and each player input position having a Natural 0 winning at least 1 .5/1 against a dealer not having a Natural 0;
f) as between each player input position and the dealer where neither hand has a Natural 0, the processor allowing each player input position to elect to take a maximum of one additional card from the virtual set of playing cards or standing pat on the initial two card player hand, while having seen only one dealer card;
g) the processor requiring the dealer/banker remaining pat within a first certain predetermined total counts and being required to take a single hit within a second predetermined total counts, where the first total counts range docs not overlap the second total counts range;
h) after all possible additional cards have been dealt from the virtual set of playing cards, the processor comparing a value of each designated player's input position hand to a final value of the banker's/dealer's hand wherein said value of the designated player's input position hand and the banker's/dealer's hand is in a range of zero to nine points based on a pre-established scoring system wherein aces count as one point, tens and face cards count as zero points and all other cards count as their face value and wherein a two-digit hand total is deemed to have a value corresponding to the one's digit of the two-digit total;
i) the dealer resolving the wagers based on whether the designated player's hand or the banker's/dealer's hand is nearest to a value of 0.
What are we to make of the allowance of claims 20 and 21? Are video game rules patent-eligible even though the same rules applied to a “physical” game are ineligible under the abstract idea exception? If so, is this because a “video gaming system” is more than a “conventional computer”? Or, should we assume the court would have held claims 20 and 21 ineligible if it had had the opportunity to review them?

Similarly, does the Board draw a distinction between physical game rules and video game rules in respect to eligibility for patent? Presumably the Board could have instructed the examiner to reject claims 20 and 21 on § 101 grounds, but chose not to do so.

Also, what should we make of the court’s comment about the lack of inventiveness of claim 1 (the “purely conventional steps” associated with the physical act of playing cards do not “supply a sufficiently inventive concept”), despite the allowance of claim 20? How can the numerous functional limitations of claim 1 be dismissed by the court as “purely conventional” for § 101 purposes, even though the same limitations in claim 20 were deemed sufficient by the USPTO to confer novelty and non-obviousness over the prior for purposes of § 102/103?

Another question is whether allowed claims 20 and 21 are entitled to a presumption of eligibility in light of the examiner’s rejection of claims 1-18. The recent district court decision in TNS Media Research[5] suggests that patents are not entitled to a presumption of eligibility, drawing a distinction between a presumption of validity versus a presumption of eligibility.[6] Whether or not the district court is correct, it would seem logical to impose a presumption of eligibility at least where the issue of eligibility was front and center before the examiner and the Board.

Alas, this decision is an example of the rash of recent decisions by the Federal Circuit and district courts leaving us with more questions than answers in the area of § 101 patent-eligibility. The Federal Circuit apparently has no clarifying ointment for this “Alice rash.” If inventors/applicants and practitioners are to receive any help, either the Supreme Court or Congress (through legislation) will have to step in. In the meantime, stay tuned here for further developments.

[1] Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014)

[2] Bilski v. Kappos, 561 U.S. 593 (2010)

[3] Claim 21 depended from claim 20 and recited, “further the processor determining that a player input position automatically loses the first wager if the player's input position initial total hand count is either 9 or is within the range of 8-9 or is in the range of 7-9.”

[4] The Final Office Action included the following statements:

In claims 20 and 21 the recitation of "a video gaming system comprising: a processor, a video display and a player input controls clearly recite a machine, clearly avoids a 101 non-statutory rejection.

Also, none of the cited references alone or in combination teach the claimed "the processor examining respective hands to determine in any hand has a Natural 0 count from totaling count of the virtual cards, defined as the first two cards in a hand being a pair of 5's, 10's, jacks, queens or kings", "a Natural 0 is present in the dealer hand from totaling the virtual cards, while the dealer exposes only a single virtual card to the player input position, wherein the each player input position not having a Natural 0 loses the first wager against the dealer Natural O", and "designating player's input position hand and the banker's/dealer's hand is in the range of zero to nine points based on a pre-established scoring system".

[5] TNS Media Research, LLC v. Tivo Research &amp; Analytics, Inc., No. 11 Civ. 4039 (SAS), 2016 U.S. Dist. LEXIS 21218, 2016 BL 49844 (S.D.N.Y. Feb. 22, 2016)

[6] The court held that “[t]he presumption of validity – and its concomitant clear and convincing evidence standard – does not apply to section 101 claims.” Drawing an analogy, the court noted that “[b]ecause no evidence outside the pleadings is considered in deciding a motion to dismiss or a motion for judgment on the pleadings, ‘it makes little sense to apply a clear and convincing standard – a burden of proof – to such motions’” (quoting Modern Telecom Sys. LLC v. Earthlink, Inc., No. SA CV 14-0347-DOC, 2015 U.S. Dist. LEXIS 31388, 2015 WL 1239992, at *7 (C.D. Cal. Mar. 12, 2015)). The court reasoned that “[t]he same is true in the summary judgment context: like summary judgment on a claim of breach of an unambiguous contract, this Court’s determination of patent-eligibility requires no extraneous information, [and] no factual record — only the patents themselves.”

In Re Smith: A Raw Deal for Inventors?