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Patent-Ineligibility of Mathematical Techniques in SAP America: Is there a distinction to be made between finance and artificial intelligence innovations backed by mathematics?

No matter how groundbreaking, innovative, or brilliant the advance, innovators in mathematical techniques, particularly in the finance field, may think twice about seeking patent protection in view of the Federal Circuit’s recent precedential Section 101 decision in SAP America, Inc. v. Investpic, LLC, No. 2017-2081 (Fed. Cir. May 15, 2018).

There, claim 1 of U.S. Patent No. 6,349,291 is directed to calculating, analyzing, and displaying investment data by: (a) selecting a sample space, wherein the sample space includes at least one investment data sample; (b) generating a distribution function using a re-sampled statistical method and a bias parameter, wherein the bias parameter determines a degree of randomness in a resampling process; and (c) generating a plot of the distribution function.  In May 2017, the district court granted SAP’s motion for judgment on the pleadings, finding that the claims were directed to “performing statistical analysis,” and that the claims “add no inventive concept to the mathematics to which they are directed—merely (a) further-specified mathematical calculations and (b) pre- and post-solution activities like use of the internet or generic computer hardware.”  Op. at 6.

The Federal Circuit affirmed, explaining that under step one of the Alice analysis, the claims are directed to “selecting certain information, analyzing it using mathematical techniques, and reporting or displaying the results of the analysis,” which “is all abstract.”  Op. at 8.  At step two of Alice, the Federal Circuit “readily conclude[d] that there is nothing in the claims sufficient to remove them from the class of subject matter ineligible for patenting and transform them into an eligible application.”  Op. at 11.

What is perhaps most interesting about SAP America is the Court’s guidance at the very end of the opinion:

“In the absence of the required ‘inventive concept’ in application, the claims here are legally equivalent to claims simply to the asserted advance in the realm of abstract ideas—an advance in mathematical techniques in finance.  Under the principles developed in interpreting § 101, patent law does not protect such claims, without more, no matter how groundbreaking the advance.  An innovator who makes such an advance lacks patent protection for the advance itself.  If any such protection is to be found, the innovator must look outside patent law in search of it, such as in the law of trade secrets, whose core requirement is that the idea be kept secret from the public.”

Op. at 13.

While the Federal Circuit has made it abundantly clear that an advance “in mathematical techniques in finance” is patent-ineligible subject matter, it is arguably less clear as to whether advances in mathematical techniques in other fields, such as in artificial intelligence and machine learning, constitute patent-eligible subject matter.

The Court, however, did provide two useful data points.  First, in characterizing McRO Inc. v. Bandai Namco Games America Inc., 837 F.3d 1299 (Fed. Cir. 2016), the Court explained that the “claimed improvement was to how the physical display operated (to produce better quality images), unlike (what is present here) a claimed improvement in a mathematical technique with no improved display mechanism.”  Op. at 9.  Second, the Court characterized the claims at issue in Thales Visionix Inc. v. United States, 850 F.3d 1343, 1348-49 (Fed. Cir. 2017) as being directed to “a physical tracking system,” where the “use of mathematics to achieve an improvement no more changed the conclusion that improved physical things and actions were the subject of the claimed advance than it did in Diamond v. Diehr, 450 U.S. 175 (1981).”  Op. at 10.

These two examples indicate that a practical application of mathematics to achieve a “physical” improvement to a device (e.g., a display) may indeed constitute patent-eligible subject matter.  Otherwise, mathematical innovations directed to a mathematical technique itself and/or a purely non-physical result may be better protected as a trade secret.