In 2013 Smartflash LLC, a technology development and licensing company, sued Apple, alleging that Apple's iTunes software infringed three of their patents. The patents relate to controlling access to data (such as audio, video, text and software) based on payment for the data, such that the data can then be downloaded onto a portable data carrier (e.g. a digitial audio player or smartphone). This addresses the problem of data that has been obtained in an unauthorised manner and distributed worldwide over the internet without authorisation.
In the original verdict, handed down in 2015, Apple were judged to be infringing Smartflash's patents and ordered to pay $533 million in damages. This decision of the Texas District Court has now been overturned by the US Court of Appeals with Smartflash's patents being invalidated.
The patents were invalidated because the Court of Appeals found the claims that Smartflash were asserting against Apple to be directed to an abstract idea, i.e. that of conditioning and controlling access to data based on payment. Using the test set by the US Supreme Court in the Alice case, the Smartflash patent claims were found not to contain any inventive concepts that were sufficient to transform this abstract idea into any that was "significantly more" and thus the patent claims were invalidated as not reciting a patent-eligible invention.
This is another decision in the US which shows that, following the Alice decision, it is increasingly difficult to patent business related methods in the US. This is particularly the case if the invention is solely in the steps of a business transaction (for Smartflash, the controlled access to data based on payment) that is simply implemented on a generic computer. To be eligible for patent protection, the patent claims need to include features which improve the functioning of the computer itself or have an impact on the functioning of technology external to the computer, for example. This brings US practice closer to that which we are accustomed in Europe.
The U.S. Court of Appeals for the Federal Circuit said on the judge should have ruled Smartflash’s patents invalid and set aside the verdict entirely. A unanimous three-judge appeals panel said Smartflash’s patents were too “abstract” and did not go far enough in describing an actual invention to warrant protection.