Introduction
In Beteiro, LLC v. DraftKings Inc., et al., No. 2022-2275 (Fed. Cir. June 21, 2024) ("Decision"), the United States Court of Appeals for the Federal Circuit affirmed the District Court for the District of New Jersey's dismissal of Beteiro's patent infringement complaints against eleven prominent online gambling companies. The district court dismissed the cases under Rule 12(b)(6) because it found Beteiro's patents were directed to unpatentable subject matter under 35 U.S.C. § 101. The Federal Circuit agreed, concluding that the patent claims are directed to an abstract idea and lack an inventive concept.
Background
Beteiro owns four patents related to remote gaming and gambling activities, including U.S. Patent Nos. 9,965,920; 10,043,341; 10,147,266; and 10,255,755. All four patents share the same title and specification: "Apparatus and Method for Facilitating Gaming Activity and/or Gambling Activity" and claim methods that enable users to participate in online gambling using communication devices equipped with GPS technology. The distinctive feature of the claimed methods is the ability to allow or disallow online bets based on the user's GPS location to check if online gambling is legal where the user is located.
The Court's Legal Analysis
The question presented was whether the asserted patent claims are patent eligible under 35 U.S.C. § 101. Patent eligibility is determined by a two-step analysis, which involves: (1) determining whether the claims are directed to a patent-ineligible concept, such as an abstract idea, law of nature, or natural phenomenon; and (2) if so, examining whether the elements of the claim, both individually and as an ordered combination, present an inventive concept that otherwise transforms the nature of the claim into patent-eligible subject matter. See Alice Corp. v. CLS Bank Int'l, 573 U.S. 208, 216-24 (2014); Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 77-80 (2012).
Step One: Patent-Ineligible Concept
In this case, the first step of the Section 101 analysis focused on whether the patent claims are directed to an abstract idea. The Federal Circuit found that the claims are directed to the abstract idea of "exchanging information concerning a bet and allowing or disallowing the bet based on where the user is located." Decision at 8. In doing so, the Federal Circuit specifically found that Beteiro's patent claims "exhibit several features that are well-settled indicators of abstractness." Id.
First, the court noted that the claims describe generic steps often considered abstract, such as detecting information, generating and sending notifications, receiving messages (bets), determining legality (GPS location), and processing information (allowing/disallowing bets). See, e.g., AI Visualize, Inc. v. Nuance Commc'ns, Inc., 97 F.4th 1371, 1378 (Fed. Cir. 2024) ("obtaining, manipulating, and displaying data, particularly when claimed at a high level of generality, are abstract concepts"); Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350 (Fed. Cir. 2016) (gathering and analyzing information and then displaying results is abstract), and Intellectual Ventures I LLC v. Capital One Bank (USA), 792 F.3d 1363 (Fed. Cir. 2015) (tailoring content based on location is abstract); buySafe, Inc. v. Google, Inc., 765 F.3d 1350, 1355 (Fed. Cir. 2014) ("receiv[ing] and send[ing] information over a network – with no further specification – is not even arguably inventive"). Moreover, each of these steps was found to be highly generalized and not tied to any specific technological process or method.
Second, the court found that the claims were drafted in a result-oriented, functional manner, using language that described the desired outcomes without explaining how to achieve them. This type of claim language is indicative of abstract ideas because it describes what the invention does instead of how it does it. See, e.g., Elec. Power Grp., 830 F.3d at 1356 ("result-focused" functional claim language using a generic computer frequently held abstract); Two-Way Media Ltd. v. Comcast Cable Commc'ns, LLC, 874 F.3d 1329, 1337 (Fed. Cir. 2017) (functional results required without sufficient description of how to achieve them).
Third, the court bolstered its abstract idea determination by pointing to its prior precedent that held "methods of providing particularized information" based on location are abstract ideas. See, e.g., Affinity Labs of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253, 1258 (Fed. Cir. 2016) ("conveying regional content to out-of-region recipients"); Intell. Ventures I, 792 F.3d at 1369 (providing newspaper inserts based upon location).
Finally, the court pointed out that the claimed methods are "persuasively analogous" to "longstanding 'real world' ('brick and mortar') activities." Decision at 10; see, e.g., Intell. Ventures I LLC v. Symantec Corp., 838 F.3d 1307, 1314 (Fed. Cir. 2016) (similarity to "fundamental . . . practices long ago prevalent" indicates abstractness). In doing so, the Federal Circuit noted with approval the district court's analogy to "a dealer at a casino that straddled state lines, who 'had to ensure patrons were on the Nevada side of the building . . . before accepting a bet.'" Decision at 10. The Federal Circuit concluded, therefore, that the patent claims are directed to an abstract idea encompassing "fundamental and longstanding economic activity." Id.
The court rejected Beteiro's assertion that the claims are not abstract. Beteiro contended that the claims are tied to a specific technological solution for remote gambling problems and that the use of GPS to determine the legality of gambling activities based on the user's location represented a technological improvement. The court disagreed, finding that the patents did not claim a specific improvement in computer technology but rather used conventional technology to perform routine functions. Specifically, the court held that "[c]ontent regulation and checking legal compliance are rooted in the abstract—they are legal problems, not technical problems—and the claims here do not provide 'a specific improvement to the way computers operate.'" Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1336 (Fed. Cir. 2016).
Step Two: Inventive Concept
The Federal Circuit next determined whether the claims include an "inventive concept" sufficient to transform the abstract idea into patent-eligible subject matter. If so, the "inventive concept . . . renders [the] claim 'significantly more' than [the] abstract idea to which it is directed." BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281, 1290 (Fed. Cir. 2018). However, if a claim's only inventive concept is the application of an abstract idea using conventional means, it remains ineligible. See id.
Here, the Federal Circuit focused on Beteiro's assertion that the requisite "inventive concept" is grounded in the patent claims' recitation of GPS location determinations. Beteiro argued that the inclusion of GPS technology in mobile devices was not conventional at the time of the patent's 2002 priority date, adding that "the current industry leader in the space—GeoComply—did not even exist until 2011." Decision at 13.
In response, the Federal Circuit turned to the patents' specification, emphasizing "what is not taught" in the disclosure about GPS, which would lead a person of ordinary skill in the art to "have recognized the claims to involve nothing more than conventional, routine, and well-understood use of GPS." Id. (emphasis in original). Indeed, the court stressed that the patents' disclosure dedicated only 15 lines out of a 98-column specification to the description of GPS technology, indicating that the inventors themselves considered GPS to be a well-understood and conventional component. Id. Thus, the court concluded that "the patent applicant drafted the specification understanding that a person of ordinary skill in the art knew what GPS was, how to include it on a mobile device, and that using it for the purposes disclosed in the patent was routine, conventional, and well-understood." Id.
Finally, the Federal Circuit distinguished this case from its prior decision in Cellspin Soft, Inc. v. Fitbit, Inc., 927 F.3d 1306 (Fed. Cir. 2019), which was central to Beteiro's argument. In Cellspin, the Federal Circuit found that the patent claims were sufficiently detailed to survive a motion to dismiss at the pleadings stage. The Cellspinpatents involved a specific method for automatic publishing of data and pictures from a mobile device to a web service, which was described with particularity in the patent. The patentee in Cellspin made plausible and specific factual allegations about why the claimed invention was unconventional, detailing how the combination of steps improved computer functionality and how it overcame specific technological challenges. "[B]y comparison," the Federal Circuit concluded that Beteiro's assertions of inventive concept "are neither specifically tied to the claimed invention nor . . . plausible (in light of the specification's description of generic technology)." Decision at 14-15.
Conclusion
The Federal Circuit's decision affirming the district court's dismissal of Beteiro's patent infringement cases against eleven leading competitors in the online gaming industry highlights the frustrations faced by patent holders in proving patent eligibility for subject matter utilizing generic computer technology. As the list of such Section 101 cases grows in number, the clarity of the rulings is increasingly dulled by seemingly conflicting outcomes and unintelligible factual distinctions. As such, this body of precedent offers a smorgasbord of legal authority for advocates on either side of a Rule 12(b)(6) or Rule 56 challenge—advantage patent bar, disadvantage patentees.
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