Apple saves itself $533 million

Apple has been successful in avoiding paying damages worth $533 million to Smartflash following the U.S. Court of Appeals for the Federal Circuit holding that three patents on mobile payments owned by Smartflash were ineligible for protection. Whilst Apple is continually involved in litigation, this decision represents a significant win and is an interesting case as it has turned on the ever -evolving area or question of law of what is or is not an abstract idea.

In the US, abstract ideas cannot gain patent protection. The 2014 a decision in Alice Corp. v. CLS Bank International shook up US patent law by clarifying the provisions under which abstract ideas could become patentable by requiring that they must have additional elements capable of rendering them significantly more than just abstract ideas alone. It was these additional elements laid down in Alice which Smartflash could not overcome.

The Smartflash was designed as a portable card and reader. The idea behind it was that the card would allow users to load digital content and billing information onto it in the hopes of promoting security around payments and preventing the potential for online piracy. In 2015, Smartflash was successful in arguing that Apple's iTunes stored infringed these patents. However, the Chief Judge Prost of the US Court of Appeals did not agree.

In her judgement, Chief Judge Prost made clear that as a result of the new Alice test a patent application over an abstract idea would have to demonstrate sufficient inventive concepts to transform it from an idea into a tangible invention in order to obtain patent protection. Smartflash had not displayed any sufficient inventive concepts to obtain patent protection as, according to Prost, "merely storing, transmitting, retrieving, and writing data to implement an abstract idea on a computer" would not be sufficient to satisfy the new Alice test.

If you have any questions on the above, please do not hesitate to contact the team at McDaniel & Co. on 0191 281 4000 or legal@mcdanielslaw.com.