In Re: Smith

  United States Court of Appeals
      for the Federal Circuit
                 ______________________

   IN RE: RAY SMITH, AMANDA TEARS SMITH,
                    Appellants
              ______________________

                       2015-1664
                 ______________________

    Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board, in No. 12/912,410.
                  ______________________

                Decided: March 10, 2016
                ______________________

   MARK ALAN LITMAN, Mark A. Litman & Associates,
P.A., Edina, MN, argued for appellants.

    SCOTT WEIDENFELLER, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA,
argued for appellee Michelle K. Lee. Also represented by
THOMAS W. KRAUSE, ROBERT MCBRIDE.
                 ______________________

   Before MOORE, HUGHES, and STOLL, Circuit Judges.
STOLL, Circuit Judge.
    Ray and Amanda Tears Smith (collectively, “Appli-
cants”) appeal the final decision of the Patent Trial and
Appeal Board (“Board”) affirming the rejection of claims
1–18 of U.S. Patent Application No. 12/912,410 (“the ’410
patent application”) for claiming patent-ineligible subject
matter under 35 U.S.C. § 101. Because the claims cover
2                                                IN RE: SMITH




only the abstract idea of rules for playing a wagering
game and use conventional steps of shuffling and dealing
a standard deck of cards, we affirm.
                       BACKGROUND
    On October 26, 2010, Applicants filed the ’410 patent
application, titled “Blackjack Variation.” According to the
application, “[t]he present invention relates to a wagering
game utilizing real or virtual standard playing cards.”
Joint Appendix (“J.A.”) 258. Claim 1, which the Board
analyzed as representative, recites:
    1. A method of conducting a wagering game
    comprising:
        [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 wa-
    ger 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 des-
    ignated player and two cards to the banker/dealer
    such that the designated player and the bank-
    er/dealer receive the same number of exactly two
    random physical playing cards;
         [d]) the dealer examining respective hands to
    determine in 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
IN RE: SMITH                                               3



    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 ini-
    tial 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 pre-
    determined total counts, where the first total
    counts range does not overlap the second total
    counts range;
        [h]) after all possible additional random physi-
    cal playing cards have been dealt, the dealer com-
    paring 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 correspond-
    ing 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.
J.A. 10–11. The examiner rejected claims 1–18 as di-
rected to patent-ineligible subject matter under § 101,
applying the machine-or-transformation test described in
Bilski v. Kappos, 561 U.S. 593 (2010). The examiner
concluded that the claims represented “an attempt to
claim a new set of rules for playing a card game,” which
4                                                IN RE: SMITH




“qualifies as an abstract idea.” J.A. 102. On appeal, the
Board affirmed the rejection, applying the two-step test
outlined in Alice Corp. v. CLS Bank International, 134
S. Ct. 2347 (2014), which had been decided in the interim.
Applying step one, the Board determined that “independ-
ent claim 1 is directed to a set of rules for conducting a
wagering game which . . . constitutes a patent-ineligible
abstract idea.” J.A. 16. 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.
J.A. 17.
    Applicants appealed to this court, and we have juris-
diction pursuant to 28 U.S.C § 1295(a)(4)(A) and
35 U.S.C. § 141(a).
                        DISCUSSION
    We review de novo whether a claim is drawn to pa-
tent-ineligible subject matter. In re Nuijten, 500 F.3d
1346, 1352 (Fed. Cir. 2007). Section 101 defines patent-
eligible subject matter as “any new and useful process,
machine, manufacture, or composition of matter, or any
new and useful improvement thereof.” 35 U.S.C. § 101.
The Supreme Court has “long held that this provision
contains an important implicit exception. Laws of nature,
natural phenomena, and abstract ideas are not patenta-
ble.” Mayo Collaborative Servs. v. Prometheus Labs., Inc.,
132 S. Ct. 1289, 1293 (2012) (internal quotation marks,
brackets, and citations omitted).
    To determine whether an invention claims ineligible
subject matter, we apply the now-familiar two-step test
introduced in Mayo, id. at 1296–97, and further explained
in Alice, 134 S. Ct. at 2355. First, we determine whether
the claims at issue are directed to a patent-ineligible
concept such as an abstract idea. Id. Second, we “exam-
ine the elements of the claim to determine whether it
contains an ‘inventive concept’ sufficient to ‘transform’ the
IN RE: SMITH                                                5



claimed abstract idea into a patent-eligible application.”
Id. at 2357 (quoting Mayo, 132 S. Ct. at 1294, 1298).
    On the first step, we conclude that Applicants’ claims,
directed to rules for conducting a wagering game, compare
to other “fundamental economic practice[s]” found ab-
stract by the Supreme Court. See id. As the Board rea-
soned here, “[a] wagering game is, effectively, a method of
exchanging and resolving financial obligations based on
probabilities created during the distribution of the cards.”
J.A. 15. In Alice, the Supreme Court held that a method
of exchanging financial obligations was drawn to an
abstract idea. 134 S. Ct. at 2356–57. Likewise, in Bilski,
the Court determined that a claim to a method of hedging
risk was directed to an abstract idea. 561 U.S. at 611.
Here, Applicants’ claimed “method of conducting a wager-
ing game” is drawn to an abstract idea much like Alice’s
method of exchanging financial obligations and Bilski’s
method of hedging risk.
    Moreover, our own cases have denied patentability of
similar concepts as being directed towards ineligible
subject matter. See OIP Techs., Inc. v. Amazon.com, Inc.,
788 F.3d 1359, 1362 (Fed. Cir. 2015) (finding offer-based
price optimization abstract), cert. denied, 136 S. Ct. 701
(2015); Planet Bingo, LLC v. VKGS LLC, 576 F. App’x
1005, 1007–08 (Fed. Cir. 2014) (determining that methods
of managing a game of bingo were abstract ideas). Thus,
in light of these cases, we conclude that the rejected
claims, describing a set of rules for a game, are drawn to
an abstract idea.
    Our inquiry, however, does not end there. Abstract
ideas, including a set of rules for a game, may be patent-
eligible if they contain an “‘inventive concept’ sufficient to
‘transform’ the claimed abstract idea into a patent-eligible
application.” Alice, 134 S. Ct. at 2357 (quoting Mayo, 132
S. Ct. at 1294, 1298). But appending purely conventional
steps to an abstract idea does not supply a sufficiently
6                                                IN RE: SMITH




inventive concept. Id. at 2357–58. The claims here
require shuffling and dealing “physical playing cards,”
which Applicants argue bring the claims within patent-
eligible territory. J.A. 10–11. We disagree. Just as the
recitation of computer implementation fell short in Alice,
shuffling and dealing a standard deck of cards are “purely
conventional” activities. See Alice, 134 S. Ct. at 2358–59.
We therefore hold that the rejected claims do not have an
“inventive concept” sufficient to “transform” the claimed
subject matter into a patent-eligible application of the
abstract idea.
    That is not to say that all inventions in the gaming
arts would be foreclosed from patent protection under
§ 101. We could envisage, for example, claims directed to
conducting a game using a new or original deck of cards
potentially surviving step two of Alice. The Government
acknowledged as much during oral argument. See Oral
Argument        at      14:59–15:31,      available     at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
15-1664.mp3.
    Finally, we cannot address Applicants’ argument that
the PTO’s 2014 Interim Guidance on Patent Subject
Matter Eligibility (“Interim Eligibility Guidance”) exceeds
the scope of § 101 and the Supreme Court’s Alice decision.
Applicants’ challenge to the Guidelines is not properly
before us in this appeal. See 35 U.S.C. § 141(a) (stating
that an applicant “dissatisfied with the final decision” of
the Board may appeal that decision to the Federal Cir-
cuit) (emphasis added). As the Interim Eligibility Guid-
ance itself states, it “is not intended to create any right or
benefit, substantive or procedural, enforceable by any
party against the Office. Rejections will continue to be
based upon the substantive law, and it is these rejections
that are appealable.” Interim Eligibility Guidance,
Vol. 79 Fed. Reg. 74618, 74619 (Dec. 16, 2014) (emphasis
added). And even if the Applicants had properly chal-
lenged the Guidance, we have previously determined that
IN RE: SMITH                                            7



such Guidance is “not binding on this Court.” See In re
Fisher, 421 F.3d 1365, 1372 (Fed. Cir. 2005). Thus we
decline to consider Applicants’ argument regarding the
Interim Eligibility Guidance.
    We have considered Applicants’ remaining arguments
and find them unpersuasive. Because the rejected claims
are drawn to the abstract idea of rules for a wagering
game and lack an “inventive concept” sufficient to “trans-
form” the claimed subject matter into a patent-eligible
application of that idea, we affirm.
                      AFFIRMED