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`Case 3:17-cv-05659-WHA Document 235-1 Filed 11/16/18 Page 1 of 14
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`EXHIBIT 1
`EXHIBIT 1
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`Case: 18-1404 Document: 39 Page: 1 Filed: 11/16/2018
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`United States Court of Appeals
`for the Federal Circuit
`______________________
`
`ANCORA TECHNOLOGIES, INC.,
`Plaintiff-Appellant
`
`v.
`
`HTC AMERICA, INC., HTC CORPORATION,
`Defendants-Appellees
`______________________
`
`2018-1404
`______________________
`
`Appeal from the United States District Court for the
`Western District of Washington in No. 2:16-cv-01919-
`RAJ, Judge Richard A. Jones.
`______________________
`
`Decided: November 16, 2018
`______________________
`
`MARC LORELLI, Brooks Kushman PC, Southfield, MI,
`argued for plaintiff-appellant. Also represented by MARK
`A. CANTOR, JOHN S. LE ROY, JOHN P. RONDINI.
`
` IRFAN A. LATEEF, Knobbe, Martens, Olson & Bear,
`LLP, Irvine, CA, argued for defendants-appellees. Also
`represented by BRIAN CHRISTOPHER CLAASSEN, DANIEL C.
`KIANG, JOSEPH R. RE.
` ______________________
`
`Before DYK, WALLACH, and TARANTO, Circuit Judges.
`
`

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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`TARANTO, Circuit Judge
`Ancora Technologies, Inc.’s U.S. Patent 6,411,941 is
`entitled “Method of Restricting Software Operation With-
`in a License Limitation.” The patent describes and claims
`methods of limiting a computer’s running of software not
`authorized for that computer to run. It issued in 2002,
`and the patentability of all claims was confirmed in a
`reexamination in 2010. The ’941 patent was previously
`before this court in Ancora Technologies, Inc. v. Apple,
`Inc., 744 F.3d 732 (Fed. Cir. 2014), which involved a 2011
`infringement suit against Apple that raised issues of
`claim construction and indefiniteness in this court.
`Ancora brought this action against HTC America and
`HTC Corporation in 2016, alleging infringement of the
`’941 patent. HTC moved to dismiss on the ground that
`the patent’s claims are invalid because their subject
`matter is ineligible for patenting under 35 U.S.C § 101.
`The district court granted HTC’s motion to dismiss,
`concluding that the claims are directed to, and ultimately
`claim no more than, an abstract idea.
`We reverse. Under Enfish, LLC v. Microsoft Corp.,
`822 F.3d 1327 (Fed. Cir. 2016), and related authorities,
`we conclude, the claims at issue here are not directed to
`ineligible subject matter. Rather, we hold, the claimed
`advance is a concrete assignment of specified functions
`among a computer’s components to improve computer
`security, and this claimed improvement in computer
`functionality is eligible for patenting. As a result, the
`claims are not invalid under § 101.
`I
`A
`Describing aspects of the prior-art methods it seeks to
`improve, the ’941 patent states that “[n]umerous methods
`have been devised for the identifying and restricting of an
`unauthorized software program’s operation.” ’941 patent,
`
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`col. 1, lines 12–14. For example, software-based methods
`exist that require writing a license signature on the
`computer’s hard drive, but a flaw in those methods is that
`such a signature can be changed by hackers without
`damaging other aspects of computer functionality. Id.,
`col. 1, lines 19–26. Hardware-based methods exist that
`require inserting a dongle into a computer port to authen-
`ticate the software authorization, but those methods are
`costly, inconvenient, and not suitable for software sold
`and downloaded over the internet. Id., col. 1, lines 27–32.
`The ’941 patent describes an asserted improvement
`based on assigning certain functions to particular com-
`puter components and having them interact in specified
`ways. The proposed method “relies on the use of a key
`and of a record.” Id., col. 1, lines 40–41. A “key,” which is
`“a unique identification code” for the computer, is embed-
`ded in the read-only memory (ROM) of the computer’s
`Basic Input Output System (BIOS) module: the key
`“cannot be removed or modified.” Id., col. 1, lines 45–51.
`A “record” is a “license record” associated with a particu-
`lar application: “each application program that is to be
`licensed to run on the specified computer[] is associated
`with a license record[] that consists of author name,
`program name[,] and number of licensed users (for net-
`work).” Id., col. 1, lines 52–57.
`The asserted innovation of the patent relates to where
`the license record is stored in the computer and the inter-
`action of that memory with other memory to check for
`permission to run a program that is introduced into the
`computer. The inventive method uses a modifiable part of
`the BIOS memory—not other computer memory—to store
`the information that can be used, when a program is
`introduced into the computer, to determine whether the
`program is licensed to run on that computer. BIOS
`memory is typically used for storing programs that assist
`in the start-up of a computer, not verification structures
`comparable to the software-licensing structure embodied
`
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`by the claimed invention. Using BIOS memory, rather
`than other memory in the computer, improves computer
`security, the patent indicates, because successfully hack-
`ing BIOS memory (i.e., altering it without rendering the
`computer inoperable) is much harder than hacking the
`memory used by the prior art to store license-verification
`information. Id., col. 3, lines 4–17; see Ancora, 744 F.3d
`at 733–34 (“Thus, the inventors stated that their method
`makes use of the existing computer hardware (eliminat-
`ing the expense and inconvenience of using additional
`hardware), while storing the verification information in a
`space that is harder and riskier for a hacker to tamper
`with than storage areas used by earlier methods.”).
`More specifically: The method calls for storage of a li-
`cense record in a “verification structure” created in a
`portion of BIOS memory that, unlike the ROM of the
`BIOS, “may be erased or modified”—for example, an
`Electrically Erasable Programmable Read Only Memory
`(E2PROM), which may be altered by “using E2PROM
`manipulation commands.” Id., col. 1, line 65 through col.
`2, line 5. The role of the verification structure is to “indi-
`cate that the specified program is licensed to run on the
`specified computer.” Id., col. 1, lines 60–62. “This is
`implemented by encrypting the license record (or portion
`thereof) using [the computer-specific] key (or portion
`thereof) . . . as an encryption key.” Id. at lines 59–67.
`When a program has been loaded into the computer’s
`volatile memory (e.g., Random Access Memory), the
`computer, in order to verify authorization to run that
`program, “accesses the program under question, retrieves
`therefrom the license record, encrypts the record utilizing
`the specified unique key . . . and compares the so encrypt-
`ed record” to the one stored in the verification structure in
`the (erasable, modifiable) BIOS. Id., col. 2, lines 10–19.
`If the newly encrypted record does not match the one in
`the BIOS, the program is halted or other action is taken.
`Id. at lines 19–26.
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`In the district court, the parties focused their argu-
`ments on claim 1 of the ’941 patent. We therefore discuss
`only that claim. It reads as follows:
`1. A method of restricting software operation
`within a license for use with a computer including
`an erasable, non-volatile memory area of a BIOS
`of the computer, and a volatile memory area; the
`method comprising the steps of:
`selecting a program residing in the volatile
`memory,
`using an agent to set up a verification struc-
`ture in the erasable, non-volatile memory of the
`BIOS, the verification structure accommodating
`data that includes at least one license record,
`verifying the program using at least the veri-
`fication structure from the erasable non-volatile
`memory of the BIOS, and
`acting on the program according to the verifi-
`cation.
`Id., col. 6, line 59 through col. 7, line 4.
`B
`On December 15, 2016, Ancora filed this action in the
`Western District of Washington, alleging that HTC has
`infringed and is infringing the ’941 patent. In April 2017,
`HTC moved to dismiss under Rule 12(b)(6) of the Federal
`Rules of Civil Procedure. HTC argued that the subject
`matter of the claims of the patent is ineligible for patent-
`ing under 35 U.S.C. § 101.
`In May 2017, HTC filed with the Patent Trial and
`Appeal Board a petition to institute a review of the ’941
`patent, on § 101 and other grounds, under the provision
`for review of Covered Business Method patents set forth
`in Section 18 of the Leahy-Smith America Invents Act,
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`Pub. L. No. 112-29, 125 Stat. 284, 329–31 (2011). Section
`18(d)(1) excludes patents “for technological inventions”
`from such review. An implementing regulation calls for
`consideration of “whether the claimed subject matter as a
`whole recites a technological feature that is novel and
`unobvious over the prior art; and solves a technical prob-
`lem using a technical solution.” 37 C.F.R. § 42.301(b). On
`December 1, 2017, the Board rejected the request to
`institute a review, concluding that the ’941 patent claims
`a technical solution to a technical problem and comes
`within the “technological inventions” exception for such
`reviews. HTC Corp. v. Ancora Techs. Inc., CBM2017-
`00054, 2017 WL 6032605, at *3–5 (P.T.A.B. Dec. 1, 2017).
`On December 14, 2017, the district court granted
`HTC’s motion to dismiss. Ancora Techs., Inc. v. HTC
`America, Inc., 287 F. Supp. 3d 1168, 1170 (W.D. Wash.
`2017). The court followed the two-step analytic process
`set forth in Alice Corp. v. CLS Bank International, 573
`U.S. 208, 134 S. Ct. 2347 (2014). At the first step, be-
`cause “the claims at issue are directed toward computer-
`related technology,” the court asked “whether the focus of
`the claims is on the specific asserted improvement in
`computer capabilities or, instead, on a process that quali-
`fies as an ‘abstract idea’ for which computers are invoked
`merely as a tool.” Ancora Techs., Inc., 287 F. Supp. 3d at
`1173 (quoting Enfish, 822 F.3d at 1335–36). The court
`stated that the patent claims are “not focused on how
`usage of the BIOS to store the verification structure leads
`to an improvement in computer security” and that “the
`erasable, non-volatile memory of the BIOS . . . is typically
`used to store data.” Id. at 1174. The court concluded that
`the claims’ “focus is on the abstract concept of selecting a
`program, verifying whether the program is licensed, and
`acting on the program according to the verification.” Id.
`Proceeding then to step two of the Alice framework, the
`district court concluded that the claims contained no
`“inventive concept” that makes their subject matter
`
`

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`something significantly more than the abstract idea: in
`particular, “[s]pecifying that the BIOS be used to house
`the verification structure” calls for nothing more than
`“[s]toring data in the memory of a computer component
`that generally stores data.” Id. at 1175.
`The district court issued its final judgment on Decem-
`ber 20, 2017. Ancora timely filed a notice of appeal on
`December 29, 2017. See 28 U.S.C. § 2107(a). We have
`jurisdiction to hear this appeal pursuant to 28 U.S.C. §
`1295(a)(1).
`
`II
` We review the Rule 12(b)(6) dismissal de novo. See
`OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362
`(Fed. Cir. 2015) (following Ninth Circuit law). We recent-
`ly explained:
`Eligibility under 35 U.S.C. § 101 is a question of
`law, based on underlying facts. Like other legal
`questions based on underlying facts, this question
`may be, and frequently has been, resolved on a
`Rule 12(b)(6) or (c) motion where the undisputed
`facts, considered under the standards required by
`that Rule, require a holding of ineligibility under
`the substantive standards of law.
`SAP America, Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166
`(Fed. Cir. 2018) (internal citations omitted).
`Section 101 defines patent-eligible subject matter as
`“any new and useful process, machine, manufacture, or
`composition of matter, or any new and useful improve-
`ment thereof.” 35 U.S.C. § 101. Laws of nature, natural
`phenomena, and abstract ideas are not eligible matter.
`Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566
`U.S. 66, 70 (2012). A two-step analysis determines
`whether claim 1 of the ’941 patent falls outside § 101. We
`ask (1) whether the claim, as a whole, is “directed to”
`patent-ineligible matter—here, an abstract idea—and (2)
`
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`if so, whether the elements of the claim, considered indi-
`vidually or as an ordered combination “‘transform the
`nature of the claim’ into a patent-eligible application.”
`Alice, 573 U.S. at ___, 134 S. Ct. at 2355 (quoting Mayo,
`566 U.S. at 78). We conclude that claim 1 is not directed
`to an abstract idea, and therefore we do not reach the
`second step.
`We examine the patent’s “‘claimed advance’ to deter-
`mine whether the claims are directed to an abstract idea.”
`Finjan, Inc. v. Blue Coat System, Inc., 879 F.3d 1299,
`1303 (Fed. Cir. 2018). “In cases involving software inno-
`vations, this inquiry often turns on whether the claims
`focus on ‘the specific asserted improvement in computer
`capabilities . . . or, instead, on a process that qualifies as
`an “abstract idea” for which computers are invoked mere-
`ly as a tool.’” Id. (quoting Enfish, 822 F.3d at 1335–36);
`see BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281,
`1285–86 (Fed. Cir. 2018). Computers are improved not
`only through changes in hardware; “[s]oftware can make
`non-abstract improvements to computer technology . . . .”
`Enfish, 822 F.3d at 1335; see Finjan, 879 F.3d at 1304.
`We have several times held claims to pass muster under
`Alice step one when sufficiently focused on such improve-
`ments.
`In Enfish, we held that the patent claims at issue
`were not directed to an abstract idea because the claimed
`self-referential tables improved the way that computers
`operated and handled data. The claimed self-referential
`tables allowed the more efficient launching and adapta-
`tion of databases. Enfish, 822 F.3d at 1333, 1336; see
`BSG, 899 F.3d at 1288 (noting that the self-referential
`table in Enfish “enabled programmers to construct data-
`bases in new ways that required less modeling and con-
`figuring of various tables prior to launch”); Finjan, 879
`F.3d at 1304–05 (describing Enfish).
`
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`In Visual Memory LLC v. NVIDIA Corp., we drew a
`similar conclusion about claims focused on a specific
`improvement in computer memory. 867 F.3d 1253, 1262
`(Fed. Cir. 2017). The district court had determined that
`the claims were directed to the abstract concept of cate-
`gorical data storage. Id. at 1257. We determined that the
`district court had erred because the patent was specifical-
`ly “directed to an improved computer memory system, not
`to the abstract idea of categorical data storage,” and
`therefore was not directed to an abstract idea. Id. at
`1259. The claims were specific and limited to certain
`types of data to be stored. Id. “None of the claims re-
`cite[d] all types and all forms of categorical data storage.”
`Id. As we summarized in BSG, the Visual Memory claims
`were directed to “an ‘improved memory system’ that
`configured operational characteristics of a computer’s
`cache memory based on the type of processor connected to
`the memory system,” allowing “the claimed invention to
`accommodate different types of processors without com-
`promising performance.” 899 F.3d at 1288. This was an
`improvement in computer functionality. Visual Memory,
`867 F.3d at 1260.
`In Finjan, we held that claims to a “behavior-based
`virus scan” were a specific improvement in computer
`functionality and hence not directed to an abstract idea.
`879 F.3d at 1304. The claimed technique of scanning
`enabled “more flexible and nuanced virus filtering” and
`detection of potentially dangerous code. Id. The claims
`thus were directed to “a non-abstract improvement in
`computer functionality” having the benefit of achieving
`greater computer security. Id. at 1305.
`In Core Wireless Licensing S.A.R.L. v. LG Electronics,
`Inc., we held that claims to a method for making websites
`easier to navigate on a small-screen device were not
`directed to an abstract idea. 880 F.3d 1356, 1363 (Fed.
`Cir. 2018). The claimed method involved launching a
`summary window to allow small-screen users to quickly
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`access commonly used features of a website. Id. at 1359–
`60. Although the defendant argued that the patent was
`directed to the abstract idea of indexing information, we
`determined that the claims were directed to a specific
`type of index for a specific type of user and so not directed
`to an abstract idea. Id. at 1362–63.
`Most recently, in Data Engine Technologies LLC v.
`Google LLC, this court held that claims to “a specific
`method for navigating through three-dimensional elec-
`tronic spreadsheets” were “not directed to an abstract
`idea.” 906 F.3d 999, 1007 (Fed. Cir. 2018). The method
`provided “a specific solution to then-existing technological
`problems in computers and prior art electronic spread-
`sheets.” Id. at 1008. The navigation difficulties of prior-
`art spreadsheets were addressed “in a particular way—by
`providing a highly intuitive, user-friendly interface with
`familiar notebook
`tabs
`for navigating
`the
`three-
`dimensional worksheet environment.” Id. We distin-
`guished other cases in which we had held claims to be
`“simply directed to displaying a graphical user interface
`or collecting, manipulating, or organizing information”;
`the claims in Data Engine, we concluded, recite “a specific
`structure (i.e., notebook tabs) within a particular spread-
`sheet display that performs a specific function (i.e., navi-
`gating within a three-dimensional spreadsheet).” Id. at
`1010–11.
`In accordance with those precedents, we conclude that
`claim 1 of the ’941 patent is not directed to an abstract
`idea. Improving security—here, against a computer’s
`unauthorized use of a program—can be a non-abstract
`computer-functionality improvement if done by a specific
`technique that departs from earlier approaches to solve a
`specific computer problem. See Finjan, 879 F.3d at 1304–
`05. The claimed method here specifically identifies how
`that functionality improvement is effectuated in an as-
`sertedly unexpected way: a structure containing a license
`record is stored in a particular, modifiable, non-volatile
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`portion of the computer’s BIOS, and the structure in that
`memory location is used for verification by interacting
`with the distinct computer memory that contains the
`program to be verified. In this way, the claim addresses a
`technological problem with computers: vulnerability of
`license-authorization software to hacking. ’941 patent,
`col. 1, lines 12–35; cf. HTC, 2017 WL 6032605, at *3–5
`(PTAB conclusion regarding “technological inventions”).
`It does so by relying on specific and unique characteristics
`of certain aspects of the BIOS that the patent asserts, and
`we lack any basis for disputing, were not previously used
`in the way now claimed, and the result is a beneficial
`reduction of the risk of hacking. ’941 patent, col. 1, line
`39, through col. 2, line 59; id., col. 3, lines 4–17; id., col. 6,
`lines 59–67. The prosecution history reinforces what the
`patent itself indicates about the change in previous verifi-
`cation techniques for computer security. See J.A. 283
`(examiner stating reasons for allowance, summarizing
`patent’s solution of “using an agent to set up a verification
`structure in the erasable, non-volatile memory of the
`BIOS”); Ancora, 744 F.3d at 735–36 (quoting applicants’
`arguments to examiner).
`In short, claim 1 of the ’941 patent is directed to a so-
`lution to a computer-functionality problem: an improve-
`ment in computer functionality that has “the specificity
`required to transform a claim from one claiming only a
`result to one claiming a way of achieving it.” SAP Ameri-
`ca, Inc., 898 F.3d at 1167. It therefore passes muster
`under Alice step one, as it is not directed to patent-
`ineligible subject matter. We need not and do not apply
`step two of the Alice analysis. See Data Engine, 906 F.3d
`at 1011; Finjan, 879 F.3d at 1306; Visual Memory, 867
`F.3d at 1262.
`We do note, in accord with our recognition of overlaps
`between some step one and step two considerations,
`Electric Power Group, LLC v. Alstom S.A., 830 F.3d 1350,
`1353 (Fed. Cir. 2016), that our conclusion that the specific
`
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`ANCORA TECHNOLOGIES, INC. v. HTC AMERICA, INC.
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`improvement in this case passes muster at step one is
`indirectly reinforced by some of our holdings under step
`two. For example, in BASCOM Global Internet Services v.
`AT&T Mobility, we held that claims to a method and
`system of filtering Internet content using an Internet
`Service Provider (ISP) server were a “technical improve-
`ment over the prior art ways of filtering such content.”
`827 F.3d 1341, 1350, 1352 (Fed. Cir. 2016). The prior art
`disclosed two forms of content-filtering systems: software
`was either (1) “placed on local computers, such that each
`local computer had its own tool for filtering [content]”; or
`(2) placed on “a local server” or remote ISP server. Id. at
`1343–44. But both of those systems had disadvantages:
`the former allowed end-user modifications and was diffi-
`cult to administer; the latter ignored material differences
`among end users. Id. The claimed invention addressed
`the disadvantages of the prior art through a filtering
`system located on an ISP server that used the server’s
`ability to “to associate an individual user with a specific
`request” to create individually customizable filtering. Id.
`In holding the claimed invention eligible under Alice step
`two, we reasoned that although “[f]iltering content on the
`Internet was already a known concept, . . . the patent
`describes how its particular arrangement of elements is a
`technical improvement over the prior art ways of filtering
`such content.” Id. at 1349–50. A similar characteriza-
`tion, we think, applies to the technical improvement
`claimed in this case and, in light of the line of cases we
`have discussed above, justifies the conclusion that claim 1
`of the ’941 patent is not directed to an abstract idea, but
`to a computer-functionality improvement.
` The contrast with another step-two case, Intellectual
`Ventures I LLC v. Symantec Corp., 838 F.3d 1307 (Fed.
`Cir. 2016), is also instructive. There, the claimed inven-
`tion required the installation of a virus-screening soft-
`ware on a telephone network. Id. at 1319. But because
`the claim at issue did not “recite[] any improvement to
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`conventional virus screening software, nor . . . solve any
`problem associated with situating such virus screening on
`the telephone network,” we held that the patent did not
`identify a sufficient inventive concept under Alice to
`transform the claimed abstract idea into something
`patentable. Id. at 1320–21. Nor did the claimed method
`provide advantages with respect to computer function. Id.
`at 1320. In the present case, in contrast, the record
`described above shows that the claimed invention moves a
`software-verification structure to a BIOS location not
`previously used for this computer-security purpose and
`alters how the function is performed (in that the BIOS
`memory used for verification now interacts with distinct
`computer memory to perform a software-verification
`function), yielding a tangible technological benefit (by
`making the claimed system less susceptible to hacking).
`Thus, Intellectual Ventures I v. Symantec is consistent
`with our conclusion.
`HTC does not dispute that all claims pass muster if
`claim 1 does. Accordingly, we hold that HTC has not
`shown the ’941 patent’s claims to be invalid under 35
`U.S.C. § 101. We do not have before us any question
`about invalidity under other provisions of Title 35.
`III
`For the foregoing reasons, we reverse the judgment of
`the district court and remand the case.
`Costs to Ancora.
`REVERSED AND REMANDED
`
`
`
`