Nintendo Dodges Patent Infringement – and a $10.1 Million Dollar Penalty – After Appeals Court Uses the Alice Test to Clear the Japanese Gaming Giant

May 7, 2021

By Jason Re, 2L at the George Washington University Law School
Research Assistance by Leila M. Diallo, 1L

(The following appears in Esports and the Law, a sister publication of Sports Litigation Alert)

In 2013, iLife Technologies, Inc. (“iLife”) brought suit against Nintendo of America, Inc. (“Nintendo”) alleging patent infringement of six motion detection patents. In 2016, the U.S. Patent Trial and Appeal Board invalidated five of the six patents for obviousness, leaving only one remaining patent in the case, which proceeded to trial in 2017.

The patent at issue was U.S. Patent No. 6864796 – also known as Systems Within a Communications Device for Evaluating Movement of a Body and Methods of Operating the Same. Claim 1 of the patent, the claim at issue, was directed to a sensor and processor system that can evaluate body movement relative to the environment, via dynamic and static acceleration, for application in medical technology. Nintendo’s gaming console, the “Wii”, uses motion sensor technology to process the users’ body position in order to perform different functions within the game itself.

The jury found that four of Nintendo’s games – Mario Kart, Wii Club Sports, Wii Sports Resort, and Wii Sports – infringed on iLife’s patent, and the court granted the plaintiff a $10.1 million judgment as royalty payment. Nintendo subsequently appealed the verdict and the award.

In January of 2020, the U.S. District Court for the Northern District of Texas vacated the jury verdict on appeal, absolving Nintendo of the directed payment. The court reached this conclusion on the basis that Claim 1 was patent-ineligible subject matter pursuant to 35 U.S.C. §101 that added no inventive context or application. In order to come to this conclusion, the court used the “Alice Test” – a two-factor test established in Alice Corp. Pty. Ltd. v. CLS Bank Intern (U.S. 2014).

The first factor is whether the character of the relevant claim is directed to patent-ineligible subject matter, such as laws of nature, natural phenomena, or abstract ideas. If the relevant claim is directed to a patent-ineligible subject matter, the second factor is whether the elements of the claim transform the nature of the process so the patent is inventive in a way that goes beyond previously understood, routine, and conventional application. Claim 1 did not pass the Alice test as it described conventional motion sensor technology and activities that were previously known to the industry as an abstract idea, and did not add any inventive transformation, and thus was not eligible for patent protection. The court voided the $10.1 million royalty award, as Nintendo did not violate any patent that was eligible for protection.

In January of 2021, the U.S. Court of Appeals for the Federal Circuit upheld the District Court’s ruling on appeal, affirming the erasure of the $10.1 million verdict against Nintendo and declaring Claim 1 ineligible for patent protection. A three-judge panel made the ruling, stating that iLife’s patent contained “nothing more than the idea of gathering, processing and transmitting data,” which is an abstract idea that cannot be patented, based on the Alice framework as noted prior.

The court noted that the claim recites a motion sensor system that evaluates and communicates the relative movement of a body using information collected from sensors, but the court has routinely held that claims directed to gathering and processing data are an abstract idea, The court also found that the elements of Claim 1 fail to recite an inventive concept, reciting only generic computer components, even the claim’s description of these elements noting they are generic. Further, the claim did not recite any unconventional means of configuring or processing that information. Thus, the court found that Claim 1 of iLife’s patent was not transformative with regard to the nature of the claim, and was not patent-eligible subject matter. Nintendo was not guilty of infringement, affirming the decision of the case below and upholding the ruling that Nintendo did not have to pay a $10.1 million lump-sum royalty payment.

While Nintendo may have avoided liability for patent-infringement, and saved $10.1 million, gaming development companies around the world must be increasingly careful about patent infringement when attempting to implement the newest technologies into their games and consoles. It’s possible that iLife could have prevailed in this case, making their Claim 1 patent-eligible, if they included notes on the innovative functions of the technological system. This case suggests that, when filing a patent, prudent counsel would take great care in including explanations of the processes so as to show innovative transformation or usage, as explicit inventiveness is the key to the second step of the Alice test. This is particularly important in cases regarding computer hardware and processes; as such claims are in danger of early ineligibility on the basis of abstract nature or routine process.

Further, the Alice test generally is not as clear-cut as one would probably like. The language of the test – “distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent-eligible applications of those concepts”; “determining whether the claims at issue are directed to patent-ineligible concept, such as an abstract idea”; “determining whether the additional elements transform the nature of the claim”; etc. – lends to broad judicial discretion in the evaluation of what constitutes patent-eligible subject matter. As more of our world becomes encapsulated on computers and stored as data on servers, what is abstract and what is concrete becomes blurrier. The use of the Alice test in patent cases such as this will require judges to be the new arbiters of technological development.