- Federal Circuit Continues to Struggle with Patent Eligible Subject Matter Disputes
- May 16, 2013 | Authors: James Moore Bollinger; Timothy P. Heaton; Daniel A. Ladow
- Law Firm: Troutman Sanders LLP - New York Office
In CLS Bank Int’l et al v. Alice Corp. Pty. Ltd (Slip Op. Fed. Cir. May 10, 2013), the full Federal Circuit issued perhaps its most divided resolution on the controversial patent eligibility issue. The potential impact of this ruling should not be underestimated. As Judge Moore opined in dissent:
Holding that all of these claims are directed to no more
than an abstract idea gives staggering breadth to what is
meant to be a narrow judicial exception. And let’s be
clear: if all of these claims, including the system claims,
are not patent-eligible, this case is the death of hundred
of thousands of patents, including all business method,
financial system, and software patents as well as many
computer implemented and telecommunications patents.
(Moore Slip Op. at p. 2). But even on this the Court disagreed, as Chief Judge Rader found no precedential effect beyond the judgment (See infra).
What is crystal clear is that - absent Supreme Court consideration - all four of Alice’s patents on a computer trading platform are now invalid as covering patent ineligible “abstract ideas.” However, as indicated by their six different opinions, there is no agreement in the Federal Circuit on the proper rationale for that result and how such issues should be determined.
By leaving the boundaries of what is patentable largely unresolved, the Federal Circuit (compounding issues raised by the Supreme Court’s decision in Prometheus) has raised serious questions regarding the validity of thousands of issued patents in the software, Internet and financial area, and injected significant uncertainty regarding potential infringement liability in these fields.
Indeed, the several fractured opinions couldn’t even agree whether the full Court was equally divided - or not - emblematic of an issue that continues to defy clear judicial guidance. In addition to eroding patent protection for software-based innovations and computerized business methods, the lack of a consensus as to how such analyses should be made will likely vex district courts, businesses and litigants seeking to address these questions.
* * *
The invention at issue here involved a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.”
The Lower Court Proceedings
CLS Bank sued, in District Court for the District of Columbia, Alice Corporation (Alice), seeking to have Alice’s patents declared invalid, not infringed and unenforceable. The dispute involved four patents of Alice, all stemming from the same original application filed over a decade ago.
In response to CLS Bank’s motion for summary judgment of invalidity under Section 101, the District Court ruled that all of the asserted patent claims were invalid as improperly covering an “abstract idea.” Initially the Federal Circuit reversed, finding that the Alice claims were patent eligible; CLS Bank sought rehearing en banc, which the Federal Circuit granted.
The Per Curiam Decision and Concurrences
In affirming the District Court judgment of invalidity as patent ineligible, the ten federal circuit judges issued the Court’s ruling “per curiam” but then wrote six different opinions spanning 135 pages, including strong dissents by Judges Moore, Newman and Linn, and “Additional Reflections” by Judge Rader.
Judge Lourie wrote the lead concurring opinion on behalf of five of the judges (Judges Lourie, Dyk, Prost, Reyna and Wallach), a narrative summarizing the seminal U.S. Supreme Court cases on patent eligibility, and in particular, last year’s Mayo v. Prometheus decision (132 S.Ct. 1289 (2012)) discussing the need for substantive limitations beyond the abstract idea or law of nature:
The Supreme Court held that those claims failed the
§ 101 test for subject-matter eligibility. The Court began
its analysis by noting that the claims “set forth laws of
nature-namely, relationships between concentrations of
certain metabolites in the blood and the likelihood that a
dosage of a thiopurine drug will prove ineffective or cause
harm.” Id. at 1296. Therefore, the question was “whether
the claims do significantly more than simply describe
these natural relations”; did they “add enough” to the
natural law to render the claimed processes patent eligible?
Id. at 1297.
(Lourie Slip Op. at p. 14).
These five judges found all claims at issue - method, software and system claims - invalid as “abstract.” In discussing what more is needed in the claim - beyond the abstract idea - the court (or at least five of its members) clarified its view on the “inventive concept” as an indication of patent eligibility, one that did not turn on traditional notions of inventiveness:
The requirement for substantive claim limitations beyond
the mere recitation of a disembodied fundamental
concept has “sometimes” been referred to as an “inventive
concept.” See Mayo, 132 S. Ct. at 1294 (citing Flook, 437
U.S. at 594).We do not read the Court’s occasional use of
that language in the § 101 context as imposing a requirement
that such limitations must necessarily exhibit
“inventiveness” in the same sense as that term more
commonly applies to two of the statutory requirements for
patentability, i.e., novelty and nonobviousness. See 35
U.S.C. §§ 102, 103.
(Lourie Slip Op. at p. 19).
In ruling that the mere use by a computer that was “routinely” adapted by software did not save a system claim on an abstract idea, the Lourie opinion states:
A particular computer system, composed of wires, plastic, and
silicon, is no doubt a tangible machine. But that is not the question.
The question we must consider is whether a patent claim that
ostensibly describes such a system on its face represents something
more than an abstract idea in legal substance. Claims to computers
were, and still are, eligible for patent. No question should have
arisen concerning the eligibility of claims to basic computer
hardware under § 101 when such devices were first invented. But
we are living and judging now (or at least as of the patents’ priority
dates), and have before us not the patent eligibility of specific types
of computers or computer components, but computers that have
routinely been adapted by software consisting of abstract ideas, and
claimed as such, to do all sorts of tasks that formerly were performed
by humans. And the Supreme Court has told us that, while avoiding
confusion between §101 and §§102 and 103, merely adding existing
computer technology to abstract ideas-mental steps-does not as a
matter of substance convert an abstract idea into a machine.
(Lourie Slip Op. at p. 37).
Judge Rader issued an opinion concurring that the method and software claims are not patentable, but stating that he would find the “system” claims patentable. He noted that the Court was divided on the patent eligibility of the system claims; and that as to the method claims, while a majority agreed they were invalid, there was no majority on the reasoning to reach this conclusion - thus resulting in “nothing said today beyond our judgment has the weight of precedent.” (Rader Slip. Op. at n.1).
In addressing the need for “meaningful” limitations beyond the law of nature or abstract idea, the Chief Judge applied the “concrete” terminology from the Court’s controversial State Street decision, stating:
The relevant inquiry must be whether a claim includes
meaningful limitations restricting it to an application,
rather than merely an abstract idea. See
Prometheus, 132 S. Ct. at 1297 (“[D]o the patent claims
add enough to their statements of the correlations to allow
the processes they describe to qualify as patent-eligible
processes that apply natural laws ... An abstract idea is one
that has no reference to material objects or specific
examples-i.e., it is not concrete. See Merriam-Webster’s
Collegiate Dictionary 5 (11th ed.2003) (defining abstract
as “disassociated from any specific instance . . . expressing
a quality apart from an object
poem is concrete,
poetry is [abstract]>”). A claim may be premised on an
abstract idea-the question for patent eligibility is whether
the claim contains limitations that meaningfully tie that idea
to a concrete reality or actual application of that idea.
(Rader Slip. Op. at p. 16; State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368, 1373 (Fed. Cir. 1998)).
In assessing computer related claims, Judge Rader focused on the specific qualities of the claimed computer implementation:
The key to this inquiry is whether the claims tie the
otherwise abstract idea to a specific way of doing something
with a computer, or a specific computer for doing
something; if so, they likely will be patent eligible, unlike
claims directed to nothing more than the idea of doing
that thing on a computer
(Rader Slip Op. at p. 21).
Next Steps - the Supreme Court’s Upcoming Myriad Decision
The patent eligibility issue is now before the Supreme Court on the specific issue of whether isolated DNA can be patented. Arguments were held in April 2013 and a decision may issue as early as next month. While a completely different area of technology, some of the issues unresolved by CLS Bank may be addressed by Myriad.