May 28, 2013
Managing Intellectual Property
Authored by Erika Harmon Arner and Lauren J. Dreyer
Last month, the Federal Circuit issued its much-anticipated en banc decision in CLS Bank v Alice Corp, a case concerning the patent eligibility of computer-related inventions. When the Court announced in 2012 that it would consider the case en banc, many hoped that the full Court's decision would clarify the "murky morass" (Judge Plager in MySpace, Inc. v Graphon Corp) surrounding the scope of patent protection available to computer-implemented inventions. The Court seemed to share that goal, inviting the parties and the public to file briefs addressing a few fundamental questions for en banc consideration: (1) what test should be used to determine whether a computer-implemented invention is eligible for patenting; (2) when, if ever, does the presence of a computer lend patent eligibility to an otherwise unpatentable idea; and (3) whether different types of patent claims should be treated differently when evaluating patent eligibility.
But rather than answering these questions, the Court's en banc decision only added to the uncertainty. Spanning 135 pages and including seven separate opinions, the Court's decision contained no precedential holdings on the many legal issues involved, beyond a general ruling that the specific patent claims at issue in the case were invalid under section 101 of the Patent Act for claiming patent-ineligible subject matter. No opinion, test, or theory garnered a majority of the 10 participating judges, leaving the en banc questions, and many others, unanswered. While lengthy, the decision provides practitioners and inventors with relatively little guidance for determining how to clear the 101 hurdle in new patent applications or for analyzing whether patent claims, as now issued, will survive a validity challenge. Rather, as Judge Pauline Newman lamented, the Court's "remedial effort has failed".
Judge Kimberly Moore warned that the "judicial deadlock" created by this decision threatens the future of software patenting, which could potentially "decimate the electronics and software industries" and place additional risks on financial, business method, and telecommunications patents. Although Judge Moore suggested that this decision could be "the death of hundreds of thousands of patents", perhaps virtually every patent in the business method, financial, and software fields, the immediate consequences of the decision are not that far-reaching.
By failing to produce a majority opinion on what test determines eligibility and limiting its ruling to the specific claims before it, the CLS Bank Court did not automatically invalidate any issued patents. Rather, the Court demonstrated a wide variety of opinions on the proper scope of patent protection available to computer-related inventions. With no clear answers, the decision leaves a cloud of uncertainty hanging over software and business-method patents, which will probably face increased scrutiny in the wake of CLS Bank.
Without guidance from the Supreme Court, or further decisions from the Federal Circuit, little certainty is available to patent applicants or owners of computer-related patents after CLS Bank. There are, however, a few areas in which some consensus seems to appear across the many different opinions.
First, many of the Federal Circuit judges seemed to agree that patent eligibility under section 101 of the Patent Act is a separate and independent inquiry from patentability under sections 102 and 103 of the Act, regarding novelty and non-obviousness, respectively. Judge Newman, for example, maintained that "it is not necessary, or appropriate, to decide whether subject matter is patentable in order to decide whether it is eligible to be considered for patentability". And, while disputing the interpretation of the Supreme Court's "inventive concept" inquiry under section 101, Judge Alan Lourie, joined by four others, wrote that "inventiveness" under section 101 is not the same concept as novelty and non-obviousness under sections 102 and 103, respectively. Chief Judge Randall Rader and his three concurring colleagues agreed that the Supreme Court's language "should not be read to conflate principles of patent eligibility with those of validity". Each requirement of the Patent Act "plays a different role and no one section is more important than any other", reasoned Chief Judge Rader.
Another point of seeming agreement was over the presumption of validity that applies to issued patents. There seemed to be consensus that claims are to be presumed valid, even when considering patent eligibility under section 101. Because an issued patent has survived the Patent Office's scrutiny under patent eligibility, as equally as it has as under novelty and non-obviousness, Chief Judge Rader found "no reason not to apply the same presumption of validity to that determination as [the Court does] to the Patent Office's other patentability determinations". Therefore, the judges made clear that any attack on an issued patent as to its eligibility under 101 must be proven by the higher standard of clear and convincing evidence.
Another common theme through many of the separate opinions is that applicants cannot rely on the bare recitation of a "computer" to clear the 101 hurdle. Rather, something more than a computer must be added to a basic or fundamental process "with the result that the claim covers significantly less" than that basic process, as Judge Lourie wrote. The judges also seemed to agree that insignificant pre- or post-solution activity or mere field-of-use limitations would not be sufficient to obtain eligibility under 101. Rather, the claim must include more "meaningful limitations".
The judges, however, disagreed on what constitutes a "meaningful limitation". Chief Judge Rader's group of four judges would have found limitations "meaningful" if they were "essential" to the invention, and would have ruled that the recited structural limitations in Alice's claims were "essential" and therefore "meaningful limitations". Judge Lourie's group of five, on the other hand, would look past drafting devices and consider the "true practical effect" of the claimed invention. Thus, while agreeing that token components or hollow field-of-use limitations do not suffice, the judges did not seem to agree on how much or what type of structural computer limitations would be enough to render a claim patent-eligible.
Notably, most judges advocated that pre-emption governs the inquiry. "Guarding against the wholesale pre-emption of fundamental principles should be our primary aim" in applying 101, said Judge Lourie. Similarly, Chief Judge Rader's opinion noted that pre-emption "is only a subject matter eligibility problem when a claim preempts all practical uses of an abstract idea". As stated by Chief Judge Rader: "It is not the breadth or narrowness of the abstract idea that is relevant, but whether the claim covers every practical application of that abstract idea." Judge Lourie also suggested that inventors and claim drafters may first consider identifying the fundamental concept that the claimed invention may embody. For example, Judge Lourie found that Alice's claims were tied to the fundamental concept of escrow. By identifying that fundamental concept, practitioners can attempt to draft claim language with limitations "that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself." The real question though is, "How much is enough?"
CLS Bank leaves practitioners with the difficult question of how to determine whether claims recite enough substance that they are directed to something more than the abstract idea—a question with which the judges themselves struggled. Judge Lourie, for example, tended to disfavor reciting computer functionality when the computer merely lends speed or efficiency to the invention, calling out the "ubiquity" of computers in today's world. Under Judge Lourie's analysis, if removing the computer recitations in the claim leaves the claim with nothing more than the abstract idea itself, the claim may be rendered invalid under 101. Specifically, Judge Lourie criticized the use of "a computer", "a data storage unit", and "a communications controller" in Alice's system claims, saying that all general-purpose computers will include these components and, therefore, these components are not limiting enough. While they do limit the application of the "abstract idea" to an application on a computer, to Judge Lourie, that was simply not sufficient. Therefore, applicants may want to consider how the claimed invention interacts with less traditional structural limitations in a way that improves the computer itself. For example, reciting how the claimed invention interacts with a user interface or how it improves user experience on a mobile device may provide substantial limitations that lend eligibility to an otherwise ineligible abstract idea.
Other judges seemed to maintain that improvements in computer technology itself would render claims eligible under 101. As Chief Judge Rader voiced: "meaningful limitations may include the computer being part of the solution, being integral to the performance of the method, or containing an improvement in computer technology." For example, Chief Judge Rader cited a case where claims recited a GPS receiver, which was integral to the claimed functionality. The GPS receiver, therefore, converted a possibly ineligible abstract idea into a special-purpose computer or a specially designed machine for implementing a particular process. Like a user interface, a GPS receiver adds something more to the claimed limitations than the rote recitation of "a computer", "a data storage unit", and "a communications controller".
The judges also seemed to wrangle with whether the law should treat all claims—system, method, and computer-readable media claims—the same under a 101 inquiry. Judges Newman, Linn and O'Malley would clearly treat all claims the same. "[E]ither they are all patent eligible or they are not," said Judges Linn and O'Malley (who would find Alice's claims eligible under 101). Chief Judge Rader and Judge Moore, however, would distinguish between Alice's patent-eligible system claims compared to its patent-ineligible method and computer-readable media claims. In contrast, Judge Newman's opinion held that form is irrelevant under 101 as "[p]atent eligibility does not turn on the ingenuity of the draftsman".
These disagreements demonstrate the extreme dichotomy drawn between the opinions and the difficulty the judges had in resolving the eligibility of Alice's claims, making this case suitable for Supreme Court review.
The CLS Bank decision seems primed for Supreme Court review. Indeed, Judge Moore called upon the Supreme Court to take the case, complaining that the Federal Circuit is "irreconcilably fractured" over the eligibility of computer-related system claims. It seems likely that, if the Supreme Court did grant certiorari in this case, one issue would be the eligibility of Alice's system claims under section 101, and in turn, whether claim format matters to the inquiry of patent eligibility. It is less clear whether the Court would review the eligibility of Alice's method and computer-readable media claims. Seven of the 10 Federal Circuit judges would have found those claims ineligible. Indeed, Chief Judge Rader's opinion called them "indistinguishable from the claim in Bilski".
Additionally, the CLS Bank decision may prompt the Supreme Court to revisit dicta relating to an "inventive concept" requirement from its past cases, including its 2012 decision in Mayo v Prometheus. While agreeing that 101 is a separate inquiry, the Federal Circuit judges were sharply divided on how to interpret "inventiveness" under 101. Therefore, the Supreme Court could view this case as an opportunity to clarify what it meant by "inventiveness" or "human ingenuity" in the context of computer-implemented inventions—compared to those in the biotechnology or business-method sectors.
A petition for writ of certiorari to the Supreme Court must be filed within 90 days of the CLS Bank decision.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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