Sitting en banc, the Federal Circuit recently held patent ineligible all of Alice Corporation’s patent claims at issue directed toward computer-implemented escrow systems, software, and methods. Although the 135-page opinion, issued May 10, offers a variety of possible frameworks for evaluating patent eligibility, none received the buy-in of a majority of judges, and accordingly the court failed to articulate a standard that can be used reliably to evaluate existing patents and future filings. Only the judgment itself has precedential effect. See CLS Bank Int’l v. Alice Corp., No. 2011-1301, pages 39-40, footnote 1.
The decision marks a failure by the Federal Circuit to articulate a patent eligibility standard for computer-implemented inventions, something patentees and practitioners were awaiting following recent patent eligibility decisions in other fields. If anything, the court’s fragmented decision creates further confusion in an area of patent law already mired in conflicting, confusing, and often contradictory precedents.
In CLS Bank, the Federal Circuit was confronted with the question of patent eligible subject matter in the context of computer-implemented systems, methods, and media for implementing escrow systems to settle transactions. CLS Bank, pgs. 2-4. In an opinion drafted by Judge Lourie, five of the ten judges found that Alice’s method claims failed to articulate patent eligible subject matter because “there is nothing in the asserted method claims that represents ‘significantly more’ than the underlying abstract idea [of an escrow system] for purposes of § 101.” Id. at 28.
Lourie’s opinion considered the computer readable media claims to be “merely method claims in the guise of a device.” Id. at pg. 31. Accordingly, the media claims were also patent ineligible. Similarly, Lourie’s opinion found the system claims, while formally drawn to physical objects, did not deserve to be evaluated any differently. Id. at pg. 33. “[N]one of the recited hardware offers a meaningful limitation” beyond linking the method to a particular environment. Id. at 35. Indeed, the Lourie opinion went so far as to state that “[u]nless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility.” Id. at 27.
In an opinion drafted by Chief Judge Rader, four judges joined in finding Alice’s system claims were patent eligible. Judge Rader’s opinion focused on 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.” Id. at 59. By beginning with a machine acquiring data and ending with the machine exchanging financial instructions with other machines, and noting that the specification disclosed “numerous flowcharts” providing algorithm support for the functions recited in the claims, Radar’s opinion finds that the “’abstract idea’ presented here is not disembodied at all, but is instead integrated into a system utilizing machines.” Id. at 70, 76.
The judges joining in most of Rader’s opinion disagreed on the patentability of the method claims. Two judges, including Rader, found the method claims patent ineligible, while the other two wrote separately to find the method claims also patent eligible. Id. at 80. Judge Rader’s opinion found that each step of the method and media claims “individually recite[s] merely a general step inherent within the concept of an escrow” and “do not mention a computer.” Id. at 79. Accordingly, Rader’s opinion found the method and media claims patent ineligible. Id. at 79-80. The remaining two judges having joined Rader’s opinion as to the system claims wrote separately to note that, due largely to the parties’ stipulation that the method claims be construed to include electronic activity, could not be interpreted as Rader suggested, and were therefore patent eligible. Id. at 116-117.
Judge Moore wrote a separate opinion joined by three other judges largely remarking on the alarming nature of the holding. “[I]f all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents.” Id. at 81. “When you walk up to the § 101 gate holding a computer in your arms (or software for that matter), you should not be rejected because your computer is an abstract idea.” Id. at 94.
Judge Newman wrote her own opinion and would have found all the system, method, and media claims patent eligible, and reaffirmed the right of the public to freely experiment with patented technology. Id. at 95-108.
Finally, Chief Judge Rader authored several pages of “additional reflections” where he reflected on his judicial career as he has interacted with patentable subject matter and urged “[w]hen all else fails, consult the statute!” Id. at 126. He contended that all else had indeed failed, and the breadth of § 101 as written should guide patent eligibility analysis. Id.
By way of background, the patent laws state that a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” 35 U.S.C. § 101 (2006). Despite the inclusiveness of the statutory language, there has long been judicially-created exceptions stating “laws of nature, natural phenomena, and abstract ideas” are not patentable. Gottschalk v. Benson, 409 U.S. 63, 67 (1972).
The scope of the judicially-created exceptions to patent eligible subject matter has been the subject of several recent Supreme Court decisions. In Bilski v. Kappos, the Supreme Court held ineligible Bilksi’s claims directed toward processes for hedging against the risk of price changes in commodities, which did not involve the use of a computer. Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010). The Court held that the claims covered the abstract idea of hedging against risk and would “pre-empt use of this approach in all fields.” Id. Bilski left open the question of patent eligibility for computer-implemented inventions.
The Supreme Court spoke further on patent eligibility in Mayo, holding that the claimed medical diagnostic methods were patent ineligible. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1298 (2012). The Court held the claims set forth laws of nature, and did not add “significantly more” to the natural law to render the claims patent eligible. Id.at 1296-98.
Following the fractured opinion in CLS Bank, practitioners now speculate whether the Supreme Court is likely to speak again on the issue of patent eligible subject matter, and indeed much of the Federal Circuit’s opinion in CLS Bank seems directed toward the reviewing court. Until then, patentees of computer-implemented inventions are without a standard by which to definitively judge their patent eligibility. Patentees may consider strategies to keep pending cases before the office in order that they might present claims best suited for any future test yet to be articulated. Patentees in the process of drafting or filing new applications may consider including as much detailed algorithmic support for their claims as possible, noting the judges’ reliance on similar specification support in several of the CLS Bank opinions.
Beyond interim-type strategies to hedge patentees’ bets, the community is left to again await definitive guidance from the courts in interpreting claims directed toward computer-implemented inventions.