Full circuit at the CAFC

The Court of Appeals of the Federal Circuit (CAFC) has handed down its second panel decision  in Ultramercial V Hulu. The CAFC re-heard the case a second time following a remand from the Supreme Court (SCOTUS) with instructions to reconsider the case in view of the higher court’s findings in Mayo v Prometheus.

This second decision, like the first panel decision, is marked precedential. Both the first and second panel decisions in this case  cite an earlier decision of the court [In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc)].

In the first panel decision the court relied upon Alappat to support the premise that “…programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”

This second panel decision makes a similar reference to Alappat (page 24):

A special purpose computer, i.e., a new machine, specially designed to implement a process may be sufficient. See Alappat, 33 F.3d at 1544 (“Although many, or arguably even all, of the means elements recited in claim 15 represent circuitry elements that perform mathematical calculations, which is essentially true of all digital electrical circuits, the claimed invention as a whole is directed to a combination of interrelated elements which combine to form a machine for converting discrete waveform data samples into anti-aliased pixel illumination intensity data to be displayed on a display means. This is not a disembodied mathematical concept which may be characterized as an ‘abstract idea,’ but rather a specific machine to produce a useful, concrete, and tangible result.” (footnotes omitted)); see also id.at 1545 (“We have held that such programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”).

And again at page 30:

“In this context, this court examines as well the contention that the software programming necessary to facilitate the invention deserves no patent protection or amounts to abstract subject matter or, in the confusing terminology of machines and physical transformations, fails to satisfy the “particular machine” requirement. This court confronted that contention nearly two decades ago in In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc). At that time, this court observed that “programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.” Id. At 1545.”

The CAFC, in accord with the SCOTUS’ directions on remand, also analyzes whether the method claims at issue amount to more than an abstract idea and concludes that they do. Explaining that “An abstract idea is one that has no reference to material objects or specific examples—i.e., it is not concrete.” By way of example, the decision provides a dictionary definition of “abstract” which indicates that “poetry” is abstract, while “a poem” is concrete.

The second CAFC panel presumes that “… the mere idea that advertising can be used as a form of currency is abstract…” (like poetry)  but concludes that the claimed method which “…forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product…” renders the claims concrete (like a poem). The decision notes that “…the claimed invention purports to improve existing technology…”  and “…invokes computers and applications of computer technology…”.

This second decision concludes by saying that “…the claimed invention is not “so manifestly abstract as to override the statutory language of section 101.” [Research Corp., 627 F.3d at 869]”

The case is remanded to the district court for further proceedings, without opining on the patentability of the claimed invention under the substantive criteria set forth in §§ 102, 103, and 112.

Those readers that have been following the recent spate of § 101 patentability decisions from the CAFC and SCOTUS will notice the similarity between  the “manifestly abstract” language in this decision and the criteria the court employed in their original panel decision in CLS bank v Alice Corporation:

“…this court explained that the “disqualifying characteristic” of abstractness must exhibit itself “manifestly” “to override the broad statutory categories of patent eligible subject matter.”  Research Corp.,  627 F.3d at 868.”

Of course, in CLS bank v Alice Corporation the claims which were originally held to be patent eligible under §101 were deemed ineligible in an en banc rehearing following a remand from SCOTUS.

The reason for the apparent difference between the second panel decision in Ultramercial V Hulu and the CLS en banc decision may reside in the way the court viewed the claims in the context of Alappat.

The CLS en banc decision also refers to Alappat:

“The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a “disembodied” concept, In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc), a basic building block of human ingenuity, untethered from any real-world application. Standing alone, that abstract idea is not patent-eligible subject matter.”

 In CLS Bank the en banc court concluded that the method claims were abstract. 

Initially, that finding seems difficult to reconcile with the current decision in Ultramercial v Hulu. However, there is an important difference which those that practice the draftsman’s art would be wise to heed.

The method claims in Ultramercial's US 7,346,545 require concrete exchanges. A consumer requests to view a sponsor message (in lieu of payment for desired content). The sponsor message is displayed to the consumer (by a third party that is neither the owner of the content nor the sponsor). The sponsor subsequently pays the third party for each time the sponsor message is delivered.

Ironically, it seems to be the “business” nature of the claims at issue that got them over the § 101 threshold in Ultramercial v Hulu.

In contrast, the method claims at issue in CLS bank (US 5,970,479; claim 18) concludes with a “pricing and matching” step. This step has component sub-steps of “calculating”, “comparing” and “matching”. This means that, although a computer is involved, the claimed method relates to determination of relationship(s) between previously entered data sets. Presumably interested parties will see these relationships displayed and make a decision about whether or not to enter into a contract, but the claim itself does not include any commercial interaction between parties. Although the specification explains “The entitlement for each outcome can be in the form of `money` payoffs (both positive and negative) at maturity of a matched contract…” it also includes the proviso that “In the period between the match of a contract and maturity the various buyers, sellers and other contract stakeholders can review any contract to which they are a party and seek to trade that contract to other parties by the pricing and matching procedure, or variations on the pricing and matching procedure. They would tend to do so if their view of the future outcome of the phenomenon, being the subject of the contract, had changed markedly, or as a means to minimise expected losses if some unforseen adverse trend in the present day outcome of the phenomenon has occurred. As well as trading existing contracts, further contracts can be offered to `lay off` or avert risk. Stakeholder parties can build up a portfolio of matched contracts and offered contracts, which are continually traded to obtain the best possible position at any time, and that position can be continually reviewed with time.” Thus, it seems that the computer(s) are not really managing commercial transactions, rather they present suitable “matches” so that people can make subsequent decisions.

The system and computer readable media claims in CLS bank are similarly constructed. However, one might reason that expressing the same concepts as interrelated hardware components tethers them to a “real world application” as required by In re Alappat. The CAFC did not find this to be the case though.

The emerging trend from  CLS Bank and Ultramercial v Hulu seems to be that the State Street Bank criteria of “useful, concrete, and tangible result” which was the guiding principle in § 101 analyses prior to Bilski  is making a comeback. Of course, it would be naïve to think of this as a bright line rule.

The Fat Lady Sings

J.D. Salinger said “It’s not over until the fat lady sings.” He was referring to long dramatic operas which conclude with an aria sung by an [often zoftig] female soprano. Association for Molecular Pathology v Myriad Genetics has been a long dramatic opera.

The Supreme Court of the United States (SCOTUS) issued its long awaited decision in that case last week and now it is over.

The Court explicitly stated that it paid no deference to USPTO policy and then demonstrated that fact. In the popular press some headline read "Supreme court upholds gene patents" and others said “Supreme court says no to gene patents.

The gist of it is that the ACLU has pretty much succeeded in obliterating gene patents based on a DNA sequence.

The SCOTUS decision shows that the lady of Justice is truly blind.  She has upset the apple-cart of biotechnology patents. The apple remaining in the cart (cDNA claims) is bruised by remarks made in the opinion: “In that situation, [where no introns are present] a short strand of cDNA may be indistinguishable from natural DNA.[and therefore ineligible under §101]”

In a chilling footnote, the Court indicated: “We express no opinion whether cDNA satisfies the other statutory requirements of patentability. See, e.g., 35 U.S.C. §§102, 103 and 112; Brief for United States as Amicus Curiae 19, n. 5.”  The increasingly widespread availability of "whole genome sequencing" is likely to make those sections of the law relevant to any discussion of future patent claims that recite oligo-nucleotide sequences as a feature.

This decision ends the prolonged opera which began in Federal district court in New York, went to the Court of Appeals of the Federal Circuit (CAFC), was appealed to SCOTUS, remanded to the CAFC for further consideration and returned to SCOTUS.

In retrospect, it seems that the climactic aria was actually sung in the earlier CAFC decision on remand:
"We also reverse the district court’s decision that Myriad’s method claim to screening potential cancer therapeutics via changes in cell growth rates of transformed cells is directed to a patent-ineligible scientific principle. We affirm the court’s decision, however, that Myriad’s method claims directed to “comparing” or “analyzing” DNA sequences are patent ineligible; such claims include no transformative steps and cover only patent-ineligible abstract, mental steps. "

These two types of method claims were not re-addressed by SCOTUS, although the outcome would likely have been the same since the CAFC clearly followed the Mayo v Prometheus decision which caused SCOTUS to remand the case to them.

The CAFC decision on remand, practically dictated by SCOTUS, effectively rendered patent claims to medical diagnostic methods which rely upon comparison of two sequences to analyze mutations invalid as being directed to non-statutory subject matter under §101.   

Until last week’s SCOTUS decision, practice of those medical diagnostic methods which rely upon comparison of two sequences might have infringed patent claims directed towards “An isolated nucleotide sequence comprising…” . The fat lady’s closing aria makes it clear that even this possibility has vanished.

It is of interest to note that the USPTO was originally opposed to biotechnology patents. In the landmark  Diamond V Chakrabarty case, it was the Commissioner of Patents and Trademarks that appealed all the way to SCOTUS. The Chakrabarty case centered around US 4,259,444 (granted March 31, 1981) and involved genetically modified bacteria capable of digesting hydrocarbons (e.g. petroleum products) but did not claim any “isolated nucleic acid/oligonuclueotide sequence” per se.  A quick search of the USPTO database suggests that “an isolated nucleic acid sequence” was first claimed in US 4713332 (granted December 15, 1987). 

In terms of the judicial history of this type of phrasing in US patent claims, the first case seems to be Amgen, Inc v. Chugai Pharm. Co. Ltd., 13 U.S.P.Q. 2d 1737 (D. Mass. 1989), aff'd in part, rev'd in part, vacated in part, 927 F.2d 1200 (Fed. Cir. 1990).

Interestingly, SCOTUS denied certiorari  in this case  (502 U.S. 856 (1991)) which gave rise to the long opera culminating in last week’s final aria over 20 years later. It is the fact that we were putting apples in the cart for 20 years that makes us so upset that it has been overturned.

Trouble in Gotham (or Washington)

In a recent (May 10, 2013) en-banc decision  CLS Bank V Alice Corporation the CAFC decided that system claims in asserted patents which recite hardware components (defined in functional terms) are not eligible for patent protection under 35 U.S.C. §101. 

No single opinion issued by the en-banc court commanded a majority. However seven of the ten members, a majority, of the en- banc court agreed that the method and computer-readable medium claims fail to recite patent-eligible subject matter. In addition, eight judges, a majority, concluded that the particular method, medium, and system claims at issue in this case should rise or fall together in the § 101 analysis.

The district court had originally ruled that 

(I) Alice's method claims “are directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk.”; 

(2) The asserted system claims are similarly ineligible, as those claims “would preempt the use of the abstract concept of employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk on any computer, which is, as a practical matter, how these processes are likely to be  applied.”; and

(3) The asserted media claims failed on the same ground as “directed to the same abstract concept despite the fact they nominally recite a different category of invention.”

An earlier panel decision at the CAFC had reversed the district court but the en-banc decision upheld the district court's findings that all claims at issue are patent ineligible. The en-banc panel was equally divided (five to five) and five supplementary opinions (concurring-in-part and dissenting-in-part or dissenting-in-part or dissenting) were drafted by various judges or groups of judges. Chief Judge Rader also added additional reflections beyond the concurring-in-part and dissenting-in-part opinion he authored. The main opinion is 45 pages long and the additional opinions/reflections make the document 145 pages long.

The main opinion is most interesting for what it does not contain. There is not a single reference to an earlier CAFC decision. 

This is in sharp contrast to the earlier panel decision which relied heavily on CAFC precedents:

"The “disqualifying characteristic” of abstractness must exhibit itself “manifestly” “to override the broad statutory categories of patent eligible subject matter.” Research Corp.,  627 F.3d at 868. [CAFC];

"While the use of a machine in these limitations is less substantial or limiting than the industrial uses examined in  Diehr (curing rubber) or  Alappat (a rasterizer), the presence of these limitations prevents us from finding it manifestly evident that the claims are patent ineligible under § 101."   Research Corp. (ibid) 

The earlier panel decision concluded

 "In such circumstances, we must leave the question of validity to the other provisions of Title 35: §102; §103 and §112"  

In sharp contrast  the divided en-banc court cites only SCOTUS decisions as precedents (Benson; Flook; Diehr; Bilski and Mayo).

Perhaps most troubling is the explanation in the context of review of the Flook decision that   "...the case must “be considered as if the principle or mathematical formula were well known.” and "...to confer patent eligibility, the claim [must]contained sufficient substance beyond the abstract mathematical formula itself—that is, “some other inventive concept in its application.”

The main decision concludes by postulating an Integrated Approach to § 101 in which: 

"patents should not be allowed to preempt the fundamental tools of
discovery" ;

 "claim drafting strategies that attempt to circumvent the basic exceptions to § 101 using, for example, highly stylized language, hollow field-of-use limitations, or the recitation of token post-solution activity should not be credited. "; and

"Bright-line rules may be simple to apply, but they are often impractical and counterproductive when applied to § 101. "

The court concludes by advising us that (citations omitted): 

"...the following analysis should apply in determining whether a computer-implemented claim recites patent-eligible subject matter under § 101 or falls into the common law exception for abstract ideas.
 

The first question is whether the claimed invention fits within one of the four statutory classes set out in § 101. 

Assuming that condition is met, the analysis turns to the judicial exceptions to subject-matter eligibility. A preliminary question in applying the exceptions to such claims is whether the claim raises § 101 abstractness concerns at all. Does the claim pose any risk of preempting an abstract idea? In most cases, the answer plainly will be no.

Where bona fide § 101 concerns arise, however, it is important at the outset to identify and define whatever fundamental concept appears wrapped up in the claim so that the subsequent analytical steps can proceed on a consistent footing. Section 101 is concerned as much with preserving narrow “basic tools” as it is with abstract concepts that have far-reaching implications—for example, risk hedging or transmitting information at a distance using electricity—and the breadth of acceptable exclusion may vary accordingly. 

In short, one cannot meaningfully evaluate whether a claim preempts an abstract idea until the idea supposedly at risk of preemption has been unambiguously identified. Although not required, conducting a claim construction analysis before addressing § 101 may be especially helpful in this regard by facilitating a full understanding of what each claim entails.
 

The § 101 inquiry next proceeds to the requisite preemption analysis. With the pertinent abstract idea identified, the balance of the claim can be evaluated to determine whether it contains additional substantive 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 requirement for substantive claim limitations beyond the mere recitation of a disembodied fundamental concept has “sometimes” been referred to as an “inventive concept.”  

 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.  

The phrase “inventive concept” originated with Flook, yet the Court began its discussion of § 101 in that case by stating that the question of patenteligible subject matter “does not involve the familiar issues of novelty and obviousness that routinely arise under §§ 102 and 103.” 

The Court has since reiterated that those separate inquiries do not bear on the question of subject-matter eligibility under § 101.

An “inventive concept” in the § 101 context refers to a genuine human contribution to the claimed subject matter. “The underlying notion is that a scientific principle reveals a relationship that has always existed.”  From that perspective, a person cannot truly “invent” an abstract idea or scientific truth. He or she can discover it, but not invent it. Accordingly, an “inventive concept” under § 101—in contrast to whatever fundamental concept is also represented in the claim—must be “a product of human ingenuity.”  

In addition, that human contribution must represent more than a trivial appendix to the underlying abstract idea. The § 101 preemption analysis centers on the practical, real-world effects of the claim. Limitations that represent a human contribution but are merely tangential, routine, well-understood, or conventional, or in practice fail to narrow the claim relative to the fundamental principle therein, cannot confer patent eligibility."

In summary, if the claim recites features that are "merely tangential, routine, well-understood, or conventional..." those features do not meet the requirement for an “inventive concept”. However, that "inventive concept" is not to be confused with the requirement for novelty under §102 or non-obviousness under §103. 

The USPTO responded almost immediately by posting a Memorandum to the Examining Corps which instructs the Examiners that there is no change in Examination policy and that they should continue to use the instructions provided in MPEP § 2106. 

The en-banc decision almost certainly means that a large number of granted patents dealing with computer implemented inventions will prove to be patent ineligible under § 101. 

The USPTO memorandum concludes by saying "Given the multiple divergent opinions, the USPTO is continuing to study the decision in CLS Bank and will consider whether further detailed guidance is needed on patent subject matter eligibility under 35 U.S.C. § 101. "

I guess that means more learned minds than mine have not yet fully understood all the implications of this decision.

Perhaps we will begin to apprehend the magnitude of the change when the CAFC hears Ultramercial V Hulu en-banc following SCOTUS GVR of the case.