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.