The highly anticipated en banc decision in CLS Bank International v. Alice Corp. Pty. Ltd., No. 2011-1301, 2013 WL 1920941 (Fed. Cir. May 10, 2013) (en banc), did little to clarify the boundaries of patent eligibility for U.S. applicants, but the per curiam decision provided interesting clues to how individual Federal Circuit judges view the question.  These clues can assist patent prosecutors in drafting claims that will withstand patent-eligibility challenges.

Alice sued CLS Bank for infringing U.S. Patent Nos. 5,970,479 ("the '479 patent"), 6,912,510 ("the '510 patent"), 7,149,720 ("the '720 patent"), and 7,725,375 ("the '375 patent") directed to managing "settlement risk" in financial transactions by relying on a trusted third party.  The '479 and '510 patents claim methods, and the '720 patent claims data-processing systems.  The '375 patent claims both data-processing systems and computer-readable media.

All claims of the patents were found invalid by the U.S. District Court for the District of Columbia as directed to patent-ineligible subject matter under 35 U.S.C. § 101.  In particular, the district court found that Alice's method claims were directed to an unpatentable abstract idea.  Further, the system and media claims were also found invalid, as allowing the claims would preempt the use of the abstract concept on any computer, which, as a practical matter, is how the concept would be implemented.

On appeal, a Federal Circuit panel reversed.  CLS Bank Int'l v. Alice Corp. Pty. Ltd., 685 F.3d 1341 (Fed. Cir. 2012).  CLS Bank then filed a petition for rehearing en banc.  In its order granting rehearing en banc, the court invited the parties to address two questions:  (1) What test should be adopted to determine whether a computer-implemented invention is a patent-ineligible "abstract idea" and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?  (2) In assessing eligibility under § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium?  In its en banc decision, although a majority of the court (seven out of ten judges sitting) affirmed the district court's holding that Alice's asserted method and media claims were patent ineligible, the judges could not agree on the reason.  Additionally, an equally divided court affirmed the district court's finding of ineligibility for the asserted system claims.  As a result, other than the holding, nothing in the 135-page opinion can be cited as precedent.

A total of six concurring and dissenting opinions were filed.  In addition to the finding of patent ineligibility of the method and computer-readable-media claims, a majority of the court (eight out of ten judges sitting) agreed that the method and system claims should "rise or fall" together (i.e., have their patent-eligibility determined together).  However, because none of the opinions were joined by a majority, none have precedential weight.

Judge Lourie, joined by Judges Dyk, Prost, Reyna, and Wallach, concurred in the affirmance of the district court's holding all claims patent ineligible under 35 U.S.C. § 101.  Judge Lourie further proposed an "integrated approach" to § 101 questions based on an analysis of five Supreme Court cases concerning patent eligibility.  Judge Lourie extracted three common themes.  First, patents should not preempt fundamental tools of discovery by claiming a natural law, natural phenomenon, or abstract idea.  Second, the substance of a claim is more important than its form in determining patent eligibility.  Third, courts should avoid rigid rules regarding subject-matter eligibility.

With these themes in mind, Judge Lourie adopted a four-step "integrated" approach for analyzing the patentability of claims:

  1. verify the claim fits into one of the four statutory classes of invention (process, machine, manufacture, or composition of matter);
  2. determine whether the claim raises § 101 abstraction concerns at all;
  3. if abstraction concerns arise, unambiguously identify the fundamental concept or abstract idea; 
  4. after identification of the abstract idea, evaluate the remainder of the claim to determine whether it contains an "inventive concept" in the form of a "genuine human contribution" above and beyond the involved abstract idea.

Judge Lourie then applied this approach and found all the method claims patent ineligible under § 101.  Specifically, Judge Lourie identified the claim as a process and the abstract idea as "a form of escrow."  Judge Lourie evaluated the remainder of the claim and found that the requirement to implement the method through a computer failed to supply an "inventive concept" because it did no more than add generic computer functionality to make the processing faster.  Judge Lourie then found the media claims invalid as merely "method claims in the guise of a device."  Judge Lourie similarly found the system claims invalid, as they only served to limit the method to a particular technological environment, which was not enough to satisfy § 101.

Judge Lourie's opinion found, at least in this case, that the method and system claims should "rise or fall" together, so that the substance of a claim controls its eligibility under § 101, rather than how skillfully it was drafted.

Chief Judge Rader, joined by Judges Linn, Moore, and O'Malley, dissented, and would have found the system claims patent eligible.  However, Chief Judge Rader, joined only by Judge Moore, concurred with the court's judgment that the method and media claims were not patent eligible.  Additionally, Judge Moore wrote separately, in an opinion joined by Judges Linn, Rader, and O'Malley, to emphasize the eligibility of the system claims under § 101.  Judges Linn and O'Malley, who did not join Judge Rader and Moore, wrote separately to express their view that the method and media claims were also patent eligible.

Somewhat similar to the "inventive concept" approach favored by Judge Lourie, Chief Judge Rader focused on whether a claim includes "meaningful limitations," restricting it to an application rather than claiming an abstract idea itself.  However, unlike Judge Lourie, Chief Judge Rader limited the scope of this requirement.  In order to avoid mixing patent-eligibility requirements with the separate requirements for novelty, nonobviousness, and enablement, only those limitations that are "inherently" required to implement the abstract ideas were excluded by Chief Judge Rader as nonmeaningful ("inherency test").  Using this approach, Chief Judge Rader found that limiting a method to a particular machine could be sufficient for patent eligiblity because a computer is not inherently required for an escrow arrangement.  That does not mean, however, that such a claim would be novel and nonobviousness.

Chief Judge Rader, joined only by Judge Moore, also concurred with the court's judgment that the media and method claims were ineligible using the "inherency test."

Judge Linn, joined by Judge O'Malley, wrote separately to express his view that the method and media claims were also patent eligible under § 101.  Judge Linn, however, agreed with Judge Lourie that the method, system, and media claims must "rise or fall" together.  Applying the reasoning employed by Chief Judge Rader for the system claims, Judge Linn found the method and media claims patent eligible, because of the district court's finding that those method claims inherently required a computer limitation.

Judge Newman, though agreeing that the method, system, and media claims should "rise or fall" together, dissented with the court's judgment, finding all the claims patent eligible.

Judge Newman proposed eliminating the abstract idea, law of nature, and natural phenomenon exceptions to § 101 and simply establishing eligibility if the claimed subject matter falls within one of the statutory classes of machine, manufacture, process, or composition of matter.  As a result, since the claims in Alice's patents are directed to methods and systems, eligibility is established.

Judge Newman proposed to expand the "experimental use" exception to patent infringement to cover commercially motivated experimental uses.  By expanding the experimental-use exception, Judge Newman concluded, many of the concerns driving the desire to limit the patenting of abstract ideas that preempt the use of those ideas in all fields would disappear.

Although none of the opinions carry precedential weight, the insights provided in this lengthy opinion provide important guidance to patent prosecutors for claim drafting.  Specifically, moving forward, patent prosecutors should draft patent specifications and claims that include both method and system claims where appropriate.  For those judges that see a distinction between method and system claims, as in the case of Judges Rader and Moore, the inclusion of physical limitations in a system claim can help ensure patenteligibility.

Further, including multiple claim types in a patent application could also increase the chances of clearing the § 101 hurdle, even where system and method claims must rise and fall together.  As Judge Linn's dissent illustrates, including system claims gives rise to the possibility of construing accompanying method claims to include all of the limitations of the accompanying system claims, thus preserving § 101 validity.

Ultimately, however, this case shows that claims that do more than implement a method through a computer have the highest chance of success.  These are claims where a computer-implemented method comprises only a portion of the claim rather than the entire claim, and the results of that method are used to accomplish some other real-world task.

Published in Full Disclosure Patent Newsletter - June 2013

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