In CLS Bank Int’l v. Alice Corp. PTY. LTD (2013 WL 1920941 (C.A.Fed.(Dist.Col))), the Federal Circuit has arguably provided the first substantive guidance on the patentability of software patents with claims drawn to systems, methods, and computer readable media since Bilski v. Kappos. And that guidance is arguably not good news for software patents.

In the per curia opinion, the Court writes:

“What is needed is a consistent, cohesive, and accessible approach to the § 101 analysis–a framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts. As set forth below, the Supreme Court’s foundational § 101 jurisprudence offers the guideposts to such a system, one that turns primarily on the practical likelihood of a claim preempting a fundamental concept. We would adopt this approach to address the abstractness of the specific computer-implemented inventions presented in this case, but it might also inform patent-eligibility inquiries arising in other contexts.”

Although on the surface the Federal Circuit’s standard procedure for determining the § 101 patent eligibility of software patents does not seem to have been substantially modified, the practical guidance does appear to make it more difficult for the patent draftsman to avoid a § 101 rejection on system, process, and computer-readable media claims.

The Court’s rejection of the process and computer-readable media claims is not surprising considering how close the claims were to those earlier rejected by the Supreme Court in Bilski. However, the Court’s basis for its rejection of the system claims arguably sets forth a new standard. Basically, the Court looks skeptically at system claims that appear merely to cast an ineligible method claim in system form by adding limitations to a computer:

“…applying a presumptively different approach to system claims generally would reward precisely the type of clever claim drafting that the Supreme Court has repeatedly instructed us to ignore. As illustrated by the obvious parallels between the method and system claims now before us, it is often a straightforward exercise to translate a method claim into system form, and vice versa.”

It should be noted that the dissenting opinion of Judges Moore, Rader, Linn, and O’Malley disagrees with the per curia opinion regarding system claims, arguing that the ”computer covered by this claim is a tangible item that you could pick up and put on your desk.” However, the per curia opinion arguably significantly narrows the patentability of system claims, stating:

“A particular computer system, composed of wire, plastic, and silicon, is no doubt a tangible machine. But that is not the question. The question we must consider is whether a patent claim that ostensibly describes such a system on its face represents something more than an abstract idea in legal substance. Claims to a computer were, and still are, eligible for patent. No question should have arisen concerning the eligibility of claims to basic computer hardware under § 101 when such devices were first invented. But we are living and judging now…and have before us not the patent eligibility of specific types of computers or computer components, but computers that have routinely been adapted by software consisting of abstract ideas, and claimed as such, to do all sorts of tasks that formerly were performed by humans. And the Supreme Court has told us that, while avoiding confusion between § 101 and §§ 102 and 103, merely adding existing computer technology to abstract ideas — mental steps — does not as a matter of substance convert an abstract idea into a machine…Abstract methods do not become patent-eligible machines by being clothed in a computer language.”

The Moore, Rader, Linn and O’Malley dissenting opinion takes strong issue with the per curia opinion, dramatically holding that “the current implementation of § 101, and in particular the abstract idea exception, is causing a free fall in the patent system…if 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 as well as many computer implemented and telecommunication patents.”

Considering that the Federal Circuit is “irreconcilably fractured over these system claims,” Judges Moore, Rader, Linn, and O’Malley believe the Supreme Court must once again address § 101.