On May 10, 2013, the Federal Circuit, sitting en banc,1 issued a per curiam decision in CLS Bank International v. Alice Corporation Pty. Ltd., No. 2011-1301, affirming that the asserted method, computer-readable media, and system claims are not directed to eligible subject matter under 35 U.S.C. §101. Although the ultimate holding by the court was limited, voluminous concurring and dissenting opinions issued with the per curiam decision reveal a serious and deep divide over what claims are patent-eligible and what the test for patent eligibility should be for computer-related claims.
The appeal arose from a grant of summary judgment from the United States District Court for the District of Columbia that the asserted claims of Alice Corporation’s (Alice) patents were invalid for failing to claim patent-eligible subject matter, CLS Bank Int’l v. Alice Corp., 768 F. Supp. 2d 221 (D.D.C. 2011). A summary of the oral hearing and brief history of the case can be found here.
The 58-word holding concluded that the asserted method, computer-readable media, and system claims were not directed to eligible subject matter under 35 U.S.C. §101. However, as noted by Chief Judge Rader, “though much is published today discussing the proper approach to the patent eligibility inquiry, nothing said today beyond our judgment has the weight of precedent.” For the moment, the decision in CLS Bank is limited only to affirming the invalidity of the asserted claims. Given the split in the Federal Circuit regarding the eligibility of the computer-implemented claims, further clarity will likely be needed from the Supreme Court.
The Breakdown of the En Banc Decision
The per curiam opinion noted that a majority of the court, Judges Lourie, Dyk, Prost, Reyna, Wallach, Rader, and Moore, affirmed that the asserted method claims and computer-readable media claims are not directed to patent-eligible subject matter under 35 U.S.C. §101. Only five of the 10 judges sitting en banc, Judges Lourie, Dyk, Prost, Reyna, and Wallach, affirmed that the asserted system claims are not directed to patent-eligible subject matter. Judges Rader and Moore would find that only the system claims recite patent-eligible subject matter, while Judges Linn, O’Malley, and Newman would conclude that all claims recite patent-eligible subject matter. Because no single opinion garnered a majority of the judges, only the final judgment is precedential. However, the concurring and dissenting opinions shed light on the thinking of the various judges of the Federal Circuit regarding the operation of §101 for patent-eligibility.
Judge Lourie’s Concurrence — Focusing on the “Abstract Idea” Exception
Judge Lourie’s concurring opinion, joined by Judges Dyk, Prost, Reyna, and Wallach, focused on the judicially created “abstract idea” exception to patent-eligibility under 35 U.S.C. §101. In particular, Judge Lourie noted that the “animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add ‘significantly more’ to the basic principle, with the result that the claim covers significantly less.” (emphasis in the original). For claims that appear to pose a risk of preempting an abstract idea, the initial step, according to the concurrence, is to define the fundamental concept that is “wrapped up in the claim.” Once the applicable abstract idea is 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 claims so that, in practical terms, it does not cover the full abstract idea itself.” Utilizing the Supreme Court’s decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), the concurrence reasoned that, if the steps or other limitations added to the identified abstract idea only include insignificant, conventional, or routine steps or limitations, then the claim still effectively covers the abstract idea itself and does not contain patent-eligible subject matter.
In applying the abstract idea exception to the claims at issue, the concurrence identified the abstract concept at issue to be reducing settlement risk by facilitating a trade through third-party intermediation. After considering the additional limitations, Judge Lourie concluded that none of the method claims recited “significantly more” than the underlying abstract idea.
The concurring opinion then considered the computer-readable medium and system claims, and concluded that those claims likewise fail to recite patent-eligible subject matter. The opinion stated that it is necessary to look past “drafting formalities” and let the “true substance of the claims” guide the analysis. Under this approach, the concurrence concluded that none of the system or medium claims offered meaningful limitations, and determined that “[a]bstract methods do not become patent-eligible machines by being clothed in computer language.”
Chief Judge Rader — Concurring-in-Part and Dissenting-in-Part
The opinion authored by Chief Judge Rader took a different perspective regarding the use of a computer with an abstract idea, emphasizing that it is necessary to analyze each asserted claim as a whole. In particular, “where the claim is tied to a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention, and the claim does not pre-empt virtually all uses of an underlying abstract idea, the claim is patentable.” In distinguishing Judge Lourie’s concurrence, Chief Judge Rader resolved that the “inventiveness” referenced in Prometheus only required that the additional limitations recited in a claim not be inherently required by the abstract idea.
Initially addressing the system claims, Chief Judge Rader concluded that the claims recited patent-eligible subject matter in view of the detailed algorithms of the specification and the specific hardware components recited in the claim language. Chief Judge Rader cautioned that “[l]abeling this system claim an ‘abstract concept’ wrenches all meaning from those words, and turns a narrow exception into one which may swallow the expansive rule (and with it much of the investment and innovation in software).”
Chief Judge Rader, joined by Judge Moore, however, concluded that the method claims are not patent-eligible. According to Chief Judge Rader, the method claims as a whole only recite general steps that would be inherent within the concept of an escrow using a third-party intermediary. Thus, Judge Rader and Judge Moore agreed with Judge Lourie as to these claims in result, but for different reasons.
The Additional Opinions of Judges Moore, Newman, Linn, and O’Malley and “Additional Reflections” by Chief Judge Rader
Judge Moore filed an additional dissenting-in-part opinion to specifically address the system claims at issue. As succinctly noted by Judge Moore, the potential ramifications that could result following the analysis of the concurrence could be quite drastic: “if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents.” Regarding the system claims, Judge Moore’s stated that, “[l]ooking at [the] hardware and software elements [of the system claim], it is impossible to conclude that this claim is merely an abstract idea.”
Judge Newman’s opinion focused on the experimental use of patented information. By clarifying the right to experiment on information disclosed in patents, it would not be necessary to determine whether the information of the patent was an abstract idea. According to Judge Newman, “when subject matter is within the statutory classes in section 101, eligibility is established.”
Judges Linn and O’Malley filed an opinion concluding that all the claims contain patent-eligible subject matter, including the method and computer-readable media claims, because the district court construed those claims to include all the computer-implemented limitations of the system claims.
Finally, Chief Judge Rader submitted additional reflections in which he strongly cautioned against inserting the concept of “inventiveness” into the statutory concept of subject matter patent eligibility. Chief Judge Rader emphasized that when faced with conflicting precedent, courts should consult the statute, which broadly defines patent-eligible subject matter.
Predicting the practical implications of a fractured decision can be difficult. Because the per curiam opinion is limited to affirming the district court’s decision regarding the invalidity of the asserted method, computer-readable media, and system claims, the Federal Circuit’s decision does not provide clear guidance to district courts as to the proper “test” to apply when faced with a patent eligibility challenge to patents drawn to computer-related inventions.
However, the additional opinions reveal a serious divide over what claims are patent-eligible and what the test for patent eligibility should be for computer-related claims. In particular, the additional opinions reveal that a clear majority of the Federal Circuit would likely affirm a judgment of invalidity of method and computer-readable media claims lacking any additional limitations beyond those required to perform the concept underlying the claim. The Federal Circuit thus appears to be split between judges who appear to favor a broad §101 standard with a narrow “abstract idea” exception versus those who appear to favor a broader “abstract idea” exception to exclude claims that preempt the use of the abstract concept. It seems likely that further review by the U.S. Supreme Court may be warranted to clarify the scope of the “abstract idea” exception for computer-implemented inventions.
Given the potential impact that a final decision regarding the patent eligibility of computer-related inventions may have on thousands of issued patents and pending patent applications, the future progress of this case will likely be monitored and highly scrutinized should a petition for writ of certiorari be filed with the Supreme Court.