In CLS Bank v. Alice Corp., the Federal Circuit addressed the question of subject matter eligibility for the first time since the Supreme Court issued its decision in Mayo Collaborative Services v. Prometheus Laboratories earlier this year. Many hoped that the Federal Circuit would provide clear guidance on how it would apply Prometheus when determining whether claims are ineligible under 35 U.S.C. § 101 for encompassing abstract ideas. However, the majority and dissenting opinions take vastly different approaches that seem to only further muddy the waters.
Alice Corporation ("Alice") owns several patents covering a computerized trading platform for exchanging obligations between a first and second party to eliminate settlement risk. In May 2007, CLS Bank filed suit against Alice seeking declaratory judgment that three of the patents are invalid, unenforceable, and otherwise not infringed. In August 2007, Alice filed a counterclaim alleging that CLS Bank infringes these patents. In March 2009, CLS Bank moved for summary judgment contending that the asserted claims are invalid under 35 U.S.C. § 101. Alice opposed and cross-moved for summary judgment.
Following the Supreme Court's grant of certiorari in In re Bilski, the district court denied the parties' cross motions as to subject matter eligibility without prejudice for re-filing following the Supreme Court's decision. In May 2010, an additional patent issued to Alice, and in August 2010, Alice filed amended counterclaims asserting CLS Bank infringes all claims of that patent.
The district court granted CLS Bank's motion for summary judgment holding that each asserted claim of Alice's four patents is invalid for failure to claim patent eligible subject matter. In its analysis of the method claims, the district court first employed the machine-or-transformation test. After interpreting the claims to require electronic implementation and a computer, the district court concluded that the nominal recitation of a general-purpose computer in a method claim does not tie the claim to a particular machine or apparatus. The district court then analyzed the method claims under the abstract idea exception, finding the methods to be directed to the fundamental idea of employing a neutral intermediary during an exchange to eliminate settlement risk. When analyzing the computer system and media claims, the district court also concluded that they were directed to an abstract concept as mere incarnations of the abstract idea on a computer without any further exposition or meaningful limitation.
Following the summary judgment decision, in March 2012, the Supreme Court decided Mayo Collaborative Services v. Prometheus Laboratories in which it held that claims concerning the use of thiopurine to treat autoimmune diseases are unpatentable under § 101 for not being directed to patent-eligible subject matter. The claims at issue identify relationships between concentrations of metabolites in the blood and the likelihood that a dosage of a thiopurine drug would be ineffective or cause harm. The Court determined that the correlations between the metabolite levels and the toxicity and efficacy of thiopurine drug dosages are unpatentable natural laws. The Court recognized that the claims also include applications using the correlations in the form of administering doses and determining metabolite levels. When considering the applications of the correlations, the Court asserted that to transform an unpatentable law of nature into a patent-eligible application of such a law, one must do more than simply state the law of nature while adding the words “apply it.” The Court concluded that the claimed processes do not transform the unpatentable laws into patent-eligible applications of those laws.
The Federal Circuit reversed the district court and found that the asserted method, system, and product claims are all directed to patent eligible subject matter under § 101. After analyzing Supreme Court precedent and the role of § 101, the majority held that
[W]hen— after taking all of the claim recitations into consideration—it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101.
Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible “abstract idea” under 35 U.S.C. § 101.
The majority argued that the district court erred in looking past the details of the claims to characterize them as being directed to a fundamental concept, because ignoring claim limitations is legally impermissible. When looking at the claims as a whole in light of the specification, the majority reasoned that it would be difficult to conclude that the computer limitations do not play a significant part in the performance of the invention, or that the claims are not limited to a very specific application of using an intermediary to help consummate exchanges between parties. The asserted claims cover the practical application of a business method concept in a specific way. The majority also expressed that the claims had little pre-emptive risk to innovation, because the claims leave broad room for other methods of using intermediaries to help consummated exchanges, whether computer aided or otherwise.
The dissenting opinion disagreed sharply with the majority's approach. It argued that the majority created a new framework with the "manifestly evident" standard, which would allow courts to avoid questions of patent eligibility under § 101 whenever they desire. Instead, the dissent argued that the court should have followed the Supreme Court's approach of inquiring whether the asserted claims include an inventive concept. The dissent applied this analysis to look beyond the "non-inventive" aspect of the claims, to ask whether the remaining portion is an abstract idea, and to determine that it is. Additionally, the dissent criticized the majority for not providing any explanation as to why the specific computer implementation in this case brings the claim within patentable subject matter, why the additional computer-related limitations are integral to the invention, and what "integral" means in the context of § 101.
However, the majority and dissent do seem to agree on several core issues. First, the form of the claims does not change the patent eligibility analysis under § 101, despite the claims being directed to different statutory categories. Second, the mere recitation of a general-purpose computer is alone not enough deem the claims patent eligible under § 101. Finally, both the majority and dissent claim that the most recent Supreme Court decisions regarding statutory subject matter provide clear guidance on how to analyze subject matter eligibility. Unfortunately, their disagreement over that guidance demonstrates how elusive this area of law remains.