By Michael Borella --
In a previous article, we discussed the background of this case, and provided an overview of the Petitioner Brief of patentee Alice Corp. In this article, we continue by covering the brief of the Respondent, CLS Bank.
The Supreme Court is scheduled to hear oral arguments for this case on March 31st.
CLS Bank's Brief
CLS began its trek through the dark forest of § 101 by setting the tone of the conversation. It noted that Alice is a patent assertion entity, rather than a company that practices its inventions. Perhaps CLS Bank intended to leverage recent critical remarks made by members of Congress, as well as President Obama, about such entities. CLS Bank also suggested that Alice's patents were issued under a "permissive standard for patent-eligibility" that pre-dates the Court's recent Bilski v. Kappos and Mayo v. Prometheus cases.
Moving on, CLS Bank asserted that Bilski is controlling law for this dispute, and that Alice's claims should suffer the same fate as Bilski's. CLS Bank drew parallels between the method claims of Alice and Bilski. Both are disembodied processes drawn to ways of managing risk that were well known in systems of commerce. Holding Alice's patent valid would, in CLS Bank's view, foreclose the use of basic building blocks of scientific and technologic work in a way that goes beyond the contribution provided by Alice.
Along the way, CLS Bank rejected Alice's attempt to differentiate between abstract ideas drawn to a fundamental scientific or mathematical principle and disembodied concepts that underlie all inventions. However, CLS Bank downplayed this point by briefly addressing it in a footnote, and later providing an indirect rebuttal. Particularly, CLS Bank noted that Bilski, as well as post-Bilski guidelines from the U.S. Patent and Trademark Office (USPTO), both provide examples of abstract ideas that are non-mathematical, human actions.
One of Alice's more interesting arguments was its attempt to explain why its patents were valid under § 101, whereas Bilski's were not. In essence, Alice argued that one of Bilski's dependent claims demonstrated that the invention of the independent claims could be expressed as a simple mathematical formula, and thus Bilski's entire invention was an abstract mathematical concept. CLS Bank disputed this reading, pointing out that the dependent claim "provided only one way of calculating certain inputs for the method of hedging described in independent claim 1." CLS Bank further argued that Bilski's dependent claims were "were ineligible not because they included a formula, but because they added mere 'token' limitations to the abstract idea" of the independent claim. Surprisingly, CLS Bank did not bring up the doctrine of claim differentiation, which may have also supported its position.
Instead, CLS Bank asserted that "[m]athematical formulas neither secure nor preclude eligibility, for a mathematical formula may describe a law of nature, a scientific truth, or an abstract idea. As courts have recognized, mathematics may also be used to describe steps of a statutory method or elements of a statutory apparatus." Thus, CLS Bank argued, claims that do not directly invoke mathematics, such as Alice's claim, can be patent-ineligible as abstract ideas.
CLS Bank then undertook what essentially was an extended prior art analysis to establish that the "inventive concept" of Alice's claims, as well as its additional features, have long been known in the fields of economics and accounting. Along the way, CLS Bank contended that the concept of preemption that plays so strongly in Gottschalk v, Benson and Parker v. Flook does not require that a claim "foreclose every conceivable application of an abstract idea to be ineligible." Instead, quoting Mayo, CLS Bank asserted that "the underlying functional concern here is a relative one: how much future innovation is foreclosed relative to the contribution of the inventor," and that a patent that "forecloses more future invention than the underlying discovery could reasonably justify impedes progress, rather than promotes it." Nevertheless, neither Mayo nor CLS Bank proposed a workable, objective method for weighing the contribution of an inventor versus foreclosed future innovation.
This expression of concern, as well as CLS Bank's unease regarding the "breathtaking sweep of the asserted claims" cuts to the heart of the matter -- is it appropriate to consider whether a claim element is known when performing a § 101 analysis, or should such deliberations be reserved for those of §§ 102 and 103? Diehr and 1952 patent statute coauthor Judge Rich would require the separation of these three inquiries.
CLS Bank, however, waved its hands at Diehr, burying this issue in a footnote. In its fleeting discussion of the holding of Diehr, CLS Bank wrote that that case actually "prohibits dissecting the claims into old and new elements and then ignoring claim elements upon determining that they are non-novel." CLS Bank attempted to align Mayo and Diehr by contending that Mayo "focuses attention on all claim elements, asking whether individually or 'as a whole' they are sufficient to transform the nature of the claim." CLS Bank went on to shrewdly characterize Alice's disagreement with Judge Lourie's plurality opinion as actually a disagreement "with Justice Breyer's opinion for nine Members of this Court" when applying Mayo and Diehr.
With respect to Alice's system and media claims, CLS Bank took the position that the issue "is not whether computer is tangible, but whether . . . computer implementation adds enough to confer eligibility." Cast in this light, adding general purpose computer hardware to an unpatentable abstract idea would have the practical effect of granting a patent that preempts a broad range of uses of the abstract idea itself. In essence, the contribution of the system and media claims is no greater than the contribution of method claims with the same elements. CLS Bank also noted that before the USPTO, Alice conceded that "its later-issued system and media claims were no different in terms of patentability from the method claims in the first-issued '479 patent."
CLS wrapped up with a parade of horribles that would occur should the Court hold that Alice's patents were valid. Particularly, CLS Bank believes that allowing patents such as Alice's to be asserted would impede innovation in the information economy, permit inventors to claim more than they are entitled to, and invigorate patent assertion entities.
The elephant in the room for CLS Bank is that it never directly addresses the propriety of a prior art analysis under § 101. While not perfect, the principle that "each and every element as set forth in the claim [must be] found . . . in a single prior art reference" for a claim to be anticipated, as well as the Graham v. John Deere obviousness framework, are both workable standards. Adding a similar "inventive analysis" as part of § 101 would allow patent examiners and litigation defendants to bring alleged prior art in through the back door in order to invalidate claims. The danger of ignoring Diehr in this regard is illustrated by CLS Bank's subjective and conclusory analysis of the so-called additional elements contributed by Alice's claims. It is unlikely that the more traditionalist Justices would agree to such a disruption in the stare decisis of patent law.
CLS Bank's strongest position is based on the high-level similarity of Alice's and Bilski's method claims, and the fact that the Court struck down Bilski's claims only four years ago. The Court is unlikely to walk back Bilski so soon, or to engage in the logical contortions required to differentiate the claims of these two cases. However, it may be too much to ask the Justices to preclude all claims to tangible computing hardware that invoke abstract ideas.
CLS Bank also set forth the concern that the patent law is slanted towards those who contribute only ideas over those who actually build products and services. However, this point is at odds with the bedrock principle that, in the United States, an inventor is one who conceives of an idea, not one who only reduces that idea to practice. Further, the current computer and Internet technology boom that is coincident with a ramp up of patents in related areas seems to belie the notion that the incentive to develop products is destroyed by the grant of patents.
As many commentators have noted, and as Judge Newman eloquently explained in the Federal Circuit en banc decision, many if not all of the problems that CLS Bank has with Alice's claims would be addressed by proper § 102 and § 103 review of the claims. If Alice's claims are truly directed to accounting techniques that date back to antiquity, then they should be anticipated or obvious. If Alice's claims are too broad, or if their scope outweighs the inventor's contribution, they can be invalidated under § 102 or § 103. Reducing the role of subject matter eligibility to focus on whether claims truly fit into one of the four statutory classes would slice through the Gordian Knot that § 101 has become, and only serve to simplify and clarify proceedings in the USPTO and lower courts.