Thoughts on Alice Corp. v. CLS Bank Int'l

By Michael Borella --

There's an old saying that "bad facts make bad law," acknowledging that a court's decision regarding an extreme case can result in law that poorly serves less extreme cases.  The Supreme Court's recent trio of 35 U.S.C. § 101 decisions, Bilski v. Kappos, Mayo Collaborative Services v. Prometheus Laboratories, Inc., and today's unanimous Alice Corp. v. CLS Bank Int'l each involved claims that were probably too broad for their own good.  But instead of directly challenging the novelty or non-obviousness of these claims, the patent-eligibility of the claims were the core of the respective disputes.  As a result, the lines between §§ 101, 102, and 103 have become blurred, and the Court still hasn't clarified what makes a claim too abstract to be patent-eligible despite using this doctrine to strike down claims in all three cases.  Thus, the impact of CLS Bank on less extreme cases -- those with more focused claims for instance -- remains to be seen.

As noted in an earlier overview article by Kevin Noonan, the Court did not bar software or business method patents per se.  This case, however, continues the trend of two other patent cases decided this term, Limelight Networks, Inc. v. Akamai Technologies, Inc. and Nautilus, Inc. v. Biosig Instruments, Inc., in which the Court has placed further limits on the scope of patent protection.  Consequently, the Court has introduced new avenues for challenging the validity of patents.

The following is a collection of initial thoughts regarding the CLS Bank decision and its impact on software and business method practice.

• The Court declined to clearly define the term "abstract idea."  It stated that "we need not labor to delimit the precise contours of the 'abstract ideas' category in this case."  Instead, the Justices relied on the conceptual similarity between Alice's claims and those found patent-ineligible in Bilski.  Alice argued that abstract ideas must exist apart from any human interaction (e.g., an equation would be an abstract idea, but a process involving human activity would not).  The Court would hear nothing of this, couching the abstract claims of Bilski as "a method of organizing human activity."

• In Bilski, the Court held that "while the machine-or-transformation test has always been a 'useful and important clue,' it has never been the 'sole test' for determining patentability."  In this case, Alice's computer-readable media and system claims were struck down under § 101, despite reciting general-purpose computer components.  Thus, it appears that to pass the machine-or-transformation test, claims must be tied to a particular machine and not just a generic computer.

• To that point, the Court has taken a rather dim view of the ability of general purpose computing to lift an otherwise abstract idea above the § 101 bar.  For instance, the Court stated that "method claims, which merely require generic computer implementation, fail to transform [an] abstract idea into a patent-eligible invention," "[t]he fact that a computer necessarily exist[s] in the physical, rather than purely conceptual, realm is beside the point," "each step [of Alice's claims] does no more than require a generic computer to perform generic computer functions," and "nearly every computer will include a 'communications controller' and 'data storage unit' capable of performing the basic calculation, storage, and transmission functions required by the method claims."  It is now abundantly clear that recitation of generic computer structure will not save a claim that is drawn to an abstract idea.

• 1980's Diamond v. Diehr noted that "[t]he question therefore of whether a particular invention is novel is wholly apart from whether the invention falls into a category of statutory subject matter."  After today, it appears as if novelty (or lack thereof) can play a major role in determining whether claims are statutory under § 101.  In finding Alice's claims drawn to the abstract idea of "intermediated settlement," the Court cited several references (some of which might not qualify as prior art under §§ 102 or 103) to establish that such undertakings were "fundamental economic practice long prevalent in our system of commerce."  Similarly, when considering the impact of the recited (or stipulated) computer implementation, the Court stated that "all of these computer functions are well-understood, routine, conventional activities previously known to the industry."

• Justice Breyer's two step test for § 101 worthiness introduced in Mayo was thought by some to be an aberration or a temporary departure from the Court's previous holdings.  Others criticized it as being subjective and too difficult to apply in practice -- the test certainly divided the Federal Circuit judges.  With the Justices relying on the test, it is now evident that the Mayo framework was no passing fad.

• The first prong of the Mayo test is to "identify the abstract idea represented in the claim."  In doing so, the Court did not focus on the language of the claims, but instead focused on a summary of the claimed invention.  But almost any invention can be made to look abstract or conventional through summarization, or by downplaying certain aspects of the claim.

• The second prong of the Mayo test is to determine whether a claim directed to an abstract idea recites "an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself."  But we have little guidance as to what "significantly more" entails.  In the last 40 years, the only example of a claim meeting the § 101 bar in the Supreme Court is that of Diehr.

• The Court seems to use the word "technological" as something of a synonym for "physical."  Thus, novel and non-obvious algorithmic improvements might not be patent-eligible unless they are integrated somehow with a physical process.  For instance, the Court wrote that "the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer."  This fixation on physicality may demonstrate an underlying predisposition against software, which is technology that operates in a mostly unseen fashion.

Alice's claims could have, and probably should have, been attacked as being anticipated or obvious.  After all, this decision relies on the existence of prior art that could have been used for such a purpose.  Instead, the Court has fully opened the § 101 Pandora's Box that it peeked into with Mayo.

Comments

[Skeptical]

The Breyer Two-Step is not a novel thing.

It has a long history of use under the name "divide and conquer."

Diehr - if reheard in today's climate would not pass. Some would indicate that it is Diehr that it the aberration. As indicated below, such an indication points to a larger problem. Diehr has become eye-candy and a mere mechanism for giving lip service to the explicit words chosen by Congress that are otherwise "interpreted" out of recognition (like a mashed nose of wax one might say).

"Technological" is nowhere found in US patent law of 101. Contrast that with foreign patent law where it is explicitly (albeit imperfectly) found. While the Court is fond of disparaging scriviners, it appears to have no compunction of picking up its own pen and adding to the words of Congress.

If I may add to the picture, the lid of Pandora's Box has not only been pried open, but also smashed. Congress last acted in 1952 against an activist court seeking to contain Pandora's contents of the ill-defined "invention," "gist of the invention," or a myriad of ever changing - and too susceptible to philosophical manipulation - definitions that were allowed to the courts under the theory that the definition would solidify under common law development, creating a new 101 and a partitioned 103.

The Court has actively sought to regain its pre-1952 capabilities and to that end have mired 103 back into its 101 power base. This is not a matter of using one section OR another - this is a matter of ignoring what the differences in the sections were intended to do. Further, this attack has been ongoing, and evidence of the attack can be seen in previous decisions like Graham and eBay.

Without the lid to Pandora's box, no viable distinction can be maintained between patent eligibility and patentability. Congress made that distinction seeking to restrain what the courts, This Court, had done in the past in an anti-patent era, and what that same Court is doing in today's anti-patent era.

It is said that those who do not learn from history are doomed to repeat it. Perhaps maintaining the smokescreen of Diehr, the Court has attempted to learn from history, and this time around is attempting to keep Congress from noticing what it is doing - what power it is exercising? The inability of squaring Diehr with Mayo draws the view into sharp focus. In many cases brightlines are desired. Why then in patent jurisprudence bright lines are decidedly DISfavored by the Court? Why obscure the lines of distinction?

If the smokescreen is allowed to work, if lip service as to explicit words is allowed to obscure the rewriting by implicit (or now with "technological" fully added words), we have, in a very real sense, undergone a bloodless revolution. The pen, the scriviner's pen has been used by the Court where a sword would not be countenanced.

Congress acted once to protect that power solely bequeathed to them under the Constitution. While Congress may - and in fact often does in agency settings - share its power, that sharing is done at Congress's doing, NOT, as here, taken without Congress's consent and in opposition to an action of Congress telling the judiciary to keep its hand's off (or to borrow an analogy, to keep its fingers out of the nose of wax.

Will Congress wake up, shake off the anti-patent rhetoric steeped in today's movements and realize that its power has been taken? Sadly, I am...

[Gary Cohen]

As Michael so aptly suggests, the two tiered test from Prometheus does little to define the patent eligibility boundaries for software (let alone business methods and services). It is a bit ironic that the SCOTUS majority opinion ends with the following quote from Flook,"The concept of patentable subject matter under §101 is not 'like a nose of which may be turned and twisted in any direction'" since the two tiered test of Prometheus is so susceptable to such twisting and turning. Claims, by their very nature, can be characterized as being representative of an abstract concept, and it doesn't take much creativity to further characterize attendant claim limitations as being conventional or associated with extra solution activity.

[Richard Stern]

The particular machine requirement occurs in Benson. The first paragraph of the opinion says: "The claims were not limited to any particular art or technology, to any particular apparatus or machinery, or to any particular end use. They purported to cover any use of the claimed method in a general purpose digital computer of any type."

Later, the same opinion says: "Transformation and reduction of an article 'to a different state or thing' is the clue to the patentability of a process claim that does not include particular machines." 409 U.S. at 70.

The Benson Court then addressed the government's argument that to explain the process patent cases one must use a test requiring either a transformation of articles or else a limitation on the process to its practice with a particular apparatus. The Court said: "It is argued that a process patent must either be tied to a particular machine or apparatus or must operate to change articles or materials to a 'different state or thing.' We do not hold that no process patent could ever qualify if it did not meet the requirements of our prior precedents."

In the Benson case, the Court did not see a programmed general purpose digital computer as an example of a particular machine that satisfied the requirement "of our prior precedents" that preemption of the underlying idea could be avoided by limiting the process to its practice with a particular machine. (The Court still refuses to make that an absolute requirement, although it has yet to provide any alternative way to limit a patent exploiting an abstract idea against preemption of the idea--and has expressly rejected field of use limitations as a solution.)

It is thus seen that the requirement (in old precedents) of a particular machine is not novel, nor is the refusal to consider a programmed general purpose digital computer as an example of a particular machine. So, don't be shocked, shocked now in 2014 by the Alice case.

[Skeptical]

Mr Stern,

Maybe the Congress - and not the Court - should legislate should things...

[Stan Lieberstein]

Possibly the ultimate message is that mere automation of a series of steps
or procedure previously conducted manually, is not patentable subject matter.
In Mayo the Court assumed that some physicians normally conducted the claimed procedure to determine the appropriate dosage. Apparently the Court believed that the claims embodied a formal version of what physicians knew, ignoring the realities and significance of optimum dosage.
In Alice the Court believes that the claims capture a procedure previously conducted manually.
Although the Court's understanding of the facts in each case is questionable, the bottom line is that claims should not appear to embody
a series of steps implicit in the relevant art- regardless of the extent and difficulty of implementation.