Bar to Courts: Please Define “Unpatentably Abstract”

By Dennis Crouch

Fort Properties, Inc. v. American Master Lease LLC, __ F.3d __ (Fed.Cir. 2012)(Judge Prost joined by Judges Schall and Moore.

American Master Lease (AML) owns a patent that covers a method of creating a tax-deferred real estate investment instrument. U.S. Patent No. 6,292,788. Claim 1 includes three primary steps: aggregating title to real property to form a real estate portfolio; encumbering the property in the real estate portfolio with a master agreement; and creating a plurality of deedshares by dividing title in the real estate portfolio into a set of tenant-in-common deeds with each of the deedshares subject to a reaggregation provision in the master agreement. This method is designed to take advantage of a federal income tax loophole that allows investment properties to be traded tax free in some circumstances.

This litigation arose after AML threatened Fort Properties with an infringement lawsuit and Fort Properties filed an action in the Central District of California asking for a declaratory judgment of invalidity. In a decision predating Bilski v. Kappos, the district court ruled the patent invalid for failing the machine-or-transformation test (MoT). On appeal, the Federal Circuit affirmed – finding the invention unpatentably abstract.

Unpatentably Abstract: Courts have long recognized patent claims as abstractions that tend to generalize and broaden the scope of a particular invention. That small level of abstraction is acceptable and encouraged. However, if a claim is too abstract then it becomes unpatentably abstract. At a conference this weekend, Chief Judge Rader, USPTO Solicitor Chen, and I held an interesting discussion on drawing that line. In my view, “preemption” is largely unhelpful because it falls into the same line drawing trap: A patent is only useful if it sufficiently preempts (i.e., excludes) others, but at some point too much preemption renders a claim unpatentably preemptive. I believe that all three of us see the current jurisprudence on abstract ideas as problematic. It leaves the courts and patent examiners without any real standards for determining an outcome other than asking whether the particularly claimed invention is “too much like Bilski, Benson, or Flook?”

Here, the appellate panel reviewed the tax strategy patent and decided that it counts as abstract because the invention is too much like Bilski.

We view the present case as similar to Bilski. Specifically, like the invention in Bilski, claims 1-31 of the ‘788 patent disclose an investment tool, particularly a real estate investment tool designed to enable tax-free exchanges of property. This is an abstract concept. Under Bilski, this abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world through deeds, contracts, and real property. . . . When viewing the claimed invention as a whole, the physical activities involving the deeds, contracts, and real property are insufficient to render these claims patentable.

Some of the claims included a computer limitation. However, the court held that limitation did not impose any meaningful limits on the claim scope for subject matter eligibility purposes. “AML simply added a computer limitation to claims covering an abstract concept—that is, the computer limitation is simply insignificant post-solution activity. Without more, claims 32-41 cannot qualify as patent-eligible.”

The problem with the court’s jurisprudence here is that “unpatentably abstract” is not defined. Rather, the court simply recited the core function of the invention and the conclusion that it is abstract.

309 thoughts on “Bar to Courts: Please Define “Unpatentably Abstract”

  1. 308

    Why that awful word “recant”?… Your love of it

    What is so awful about the word recant? How is a single use indicative of “in love with it?” Why no answer to the clear proposition that you want to hold inconsistent beliefs? Contrary to your supposition that the word is not apt, it perfectly fits. “To make a formal retraction or disavowal of (a statement or belief to which one has previously committed oneself).

    Inciting LOL’s by gratuitous allusions to Popes or Toquemada, rather than admitting what is obvious, and then leaning on a snide “willingness to understand” when it is you that refuses to do so. Why? I want to understand that.

  2. 307

    The recognition of a third philosophy, taking and believing parts of incongruent philosophies that suits the moment and whim of the holder, grinning and disappearing when legal insight shines on it.

    Not the type of “clarity” that is needed or desired.

  3. 306

    Your love of it gives me the feeling that you think you are the Pope. Or Torquemada.


  4. 305

    As to your defining 101 under two different tests, you cannot have at the same time, a philosophical holding of the “absolute” and the “relative.”

    You ever heard of Schrodinger’s cat?

  5. 304

    No, sorry, I still don’t follow your drift.

    Perhaps an example would help.

    At the EPO, a claim directed to hedging like Bilski would be seen as lacking technical character, and therefore ineligible, but a claim to a computer programmed for Bilski hedging would pass the eligibility hurdle. Some people find that distinction to elevate form over substance and perhaps it does, but it sure does simplify 101 eligibility issues at the EPO. 103 is already simple and sorted at the EPO, and so easily weeds out any unpatentable matter that survives the EPO’s eligibility test.

    Also eligible at the EPO, still today, is a claim directed to matter notoriously lacking novelty, such as a computer running an MS WINDOWS operating system (whether it is progammed by Bilski or not). You see, eligibility at the EPO is nothing to do with how much of the claim is already old. You test eligibility against the claim as a whole, not the parts of it that are new.

    Why that awful word “recant”? Nobody is doing any recanting, sorry. The word is not apt. Not for my stuff and not for that of Paul Cole. Your love of it gives me the feeling that you think you are the Pope. Or Torquemada. As AINAE writes, what is needed round here are minds willling to understand (he’s quoting there, by the way, from the EPO’s standing Principle of Synthetical Propensity)

  6. 303

    Thank you for taking it slowly; however, the speed involved should be for your benefit, as you still seem confused, and you still have not decided to take a stand on the issue.

    Your statement at 1:26 PM (particularly your point 1 and first sentence of point 2) contradicts your statement of 3:21 AM.

    So let me force your hand. I will take this later post as an admission and a recant of your 3:21 AM statement, unless you clearly take a stand and state otherwise. In which case, you still have not provided an answer to the question put to you at 1:01 PM on March 1. If you still hold fast to your 3:21 AM statement, then you need to somehow reconcile answers that are not congruent.

    You have moved the goalposts (not to an inconsiderable distance) when you (re)state the “absolute” in your point 2 with this “prior art search report” as prior art has nothing to do with patent eligibility.

    As to your defining 101 under two different tests, you cannot have at the same time, a philosophical holding of the “absolute” and the “relative.” Whether or not “it” can be tested under one philosophy or the other, is simply not the question. The question is which philosophy is correct. They cannot both be correct.

    You follow?

  7. 302

    Simple, I will take it slowly, in the hope that you will grasp it at last.

    1. Just what is contemplated by “useful arts” or “all fields of technology” can slowly evolve over a time frame of judge thinking in timeframes comparable to the lifetime of patent rights.

    2. What is eligible under 101 can be examined with reference to the benchmark “what” of 1, that slowly changes over a timescale of generations. A prior art search report is neither necessary nor appropriate. That’s the “absolute” test. But eligibility can also be tested relative to the benchmark of the aggregate “prior art” that has accumulated, up to the very date of the claim. That’s the “relative” way to do eligibility.

    On these boards, I see vigorous argument whether the absolute or the relative way is the better way. You follow? If so, why do you say that I contradict myself?

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