Alice Corp v. CLS Bank: When Two Become One

by Dennis Crouch

The Alice test officially includes two steps. But these are highly correlated steps. Thus, if a claim fails step one, it usually fails step two as well. In this case, the court appears to borrow heavily from typical step two analysis in order to make its step one conclusion:

Universal Secure Registry v. Apple and Visa (Fed. Cir. 2021)

The district court dismissed USR’s patent infringement complaint, holding of all four asserted patents were ineligible under the abstract idea test incorporated into 35 U.S.C. § 101.  On appeal, the Federal Circuit has affirmed. U.S. Patent Nos. 8,856,539; 8,577,813; 9,100,826; and 9,530,137.

The patents here are directed to technology for securing electronic payment transactions.  This is an area of technology that the Federal Circuit has previously addressed. Here, the court notes that cases “often turn[] on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself.” Slip Op. Note that this statement from the court has two specific requirements: (1) that the claims be drafted with specificity; and (2) that the element claimed by an “improvement to computer functionality.”  Generic claims are not enough; neither are specific claim limitations directed toward elements already well known in the art.

  • Secured Mail Solutions LLC v. Universal Wilde, Inc., 873 F.3d 905  (Fed. Cir. 2017) (use of conventional generically claimed barcode to communicate information about the object being mailed was an abstract idea).
  • Electronic Communication Technologies, LLC v. ShoppersChoice.com, LLC, 958 F.3d 1178 (Fed. Cir. 2020) (requirement of input, storage, and use of generically claimed authentication information was abstract).
  • Solutran, Inc. v. Elavon, Inc., 931 F.3d 1161 (Fed. Cir. 2019) (use of well known check verification method did not save the claims from being abstract).
  • Prism Technologies LLC v. T-Mobile USA, 696 F. App’x 1014 (Fed. Cir.
    2017) (receiving and authenticating identity data to permit access was abstract since they were claimed generically rather than offering a “concrete, specific solution”).

Here, the claimed method enables a merchant transaction. The merchant is given a time-varying code instead of a credit card number.  That code is then set the credit card company servers for authorization, including any restrictions on transactions with the merchant.  The company then either approves or denies the transaction.  This approach allows for purchases without actually providing the merchant with the “secure information” such as the credit card or account number.

The district court identified the abstract idea here of “obtaining the secure verification of a user’s identity to enable a transaction.” On appeal, the Federal Circuit suggested that analysis wasn’t entirely correct, but did agree that the claims are directed to an abstract idea.

In our view, the claims “simply recite conventional actions in a generic way” (e.g., receiving a transaction request, verifying the identity of a customer and merchant, allowing a transaction) and “do not purport to improve any underlying technology.” Solutran. Accordingly, the claims are directed to an abstract idea under Alice step one.

[T]he asserted claims are directed to a method for verifying the identity of a user to facilitate an economic transaction, for which computers are merely used in a conventional way, rather than a technological improvement to computer functionality itself.

Slip Op.   The court found this case “closer to the demarcation line between what is abstract and non-abstract” than some other cases, but still on the wrong side of the line.

As you’ll see, the court’s conclusions in Alice Step One (conventional actions in a generic way) fully answer Alice Step Two as well.   The court particularly notes that time-varying codes were already well known in the field. Further, this case of using a third-party intermediary is also well known and an abstract idea itself.

Invalidity Affirmed.

Notes

  • The court walked through several other related claims, including the use of a biometric sensor, but found them all abstract.
  • The decision discussed here was precedential. The court also released four non-precedential USR v. Apple decisions. Apple v. USR, 20-1330.  The PTAB sided with the patentee in an IPR and found claims of US8856539 not proven invalid.  That decision was vacated based upon the invalidity finding.  See also, Visa and Apple v. USR, 20-1662 (Same result); Apple v. USR, 20-1222 (appeal rendered moot); Apple v. USR, 20-1223 (appeal rendered moot; vacate and remand for dismissal; holding that substitute claim was also ineligible).

 

 

 

50 thoughts on “Alice Corp v. CLS Bank: When Two Become One

  1. 8

    Perhaps a parting thought…

    The phrase “when two become one” is often viewed in the context of weddings.

    Another phrase from the context of weddings is “tie the knot.”

    To flip then from the happiness of weddings to the unhappiness of the current state of patent law (and to complete the circle), there is a rather u g l y knot — a Gordian Knot — that has been tying up innovation protection in the context of patent eligibility.

    Somehow, the most prominent form of innovation (related to the Fifth Kondratiev wave) is viewed with disdain in comparison to most all other forms of innovation.

    Without a cogent reason.

  2. 7

    USR was robbed.

    Blind.

    Given the eligibility swamp the CAFC has dug, filled, and happily does innovation-killing laps in (even Michael Phelps would be jealous), why do folks continue to assert and thereby risk multiple patents from the same (and/or closely related) family/ies?

    Got three or four same-family patents? Assuming sufficient remaining term/s, why not start with one or two and see what happens?

    If they get trashed, at least you can hope for better days as you lick your eligibility wounds.

  3. 6

    As I’ve said before, if you’re not really interested in the answer to a question, then why bother asking?
    Give me an example of a method claim that includes the kind of specific algorithm that you are looking for.

    You say you’ve got the answers — then let’s see them.

    1. 6.1

      Do not confuse real answers with what Malcolm states as his “having answers.”

  4. 5

    The reality is 1) Stoll is a monster and total disaster.

    2) The reality that the CAFC has —by judicial activism–turned 101 into a technological test that is less consistent than what is used at the EPO.

    I don’t think that any information processing is per se eligible in that the CAFC can find a way to hold it is ineligible under 101.

    1. 5.1

      We have turned into a third-world country. The seminal case in all this is Ultramericial. Rader’s version set up a rational way to think about information processing. Ultramericial Lourie set up psychotic nonsense where all algorithms were deemed abstract and directed to thoughts rather than technical solutions that were specific (as they MUST—MUST–be in order to have an actual working machine.) That is the giant lie in Lourie’s Ultravericial where he lists the elements of the claims and says they are abstract and not directed to a specific solution which is a lie. Lourie knows that is a lie. He knows that there must be a specific solution or it wouldn’t work on a computer. The fact is that all technology is claimed and worked on by real inventors in that way. There are so many solutions that could be used that abstract terms are used to represent the set of solutions that are enabled by the specification and claims. Lourie must know that.

      Most telling statement:
      >”With this precedent in mind, we turn to the patent claims at issue in this case. We address each patent in turn.”

      In other words, no real law being applied here. We are making this shxt up. This is just ridiculous. Imagine a criminal statute being interpreted in this way.

      The ridiculous nonsense continues.

      >”While we appreciate that the claims here are closer to the demarcation line between what is abstract and non-abstract than the claims in Prism, we conclude that, at Alice step one, the asserted claims are directed to a method for verifying the identity of a user to facilitate an economic transaction, for which computers are merely used in a conventional way, rather than a technological improvement to computer functionality itself. ”

      Note the all encompassing phrase “a conventional way rather than a technological improvement to computer functionality.” So they have put a technological test to 101. It is worse than at the EPO, though, because at least there they make carve-outs for various things they think should be patent eligible.

      The 103 analysis is performed as part of 101.

      >”Turning to Alice step two, the district court rejected USR’s argument that the claim’s recitations of (1) time-varying codes and (2) sending data to a third-party as opposed to the merchant each rise to the level of an inventive concept.”

      >”[R]ise to the level of an inventive concept.” “[C]onstitutes an
      inventive concept … .”

      So, in other words, non0bvious.

      So, in other words, we’ll do whatever we want and we don’t like these claims. I just don’t feel like this is enough for a patent so I am going to make a bunch of shxt up and yap out some ridiculous shxt and then hold them ineligible—third-world country.

  5. 4

    Two becoming one is more defensible that two becoming three.

    1. 4.1

      Says the examiner with no understanding of the Rule of Law…

      1. 4.1.1

        “ Rule of Law…”

        Does anyone believe that Billy or any of his cohorts really cares about the “rule of law”? If so, I’ve got a bridge to sell you.

        1. 4.1.1.1

          another return to an old script item with the “Billy” reference…

          I would say that you were fondly missed during your year plus hiatus, but that would be a
          L
          I
          E

  6. 3

    A client wants to file an application to cover treating symptoms of a common human ailment using a particular substance (the substance isn’t known for treating symptoms of this particular element and, no, the substance isn’t cannabis). I told the client that no matter how we approach trying to draft the claim, we’re likely going to get a 101 rejection saying we’re trying to claim a human being.

    1. 3.1

      “ we’re likely going to get a 101 rejection saying we’re trying to claim a human being.”

      I’ve written thousands of treatment claims and never gotten that rejection so probably you’re doing it wrong.

      “the substance isn’t known for treating symptoms of this particular ailment”

      If your substance was administered for another ailment and you lack good data and facts demonstrating unexpected results with respect to this ailment then this can be a difficult row to hoe. Is that a problem? Only for the person who wants a patent. Maybe think of another way to make some money off the discovery (or otherwise benefit from it), if it’s really that awesome.

  7. 2

    Is using striped lightening bolts to connect between black boxes as in Fig. 17 above something new and PTO acceptable?
    Expensive big-name law firms here, but it didn’t make any difference.
    Reading all the “well known” comments on claimed features in this “101” decision creates an impression that the Fed. Cir. panel would have liked to make a 103 claim rejection here? Did the patent owner did not even attempt to refute those features being “well known” in their response to the defendants 12(b)(6) motion?

    1. 2.1

      “ Did the patent owner did not even attempt to refute those features being “well known””

      Even in the deep slime pool of patent law, there are attorneys who put reasonable limits on what lies they are willing to tell for their disgusting clients. It’s true! Some of them even refuse to work with or for Repukkkes.

      1. 2.1.1

        Sir Thomas More called, wondering if you are really an attorney.

  8. 1

    Decided on a 12b6 motion for failure to state a claim. Berkheimer wasn’t even cited — pretty much dead letter law at this point. How long did that last? 3 years or so. Iqbal or Twombly wasn’t cited either. Apparently, Supreme Court case law doesn’t apply to the Federal Circuit.

    Oh wait, here it is … sort of:
    There is nothing in the specification suggesting, or any other factual basis for a plausible inference (as needed to avoid dismissal), that the claimed combination of these conventional authentication techniques achieves more than the expected sum of the security provided by each technique.
    So they are essentially asking for evidence in a pre-evidentiary motion? What happened to “accepting as true all factual allegations in the complaint and viewing those facts in the light most favorable to the non-moving party”? Facts — such an inconvenient thing. Really, who needs them? Aren’t we living in a post-factual world these days anyway? Just make them up as you go along.

    Heck, “the magistrate judge was the conclusion that the claimed invention provided a more secure authentication system.” Shouldn’t that be enough to get one past the door of Berkheimer?

    Here is a cute line: “the district court explained that the claimed invention was directed to the abstract idea of ‘the secure verification of a person’s identity’.” And how is this supposed ‘abstract idea’ preempted in any way, shape, or form? From personal knowledge, computer systems have been verifying a person’s identity on a computer for at least 40 years via the use of user names and passwords.

    Here is a wonderful little comment: “In cases involving authentication technology, patent eligibility often turns on whether the claims provide sufficient specificity to constitute an improvement to computer functionality itself.”
    What the heck is “sufficient specificity” in the context of 35 USC 101? Will the Federal Circuit EVER give us a definition that us little people can work with to draft claims? Or are they going to keep that “sufficient specificity” test to themselves? Silly question — of course we’ll never know what constitutes “sufficient specificity.” It is one of those “I know it when I see it tests” in which the person administering the test and who the test applies to is more important than the test itself. The “sufficient specificity” test, like most of 101 jurisprudence created by the Federal Circuit, is merely a fig leaf to disguise that the Federal Circuit is a panel based, result-oriented judicial system. The Federal Circuit’s 101 jurisprudence itself is merely a nose of wax that can be twisted one way or another depending on whatever end result is desired by the particular judges on the panel.

    It is amusing, I guess, that some people really think that the law matters anymore and that there is some consistent theme running throughout these decisions. Every Federal Circuit decision in which a claim has been deemed patent eligible under 35 USC 101 can easily be reversed with the current jurisprudence. Just look at the claim language of DDR Holdings — those claims would never make it past the Federal Circuit today. Heck, I could put together arguments, consistent with certain Federal Circuit recent cases (I’m looking at you American Axle), that would invalidate most mechanical/electrical-based inventions under 35 USC 101.

    What irks me is that Stoll wrote this disaster of an opinion. I thought she had better sense than this. This is the kind of &^%$ legal analysis I would expect out of Dyk, Prost, or Mayer.

    1. 1.1

      “ Facts — such an inconvenient thing. Really, who needs them? Aren’t we living in a post-factual world these days anyway? Just make them up as you go along.”

      How do you think the patenting of logic applied to data got into the system in the first place? Were you born yesterday?

      “ I could put together arguments, consistent with certain Federal Circuit recent cases (I’m looking at you American Axle), that would invalidate most mechanical/electrical-based inventions under 35 USC 101.”

      You guys just keep recycling the same script, over and over. So unbelievably lame.

      1. 1.1.1

        Not getting paid by the anti-patent groups to comment anymore so you are left doing drivebys? How sad for MM.

        1. 1.1.1.1

          “Not getting paid by the anti-patent groups to comment anymore”

          Low intelligence, paranoia and a willingness to be self-deluded are the only explanations for a belief as bizarre (and wrong) as this one.

          But yes you are deeply invested in keeping the clown show of logic patenting continuing for as long as possible. That is plainly true of pretty much every staunch defender who mewls here continually about literally EVERY aspect of the patent statute and its application to software and logic patenting.

          1. 1.1.1.1.1

            Come on now “The Poopy Diaper”, we know you were a paid blogger.

        2. 1.1.1.2

          I chuckled at your put-down, but as I have shared with Night Writer, no one with any sense of reason would have been paying Malcolm to post, as it has been abundantly clear that anyone not already sold on the anti-patent viewpoint would recoil from Malcolm’s methods, and come away with an opposite viewpoint of the putatively paid and desired one.

          1. 1.1.1.2.1

            “Malcolm’s methods”

            aka known as writing plainly and not playing pattycake with adult human being patent attorneys who pretend (very poorly) to have really high ideals about rational discourse.

            Grow up, Billy. Your arse has been showing for so long it’s got third degree burns.

            1. 1.1.1.2.1.1

              LOL – your “writing plainly” is known as a different term: complete B$.

              As to “not playing pattycake,” it is entirely UNCLEAR just what you think that term means here in this context.

              If you mean, “don’t placidly agree,” whoopeee! Do you really think you have the market cornered on that? Do you really think that THAT alone is sufficient?

              Grow up, Billy. Your arse has been showing for so long it’s got third degree burns.

              Another old standby: the “Accuse Others Of That Which Malcolm Does (or its variant, Is).

              Oh the joy!

              In case you haven’t noticed your new nickname (poopy diaper), it is you that needs to ‘grow up.’

    2. 1.2

      “It is amusing, I guess, that some people really think that the law matters anymore”

      Yes I remember all the glibertarian patent huffers here really complaining when a pathological lying authoritarian p-I-gman was elected President, refused to acknowledge losing the election, and encouraged a bunch of snail brains to storm the capitol.

      You’re a very serious person! Really concerned. We can all see that.

    3. 1.3

      “ Just look at the claim language of DDR Holdings — those claims would never make it past the Federal Circuit today.”

      Nobody could have predicted that ridiculous nonsensical case would have such a short life.

    4. 1.4

      “ What the heck is “sufficient specificity” in the context of 35 USC 101?”

      A specific algorithm that is more than a simple if/then statement is probably a good start, although still a total farce in the larger context of the patent system.

      “Will the Federal Circuit EVER give us a definition”

      You are looking for a test that determines when an abstraction has “sufficient” structure that isn’t really structure because … it’s a logic applied to data. Guess what? Never going to happen.

      Now ask me what the alternatives are.

      Oh, and nobody has ever thought about these issues before. Nope.

      1. 1.4.1

        A specific algorithm that is more than a simple if/then statement is probably a good start, although still a total farce in the larger context of the patent system.
        What is a specific algorithm? How does it differ from a non-specific algorithm? Can you give us an example? Since I won’t be holding my breath for that to happen, perhaps, in a different context, you can provide a specific algorithm used to manufacture a new biologic drug that what meet your standard?

        You are looking for a test that determines when an abstraction has “sufficient” structure that isn’t really structure because
        You do realize method/process claims aren’t really about the structure — it is about the steps being performed.

        1. 1.4.1.1

          “ What is a specific algorithm?”

          A species member of a class of generic algorithms.

          “How does it differ from a non-specific algorithm?”

          There are more details and limitations.

          Recall that I already explained to you the problem with “sufficiency” in this context. If you can’t understand that explanation or you refuse to even try to understand it, you probably shouldn’t be having this conversation. Just return to taking money from people in exchange for writing ineligible patents until the plug is pulled. It’s a living, right?

          1. 1.4.1.1.1

            A species member of a class of generic algorithms.
            I identify a species.
            MM: ‘but that species is itself a generic algorithm’
            I identify a species of the species.
            MM: ‘but that species of the species is itself a generic algorithm’
            I identify a species of the species of the species.
            MM: ‘but that species of the species of the species is itself a generic algorithm’

            This is boring dance.

            Just return to taking money from people in exchange for writing ineligible patents until the plug is pulled. It’s a living, right?
            Stop projecting your self-loathing. Seek help — this really is sad.

            1. 1.4.1.1.1.1

              As I’ve said before, if you’re not really interested in the answer to a question, then why bother asking? If you have a better answer, then provide it.

              Why is that so difficult? I can tell you that it’s not difficult to see the game you’re playing, although it is tiresome to watch.

              1. 1.4.1.1.1.1.1

                Yay – the “Accuse Others Of That Which Malcolm Does

                Oh the joy!

        2. 1.4.1.2

          “method/process claims aren’t really about the structure”

          That is certainly true of the ineligible ones. Definitely not true of all method/process claims. No reasonable practioner in the chem/bio field would ever make such a statement about method claims without qualifying it appropriately. At least I hope not for the sake of their clients.

          1. 1.4.1.2.1

            Obtuse.

            Is it deliberate?

            1. 1.4.1.2.1.1

              There is nothing “obtuse” about what I wrote.

              If you disagree, explain exactly what the “obtusity” is. Hint: contemplate the possibility that your reading comprehension and writing skills are poor, even for a lawyer.

              1. 1.4.1.2.1.1.1

                Obtuse: annoyingly insensitive or slow to understand.

                You attempt to focus on the item that is NOT at focus in the provided statement of method/process claims.

                That YOU think that you DO understand does appear to be part of your problem.

      2. 1.4.2

        Here, the claims themselves seem to contain an algorithm:

        receiving a transaction request including at least
        the time-varying multicharacter code for an entity
        on whose behalf a transaction is to take place and
        an indication of the provider requesting the transaction;

        mapping the time-varying multicharacter code to
        an identity of the entity using the time-varying
        multicharacter code;

        1. 1.4.2.1

          “ the claims themselves seem to contain an algorithm”

          Yes that is an old logic method for “encoding” identity information. Not an invention. Anything else of substance in the claims beyond that abstract concept?

          1. 1.4.2.1.1

            ? Is your complaint a prior art complaint or an eligibility complaint?

            Do you recognize the difference?

            1. 1.4.2.1.1.1

              It’s well understood by everyone who matters (and most attorneys as well) that you can’t have a working “eligibility requirement” in our current patent system if the eligibility requirement does not take into account the prior art.

              Thank you for the comment.

              1. 1.4.2.1.1.1.1

                Is that really what you think Congress intended in the Act of 1952, when they did the opposite of what you are saying?

          2. 1.4.2.1.2

            I’m no expert in this field, but I’d guess the ‘conventional’ technique was to just transmit the cc number, not generating and transmitting a “time-varying multicharacter code” that you must subsequently map to something else (iif your clocks are set correctly).

        2. 1.4.2.2

          Like typical time and amount limited “gift card” credit cards? [Having a “time-varying multicharacter code for an entity on whose behalf a transaction is to take place”?]

          1. 1.4.2.2.1

            Does that get mapped to an identity of an entity? And isn’t this a 103 argument anyway?

            I have never been able to tell the difference between the first and second steps of Alice. In my mind, they’re basically identical. True, there’s some lip-service given to the “something more”, but it seems as if you have “something more”, you can distinguish using the first step.

            1. 1.4.2.2.1.1

              BobM,

              Leastwise as applied in the patent office during prosecution, there was a substantial difference** between the two steps.

              But keep in mind that this is because those in the Office lack the Judicial Branch ability to simply ‘make things up and not stick to any semblance of restraint’ – as seen here with a PANEL decision being labeled precedential that is simply incongruent with prior precedential panel decisions (and which would require en banc to properly set the law).

              The patent office is NOT so at liberty.

              **items include the APA level of finding conventionality which is more intensive than merely ‘anticipated’ or ‘found obvious’ and that applies not only to individual claim elements, but to ordered claim elements and the claim as a whole. While lamenting of Berkheimer may be heard, that decision has NOT been rescinded, and the Executive Branch still is bound. The whole point of the prongs under Step 2A as opposed to Step 2B was to alleviate the necessity of Examiners doing (to the degree required) that which they are ill-equipped to do.

    5. 1.5

      Malcolm being Malcolm in full (but nothing new) blighted form.

      Good morning Malcolm – still waiting on you: link to patentlyo.com

      Still.

      Let’s see you lead by example with all of the level of detail that you want from others, eh?

    6. 1.6

      “Will the Federal Circuit EVER give us a definition that us little people can work with to draft claims?”

      Looking forward to you calling out all the terms with non-circular definitions in patent law.

      1. 1.6.1

        Did you have any particular ones in mind?

    7. 1.7

      Great comments Wandering. Thanks.

      1. 1.7.1

        Yup – and notice how the Malcolm retread machine has geared up again (while ALL the other anti’s have run for cover)

    8. 1.8

      Laurie is the worst.

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