Tag Archives: Abstract Idea

Update on USPTO’s Implementation of ‘Alice v. CLS Bank’

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The following guest post comes from USPTO Commissioner for Patents Peggy Focarino and is a re-publication of what Commissioner Focarino published on the USPTO Director’s Blog.

Today I would like to address our ongoing implementation of the June 19, 2014, unanimous Supreme Court decision in Alice Corporation Pty. Ltd. v. CLS Bank International, et al. (Alice Corp.). In the decision, the court held claims to a computerized scheme for mitigating settlement risk patent-ineligible because they are drawn to an abstract idea. I want to share with you the steps we’re taking to implement the decision.

First, on June 25th, we issued preliminary examination instructions to assist examiners when evaluating subject matter eligibility of claims involving abstract ideas, particularly computer-implemented abstract ideas, in view of Alice Corp.

Second, the USPTO has applications that were indicated as allowable prior to Alice Corp., but that have not yet issued as patents. Given our duty to issue patents in compliance with existing case law, we have taken steps to avoid granting patents on those applications containing patent ineligible claims in view of Alice Corp. To this end, our primary examiners and supervisory patent examiners (SPEs) promptly reviewed the small group of such applications that were most likely to be affected by the Alice Corp. ruling.

We withdrew notice of allowances for some of these applications due to the presence of at least one claim having an abstract idea and no more than a generic computer to perform generic computer functions. After withdrawal, the applications were returned to the originally assigned examiner for further prosecution. Over the past several days, our examiners have proactively notified those applicants whose applications were withdrawn. (Applicants who had already paid the issue fee for applications withdrawn from allowance may request a refund, a credit to a deposit account, or reapplication of the fee if the applications return to allowed status.)

This limited action was closely-tailored and taken specifically in reaction to the Alice Corp. decision. We do not anticipate further review of any applications indicated as allowable under this process, as examiners are currently following the Alice Corp. preliminary instructions during examination (i.e., prior to allowance).

Third, as we continue to study Alice Corp. in the context of existing and developing precedent, public feedback will assist us in formulating further guidance for our examiners. On June 30th, a Federal Register Notice was published to solicit written comments from the public on the preliminary examination instructions. The period for submitting those comments ended July 31, 2014. We appreciate the comments we have received to date. All input will be carefully considered as we work to develop further examination guidance, which we anticipate issuing this coming fall.

We look forward to working with our stakeholders in refining our examination guidance, and will continue to seek feedback as we implement changes as the laws evolve.

USPTO Moves to Strongly Enforce Eligibility Limitations

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By Dennis Crouch

Earlier this summer, the Supreme Court decided the subject matter eligibility case of Alice Corp. v. CLS Bank Int’l, 573 U.S. ___ (2014). The main point of Alice Corp. was to find that the eligibility-limiting holding of Mayo v. Prometheus, 566 U.S. ___ (2012) applies equally to the patenting of abstract ideas. (Mayo focused on laws of nature).

Alice Corp. offers a two-step process for determining patent eligibility of a claimed invention:

  • Building Block: First, determine whether the claim recites or is directed to a patent-ineligible concept such as an abstract idea, law of nature, or product of nature. The court calls these “building blocks of human ingenuity” that should not themselves be patentable.
  • Something More: Second, determine whether the claim recites sufficient additional inventive features such that the claim does not solely capture the abstract idea.

Although Alice Corp decision stemmed from a district court challenge to an issued patent, the law of subject matter eligibility applies (roughly) equally to pending patent applications. In particular, the USPTO is charged with the task of ensuring that patents are only issued for eligible inventions. Thus, following Alice Corp the USPTO issued a set of guidance instructions to its examiners that follow the two step process. Although the two step approach appears straightforward. There is no standard definition for “abstract” and so it is difficult to identify abstract ideas from non-abstract ideas. Further, we do not know the threshold of “something more” that would allow patentability.

As I have written before, every patent claim serves as an abstraction from any physical implementation of an invention – and so any line-drawing rules on this front will necessarily be either arbitrary or murky. Still, the USPTO is charged with moving forward and examining these cases and, in the absence of concrete guidance in the law, the USPTO must create its own policy. At this stage, USPTO policy on examining for 101 can be largely impacted by White House views on patentability. And the current White House viewpoint seems to be that information-software focused inventions are likely unpatentable under 101 unless tied to inventive technology.

Based on information from several sources, it appears that the USPTO is now taking a more aggressive stance on subject matter eligibility and is particularly re-examining all claims for eligibility grounds prior to issuance. This is most apparent in technology centers managing data-processing inventions classes (Classes 700-707).

A set of form-paragraphs are being used that may present a prima facie case but that do not really provide much analysis:

Claims XXXX are rejected under 35 U.S.C. § 101 because the claimed invention is directed to non-statutory subject matter, specifically an abstract idea.

Claims are directed to a judicial exception (i. e., law of nature, natural phenomenon, or abstract idea), specifically, the abstract idea of [INSERT INVENTION HERE]. After considering all claim elements, both individually and in combination, it has been determined that the claim does not amount to significantly more than the abstract idea itself. Further, while the claims recite [hardware or software elements, such as processors or modules], these limitations are not enough to qualify as “significantly more” being recited in the claim along with the abstract idea. Therefore, since there are no limitations in the claim that transform the exception into a patent eligible application such that the claim amounts to significantly more than the exception itself, the claim is rejected under 35 USC § 101 as being directed to non-statutory subject matter.

. . . Indeed, the claims fail to recite any improvements to another technology or technical field, improvements to the functioning of the computer itself, and/or meaningful limitations beyond generally linking the use of an abstract idea to a particular environment. Although the claims do recite the use of a computer, nothing more than a generic computer, performing generic, well-understood and routine computer functions, would be required to implement the aforementioned abstract idea.

Therefore, because there are no meaningful limitations in the claim that transform the exception into a patent eligible application such that the claim amounts to significantly more than the exception itself, the claim is rejected under 35 U.S.C. § 101 as being directed to non-statutory subject matter.

It appears that applications whose inventive features are found in software or information processing will now have a difficult time being patented.

Data Structure Patent Ineligible

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By Dennis Crouch

Digitech Image v. Electronics for Imaging (Fed. Cir. 2014)

Digitech sued dozens of companies for infringing its U.S. Patent No. 6,128,415. As I wrote back in April 2014, basic idea behind the invention is to tag digital images with particular information about the camera and its color/spatial image qualities in a form that is device-independent. The patent includes claims directed to both a “device profile” and a “method of generating a device profile.” The profile is simply a set of data elements regarding the camera qualities discussed above and the method simply involves generating and combining those data elements. This sort of tagging of digital images has become ubiquitous and so the patent could be quite valuable – except that the Federal Circuit has held the patent invalid as lacking subject matter eligibility under 35 U.S.C. §101.

Claim 1 is drafted as follows:

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:

first data for describing a device dependent transformation of color information content of the image to a device independent color space; and

second data for describing a device dependent transformation of spatial information content of the image in said device independent color space.

The District Court found the claims invalid and that decision has been affirmed by the Federal Circuit. Decision by Judge Reyna, joined by Judges Moore and Hughes. Because subject matter eligibility is a question of law, the Federal Circuit reviews that issue de novo without giving deference to the district court analysis. (more…)

Alice, Artifice, and Action – and Ultramercial

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Guest post by Emily Michiko Morris, Associate Professor, Indiana University Robert H. McKinney School of Law

Anyone familiar with recent Supreme Court patent jurisprudence was perhaps disappointed but certainly not surprised by the Court’s latest decision, Alice Corp. v. CLS Bank Int’l. The Court once again left many questions unanswered and failed to provide a clear rubric for identifying patentable subject matter. When viewed within the broader context, however, Alice fits nicely within what is actually a long-standing pattern in § 101 cases. IF Ultramercial v. Hulu follows this pattern after its now second GVR, the Federal Circuit may finally affirm that the internet-mediate advertising method at issue there is unpatentable subject matter.

In What Is “Technology”?, I explain that as unmethodical as patentable subject matter often seems, two surprisingly consistent concepts explain how courts identify patentable subject matter. The article dubs these concepts “artifice” and “action.”

Artifice refers to the well-recognized requirement that patentable subject matter be the product of human ingenuity, not nature. Less appreciated is the fact that artifice requires more than just changes in structural or other physical characteristics; to be patentable, a claimed invention must also function in some new, non-naturally occurring way. We can see this latter point illustrated in the purification line of cases as well as Myriad, Funk Brothers, and Chakrabarty.

Much more obscure but more relevant to Alice is the concept of action. Roughly defined, action is the requirement of active rather than passive utility through operating, behaving, performing, or otherwise actively doing something; that is to say, an invention must be “self-executing.” Inventions that display, transmit, or even store information may satisfy the action requirement, but works such as laws of nature, mathematical algorithms, and “abstract ideas” are (perceived as) merely informational or descriptive in value and therefore unpatentably inert. Moreover, as Alice explains, the abstract idea category is not “confined to ‘preexisting, fundamental truth[s].’” By definition any purely informational or descriptive content, whether naturally occurring laws of nature and mathematical algorithms or human-made financial and economic methods, fails the action requirement. As the Court in Diamond v. Diehr put it, such works simply do not “perform[ ] a function which the patent laws were designed to protect.”

To the extent different tests appear to govern natural products versus laws of nature and abstract ideas, then, artifice and action – and more importantly, the circumstances in which each are likely to be invoked – account for these differences. Artifice obviously plays its largest role in cases involving products or laws of nature, whereas action is most important in cases involving abstract ideas and laws of nature. Nonetheless, patentability under § 101 requires both artifice and action.

Both Alice and Bilski illustrate what role action plays under § 101. The methods in both Alice and Bilski involved hedging risk during business transactions by relying on intermediaries, but more importantly, both methods served solely to inform parties about when they can safely transact. The Alice and Bilski opinions describe this as the abstract concept of intermediated settlement, but really it is just information – information about risk. As such, both methods were unpatentably inactive under § 101.

And although Alice differs from Bilski in that Alice’s method was computer-implemented, the Court found both methods to be unpatentable. Like artifice, action is also a scalar characteristic. Just as artifice depends on an invention’s perceived degree of alteration from nature, action depends on an invention’s perceived degree of activity, and despite Alice’s computer-implementation, the method was still not active enough under § 101.

Indeed, both Alice and Mayo emphasize the scalar nature of patentability under § 101. Under Mayo’s two-step test, a court first determines whether a claim is directed to a law of nature, natural phenomenon, or abstract idea. As the Alice Court observed, however, all inventions are directed to one of the patent-ineligible concepts at some level. The second and pivotal step is therefore to determine whether the claim demonstrates an “inventive concept” – that is, does the claim add elements “sufficient” and “enough” to establish patentable subject matter.

And to see that a sufficient “inventive concept” requires sufficient action, one need only look at how the Court treats computer-mediated elements with regard to patentability under § 101. Computers are widely regarded as “technological,” but much computer technology is “information technology,” and computer use primarily to manipulate data or other information thus adds no patentable action. Computer implementation in Alice’s method followed exactly this pattern – as the Court noted, the computer served only to create and maintain “shadow” accounts, obtain data, adjust account balances, and issue automated instructions. Accordingly, whether Alice claimed its invention as a method, system, or medium, the invention failed to provide an adequate “inventive concept” because it did not demonstrate sufficient action.

Under an artifice-plus-action standard, then, Ultramercial’s internet-mediated advertising method fails § 101. Ultramercial claimed a method of distributing copyrighted content for free in return for viewing an advertisement. The method is purely an exchange of informational and expressive content and performs no action whatsoever, and the claim’s cursory reference to the internet does nothing to add a “sufficient inventive concept.”

This is not to say, of course, that computer-implemented methods are never patentable subject matter. The Alice Court pointed out the difference between computers used purely for information processing and computers used to effect improvements in “any other technology or technical field,” or improvements in the function of the computer itself. Diehr’s computer-assisted rubber-curing process, for example, was adequately “technological” and therefore patentable, whereas the computer-implemented methods in Benson and Flook yielded “simply a number” and were therefore unpatentable. Per the view of the patent system, information processing is simply not “technological.” Similarly, computer or storage media that are distinguishable only by their informational or expressive content alone been held unpatentable if the content has no “functional” relationship with the device. The variable role that computers and other tangible devices can thus play in an invention may be why the Supreme Court rejected the machine-or-transformation test as the sole test for methods under § 101.

And while the discussion here focuses mostly on business methods, note that the Mayo two-step test as stated in Alice covers all patent-ineligible abstract ideas, laws of nature, and even phenomena of nature – all are subject to the same requirement that a claimed invention add “enough” to constitute a patentable inventive concept. For claims directed to phenomena of nature, “enough” means artifice and meeting the age-old test of “markedly different characteristics from any found in nature.” For abstract ideas, laws of nature, mathematical algorithms, mental processes, and all other forms of information, “enough” means action and demonstrating function beyond merely informing.

As simple as artifice and action may sound, however, patentable subject matter clearly remains a difficult and ambiguous issue. The difficulty lies in the scalar quality of both artifice and action and deciding where along these spectra any given new invention falls. The requisite degree of artifice and action has also varied over time as the liberality of patentable subject matter has waxed and waned, creating yet further uncertainty. Most significantly, where the line between patentable and unpatentable lies along the spectrum is entirely unclear. There are no bright-line rules and no magical claim elements that can guarantee patentability under § 101.

The Court has often (but not always, as our host Jason Rantanen has pointed out) expressed a preference for a “functional” approach to patent law, however: that is, a preference for standards over hard and fast rules. As stated in Bilski’s rejection of the machine-or-transformation test, to do otherwise would “make patent eligibility ‘depend simply on the draftsman’s art.’” True, the artifice-plus-action standard requires courts to make many judgment calls about where along the spectrum of artifice and action any given invention must fall before it can be considered patentable technology, but standards are often vague. Besides, patent law frequently must address these kinds of line-drawing exercises. The non-obviousness, utility, enablement, and even written description requirements all force courts to make judgment calls.

Compounding the difficulty is the fact that § 101 determinations are in the end based on nothing more than intuition. As I and a number of others have noted, none of the pragmatic justifications commonly cited in support of § 101, such as preemption and disproportionality explain how patentable subject matter determinations are actually made or, more importantly, why. Thus, although artifice and action consistently appear in patentable subject matter, the combination does not necessarily reflect the most efficient or “correct” way to define patentable subject matter. Rather, the combination merely reflects an underlying intuition about what constitutes technology. (In Intuitive Patenting, a companion article to What Is “Technology”?, I argue that there simply are no more objective bases on which to make these determinations.) Unfortunately, patentable subject matter’s intuitive nature leaves courts effectively unable to specify how they reached their determinations. This often leads to language that sounds more like non-obviousness, novelty, or utility than to § 101, but in the end, artifice and action are better explanations for these otherwise perplexing references.

Federal Circuit: Now is Not the Time to Judge the Constitutionality of the First-to-File Patent Regime

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By Dennis Crouch

MadStad Enginering v. USPTO (Fed. Cir. 2014)

In 2012, MadStad and its owner Mark Stadnyk filed a declaratory judgment lawsuit against the USPTO alleging that the new first-to-file regime implemented by the America Invents Act of 2011 (AIA) was unconstitutional. See Crouch, Constitutional Challenge to the First-to-Invent Rule
(2012), and Crouch, Constitutionality Question Looms as USPTO Implements Regime that favors a “Filers” over “Inventors”
(2013). In discussing the case, I wrote:

MadStad’s basic argument is that when the U.S. Constitution speaks of exclusive rights for “inventors” it should be interpreted to mean “first and true inventor.” Under this analysis, the AIA fails because it purposefully rewards the first-to-file a patent application rather than the first-to-invent.

Further, MadStad argues that the new law allows non-inventors to obtain patents on inventions that they learned-of because the law no longer requires that the applicant be an inventor.

Rather than reaching the merits of MadStad’s allegations, the district court rejected the case for lack of standing. The Federal Circuit has now affirmed that decision — holding that MadStad’s potential injury due to the legal change is too speculative. MadStad’s alleged injuries due to the change are creative, but ultimately the court determined that they lacked sufficient concreteness. The alleged injury included increase cost of computer security to avoid hacking that – if not blocked – could result in stolen ideas that the thief could patent under the new regime. A second alleged injury is increased time and effort to file additional patent applications before the invention’s value is properly understood.

The key precedent relied upon by both the Federal Circuit and the District Court is the secret FISA court case of Clapper v. Amnesty International USA, __ U.S. __, 133 S. Ct. 1138 (2013). In that case Amnesty Int’l did not have proof that the NSA was tapping its conversations (because the activity is secret) and the Supreme Court held that the threat was too speculative. In my view, the direct applicability of Clapper here is somewhat attenuated because it is clear that MadStad’s new patent applications would be governed under the new regime and the separation-of-powers issues are not so great.

Next steps: Regardless of the merits of this decision, by now there should be at least some patent applications that have been rejected due under the new first-to-file regime that would not have arguably been patentable under the old regime. Applicants injured in that way would certainly have standing to bring this challenge.

= = = = =

The decision by Judge O’Malley also includes an interesting discussion of Federal Circuit Jurisdiction. The law provides that the Federal Circuit has jurisdiction over appeals that arise under the patent law statutes. Here, however, the claim is based upon the U.S. Constitution.

PTO Issues Alice-based Examination Instructions

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By Jason Rantanen

Today, the patent office issued new instructions (download: PTO Alice Instructions) for patent examiners to follow when examining claims for compliance with Section 101.  This practice is similar to those  it followed after the Court issued other substantive patent law opinions.  One important component of the new instructions are that they make it clear that going forward, the PTO will be applying the Mayo v. Prometheus framework to all types of inventions:

[T]he following instructions differ from prior USPTO guidance in two ways:

1) Alice Corp. establishes that the same analysis should be used for all types of judicial exceptions, whereas prior USPTO guidance applied a different analysis to claims with abstract ideas (Bilski guidance in MPEP 2106(1I)(B)) than to claims with laws of nature (Mayo guidance in MPEP 2106.01).

2) Alice Corp. also establishes that the same analysis should be used for all categories of claims (e.g., product and process claims), whereas prior guidance applied a different analysis to product claims involving abstract ideas (relying on tangibility in MPEP 2106(Il)(A)) than to process claims (Bilski guidance).

In addition, the PTO provides a bit of guidance for determining whether a claim will fail one of the two steps.  For the first step (determine whether the claim is directed to an abstract idea), the memorandum provides four examples of abstract ideas referenced in Alice:

  • Fundamental economic practices;
  • Certain methods of organizing human activities;
  • “[A]n idea of itself; and
  • Mathematical relationships/formulas

If an abstract idea is present in the claim, the examiner should proceed to the next step, determining whether any element or combination of elements in the claim  sufficient to ensure that the claim amounts to significantly more than the abstract idea itself.  Examples of limitations that may be sufficient to qualify as “significantly more” include:

  • Improvements to another technology or technical fields;
  • Improvements to the functioning of the computer itself;
  • Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

Examples of limitations that are not enough to qualify as “significantly more” include:

  • Adding the words “apply it” (or an equivalent) with an abstract idea, or mere instructions to implement an abstract idea on a computer;
  • Requiring no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry.

Read the entire memorandum here:  PTO Alice Instructions. Thanks to David Taylor at SMU Law for sending me a copy of the memo.

Hindsight in 101 Jurisprudence: an early morning half-baked thought or an insight?

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Dennis is on vacation and said I could post so I’m running with it!

The analysis everyone suggests is right under 101 (recall I don’t think it’s an invalidity defense; not sure what impact, if any, it has on patentability) goes something like this:

Is the claim “directed to” some natural law/natural thing/abstract idea?

If so, there must be more than ‘conventional’ application of it.

Applying that to a lot of medical method claims (Ariosa v. Sequenom is discussed by others below), the problem is that, before the discovery of the natural thing/idea/law, no one knew that you could apply anything to do whatever the claim says.  Nothing was “conventional” with respect to the newly discovered thing/law/idea.

By asking what’s conventional, we are importing hindsight.

Thoughts, or am I not yet awake and Dennis should come back and get this ship righted?

One last thought for those of you who think “invention” has meaning beyond 103.  I think the legislative history is beyond clear, as is the statute, but here’s a committee report:

“The major changes or innovations in the title consist of incorporating a requirement for invention in § 103 and the judicial doctrine of contributory infringement in § 271.”

 

The Three Faces of Prometheus: Alice and Generic Application

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Today continues our mini-symposium on Alice v. CLS Bank with a guest post by Jeffrey A. Lefstin, Professor at the University of California, Hastings College of the Law.  

Alice Corp. marks the Supreme Court’s eighth subject-matter eligibility case since the 1952 Act. Without question, the most problematic aspect of the Supreme Court’s § 101 jurisprudence has been discerning the actual test for patent-eligibility. In Mayo v. Prometheus, the Court purported to establish a general framework for subject-matter eligibility: that to be patent-eligible, a claim must include an “inventive concept” beyond an underlying fundamental principle, such as a law of nature, natural phenomenon, or abstract idea. The Court’s omission of significant reference to Mayo in Association for Molecular Pathology raised some doubt as to whether Mayo defined a universal test for eligibility under § 101.  Yet Alice Corp. appears to confirm that Mayo is a universal framework for discriminating between ineligible principles and patent-eligible applications.

Mayo’s ambiguity led to the Federal Circuit’s fracture when it heard CLS Bank en banc.  Mayo suggested three possible tests for patent-eligibility, without committing definitively to any one of them:  inventive application, pre-emption, and “more than just apply it.” Justice Thomas’s opinion in Alice does not expressly commit to a single interpretation of Mayo. Yet Thomas’s presentation of Mayo, his framing of the Court’s prior precedent, and his application of Mayo to Alice’s claims all indicate that Alice endorses the last aspect of Mayo: that a claim must do more than set forth a fundamental principle and add a generic instruction to “apply it.”  If this interpretation is correct, then Alice may in the long run be more significant for fields such as biotechnology, where Mayo’s “inventive application” aspect has cast doubt on the patent-eligibility of many discovery-based inventions.

Mayo’s first test of patent-eligibility is a test for inventive, or non-obvious, application of a fundamental principle.  Drawing from Flook, where Justice Stevens wrote that “conventional and obvious” post-solution activity cannot transform an unpatentable principle into a patentable process, and Funk Brothers, where Justice Douglas held that a composition of matter was not patentable because the patentee’s application was “a simple step” once his discovery was assumed away, Justice Breyer invalidated Prometheus’s claims because the steps of the claimed method beyond the underlying natural law were merely “well-understood, routine, conventional activity already engaged in by the scientific community.” Breyer contrasted those steps with the additional steps claimed in Diamond v. Diehr, which in context were not “obvious, already in use, or purely conventional.”  The Mayo Court drew support for this test from the Court of Exchequer’s 1843 opinion in Neilson v. Harford, where the patent was said to have been sustained because the patentee implemented his newly discovered principle “in an inventive way.”*  This view of Mayo – that obvious applications of fundamental principles are not patent-eligible – was the one taken by the Northern District of California in the Ariosa v. Sequenom litigation, where Judge Ilston invalidated Sequenom’s claims largely because once Sequenom’s discovery of cell-free fetal DNA in the maternal bloodstream was assumed to be known, the application in the form of a test for fetal abnormalities required only routine and well-known methods of DNA amplification.

The second test of eligibility suggested by Mayo is a test of pre-emption. The Court explained that subject-matter exclusions were grounded in pre-emption, echoing Benson’s concern that patents should not monopolize “the basic tools of scientific and technological work.”  Mayo seemed to state that pre-emption was analytically secondary to categorical exclusion:  the concern that Prometheus’s claims would tie up too much future use of the underlying natural laws “simply reinforces our conclusion” that the claimed processes were not patent-eligible.   Yet Breyer’s opinion intertwined pre-emption with inventive application as a criterion for patent-eligibility:  Diehr was described as a case where the patentee had not sought to pre-empt the use of the Arrhenius equation. While the patentee in Flook had failed to “limit the claim to a particular application,” the supposedly unconventional steps in Neilson had “confined the claims to a particular, useful application of the principle.” This interpretation of Mayo was followed by the majority of the Federal Circuit when it heard CLS Bank en banc. Both Judge Rader and Judge Lourie rejected the notion that Mayo’s “inventive concept” demanded “inventiveness” in the sense of a non-obvious application. And while they disagreed on the proper framework, both Judge Lourie and Judge Rader founded their analyses on the question of whether Alice’s claims would pre-empt every practical application of the underlying abstract idea.

But Mayo suggests a third test beyond inventive application or pre-emption: that a claim must represent more than a mere direction to apply a fundamental principle. According to Justice Breyer, one could not transform a law of nature into a patent-eligible application by simply disclosing the law of  nature, and adding the words “apply it;” Einstein or Archimedes, for example, could not have patented their famous discoveries by merely appending an instruction to apply them. This aspect of Mayo has received the least attention in subsequent cases and commentary. And yet in Justice Thomas’s opinion in Alice, it is this aspect of Mayo that becomes the core of the doctrine.

In Alice’s framework, once it has been determined that a claim is drawn to an abstract idea, ‘step two’ of the Mayo test is to determine whether it contains an “inventive concept” sufficient to transform the claim into a patent-eligible application. But in contrast to Flook and Mayo, “inventive concept” in Alice bears little trace of “inventiveness.” Justice Thomas does describe the computer implementation in Alice as “conventional.” But nowhere does he label it non-inventive, and the word obvious is conspicuously lacking from the opinion. And while Alice hardly addresses the Federal Circuit’s opinions at all, it may be significant that Thomas never contradicts Judge Lourie’s and Judge Rader’s rejection of “inventiveness” as an aspect of “inventive concept” in their CLS Bank opinions.
The contrast between Alice and Mayo is most apparent in their treatment of Diehr.  In Mayo, the claims in Diehr represented an inventive application of the Arrhenius equation, and were not “obvious, already in use, or purely conventional.” But in Alice, the claims in Diehr were sustained not because they were non-obvious, but because “they improved an existing technological process,” and achieved a result the industry had not been able to obtain. Likewise, in Mayo, the failing of the Flook claims was that the steps of the claim were well-known, conventional or obvious; in Alice, while Thomas notes that the Flook implementation was purely conventional, Flook primarily stands for the proposition that limitation to a particular technological environment does not render an abstract idea patent eligible.

As for pre-emption, which intertwined so closely with inventive application in Mayo, is hardly present for ‘Mayo step two’ in Alice. Again the characterization of precedent is telling: in Mayo, the claim in Benson was vulnerable because it was “overly broad.”  In Alice, Benson requires a “new and useful” –  but not inventive – application of an idea for patent eligibility, but the lesson of Benson is that simply implementing a principle on a computer is not a patentable application.

For Justice Thomas, the ‘step two’ inquiry involves neither inventiveness nor pre-emption, but revolves around Mayo’s proscription against “more than just apply it.” Alice follows Flook and Mayo in holding that “conventional” activity cannot transform a principle into a patent-eligible application, but in Alice “conventional” seems to connote generic more than it connotes obvious.  Thus Thomas introduces ‘step two,’ the search for an inventive concept, by invoking the third aspect of Mayo: patent-eligible application requires more than a statement of the abstract ideas plus the words ‘apply it.’  And while Thomas notes that the measuring steps in Mayo were “well known in the art,” he again quotes the ‘more than apply it’ language from Mayo to establish that those steps adding nothing of significance to the underlying natural law.

Most significantly for the Alice analysis, Thomas ends his summary of Mayo by quoting language that played little role in Mayo itself: it was not that conventional steps cannot supply an ‘inventive concept,’ but “conventional steps, specified at a high level of generality” (emphasis added) could not supply an inventive concept. For it is genericness, not lack of invention or pre-emption, that dominates the remainder of Thomas’s opinion.  His summary of the Court’s § 101 jurisprudence touches upon the notion of pre-emption, but emphasizes above all else the requirement of “more than generic” application:

These cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it’” is not enough for patent eligibility. Nor is limiting the use of an abstract idea “‘to a particular technological environment.’ ” Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” that addition cannot impart patent eligibility. This conclusion accords with the pre- emption concern that undergirds our §101 jurisprudence. Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of “additional featur[e]” that provides any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.”

(citations omitted).

Similarly, Alice’s application of the test to the claims in suit emphasizes “more than apply it” and generic application;  the question for Justice Thomas “is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.” Thomas does describe the functions performed by the computer as “routine, conventional, and well-known in the field,” but his characterization serves to support the conclusion that the claimed steps do nothing more than define generic computer implementation. And taken as a whole, the claims at issue fail not because they lack inventiveness, nor because they reach too broadly, but because they amount to “’nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.

So Alice may fail to provide clear boundaries for the eligibility of computer-implemented inventions. But it could clarify something more important.  As I have described in a recent paper, the actual test for patent-eligibility in cases like Neilson v. Harford, and in American jurisprudence for the next century, was a requirement that the patentee claim a specific mode of application of a fundamental principle, rather than a generic claim to the principle as applied. If Alice does indeed endorse the third aspect of Mayo, then the test for patent-eligibility is not a question of non-obvious application, nor a question of pre-emption, but a question of whether the claim does significantly more than state a fundamental principle coupled with an instruction to “apply it.” Embracing that aspect of Mayo could signal a return to the historical standard of patent-eligibility.

*As I discussed in a previous post, the Court’s reliance on Neilson in Mayo and Flook was entirely misplaced.  The patent in Neilson was sustained not because the patentee’s implementation was inventive, but precisely because it was entirely conventional and well-known in the art.

The Supreme Court’s Alice Decision on Patent Eligibility of Computer-Implemented Inventions: Finding an Oasis In the Desert

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Guest Post by Donald S Chisum, Director of the Chisum Patent Academy and author of Chisum on Patents.

In Alice (June 19, 2014), the Supreme Court held that the two step framework for determining the Section 101 patent-eligibility of a patent claim, which the Court previously articulated in the 2012 Mayo decision on the patentability of a diagnostic method, applied to computer-implemented inventions.  Thus, one determines: (1) does the claim recite an ineligible concept (natural phenomena, natural law or abstract idea), and (2) if so, does the claim recite sufficient additional elements to make the claim one to an application of the concept, rather than to the concept itself?

On Mayo step one, Alice held that the claims at issue were to an abstract idea, an “intermediated settlement.”  On step two, it held that “merely requiring generic computer implementation” did not “transform that abstract idea into a patent-eligible invention.”  Thus, claims to a method, a computer system configured to carry out the method, and a computer-readable medium containing program code for performing the method all fell invalid under Section 101.

I considered but then reconsidered entitling this comment “Alice in Wonderland.”  For, indeed, the Supreme Court’s chain of decisions creating a judicial exception to the statute defining patent eligible subject matter (35 U.S.C. § 101) and holding unpatentable claims to algorithms and abstract ideas, stretching from Benson in 1972 to Alice in 2014, is wondrous.  But I will not here review the “big picture,” including the fundamental flaws in the chain; I and others have already done that.

Instead, my focus is on the “small picture,” the every day problem: does the Alice opinion provide some meaningful guidance to fill the near void left by the Court in its prior Mayo and Bilski decisions?  Those decisions provided no definition of an “abstract idea” (or “law of nature”) and little direction on, precisely, how much “more” was required for the transformation.

The Court’s fuzz left stranded in a desert of uncertainty an array of feet-on-the-ground decision makers, from inventors to rights owners to patent professionals drafting and amending claims to examiners to PTO officials to licensing negotiators to litigators to district court judges to federal circuit judges to treatise authors.

Positive news.  At least on first analysis of Alice, I find some additional guidance, perhaps enough to lead us toward an oasis in the desert.

In particular, the Alice opinion supports the following proposition:  a novel and unobvious solution to a technical problem is not an “abstract idea,” and a claim drawn to such a solution, even if broad, is not subject to the Mayo framework (though, of course, it is subject to scrutiny for disclosure support).

The Alice opinion does not state the proposition directly.  The Court expressly indicated that it did not need to “delimit the precise contours of the `abstract ideas’ category” because the concept at issue was so similar to that in Bilski.  But the proposition is fairly inferred from the Court’s rejection of the patent owner’s argument that the intermediated settlement concept in its claims was not an “abstract idea” within the implicit exception to Section 101 and from its novel description of the prior Diehr decision.

Based on prior Supreme Court cases and language in Mayo, the patent owner argued that the definition of “abstract ideas” for Section 101 was: “preexisting, fundamental truths that exist in principle apart from any human action.”  The Court disagreed because that definition did not fit Bilski, which held that risk hedging was an abstract idea. Hedging was a “longstanding commercial practice” and a “method of organizing human activity,” but not a “truth” about the natural world that “always existed.”  Hedging and the similar concept of intermediated settlement were abstract ideas because they were “fundamental economic practices.”

Thus, concepts that constitute abstracts ideas fall into two categories.  First are mathematical equations, mathematical formulae and algorithms (at least ones of a mathematical nature, and, I would emphasize, not all algorithms are mathematical or numerical).  Second are methods of “organizing human activity,” at least if they constitute a fundamental economic practice “long prevalent in commerce.”

What’s left out of the “abstract idea” category?  The Court in Alice declined to say explicitly, but there are hints in its discussion of the 1981 Diehr decision in connection with the second Mayo step.  The Court noted that Diehr had held a computer-implemented process for curing rubber was patent eligible, not because it involved a computer but rather because “it used that equation in a process designed to solve a technological problem in `conventional industry practice.”  It reiterated: “the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.”  In contrast, the claims in Alice did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field.”

The Court had discussed and distinguished the Diehr case before, in both Bilski and Mayo, but never on the basis that Diehr entailed a technological improvement.  Thus, the Alice discussion of Diehr in terms of a solution to a technical problem is important new ground.

Hence there are strong grounds for the proposition that a patent claim reaches a safe harbor from Section 101 abstract idea scrutiny, including the Mayo second question for an “inventive concept,” if the claimant establishes that the claim is directed to a solution of a technological problem.  This definition of abstract idea as excluding applied technology accommodates the case law treating pure mathematical statements, economics and finance, and schemes of a non-technical character (“methods of organizing human activity”) as “abstract ideas” that must be include additional elements to achieve patent eligibility (Mayo step two).

Is this shift in focus to “technological” an oasis of greater clarity?  No doubt there will be arguments about what is technological and what is not.  But there are at least three advantages to the verbal change.  First, technology is the historic core of the patent system, especially given  the Constitutional phrase “useful Arts,” which is 18th century terminology for “technology” in 21st century terminology.  Thus, an inquiry about the technological is much less of an alien intruder than prior Supreme Court language about the abstract idea exception to Section 101.  Second, evaluating the Section 101 abstract idea prohibition in terms of technological versus non-technological conforms to the language Congress used in Section 18 of the America Invents Act in setting up special PTO review of business method patents.  Finally, a technology test aligns the United States standard with the language used in Europe and elsewhere to address exceptions to patent eligible subject matter.

SCOTUSblog symposium on Alice v. CLS Bank

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By Jason Rantanen

SCOTUSblog is publishing a series of essays on Alice v. CLS Bank.  Current participants include:

David Kappos – Supreme Court leaves patent protection for software innovation intact

From the perspective of the parties involved, this week’s Alice Corp. v. CLS Bank decision held that a process that lessens settlement risk for trades of financial instruments is too abstract for patenting. However, to the leagues of interested onlookers holding their collective breath across our country and indeed around the world, the Supreme Court’s unanimous ruling subtly conveyed a much more significant judgment:  software, as a class, is every bit as worthy of patent protection as any other medium in which innovation can be practiced.

Robert Merges – Go ask Alice — what can you patent after Alice v. CLS Bank?

Those of us who sweat in the clammy gymnasia of patent law have been waiting – with a mix of excitement, dread, and cynical disregard – for the Alice v. CLS Bank decision.  The idea was, when the Court took the case, that we would finally have an answer to the question whether software can be patented under U.S. law. To say we did not get an answer is to miss the depth of the non-answer we did get. Reading the opinion reminds me of a famous passage in The Hitchhiker’s Guide to the Galaxy.  Acolytes wait at the feet of a giant supercomputer, which 7.5 million years before had been asked “What is the meaning of life?”  Finally, after eons of waiting, the computer spoke.  Its answer was: “42.”  The acolytes went forth, armed with this non-answer.  And life went on.  So it is with us, in the patent field. We have met our “42,” and its name is Alice.  Now life must go on.

Justin Nelson – For patent litigants, Court affirms status quo

The reaction from patent litigants to the Supreme Court’s decision yesterday in Alice Corp. v. CLS Bank was one big shrug.  The decision was exactly as expected.  While the Court made clear that abstract ideas remain unpatentable, it “tread[ed] carefully” in construing patentability.  Indeed, the most notable part of the decision was that it shied away from any grand pronouncements.  Rather, it relied heavily on prior cases such as Bilski v. Kappos, Mayo Collaborative Services v. Prometheus Laboratories, Inc., and Association for Molecular Pathology v. Myriad Genetics. As the Court correctly concluded, “[i]t follows from our prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea.”  Yet it went no further than necessary: “[W]e need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.  It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here.”

Sandra Park – The Supreme Court as promoter of progress

Yesterday’s Supreme Court decision in Alice Corp. v. CLS Bank International revisits a fundamental question about our patent system:  which patents promote the progress of science?

There’s also a detailed analysis and commentary by John Duffy that begins:

Although Alice Corp. v. CLS Bank was identified by this website and many other commentators as a major case on patent law, the Supreme Court’s unanimous resolution of the case does little to change, or even to clarify, pre-existing law.  The case becomes the fourth Supreme Court decision since 2010 to hold patent claims invalid based on judicial exceptions to patentability. While Alice Corp. is only an incremental addition, the continuation of that larger trend is hugely important because, as the Court itself acknowledges, the judge-made doctrine in this area has the potential to swallow all of patent law.

Alice v. CLS Bank: Claims Invalid Under Section 101

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By Jason Rantanen

Alice Corporation Pty. Ltd. v. CLS Bank International (2014)

Download opinion here: Alice v CLS

This morning the Supreme Court issued its opinion in Alice, unanimously affirming the Federal Circuit and finding all claims drawn to patent ineligible subject matter under Section 101.  Justice Thomas wrote for the opinion for the Court.  It begins:

The question presented is whether these claims are patent eligible under 35 U. S. C. §101, or are instead drawn to a patent-ineligible abstract idea. We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.

The opinion includes both the actual language of representative claims (in a footnote) and the court’s interpretation of them (in the body of the opinion). (more…)

SmartGene v. Advanced Biological Laboratories

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By Jason Rantanen

Earlier this month, I posed a question relating to the patent eligibility of the following claim:

  1. A method for guiding the selection of a therapeutic treatment regimen for a patient with a known disease or medical condition, said method comprising:

 (a) providing patient information to a computing device comprising:

 a first knowledge base comprising a plurality of different therapeutic treatment regimens for said disease or medical condition;

a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition;

 a third knowledge base comprising advisory information useful for the treatment of a patient with different constituents of said different therapeutic treatment regimens; and

 (b) generating in said computing device a ranked listing of available therapeutic treatment regimens for said patient; and

 (c) generating in said computing device advisory information for one or more therapeutic treatment regimens in said ranked listing based on said patient information and said expert rules.

This claim was a real one, from a real case.  It’s Claim 1 from U.S. Patent No. 6,081,786, and in a January 2014 nonprecedential opinion the Federal Circuit affirmed a district court’s ruling that it and claims from related patent No. 6,188,988 were ineligible for patent protection under 35 U.S.C. § 101.  Here’s the core of the court’s reasoning:

The district court correctly held that the claim 1 method falls outside the eligibility standards of section 101 as that provision has been construed. This conclusion follows from CyberSource Corp. v. Retail Decisions, Inc., where, based on earlier precedents, this court held that section 101 did not embrace a process defined simply as using a computer to perform a series of mental steps that people, aware of each step, can and regularly do perform in their heads. 654 F.3d 1366, 1373 (Fed. Cir. 2011); see also In re Grams, 888 F.2d 835, 840-41 (Fed. Cir. 1989); In re Meyer, 688 F.2d 789, 794-95 (C.C.P.A. 1982). As CyberSource explains, those precedents rest on Supreme Court decisions indicating that section 101 covers neither “mental processes”—associated with or as part of a category of “abstract ideas”—nor processes that merely invoke a computer and its basic functionality for implementing such mental processes, without specifying even arguably new physical components or specifying processes defined other than by the mentally performable steps. See Gottschalk v. Benson, 409 U.S. 63, 67-68 (1972); Parker v. Flook, 437 U.S. 584, 589 (1978).

***

The Supreme Court’s post-CyberSource decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012), reinforces the application of Cyber-Source to decide the present case. The Supreme Court in Mayo, though addressing a case involving the “law of nature” exclusion from section 101, recognized that “mental processes” and “abstract ideas” (whatever may be the precise definition and relation of those concepts) are excluded from section 101. See 132 S. Ct. at 1289, 1293, 1297-98 (quotation marks omitted). Whatever the boundaries of the “abstract ideas” category, the claim at issue here involves a mental process excluded from section 101: the mental steps of comparing new and stored information and using rules to identify medical options. Mayo demanded that, when a claim involves an abstract idea (or, in Mayo itself, a law of nature), eligibility under section 101 requires that the claim involve “enough” else—applying the idea in the realm of tangible physical objects (for product claims) or physical actions (for process claims)—that is beyond “well-understood, routine, conventional activity.” 132 S. Ct. at 1294, 1298, 1299. The claim here does not do so. It calls on a computer to do nothing that is even arguably an advance in physical implementations of routine mental information comparison and rule-application processes. In this context, the concern about preempting public use of certain kinds of knowledge, emphasized in Mayo, is a grave one. See id. at 1301-02.

Our decisions since Mayo do not undermine Cyber-Source or its application here…..

You can read the entire opinion here: SmartGene v ABL.

ABL has since filed a petition for certiorari, as well as an amicus brief in Alice v. CLS.  Its position is that SmartGene should be GVR’d regardless of the outcome in Alice v. CLS (which might issue as soon as tomorrow).  From the introduction:

Judge Pauline Newman recently characterized the Federal Circuit as being in a state of jurisprudential “deadlock,” making patent eligibility under 35 U.S.C. § 101 a question “whose result will depend on the random selection of the panel.” CLS Bank Int’l v. Alice Corp. Pty. Ltd., 717 F.3d 1269, 1280 (Fed. Cir. 2013) (hereinafter CLS Bank) (en banc) (Newman, J., dissenting), cert granted, Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 734 (2013) (hereinafter Alice). No better case illustrates the panel-dependent crapshoot that Section 101 jurisprudence has become than this one. Although it is impossible to predict the Court’s forthcoming opinion in Alice, there is little doubt that it will significantly impact the law in this area and break the deadlock in the Federal Circuit.

The decision below is a prime example of the
current dysfunctional state of the law in the Federal Circuit.

You can read the petition here: ABL v. SmartGene petition for writ of certiorari.

Guest Post: Are APIs Patent or Copyright Subject Matter?

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Guest Post by Pamela Samuelson, Richard M. Sherman Distinguished Professor of Law at Berkeley Law School. I asked Professor Samuelson to provide a discussion of the recent Federal Circuit decision in Oracle v. Google. DC.

Application programming interfaces (APIs) are informational equivalents of the familiar plug and socket design through which appliances, such as lamps, interoperate with the electrical grid. Just as a plug must conform precisely to the contours of the socket in order for electricity to flow to enable the appliance to operate, a computer program designed to be compatible with another program must conform precisely to the API of the first program which establishes rules about how other programs must send and receive information so that the two programs can work together to execute specific tasks.

No matter how much creativity might have gone into the design of the existing program’s interfaces and no matter how many choices the first programmer had when creating this design, once that the API exists, it becomes a constraint on the design of follow-on programs developed to interoperate with it. Anyone who develops an API is, in a very real sense, designing that aspect of the program for itself and for others.

One of the many errors in Judge O’Malley’s decision in the Oracle v. Google case was her insistence that the merger of idea and expression in computer program copyright cases can only be found when the developer of an API had no choice except to design the interface in a particular way. If there is any creativity in the design of the API and if its designer had choices among different ways to accomplish the objective, then copyright’s originality standard has been satisfied and not just the program code in which the API is embodied, but the SSO of the API, becomes copyrightable. Indeed, harkening back to an earlier era, Judge O’Malley repeated the unfortunate dicta from the Apple v. Franklin case about compatibility being a “commercial and competitive objective” which is irrelevant to whether program ideas and expressions have merged.

The Ninth Circuit in the Sega v. Accolade case, as well as the Second Circuit in Computer Associates v. Altai, have rejected this hostility toward achieving software compatibility and toward reuse of the APIs in subsequent programs.

Although purporting to follow Ninth Circuit caselaw, Judge O’Malley in Oracle v. Google ignored some key aspects of the holding in Sega. Accolade reverse-engineered Sega programs in order to discern the SSO of the Sega interface so that it could adapt its videogames to run on the Sega platform. The principal reason that the Ninth Circuit upheld Accolade’s fair use defense as to copies made in the reverse engineering process was because “[i]f disassembly of copyrighted object code is per se an unfair use, the owner of the copyright gains a de facto monopoly over the functional aspects of his work—aspects that were expressly denied copyright protection by Congress,” citing § 102(b). To get the kind of protection Sega was seeking, the Ninth Circuit said it “must satisfy the more stringent standards imposed by the patent laws.”

Judge O’Malley in Oracle also ignored the Ninth Circuit rejection of Sega’s claim that Accolade infringed based on the literal copying of some Sega code insofar as that code was essential to enabling the Accolade program to run on the Sega platform. That Sega code might have been original in the sense of being creative when first written in source code form, but by making that code essential to interoperability, the expression in that program merged with its function, and hence Accolade’s reproduction of it was not an infringement.

The SSO of the Sega interface was almost certainly creative initially as well. Yet, once that interface was developed, it was a constraint on the design choices that Accolade and other software developers faced when trying to make videogames to run on Sega platforms. The Second Circuit similarly rejected Computer Associates’ claim that Altai had infringed the SSO of its program interface and suggested that patents might be a more suitable form of legal protection for many innovations embodied in software.

Under Sega and Altai, the SSO of APIs are not within the scope of copyright protection for computer programs. Subsequent cases—at least until the Federal Circuit decision in Oracle v. Google—have overwhelmingly endorsed this approach to compatibility issues in software cases.

Perhaps Judge O’Malley was worried that if she did not extend copyright protection to the Java APIs in Oracle v. Google, there would be too little intellectual property protection available to computer programs. After all, she was one of the Federal Circuit judges who would have upheld all of the patent claims for computer-implemented inventions in the CLS Bank v. Alice Corp. case that is now pending before the U.S. Supreme Court. She joined an opinion that warned that if courts struck down the claims in CLS Bank, this mean that hundreds of thousands of software and business method patents would be invalidated. Given the Supreme Court’s skepticism about the Federal Circuit’s rulings on patentable subject matter, there is reason to think that at least some software patents may indeed fall when the Court issues its opinion in Alice. Would such invalidations affect the scope of copyright protection for software?

In the most expansive interpretation of software copyright law since Whelan v. Jaslow, Judge O’Malley in Oracle v. Google endorsed dual protection for APIs from both copyright and patent law. This ignored an important statement from that court’s earlier ruling in Atari Games v. Nintendo that “patent and copyright laws protect distinct aspects of a computer program.” The Oracle opinion instead invoked the dicta from Mazer v. Stein that “[n]either the Copyright Statute nor any other says that because a thing is patentable it may not be copyrighted.”

While it may have been true that the statuette of a Balinese dancer in Mazer was eligible for both copyright as a sculpture and a design patent for an ornamental design of an article of manufacture (as a lamp base), nothing in that decision or any other has upheld utility patent and copyright protection in the same aspect of the same creation, and it seems unlikely that the Supreme Court would abrogate the longstanding tradition tracing back to Baker v. Selden that copyrights protects expression in works of authorship and patents protect utilitarian designs.

In “The Strange Odyssey of Software Interfaces as Intellectual Property,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1323818, I traced the tortuous evolution of the law in relation to the protection of software interfaces. At first, they were not treated as intellectual property at all. Firms published APIs so that others would make programs to run on their computing systems. As firms recognized that they could license interface information to generate revenues, APIs were protected as trade secrets. In the mid- to late 1980s, some argued that the “structure, sequence, and organization” (SSO) of APIs should be protected by copyright law, but by the early 1990s, courts decided they were unprotectable elements of programs, more suited to patent than to copyright protection. And so firms began patenting interface designs, as well as continuing to license them as trade secrets.

If Judge O’Malley’s opinion in the Oracle v. Google case is to be believed, APIs have migrated back into copyright’s realm big time. Unless overturned by the Supreme Court or repudiated or distinguished in subsequent cases, the Oracle decision may well reignite the software copyright wars that so many of us thought had died out after the Sega, Altai, and their progeny.

More on Claiming Clones: Products of Nature and Source Limitations

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Guest post by Dr. Jeffrey A. Lefstin, Professor of Law, University of California, Hastings College of Law

Jason’s excellent post on Roslin summarized the case and raised the question of whether the Federal Circuit paid insufficient attention to the inherent differences conveyed by the ‘clone’ limitation of the claims. In this post I address two other issues in Roslin:  the Federal Circuit’s interpretation of Ckakrabarty and Funk Brothers, and Roslin’s consistency with Federal Circuit precedent holding that structural or functional differences between natural and synthetic products must be defined in the claims.

Unaltered by the hand of man: Judge Dyk’s opinion in Roslin unfortunately perpetuates the view, now found in the PTO’s Myriad guidelines, that Chakrabarty requires a claimed invention to be “markedly different” from a natural product for patent-eligibility under § 101.  Myriad itself imposed no such requirement: the Court found BRCA cDNAs patent-eligible without determining that they were “markedly different” from natural sequences. And though Myriad reiterated the “markedly different” language from Chakrabarty, Chakrabarty’s discussion of ‘products of nature’ was entirely dictum. Only the question of whether living organisms were patent-eligible was before the Court in Chakrabarty; the ‘product of nature’ rejection in the case had not been sustained by the Patent Office Board of Appeals.

The Chakrabarty Court noted the claimed bacteria differed markedly from natural bacteria by way of distinguishing the case from Funk Brothers.[1] As Paul Cole’s recent post notes, the patentee had discovered that certain strains of bacteria could be mixed together without inhibiting their nitrogen-fixing capability.  Justice Douglas regarded this compatibility as the unpatentable discovery of a natural phenomenon;  the claims were unpatentable because the patentee’s application – a mixed inoculant – was “a simple step” once the underlying discovery was assumed away.

As I discuss in a recent article, Funk  was nonetheless very much a patent eligibility case. It reflects Douglas’s view – shared by Justice Stevens in Flook, and Justice Breyer in Mayo – that obvious applications of scientific discoveries or abstract ideas are not patent-eligible “inventions” within the meaning of the statute.

Whether or not we share that view, understanding it shows us that Funk was an ‘inventive application’ case, not a ‘product of nature’ case. Douglas made no reference to the ‘product of nature’ doctrine, nor to the recent cases embodying it.[2] Instead, Douglas emphasized the lack of change in the bacteria to establish that the mixed inoculant was obvious (once the patentee’s discovery was assumed away). Under the old doctrine of ‘aggregation,’ it was not invention to combine old elements where the elements were unchanged, and no new function arose from their combination. It was therefore not inventive for the patentee in Funk to combine old bacteria without changing their structure or function.

But just as many combinations of old elements become patentable when a new function emerges, the mixed inoculants of Funk would have been patentable — even if the bacteria remained unchanged — had the mixed inoculant acquired new functions not performed by its constituent bacteria. If Funk Brothers instead stood for the proposition that a combination is unpatentable if its constituents are ‘unaltered by the hand of man,’ then a very large number of inventions become patent-ineligible.  An artificial structure like an arch, formed by piling stones atop each other, would be ineligible unless the stones themselves were altered by the hand of man.  Even as ardent a skeptic of the patent system as Justice Douglas would not have gone that far.

Source limitations and expressly claimed distinctions: The second difficulty with Roslin is its demand that the ‘marked differences’ between the natural organism and the invention must be expressly claimed. As Jason discussed, the applicant in Roslin argued that cloned animals differ from their natural counterparts at least in having mitochondrial DNA derived from the egg donor, rather than the animal which donated the somatic nucleus. The Federal Circuit rejected such arguments because neither the difference in mitochondrial DNA, nor any functional consequence of that difference, was recited in the claims.

However, the same argument, albeit in the context of § 102, was before the Federal Circuit in the extensive litigation over Amgen’s recombinant erythropoietin (EPO) patents. Much like Roslin, Amgen had claims to a ‘copy’ of natural product: in that case EPO produced by mammalian cells in culture. While Amgen’s synthetic EPO differed in glycosylation from the natural product, several of the claims in the case recited only the non-natural source of the EPO, not the structural differences. The Federal Circuit recognized that the novelty of the synthetic EPO claims depended on whether synthetic EPO differed from natural EPO.  Yet the court found novelty based on the unclaimed structural and functional differences between natural and  synthetic EPO, which were demonstrated in part by the specification and prosecution history, and in part by testimony at trial. Amgen Inc. v. F. Hoffman-LaRoche Ltd, 580 F.3d 1340, 1370 (Fed. Cir. 2009). In effect, the court held that the structural and functional differences characterizing the synthetic product were inherent in the source limitations. (The court did not inquire whether all synthetic EPO molecules falling within the scope of the claims would display similar differences in glycosylation.)

Thus under Amgen, a source limitation alone (such as ‘non-naturally occurring’ or ‘purified from mammalian cells grown in culture’) may establish novelty of a product. Assuming the ‘clone’ limitation in Roslin to require derivation from nuclear transfer, then it serves as a source limitation as well. Since Roslin cannot overrule Amgen, we seem to be in a regime where differences between natural and synthetic products may be unclaimed yet confer novelty under § 102, but must be explicitly claimed to establish ‘marked difference’ under § 101. Of course, if Roslin is correct, that doctrinal inconsistency is less significant than the consequence that Amgen-type claims – and perhaps a wider category of product-by-process claims involving natural products – are now ineligible under § 101.


[1] In Chakrabarty, the Commissioner never suggested that the claimed bacteria were unpatentable under Funk, nor even raised the case.  Rather, Chakrabarty argued that if living organisms were not patent-eligible, the Court would have said so in Funk.

[2] In particular, the General Electric and Marden cases denying patentability to purified tungsten, uranium, and vanadium. The defendant had urged General Electric upon the Funk court in its brief.

Funk Brothers v Kalo – Eligibility or Unobviousness?

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Guest post by Paul Cole, European Patent Attorney, Partner, Lucas & Co; Visiting Professor, Bournemouth University, UK.

New patent eligibility guidance issued by the USPTO (Andrew Hirshfeld, 4th March) will be the subject of a discussion forum this Friday 9th May.

Since the Kalo case, 333 U.S. 127 (1948) has been discussed in recent Supreme Court opinions including Chakrabarty, Myriad, and Mayo and is proposed to form the subject of an example forming part of that guidance, reflection on the true legal basis of the opinion is timely. Despite dicta in Chakrabarty and Myriad it is arguable that when viewed in its timeframe Funk concerned unobviousness not eligibility. If that view is correct, then the Kalo fact pattern should not be used as an eligibility example under current law.

The Kalo appeal was from a lengthy and careful opinion by Judge Walter C. Lindley in the Court of Appeals for the 7th circuit, 161 F.2d 981 (1947). At first instance the claimed subject matter which related to a composite culture of mutually non-inhibitive bacteria for inoculation of leguminous plants was held to be a product of nature and hence not patent-eligible. Judge Lindley reversed this finding in the following terms:

The mistake of the District Court, we think, lay in its conclusion that this did not amount to patentable invention within the meaning of the statute. Though the court recognized the value of Bond’s work, it thought that he had merely discovered a law of nature, whereas in fact the evidence is clear that what he discovered was that certain existing bacteria do not possess the mutually inhibitive characteristics which had previously prevented a successful commercial composite inoculant and that those uninhibitive species may be successfully combined. It was this contribution of noninhibitive strains which successfully combine that brought about a new patentable composition. This was application of scientific knowledge to things existing in nature and the utilization of them in a desirable composite product which had not been previously achieved but which he did achieve and of which the public now has the benefit.

We think this is clearly within the decisive definitions of patentable invention… Bond taught the method by which the composite is to be made and claims the product composed by that method, namely, a composite inoculant, comprised of different species of bacteria in sufficient numbers of each species. The noninhibitive property of bacteria was not previously known and when Bond discovered it and taught a successful composition of noninhibitive strains in combination of elements in one inoculant operating successfully on several different groups of legumes, he did much more than discover a law of nature. He made a new and different composition, one contributing utility and economy to the manufacture and distribution of commercial inoculants.”

A reader of Lindley is bound to wonder why such a conventional and straightforward opinion should have been selected for certiorari. An explanation of the significance of new effect in established patent law can be found as long ago as 1822 in Evans v Eaton 20 U.S. 356 (1822) and its evidential nature was explained by Justice Bradley in Webster Loom v Higgins
105 US 580 (1881), subsequently approved e.g. by Justice Brown in Carnegie Steel v Cambria Iron Co 185 US 402 (1902):

It may be laid down as a general rule, though perhaps not an invariable one, that if a new combination and arrangement of known elements produce a new and beneficial result, never attained before, it is evidence of invention.

The majority opinion of the Supreme Court Kalo decision was authored by Justice William O. Douglas.

His starting position was that a law of nature cannot be monopolised and he recognised the existence of the relevant non-inhibitory bacterial strains as an example of such a law. He went on to hold that invention must come from the application of the law of nature to a new and useful end and that the aggregation of select strains of the several species into one product was an application of the newly discovered natural principle. He acknowledged that there was advantage in the combination because the farmer need not buy six different packages for six different crops. He could buy one package and use it for any or all of his crops. The packages of mixed inoculants held advantages for dealers and manufacturers by reducing inventory problems, and the claimed subject-matter provided an important commercial advance.

Against this strong evidential background what was the basis for his reversal? A key to his reasoning may be found in his earlier opinion in Cuno Engineering Corp. v. Automatic Devices Corp., 314 U.S. 84 (1941) that (as the law then stood) novelty and utility were necessary but not sufficient requirements for patentability. In addition the claimed subject-matter had to reach the level of inventive genius that the Constitution authorized Congress to reward.

Several reasons supported the conclusion that the Kalo invention did not meet the standard of inventive genius. Each of the species of root nodule bacteria contained in the package infected the same group of leguminous plants that it always infected. No species acquired a different use. The combination of species produced no new bacteria, no change in the six species of bacteria, and no enlargement of the range of their utility. Each species had the same effect it always had. The bacteria performed in their natural way. Their use in combination did not improve in any way their natural function. They served the ends nature originally provided, and acted quite independently of any effort of the patentee. The claimed inoculant was not the product of invention unless invention borrowed from the discovery of the natural principle itself. It was hardly more than an advance in the packaging of the inoculants. Packaging was a simple step once the discovery had been made and all that remained were the advantages of the mixed inoculants themselves which were not enough.

The Funk opinion, amongst others, was relied on in Chakrabarty for the proposition that laws of nature, physical phenomena, and abstract ideas are not patent-eligible. As to the patentability of the Chakrabarty microorganism it was distinguished on the facts.

In Myriad Justice Thomas treated Funk as a patent-eligibility case, observing that the Bond composition fell squarely within the law of nature exception because the patent holder did not alter the bacteria in any way. Arguably such a position is inconsistent with the finding of Justice Douglas that the claimed product was an application of the principle discovered by Bond and hence implicitly patent-eligible. Classification of Funk as an unobviousness opinion accords with the reasoning of Justice Douglas whereas classification as an eligibility opinion is difficult to reconcile with his reasoning, especially against the background of his explicit reference to Cuno.

The USPTO example takes the position that the bacteria in Funk were not changed in any way, but that position is factually untrue. The naturally occurring bacteria have been the subject of a selection process to identify those strains that do not interfere, and the non-interfering strains have been cultivated and mixed. The claimed composition does not occur in nature, is produced by human intervention and has new utility. It is far from clear that the decision that was reached in 1948 would have been reached under the law as it exists post-1952 since the “flash of genius” test was rejected by Congress in favour of § 103.

For the above reasons it is submitted that the wiser course would be to delete Example D from the USPTO guidance.

Guest Post by Prof. Sichelman: Stop Bashing Academics: Why Mark Lemley, Peter Menell, and Rob Merges are Highly Qualified to Teach and Write about Patent Law

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Guest Post by Prof. Ted Sichelman, University of San Diego, School of Law

Recently, Hal Wegner has been circulating and commenting upon the qualifications of patent law professors. For example, he lists whether patent law professors at the Top Ten IP programs as ranked by US News & World Report are licensed to practice at the USPTO, have an “understanding” of international/comparative patent law, or clerked at the Federal Circuit (see below). According to Wegner, these “credentials” are “particularly” and “uniquely” valuable (in some cases, “essential”) for professors to make “optimum” patent policy reform proposals, especially those concerning PTO practice and international harmonization.

(To provide some background, I provided Wegner a list of names of all professors in the U.S. who currently teach and write about patent law at US News ranked and unranked IP programs, with the understanding that he would circulate the list to his readers. After I sent Wegner my list, without my input, he annotated it (along with other names) with various credentials and provided commentary and alternative lists, such as the one reproduced below. Because I believe Wegner’s analysis is flawed—and given my initial participation—I feel personally obligated to respond.)

NaplesNotably absent on Wegner’s list above are any professors from Stanford, Berkeley, and George Washington (GW), the top ranked IP programs in the nation. (The same holds true for many other schools, both in and outside of the top 10. I focus on the top three schools to underscore the problems with Wegner’s approach.) Rather than effectively denigrate these programs, Wegner should have recognized the transformative role that these schools have played historically (for GW) and more recently (for all three schools) in elevating patent law to a prominent place in the academy and developing unparalleled educational opportunities for future patent professionals and scholars. (more…)

Patenting a Data Structure?

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By Dennis Crouch

Digitech v. Electronics v. Imaging (Fed. Cir. 2014)

Today, the Federal Circuit held oral arguments in this Section 101 case involving Digitech’s U.S. Patent No 6,128,415 that claims a “device profile” and a “method of generating a device profile.” The invention is basically the idea of tagging images with particular information about the camera and its color/spatial image qualities. Asserted claims:

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:

first data for describing a device dependent transformation of color information content of the image to a device independent color space; and

second data for describing a device dependent transformation of spatial information content of the image in said device independent color space.

10. A method of generating a device profile that describes properties of a device in a digital image reproduction system for capturing, transforming or rendering an image, said method comprising:

generating first data for describing a device dependent transformation of color information content of the image to a device independent color space through use of measured chromatic stimuli and device response characteristic functions;

generating second data for describing a device dependent transformation of spatial information content of the image in said device independent color space through use of spatial stimuli and device response characteristic functions; and

combining said first and second data into the device profile.

The district court found that the “device profile” was merely a bit of data that did not fit within the literal requirements of the statute that an eligible invention must be “a process, machine, manufacture, or composition of matter.” The district court also concluded that the method claim encompassed an abstract idea.

Mark Lemley argued on behalf of the accused infringers and the court seemed agree with many of his arguments – especially with the notion that a claim to a data structure (claim 1) is not itself patentable. The method step involved more questioning and Judge Moore rightly challenged Lemley’s argument that “A method of generating an unpatentable idea is itself unpatentable.” Later, Lemley pulled-back from that statement somewhat and instead more particularly argued that mere generation and transformation of data should be unpatentable either as not-a-process or else unduly abstract.

Two potentially interesting questions for the case: (1) how to treat expert testimony stating that claims require technologically sophisticated computer and (2) whether the concrete and practical purposes of the invention needs to be recited in the claims.

This case may well be impacted by CLS Bank, but I would suspect the only impact will be on the language that the court uses to affirm. The politics of the outcome may be interesting. Although I would not be surprised with an affirmance without opinion, Judge Moore may want to hold this case until after CLS Bank in order to make the first post-SCOTUS comment on the issue. (Judges Moore, Reyna and Hughes were on the panel).

The patent was originally owned by Polaroid who assigned rights in 2010 to the British Virgin Islands entity known as Mitcham Global Investments – seemingly as part of the bankruptcy proceedings. Then, in 2012, rights were transferred to Digitech which is an Acacia company. The USPTO records also show a security interest held by a Saudi investment company.

Listen to oral arguments: http://www.cafc.uscourts.gov/oral-argument-recordings/all/digitech.html

2d Edition of Ethical Issues in Patent Litigation now available!

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Woo hoo!  You have no idea how much work it is to create something like this.  Very proud of the second edition and a huge thanks to the good folks at Oxford University Press, and then LexisNexis, for making it happen.  Buy (many copies of) it here.  The abstract:

Patent Ethics: Litigation (2014 Edition) by David Hricik, is a unique guide to the ethical issues arising in the course of the patent litigation process. By providing relevant rules and case law, it allows practitioners to identify ethical problems before they arise and to address them most effectively when they do. This treatise and its companion volume (Patent Ethics: Prosecution, by David Hricik and Mercedes Meyer) are the first of its kind to combine rules and patent-specific cases with author commentary, which distills the author’s experience and expertise into effective practice strategies. The 2014 Edition has been completely revised and includes discussion of ethical issues arising under new AIA post-grant proceedings, including prosecution bars. It also includes new chapters on ethical issues in alternative fee agreements and in settlement agreements, and expanded chapters on selection, compensation, and use of expert witnesses.

Unpatentable: See Bilski, Mayo, Flook, and Benson

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By Dennis Crouch

The question of patentable subject matter is nominally grounded in the statute 35 U.S.C. § 101. That statute offers patent rights to anyone who “invents or discovers any new and useful process, machine, manufacture, or composition of matter.” However, very few section 101 cases actually refer to the statutory text. Rather, the focus is on the Supreme interpretative stance that the statute also prohibits patents on abstract ideas, products of nature, and natural phenomena. It is the definition of Abstract Idea that is at stake in Alice Corporation Pty. Ltd. v. CLS Bank Int’l. [TRANSCRIPT OF ORAL ARGUMENTS]

Alice Corp.’s patent covers a computerized escrow system and method that CLS Bank allegedly uses in the process of settling trillions of dollars in transactions each week. After Alice Corp., sued CLS Bank for infringement, CLS responsively argued that the patent claims are invalid as impermissibly encompassing an abstract idea.

In the background, the Supreme Court has decided three recent Section 101 cases: Bilski, Mayo, and Myriad. Arguing for CLS Bank, Mark Perry argued that these two cases determine the outcome here.

MR. PERRY: Bilski holds that a fundamental economic principle is an abstract idea and Mayo holds that running such a principle on a computer is, quote, “not a patentable application of that principle.” Those two propositions are sufficient to dispose of this case. If Bilski and Mayo stand, Alice’s patents fail.

Rather, to be patent eligible, CLS Bank argues, the computer implementation must offer a “technological solution.”

MR. PERRY: We know from Benson, the Court’s seminal computer implementation case, that if you can do it by head and hand, then the computer doesn’t add anything inventive within the meaning of the 101 exception. That is the holding of Benson. And the Court reiterated that in Mayo. Flook said exactly the same thing. If you can do it with pencil and paper, then the computer is not offering anything that the patent laws are or should be concerned with.

It is only where the method will not work without a computer, which is not these claims, and where the computer itself is doing something that the patent law is willing to protect.

Justice Ginsburg asked why – if it is such a simple case – why the Federal Circuit struggled so:

JUSTICE GINSBURG: The Federal Circuit in this case split in many ways, and it had our decisions to deal with. You said, given Bilski and Mayo, this is an easy case. What is the instruction that escaped a good number of judges on the Federal Circuit? How would you state the rule?

MR. PERRY: Your Honor, I think there’s a significant element to the Federal Circuit that disagrees with Mayo and has been resistant in applying it. Chief Judge former Chief Judge Michel filed a brief in this Court essentially saying Mayo is a life sciences case, You should limit it to that because if you apply it to everything else, then these patents are no good. Mayo we submit is a technology-neutral, Industry-neutral, exception-neutral framework that can be used to answer all of these questions.

We should note here, that, although CLS Bank sees the Mayo test as exception-neutral, the respondent was not asked to explain why the test was not applied the most recent Section 101 case of Myriad.

The reference to Mayo/Flook is important – with the notion that to be patent eligible there must be a technological innovation rather than discovery of an abstract idea followed by routine technological implementation of that idea. The result of the Mayo/Flook approach is that patent eligibility is temporally dependent. In particular, innovations that were once patent eligible will later be not eligible once the implementing-technology becomes well known. Mr. Perry explains:

JUSTICE SOTOMAYOR: How about email and just word processing programs?

MR. PERRY: At a point in time in the past, I think both of those would have been technological advances that were patentable. . . . Because they would have provided a technological solution to a then unmet problem. Today, reciting, and do it on a word processor is no different than and do it on a typewriter or and do it on a calculator.

The inventive contribution component, which uses specifically the language of conventional and routine and well understood, will evolve with technology. That’s why it’s different than the abstract idea component.

Mr. Phillips responds somewhat weakly that there must be “significant limitations on the extent to which novelty has to be built into 101.

There is some potential that the decision will be rather small – deciding that an escrow-settlement method is an abstract idea and that the routine addition of computers to facilitate the method does not alter that original conclusion. This result would essentially parallel the results of Bilski v. Kappos and would potentially add nothing of substance to the law. Many of the questions followed this line of thinking and Alice’s attorney, Carter Phillips, repeatedly worked to explain how the technological aspect of the invention is much more complex that has been commonly caricaturized. CLS Bank argued the opposite.

JUSTICE GINSBURG: On the abstract idea, you know that the Bilski case held that hedging qualified as an abstract idea. So how is intermediate settlement a less abstract than hedging?

MR. PHILLIPS: … What we claim is a very specific way of dealing with a problem that came into being in the early 1970s of how to try to eliminate the risk of nonsettlement in these very massive multiparty problems in which you need to deal with difficulties that exist at different time zones simultaneously and to do it with a computer so that you not only take them on chronologically, deal with them sequentially, based on the kind software analysis that the patent specifically describes by function.

And it goes even further than that, and does something that no escrow agent and no … settler that I know of. It actually blocks specific transactions that, in the shadow account, would violate the terms of the settlement that would ultimately be implemented.

. . . [This is an invention that] you cannot, absolutely cannot [implement this system without a computer], because it is so complex and so many interrelated parts.

. . . I believe that if you analyze the claims and you don’t caricature them and you don’t strip them out of the limitations that are embedded in there, this is not some kind of an abstract concept. This is not some kind it’s not an abstract idea..

JUSTICE KAGAN: There is something that you’ve patented that has that is not just simple use a third party to do a settlement. . . . And what is that, putting the computer aside?

MR. PHILLIPS: It is well and again, it’s difficult to do that because you absolutely need the computer in order to implement this. But the key to the invention is the notion of being able simultaneously, dealing with it on a chronological basis to stop transactions that will otherwise interfere with the ability to settle on time and under the appropriate circumstances. And the only way you can do that in a realtime basis when you’re dealing with a global economy is to use a computer. It is necessary to the efficacy of this. So in that sense, I can’t I can’t disaggregate it the way in some sense you’re suggesting. It seems to me it’s bound up with in it’s bounds up with the whole notion of is this an abstract concept. . . .

MR. PERRY: On the abstract idea, Justice Ginsburg, you asked Mr. Phillips what’s the difference between hedging and this claim. There is no difference. This is hedging. It is hedging against credit default rather than price fluctuation, but it is simply hedging. . . . Mr. Phillips suggests, well, we have multilateral transactions, global things, chronological, time zones and so forth. None of those are claimed, Your Honor. Those are all recited in specification. The claims read on a single transaction involving two parties.

JUSTICE SCALIA: Why isn’t it why isn’t doing it through a computer not enough? I mean, was the cotton gin not an invention because it just means you’re doing through a machine what people used to do by hand? It’s not an invention. It’s the same old, same old. Why is a computer any different in that respect?

MR. PHILLIPS: At one level I agree with you completely. There is no difference between them.

This Court has, however, said on more than a few occasions, albeit in dicta, that coming up with an idea and then say, use a computer, is not sufficient. And what I’m trying to suggest to you is we don’t fall within that dicta. Now, if you don’t accept the dicta and you say use a computer is fine, then I think we’re done.

MR. PERRY: Of course, a patent that describes sufficiently how a computer does a new and useful thing, whether it’s data compression or any other technological solution to a business problem, a social problem, or a technological problem, would be within the realm of the of the patent laws. That is what the patent laws have always been for. . . . Those algorithms, those inventions are undoubtedly technological. And if they are used in a trading platform or a hedging system or something else, that wouldn’t disable them [as patent eligible].

The bigger version of the decision would more particularly address software patenting. Here, Alice suggests that the case is very much about the ongoing viability of software patents:

JUSTICE KENNEDY: You understand the government to say no software patents.

MR. PHILLIPS: That’s the way I interpret the government’s the government’s brief.

However, both CLS Bank and the Government argue otherwise. Mr. Perry states “this will not affect software patents. . . . [Rather,] we are talking about a group of patents … that’s way out at the tail end of the distribution.” Likewise, the Solicitor General Verrilli argued that “it’s just not correct to say that our approach would make software patenting ineligible. [In our proposed test] any software patent that improves the functioning of the computer technology is eligible. Any software patent that improves that is used to improve another technology is eligible.” In thinking about the consequences for patentees who already hold patents that may become ineligible, Mr. Perry suggested that their problems are minimal because “the patent holder would have the opportunity to institute a reexamination proceeding or some sort of administration process to address that issue.”

Justice Breyer indicated the importance of creating a rule that works:

JUSTICE BREYER: There is a risk that you will take business in the United States or large segments and instead of having competition on price, service and better production methods, we’ll have competition on who has the best patent lawyer. . . . And if you go the other way and say never, then what you do is you rule out real inventions with computers. . . . [The amicus briefs provide] a number of suggestions as to how to go between Scylla and Charybdis. . . . I need to know what in your opinion is the best way of sailing between these two serious arms.

MR. PHILLIPS: Well, Justice Breyer, I guess I would suggest to you that you might want to deal with the problem you know as opposed to the problems you don’t know at this stage. I mean, we have had business method patents and software patents in existence for well over a decade and they’re obviously quite significant in number. And and we know what the system is we have. And Congress looked at that system, right, and didn’t say no to business methods patents, didn’t say no to software patents, instead said the solution to this problem is to get it out of the judicial process and create an administrative process, but leave the substantive standards intact.

So my suggestion to you would be follow that same advice, a liberal interpretation of 101 and not a caricature of the claims, analyze the claims as written, and therefore say that the solution is 102 and 103 and use the administrative process.

. . . . So on the one hand, you’ve got a problem that it seems to me Congress to some extent has said is okay and we’ve got a solution and that solution’s playing through. On the other hand, if this Court were to say much more categorically either that there’s no such thing as business method patents or adopt the Solicitor General’s interpretation, which is to say that there cannot be software unless the software somehow actually improves the computer, as opposed to software improving every other device or any other mechanism that might be out there.

What we know is that this would inherently declare and in one fell swoop hundreds of thousands of patents invalid, and the consequences of that it seems to me are utterly unknowable. And before the Court goes down that path, I would think it would think long and hard about whether isn’t that a judgment that Congress ought to make. And It seems to me in that sense you’re essentially where the Court was in Chakrabarty, where everybody was saying you’ve got to act in one way or the other or the world comes to an end, and the courts have said, we’ll apply 101 directly. . . .

MR. PERRY: That path between Scylla and Charybdis was charted in Bilski and Mayo. Bilski holds that a fundamental economic principle is an abstract idea and Mayo holds that running such a principle on a computer is, quote, “not a patentable application of that principle.” Those two propositions are sufficient to dispose of this case. If Bilski and Mayo stand, Alice’s patents fail.

The Government test is a bit difficult to fully discern and even General Verrili had some trouble explaining:

JUSTICE BREYER: I think you say a computer improvement that, in fact, leads to an improvement in harvesting cotton is an improvement through a computer of technology, so it qualifies. But then I think you were going to say, or I got this also from the brief, a computer improvement that leads to an improvement in the methods of selling bonds over the telephone is not an improvement in technology reached by the computer. Am I right about the distinction you’re making?

GENERAL VERRILLI: I don’t think there’s a yes or no answer to that question. [But,] that is generally the line we’re drawing.

JUSTICE GINSBURG: I have a question about how do you identify an abstract concept. A natural phenomenon, a mathematical formula, those are easy to identify, but there has been some confusion on what qualifies as an abstract concept.

GENERAL VERRILLI: We would define abstract an abstract concept as a claim that is not directed to a concrete innovation in technology, science, or the industrial arts. So it’s the it’s abstract in the sense that it is not a concrete innovation in the traditional realm of patent law.

Although seemingly not relevant to the present case, Alice took some pains to explain why their patent includes no software code:

MR. PHILLIPS: what we did here is what the Patent and Trademark Office encourages us to do and encourages all software patent writers to do, which is to identify the functions that you want to be provided for with the software and leave it then to the software writers, who I gather are, you know, quite capable of converting these functions into very specific code. . . .

It doesn’t actually, obviously, put in the code, but that’s what the PTO says don’t do. Don’t put in the code because nobody understands code, so but put in the functions, and we know and we know that someone skilled in the art will be able to put in the code. And if they aren’t, if they can’t do that, then it’s not enabled and that’s a 112 problem.

This discussion of functionality may foreshadow the upcoming Nautilus case. On that point, Justice Sotomayor asked whether Alice is “trying to revive the patenting of a function?” Mr. Phillips did not directly respond.

In the end, Alice Corp’s case of technological innovation is slight. Mr. Phillips agreed with Justice Kennedy that it would be “fairly easy” for a “second year college class in engineering” to draft the claimed software – giving the court additional fodder for rejecting this case merely with a string citation to Bilski, Flook, and Benson.

Alice Corporation Pty. Ltd. v. CLS Bank International

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By Dennis Crouch

Today, the Supreme Court will hear oral arguments in the patent subject matter eligibility case of Alice Corporation Pty. Ltd. v. CLS Bank International. Alice Corp.’s patent covers a computerized escrow system and method that CLS Bank allegedly uses in the process of settling trillions of dollars in transactions each week.

Question presented

Whether claims to computer-implemented inventions-including claims to systems and machines, processes, and items of manufacture-are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court?

As petitioner, the patentee (Alice Corp) will argue first. Respondent’s time will be split between CLS Bank and the US Government who has filed an amicus brief highlighting a misguided argument that “the abstract idea exception is patent law’s sole mechanism for excluding claims directed to manipulation of non-technological concepts and relationships.”

A transcript should be available in the afternoon.

See: Dennis Crouch, Software Patent Eligibility: Alice Corp v. CLS Bank on the Briefs (March 13, 2014).

= = = = =

The Supreme Court is working through a number of patent related decisions this term:

  • Alice Corporation Pty. Ltd. v. CLS Bank International (subject matter eligibility of computer implemented inventions and software). Oral arguments March 31, 2014 with decision expected June 2014.
  • Teva v. Sandoz (whether a district court’s finding of fact in support of claim construction should be reviewed de novo as required by the Federal Circuit). Petition granted March 31, 2014.
  • Lexmark Int’l v. Static Control (allegations of patent infringement against non-competitor can create Lanham Act claim). Decided March 25, 2014.
  • Octane Fitness v. Icon Health & Fitness (proper standard for determining an “exceptional case” in the attorney fee shifting context of 35 U.S.C. §285). Oral arguments held February 26, 2014 with decision expected by June 2014.
  • Highmark v. Allcare Health Mgmt. (standard of appellate review for fee shifting decisions). Oral arguments held February 26, 2014 with decision expected by June 2014.
  • Nautilus v. Biosig (standard for determining when a patent claim is invalid as indefinite). Oral arguments scheduled for April 28, 2014 with decision expected in June 2014.
  • Limelight v. Akamai (determining whether inducement should be severely narrowed by the no-joint-infringement doctrine). Oral arguments scheduled for April 30, 2014 with decision expected in June 2014.
  • Medtronic v. Mirowski (holding that patentee has the burden of proving infringement even in declaratory judgment actions by a licensee in good standing). Decided January 22, 2014.
  • Petrella v. MGM (considering the laches doctrine in the copyright context). Argued January 21, 2014, awaiting decision.
  • ABC, Inc., v. Aereo, Inc (when does an internet transmission count as a “public performance” under the copyright laws?). Argument scheduled for April 22, 2014.
  • POM Wonderful v. Coca-Cola (who has standing to challenge a food or beverage label as misleading or false under the Lanham Act). Argument scheduled for April 21, 2014.