Patentable Subject Matter and the Supreme Court: What*s the Matter

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How Prometheus Has Upended Patent Eligiblity:
An Anatomy of CLS Bank v. Alice Corp.
By
Bruce D. Sunstein1
Although the decision in CLS Bank International v. Alice Corporation Pty. Ltd.,
717 F.3d 1269 (Fed. Cir. 2013)(en banc), by an equally divided court2, has no
precedential effect3, in fact the decision is a landmark, because it has introduced a pattern
of uncertainty that will not easily be removed from the jurisprudence of patent eligibility.
We will look first at the opinions handed down in this case. We will look next at the roots
of the discord in this case, and then we will examine a pair of decisions that exemplify
the uncertainty heralded by CLS Bank v. Alice Corp. We conclude with a proposal for
legislation the enactment of which would restore criteria for patent eligibility to those
prevailing just after the decision by the Federal Circuit in Street Bank & Trust Co. v.
Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998).
The case of CLS Bank v. Alice Corp. produced, in addition to the single paragraph
per curiam announcement of the decision, opinions by Judge Lourie (for himself and
Judges Dyk, Prost, Reyna, and Wallach), Judge Rader (for himself and Judge Moore, and
in some aspects, for Judges Linn and O’Malley), Judge Moore (for herself and Judge
Rader, and, in some aspects, for Judges Linn and O’Malley), Judges Linn and O’Malley,
Judge Newman, and Judge Rader (again).
The core question addressed by CLS Bank v. Alice Corp. is the eligibility of a
computer-related invention for a patent. We begin first with the opinion of Judge Lourie.
As characterized by Judge Lourie, “the patents relate to a computerized trading platform
used for conducting financial transactions in which a third party settles obligations
between a first and a second party so as to eliminate ‘counterparty’ or ‘settlement’ risk.”4
The “settlement” risk is the risk that the counterparty, on the other side of the transaction,
will fail to perform and thus deprive a party of the benefit of the bargain in the
transaction.5 “As disclosed in Alice's patents, a trusted third party can be used to verify
each party's ability to perform before actually exchanging either of the parties' agreedupon obligations.”6
Copyright © 2013 Sunstein Kann Murphy & Timbers LLP. The author’s e-mail address is
[email protected] Additional contact information is at his firm’s web site,
www.sunsteinlaw.com.
2
CLS Bank International v. Alice Corporation Pty. Ltd., 717 F.3d 1269, 1273 (Fed. Cir. 2013)(en banc)
(one-paragraph per curiam decision).
3
“[N]othing said today beyond our judgment has the weight of precedent.” CLS Bank v. Alice Corp., 717
F.3d 1269 at 1291 (opinion of Rader, J.).
4
CLS Bank v. Alice Corp., 717 F.3d 1269 at 1274.
5
Id.
6
Id.
1
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In evaluating patent eligibility, Judge Lourie posits an “integrated” approach to 35
U.S.C. § 101.7 “The first question is whether the claimed invention fits within one of the
four statutory classes set out in § 101. Assuming that condition is met, the analysis turns
to the judicial exceptions to subject-matter eligibility.”8 Next one determines “whether
the claim raises § 101 abstractness concerns”.9 “Does the claim pose any risk of
preempting an abstract idea? In most cases, the answer plainly will be no.”10 If, however,
a patent eligibility question is deemed to be posed, “it is important at the outset to
identify and define whatever fundamental concept appears wrapped up in the claim so
that the subsequent analytical steps can proceed on a consistent footing.”11 “With the
pertinent abstract idea identified, the balance of the claim can be evaluated to determine
whether it contains additional substantive limitations that narrow, confine, or otherwise
tie down the claim so that, in practical terms, it does not cover the full abstract idea
itself."12 In that respect, the requirement of additional substantive limitations, according
to Judge Lourie, corresponds to what the Supreme Court has called the “inventive
concept”, namely “a genuine human contribution to the claimed subject matter.”13
According to Judge Lourie, an abstract idea cannot be invented but only discovered, and
the “inventive concept” must be “a product of human ingenuity.”14 Moreover,
“[l]imitations that represent a human contribution but are merely tangential, routine, wellunderstood, or conventional, or in practice fail to narrow the claim relative to the
fundamental principle therein, cannot confer patent eligibility.”15
After articulating this form of analysis for patent eligibility, Judge Lourie turns to
the patent claims. Three types of patent claims were presented and discussed: method
claims, storage medium claims, and system claims. As a representative method claim,
Judge Lourie discussed claim 33 of United States patent 5,970,479, which reads as
follows:
33. A method of exchanging obligations as between parties, each
party holding a credit record and a debit record with an exchange
institution, the credit records and debit records for exchange of
predetermined obligations, the method comprising the steps of:
7
717 F.3d at 1280.
717 F.3d at 1282.
9
id.
10
id.
11
Id.
12
Id.
13
717 F.3d at 1283, citing Mayo v. Prometheus, 132 S.Ct. 1289 at 1294 (2012)(which we discuss below)
(in turn citing Parker v. Flook, 437 U.S. 584 at 594 (1978).
14
Id., citing Diamond v. Chakrabarty, 447 U.S. 303 at 309 (1980).
15
717 F.3d at 1283. In attempting to provide clarity greater than provided by the Supreme Court in the
Mayo v. Prometheus decision, 132 S.Ct. 1289, 1298 (2012) from which he has inferred the test, Judge
Lourie argues that “We do not therefore understand that language to be confused with novelty or
nonobviousness analyses, which consider whether particular steps or physical components together
constitute a new or nonobvious invention. Analyzing patent eligibility, in contrast, considers whether steps
combined with a natural law or abstract idea are so insignificant, conventional, or routine as to yield a
claim that effectively covers the natural law or abstract idea itself.” 717 F.3d at 1284.
8
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(a) creating a shadow credit record and a shadow debit record for
each stakeholder party to be held independently by a supervisory
institution from the exchange institutions;
(b) obtaining from each exchange institution a start-of-day balance
for each shadow credit record and shadow debit record;
(c) for every transaction resulting in an exchange obligation, the
supervisory institution adjusting each respective party's shadow credit
record or shadow debit record, allowing only these transactions that do not
result in in the value of the shadow debit record being less than the value
of the shadow credit record at any time, each said adjustment taking place
in chronological order; and
(d) at the end-of-day, the supervisory institution instructing ones of
the exchange institutions to exchange credits or debits to the credit record
and debit record of the respective parties in accordance with the
adjustments of the said permitted transactions, the credits and debits being
irrevocable, time invariant obligations placed on the exchange institutions.
Claim 33 is notable for failing to recite explicitly the presence of a computer or
computer component. In the District Court, however, “the parties had stipulated that
Alice's claims should all be interpreted to require a computer including at least ‘a
processor and memory.’”16
After deciding that claim 33 is directed to a “process” in accordance with section
101, Judge Lourie concludes that “[t]he methods claimed here draw on the
abstract idea of reducing settlement risk by effecting trades through a third-party
intermediary (here, the supervisory institution) empowered to verify that both parties can
fulfill their obligations before allowing the exchange—i.e., a form of escrow.”17
According to Judge Lourie, “Standing alone, that abstract idea is not patent-eligible
subject matter.”18 The question, then, in the mind of Judge Lourie, is whether the claim
adds “significantly more” than is in the abstract idea.19
While recognizing that the parties have conceded that the claimed method is
carried out using a computer, Judge Lourie concludes that the claim fails to provide
“significantly more” than is in the abstract idea:
At its most basic, a computer is just a calculator capable of performing
mental steps faster than a human could. Unless the claims require a
computer to perform operations that are not merely accelerated
calculations, a computer does not itself confer patent eligibility. In short,
the requirement for computer participation in these claims fails to supply
an “inventive concept” that represents a nontrivial, nonconventional
human contribution or materially narrows the claims relative to the
abstract idea they embrace.20
16
Id.
717 F.3d at 1286.
18
Id.
19
Id.
20
Id.
17
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Consequently, the method claims fell to recite subject matter eligible for a patent.21
According to Judge Lourie, the method claims here are similar to those examined in
Bilski v. Kappos, 561 U.S. ––––, 130 S.Ct. 3218, 3231 (2010), and “adding generic
computer functions to facilitate performance provides no substantial limitation and
therefore is not ‘enough’ to satisfy § 101. As in Bilski, upholding Alice's claims to
methods of financial intermediation “would pre-empt use of this approach in all fields,
and would effectively grant a monopoly over an abstract idea.”22
Next, Judge Lourie turned to the storage medium claims. Specifically, he
considered claim 39 of United States patent 7,725,375, which reads as follows:
39. A computer program product comprising a computer readable
storage medium having computer readable program code embodied in the
medium for use by a party to exchange an obligation between a first party
and a second party, the computer program product comprising:
program code for causing a computer to send a transaction from
said first party relating to an exchange obligation *1288 arising from a
currency exchange transaction between said first party and said second
party; and
program code for causing a computer to allow viewing of
information relating to processing, by a supervisory institution, of said
exchange obligation, wherein said processing includes (1) maintaining
information about a first account for the first party, independent from a
second account maintained by a first exchange institution, and information
about a third account for the second party, independent from a fourth
account maintained by a second exchange institution; (2) electronically
adjusting said first account and said third account, in order to effect an
exchange obligation arising from said transaction between said first party
and said second party, after ensuring that said first party and/or said
second party have adequate value in said first account and/or said third
account, respectively; and (3) generating an instruction to said first
exchange institution and/or said second exchange institution to adjust said
second account and/or said fourth account in accordance with the
adjustment of said first account and/or said third account, wherein said
instruction being an irrevocable, time invariant obligation placed on said
first exchange institution and/or said second exchange institution.
This claim specifically recites a computer. Of this feature, Judge Lourie comments: “the
claim term ‘computer readable storage medium’ is stated in broad and functional terms—
incidental to the claim—and every substantive limitation presented in the body of the
claim (as well as in dependent claims 40 and 41) pertains to the method steps of the
program code “embodied in the medium.” Therefore, claim 39 is not ‘truly drawn to a
specific computer readable medium, rather than to the underlying method’ of reducing
21
22
717 F.3d at 1287.
Id.
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settlement risk using a third-party intermediary.”23 Accordingly, Judge Lourie would rule
that the storage medium claims fail to surmount the patent eligibility criteria for the same
reasons as the method claims.24
Finally, Judge Lourie turns to the system claims and considers claim 1 of United
States patent 7,149,720, which reads as follows:
1. A data processing system to enable the exchange of an
obligation between parties, the system comprising:
a data storage unit having stored therein information about a
shadow credit record and shadow debit record for a party, independent
from a credit record and debit record maintained by an exchange
institution; and
a computer, coupled to said data storage unit, that is configured to
(a) receive a transaction; (b) electronically adjust said shadow credit
record and/or said shadow debit record in order to effect an exchange
obligation arising from said transaction, allowing only those transactions
that do not result in a value of said shadow debit record being less than a
value of said shadow credit record; and (c) generate an instruction to said
exchange institution at the end of a period of time to adjust said credit
record and/or said debit record in accordance with the adjustment of said
shadow credit record and/or said shadow debit record, wherein said
instruction being an irrevocable, time invariant obligation placed on said
exchange institution.
Manifestly, this claim requires a data storage unit and a computer. This set of differences
from the method claim, according to Judge Lourie, however, fails to render the claim
patent eligible: “The computer-based limitations recited in the system claims here cannot
support any meaningful distinction from the computer-based limitations that failed to
supply an “inventive concept” to the related method claims.”25
Moreover, Judge Lourie states that “[a]lthough the system claims associate certain
computer components with some of the method steps, none of the recited hardware offers
a meaningful limitation beyond generally linking ‘the use of the [method] to a particular
technological environment,’ that is, implementation via computers.”26 In support of this
proposition, Judge Lourie references Bilski, 130 S.Ct. at 3230 (quoting Diehr27, 450 U.S.
at 191, 101 S.Ct. 1048) (internal quotation marks omitted). Then he quotes Mayo v.
Prometheus, 132 S.Ct. 1289 at 1301: “‘[The Court in Benson28 ] held that simply
implementing a mathematical principle on a physical machine, namely a computer, was
not a patentable application of that principle.’”29 Judge Lourie’s take on these cases leads
him to the conclusion that “[f]or all practical purposes, every general-purpose computer
23
717 F.3d at 1288, quoting CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, at 1374–75
(Fed.Cir. 2011).
24
717 F.3d at 1288.
25
717 F.3d at 1290.
26
717 F.3d at 1291.
27
Diamond v. Diehr, 450 U.S. 175 (1981), discussed below.
28
Gottschalk v. Benson, 409 U.S. 63 (1972), discussed below.
29
717 F.3d at 1291.
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will include “a computer,” “a data storage unit,” and “a communications controller” that
would be capable of performing the same generalized functions required of the claimed
systems to carry out the otherwise abstract methods recited therein.30
According to Judge Lourie, “the Supreme Court has told us that, while avoiding
confusion between § 101 and §§ 102 and 103, merely adding existing computer
technology to abstract ideas—mental steps—does not as a matter of substance convert an
abstract idea into a machine.”31 For Judge Loury, “The system claims are instead akin to
stating the abstract idea of third party intermediation and adding the words: ‘apply it’ on
a computer. See Mayo, 132 S.Ct. at 1294”.32
According to Judge Lourie, therefore, none of the claims presented in CLS Bank
v. Alice Corp. defines subject matter eligible to be patented, and the most important
jurisprudential contribution to judge Lourie’s analysis is Mayo v. Prometheus.
The opinion by Judge Rader, joined by Judge Moore and, for some purposes, by
Judges Linn and O’Malley, would find the system claims patent eligible. Judge Rader
begins with legislative history of section 101 of 35 U.S.C., stating that “whether a new
process, machine, and so on is ‘inventive’ is not an issue under Section 101; the condition
for ‘more’ than novelty is contained only in Section 103.”33 In noting that Congress
added the words “or discovered” to section 100 (a), Judge Rader concludes that
“Congress made it irrelevant whether a new process, machine, and so on was
‘discovered’ rather than ‘invented.’34 Furthermore, in relating in considerable detail the
legislative history behind section 103, Judge Rader points out that “the central thrust of
the 1952 Act removed ‘unmeasurable’ inquiries into ‘inventiveness’ and instead supplied
the nonobviousness requirement of Section 103.”35 Moreover, the basis for the principle,
articulated in Mayo v. Prometheus, that “[l]aws of nature, natural phenomena, and
abstract ideas” are not patent eligible is that is “to prevent the ‘monopolization’ of the
‘basic tools of scientific and technological work,’ which ‘might tend to impede
innovation more than it would tend to promote it.’”36 Judge Rader quotes excerpts from
Bilski, Diamond v. Diehr, and Gottschalk v. Benson to the effect that “an application of a
law of nature or mathematical formula to a known structure or process may well be
deserving of patent protection.”37
In applying section 101, it is necessary to consider the claim as a whole.38 Judge
Rader explicitly criticizes Judge Lourie’s abstraction analysis for purposes of determining
patent eligibility:
Any claim can be stripped down, simplified, generalized, or paraphrased
to remove all of its concrete limitations, until at its core, something that
30
717 F.3d at 1291. Presumably that circumstance for Judge Loury is a reason to deny eligibility for a
patent.
31
717 F.3d at 1291-1292. This may be a reference to Gottschalk v. Benson, 409 U.S. 63 (1972).
32
717 F.3d at 1292.
33
717 F.3d at 1294.
34
717 F.3d at 1295.
35
717 F.3d at 1296.
36
717 F.3d at 1297, citing Mayo v. Prometheus, 132 S.Ct. 1289, 1293.
37
717 F.3d at 1297-1298.
38
717 F.3d at 1298, citing Diamond v. Diehr, 450 U.S. at 188.
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could be characterized as an abstract idea is revealed. Such an approach
would “if carried to its extreme, make all inventions unpatentable because
all inventions can be reduced to underlying principles of nature which,
once known, make their implementation obvious.” [Diamond v. Diehr,
450 U.S.] at 189 n. 12, 101 S.Ct. 1048; see also Prometheus, 132 S.Ct. at
1293. A court cannot go hunting for abstractions by ignoring the concrete,
palpable, tangible limitations of the invention the patentee actually
claims.39
After these preliminary observations, Judge Rader offers a different reading of
Mayo v. Prometheus for its evaluation of patent eligibility. “The relevant inquiry must be
whether a claim includes meaningful limitations restricting it to an application, rather
than merely an abstract idea.”40 Moreover, “[t]he key to this inquiry is whether the claims
tie the otherwise abstract idea to a specific way of doing something with a computer, or a
specific computer for doing something; if so, they likely will be patent eligible, unlike
claims directed to nothing more than the idea of doing that thing on a computer. While
no particular type of limitation is necessary, meaningful limitations may include the
computer being part of the solution, being integral to the performance of the method, or
containing an improvement in computer technology.”41 Finally, “[a]t bottom, where the
claim is tied to a computer in such a way that the computer plays a meaningful role in the
performance of the claimed invention, and the claim does not pre-empt virtually all uses
of an underlying abstract idea, the claim is patent eligible.”42
As to the requirement of “inventiveness” in connection with the Prometheus
patent eligibility analysis, Judge Rader says that the term “must be read as shorthand for
its inquiry into whether implementing the abstract idea in the context of the claimed
invention inherently requires the recited steps.” Judge Rader then provides a specific
analysis of what is meant by the term “inventiveness”:
Thus, in Prometheus, the Supreme Court recognized that the additional
steps were those that anyone wanting to use the natural law would
necessarily use. Prometheus, 132 S.Ct. at 1298. If, to implement the
abstract concept, one must perform the additional step, then the step
merely separately restates an element of the abstract idea, and thus does
not further limit the abstract concept to a practical application.43
39
717 F.3d at 1298.
717 F.3d at 1299, citing, among other things, “Prometheus, 132 S.Ct. at 1297 (‘[D]o the patent claims
add enough to their statements of the correlations to allow the processes they describe to qualify as patenteligible processes that apply natural laws?’ (emphasis in original)”.
41
717 F.3d at 1302, citing See SiRF Tech., Inc. v. Int'l Trade Comm'n, 601 F.3d 1319, 1332–33
(Fed.Cir.2010) and In re Alappat, 33 F.3d 1526 at 1544 (Fed. Cir. 1994).
42
717 F.3d at 1302.
43
717 F.3d at 1303. At this point, Judge Rader criticizes the use by Judge Lourie of “inventive concept”
four injecting, into the abstract exception inquiry, an ingenuity requirement that is nowhere found in the
patent laws.
40
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In applying the standards he has set forth to determine patent eligibility, Judge
Rader concludes that the system claims are patent eligible. “Even viewed generally, the
claim covers the use of a computer and other hardware specifically programmed
to solve a complex problem.”44 Judge Rader devotes paragraphs of the opinion to point
out the specific nature of the claimed functionality of the system.45 He points out that
there are many ways of using an escrow arrangement that are outside of the claims and
that practicing the recited steps is not inherent in the process of using an escrow.46
On the other hand, Judge Rader concludes that the method claims are not patent
eligible, because, among other things, they fail to reference a computer except, perhaps,
implicitly, and therefore they are too abstract to recite patent eligible subject matter.47
While Judges Linn and O’Malley are in accord with Judges Rader and Moore in
finding the system claims patent eligible48, Judges Linn and O’Malley would also find the
method claims patent eligible, because the record below establishes that the method
claims are practiced in a computer and have a breadth corresponding to that of the system
claims.49
Judge Newman in her opinion advances a much simpler set of rules. It would
seem that the abhorrence of patent claims that are too abstract is predicated on preventing
the patent owner from having exclusive rights in all possible implementations of an
abstract idea. Judge Newman points out that much of the focus on applying criteria for
patent eligibility is driven by “concern for the public's right to study the scientific and
technologic knowledge contained in patents.”50 She proposes that the court adopt the
principles that (1) section 101 is broadly inclusive and should not be viewed as implying
and abstractness test; (2) the form of the claim should not determine patent eligibility;
and (3) experimental use of patented information should not be barred.51 These views
would therefore find all of the claims patent eligible. Although the views of Judge
Newman were not accepted by any of the other judges, they display a keen focus on
considerations that underpin the debate among the judges.
Of the remaining opinions, we will address the opinion of Judge Moore later in
this paper. The last opinion in the case, by Judge Rader, entitled “additional
reflections”52, amounts to something like a soliloquy in which Judge Rader recounts his
experiences 25 years earlier in addressing patent eligibility in the case of Arrhythmia
Research Tech. v. Corazonix Corp., 958 F.2d 1053 (Fed.Cir.1992).53 In that case, Judges
Newman, Lourie, and Rader held that an invention involving signal processing
algorithms was patent eligible. Judge Newman wrote the opinion for herself and Judge
Lourie. Judge Rader wrote a concurring opinion in which he voiced the view that
Diamond v. Diehr had specifically limited Gottschalk v. Benson54; he then urged “when
44
717 F.3d at 1307.
717 F.3d at 1307-1309.
46
717 F.3d at 1309.
47
717 F.3d at 1312.
48
717 F.3d at 1332.
49
717 F.3d at 1328-1332.
50
717 F.3d at 1321.
51
717 F.3d at 1322 et seq.
52
717 F.3d at 1333.
53
717 F.3d at 1334 et seq.
54
Arrhythmia Research Tech. v. Corazonix Corp., 958 F.2d 1053 at 1065.
45
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all else fails (and the algorithm rule clearly has), consult the statute.”55 Regrettably, this
advice is somewhat disingenuous, in that section 101 is subject to a variety of readings.
Moreover, Judge Rader’s concurring opinion in Arrhythmia depended in part on the view
that Diamond v. Diehr had specifically limited Gottschalk v. Benson, whereas the
implication of Judge Lourie is that Mayo v. Prometheus has given new life to Gottschalk
v. Benson. Again, Judge Rader advises “When all else fails, consult the statute!”56
Perhaps the sentiment can be paraphrased to mean “Ignore outmoded doctrine and
attempt to fashion rules more consistent with good patent policy.”
At this point, we will briefly consider some of the cases underpinning the opinion
of Judge Lourie. We have pointed out that he, along with Judges Dyk, Prost, Reyna, and
Wallach, would use Prometheus and Benson to deny patent eligibility to a system claim
that recites computer components without also reciting an “inventive concept”. The
Benson case involved a computerized method for converting signals from binary coded
decimal form into binary form. One of the claims at issue read as follows:
8. The method of converting signals from binary coded decimal form into
binary which comprises the steps of
(1) storing the binary coded decimal signals in a reentrant shift
register,
(2) shifting the signals to the right by at least three places, until
there is a binary ‘1’ in the second position of said register,
(3) masking out said binary ‘1’ in said second position of said
register,
(4) adding a binary ‘1’ to the first position of said register,
(5) shifting the signals to the left by two positions,
(6) adding a ‘1’ to said first position, and
(7) shifting the signals to the right by at least three positions in
preparation for a succeeding binary ‘1’ in the second position of said
register.57
In this case, Justice Douglas wrote for the Court that “[t]he mathematical
formula involved here has no substantial practical application except in
connection with a digital computer, which means that if the judgment below is
affirmed, the patent would wholly pre-empt the mathematical formula and in
practical effect would be a patent on the algorithm itself.”58
On the other hand, it can be seen that claim 8 is limited to a process in an
item of hardware, namely a shift register, and the claim is quite precise as to how
the shift register is used in carrying out the process. Does it matter that the
mathematical formula “has no substantial practical application except in
connection with a digital computer”? The point would rather seem to be that if the
use of the procedure in the particular hardware environment claimed has
applicability only to that hardware environment, then it has been put to practical
55
958 F.2d 1053 at 1066.
717 F.3d at 1335.
57
Gottschalk v. Benson, 409 U.S. 63 at 73 (1972).
58
409 U.S. at 71-72.
56
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effect and certainly does not prevent a usage outside of the specific hardware
environment.
The case of Parker v. Flook59 reached a result similar to that of Gottschalk
v. Benson. In Parker v. Flook, the claims were said to “cover any use of
respondent's formula for updating the value of an alarm limit on any process
variable involved in a process comprising the catalytic chemical conversion of
hydrocarbons. Since there are numerous processes of that kind in the
petrochemical and oil-refining industries,[footnote omitted] the claims cover a
broad range of potential uses of the method. They do not, however, cover every
conceivable application of the formula.”60 The Court framed the issue as “whether
the identification of a limited category of useful, though conventional, postsolution applications of such a formula makes respondent's method eligible for
patent protection”61 and held that the subject matter defined by the claims was not
eligible for patent protection. “Respondent's process is unpatentable under § 101,
not because it contains a mathematical algorithm as one component, but because
once that algorithm is assumed to be within the prior art, the application,
considered as a whole, contains no patentable invention. Even though a
phenomenon of nature or mathematical formula may be well known, an inventive
application of the principle may be patented. Conversely, the discovery of such a
phenomenon cannot support a patent unless there is some other inventive concept
in its application.”62
A result contrary to that of Gottschalk v. Benson and Parker v. Flook was
reached in Diamond v. Diehr.63 In this case, a typical claim was directed to a
method of molding rubber with the aid of a digital computer, including
“repetitively calculating in the computer, at frequent intervals during each cure,
the Arrhenius equation for reaction time during the cure … and opening the press
automatically when a said comparison indicates equivalence.”64 The patent
examiner had found the claims ineligible for a patent on the basis of Gottschalk v.
Benson.65
The Court held that patent eligibility “is not altered by the fact that in
several steps of the process a mathematical equation and a programmed digital
computer are used.”66 Gottschalk v. Benson was cited with other cases for the
proposition that “[e]xcluded from such patent protection are laws of nature,
natural phenomena, and abstract ideas.”67 Moreover, “the respondents here do not
seek to patent a mathematical formula. Instead, they seek patent protection for a
process of curing synthetic rubber. Their process admittedly employs a wellknown mathematical equation, but they do not seek to pre-empt the use of that
59
Parker v. Flook, 437 U.S. 584 (1978).
437 U.S. at 586.
61
437 U.S. at 585.
62
437 U.S. at 594.
63
Diamond v. Diehr, 450 U.S. 175 (1981).
64
450 U.S. 175 at 179, n. 5, claim 1.
65
450 U.S. 175 at 180.
66
450 U.S. at 185.
67
450 U.S. at 185.
60
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equation. Rather, they seek only to foreclose from others the use of that equation
in conjunction with all of the other steps in their claimed process.”68
Words of the sort just quoted no doubt inspired Judge Rader in Arrhythmia
to declare, as we have just recounted, that Diamond v. Diehr had specifically
limited Gottschalk v. Benson. Yet Gottschalk v. Benson and Parker v. Flook
continue to coexist with Diamond v. Diehr in Mayo v. Prometheus.69
In Mayo v. Prometheus, the claims were directed to administering a
thiopurine drug to a subject with a gastrointestinal disorder, determining the level
of a specific metabolite in the subject, wherein a level below a first threshold
indicates a need to increase drug dosage and wherein a level above a second
threshold indicates a need to decrease drug dosage.70 The Court held that “the
‘administering’ step simply refers to the relevant audience, namely doctors who
treat patients with certain diseases with thiopurine drugs” , “the ‘wherein’ clauses
simply tell a doctor about the relevant natural laws”, and the determining step
“tells doctors to engage in well-understood, routine, conventional activity
previously engaged in by scientists who work in the field”.71
This case seems destined to become the Dred Scott of patent law
decisions. The court chooses to generalize the claim limitations and to ignore their
specific provisions. Whereas the claims require administering a thiopurine drug
to a subject with a gastrointestinal disorder, the Court says that “the
‘administering’ step simply refers to the relevant audience, namely doctors who
treat patients with certain diseases with thiopurine drugs”. Of course, the
administering step requires a human intervention in which a drug is administered
to a patient. The claim similarly requires a second human intervention in which
there is determined the level of a specific metabolite in the subject; such an
intervention typically requires obtaining a blood sample from the subject as well
analyzing the blood sample. As to the second human intervention, the Court
characterizes this determining step as one that “tells doctors to engage in wellunderstood, routine, conventional activity previously engaged in by scientists who
work in the field”. Furthermore, the “wherein” clauses involve making inferences
that are rooted in the context of the foregoing human interventions. Labeling such
inferences as “well understood” and “routine” may go to the question whether the
claimed subject matter taken as a whole is novel and nonobvious under sections
102 and 103 of the patent laws, but should not infect the determination of patent
eligibility.
Because the Court’s rationale fails to match the facts of the case, the
decision in Mayo v. Prometheus is bad law. The decision fails to provide any
reasonable guidance to users of the patent system as to what subject matter is
eligible to be patented. Indeed, in ruling that the claimed activities, involving a
minimum of two human interventions relating to a patient with a gastrointestinal
disorder, are too abstractly specified, the Court injects great uncertainty as to the
patent eligibility of many kinds – and perhaps all kinds – of patent claims.
68
450 U.S. at 187.
Mayo v. Prometheus, 132 S. Ct. 1289 (2012).
70
132 S. Ct. at 1295.
71
132 S. Ct. at 1297-1298.
69
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The Court in Mayo v. Prometheus distinguished Diamond v. Diehr as
having other steps that “apparently added to the formula something that in terms
of patent law's objectives had significance—they transformed the process into an
inventive application of the formula.” 72 The Court in Mayo v. Prometheus also
approved Gottschalk v. Benson because “the claim (like the claims before us) was
overly broad; it did not differ significantly from a claim that just said ‘apply the
algorithm.’”73 This thinking gives new life to Gottschalk v. Benson, and, as we
have seen near the beginning of this paper, drives the analysis in the opinion of
Judge Lourie in CLS Bank v. Alice Corp.
The recent case of Ultramercial v. Hulu74 is revealing of the split of views
seen in CLS Bank v. Alice Corp. The claims in Ultramercial v. Hulu were directed
to a method for distribution of products over the Internet via a facilitator. Claim 1
reads as follows:
1. A method for distribution of products over the Internet via a facilitator,
said method comprising the steps of:
a first step of receiving, from a content provider, media products
that are covered by intellectual property rights protection and are available
for purchase, wherein each said media product being comprised of at least
one of text data, music data, and video data;
a second step of selecting a sponsor message to be associated with
the media product, said sponsor message being selected from a plurality of
sponsor messages, said second step including accessing an activity log to
verify that the total number of times which the sponsor message has been
previously presented is less than the number of transaction cycles
contracted by the sponsor of the sponsor message;
… offering to a consumer access to the media product without
charge to the consumer on the precondition that the consumer views the
sponsor message;
[etc.]75
Following a discussion in which he laid out reasons for the correctness of his
approach in CLS Bank v. Alice Corp., Judge Rader (joined by Judge O’Malley) found the
claim patent eligible: “The claimed invention is a method for monetizing and distributing
copyrighted products over the Internet. As a method, it easily satisfies § 100's definition
of “process” and thus falls within a § 101 category of patent-eligible subject matter. Thus,
this court focuses on whether the claim is meaningfully limited to something less than an
abstract idea that pre-empts use of an abstract concept.76… [T]he '545 patent claims a
particular internet and computer-based method for monetizing copyrighted products”
using the specific steps recited in the claims.77 ...[I]t is clear that several steps plainly
72
132 S. Ct. at 1299.
132 S. Ct. at 1301. Yet we have shown above that the claim in Gottschalk v. Benson was specifically
limited to the hardware environment of a shift register and was quite precise as to how the shift register is
used in carrying out the claimed process.
74
Ultramercial v. Hulu, 722 F.3d 1335 (Fed. Cir. 6/21/13).
75
722 F.3d at 1337.
76
722 F.3d at 1349.
77
722 F.3d at 1350.
73
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require that the method be performed through computers, on the internet, and in a cybermarket environment.”78
On the basis of this analysis, Judge Rader concluded that “[A]s a practical
application of the general concept of advertising as currency and an improvement to prior
art technology, the claimed invention is not ‘so manifestly abstract as to override the
statutory language of section 101.’”79 Along the way, he also pointed out that “This court
understands that the broadly claimed method in the '545 patent does not specify a
particular mechanism for delivering media content to the consumer (i.e., FTP downloads,
email, or real-time streaming). This breadth and lack of specificity does not render the
claimed subject matter impermissibly abstract. Assuming the patent provides sufficient
disclosure to enable a person of ordinary skill in the art to practice the invention and to
satisfy the written description requirement, the disclosure need not detail the particular
instrumentalities for each step in the process.”80
Judge Lourie wrote a concurring opinion.81 “The plurality opinion in CLS Bank
identified a two-step process, derived from Mayo, for analyzing patent eligibility under §
101. First, a court must identify ‘whether the claimed invention fits within one of the four
statutory classes set out in § 101.’ … Second, one must assess whether any of the judicial
exceptions to subject-matter eligibility apply, including whether the claims are to patentineligible abstract ideas.”82 “In the case of abstractness, as discussed in CLS Bank, we
must determine whether the claim poses ‘any risk of preempting an abstract idea.’ … To
do so we must first ‘identify and define whatever fundamental concept appears wrapped
up in the claim’; a claim construction may be helpful in this analysis. … Then,
proceeding with the preemption analysis, the balance of the claim is evaluated to
determine whether ‘additional substantive limitations ... narrow, confine, or otherwise tie
down the claim so that, in practical terms, it does not cover the full abstract idea itself.’”83
The “limitations in these claims represent significantly more than the underlying abstract
idea of using advertising as an exchange or currency and, as a consequence, do not
preempt the use of that idea in all fields.”84
In a case published at the beginning of September, 2013, Accenture v.
Guidewire85, Judge Lourie wrote the majority opinion (joined by Judge Reyna), and
Judge Rader wrote a dissenting opinion. Claim 1 had this structure:
A system for generating tasks to be performed in an insurance
organization, the system comprising:
an insurance transaction database for storing information related to
an insurance transaction, the insurance transaction database comprising a
claim folder containing the information related to the insurance transaction
decomposed into a plurality of levels from the group comprising a policy
78
Id.
722 F.3d at 1354, citing Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 869
(Fed.Cir.2010).
80
722 F.3d at 1353.
81
722 F.3d at 1354.
82
722 F.3d at 1354-1355.
83
722 F.3d at 1355.
84
Id.
85
Accenture v. Guidewire, No. 2011-1486 (Fed. Cir. 9/5/13)(slip opinion).
79
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level, a claim level, a participant level and a line level, wherein the
plurality of levels reflects a policy, the information related to the insurance
transaction, claimants and an insured person in a structured format;
a task library database for storing rules for determining tasks to be
completed upon an occurrence of an event;
a client component …
a server component … the server component including an event
processor …
wherein the event processor ….86
Judge Lourie wrote: “We conclude that the district court’s decision on patentineligibility of the system claims must also be affirmed, both because the system claims
offer no meaningful limitations beyond the method claims that have been held patentineligible and because, when considered on their own, under Mayo and our plurality
opinion in CLS Bank, they fail to pass muster.”87
Judge Rader in dissent stated argued that “[A]ny claim can be stripped down,
simplified, generalized, or paraphrased to remove all of its concrete limitations, until at
its core, something that could be characterized as an abstract idea is revealed. A court
cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations
of the invention the patentee actually claims.” Ultramercial, Inc. v. Hulu, LLC, 20101544, 2013 WL 3111303, at *8 (Fed. Cir. June 21, 2013). In my judgment, the court has
done precisely that. Therefore, I respectfully dissent.”88
There remains to be discussed the opinion of Judge Moore in CLS Bank v. Alice
Corp. In this opinion, Judge Moore was joined by Judges Rader, Linn, and O’Malley.
Judge Moore wrote, “I am concerned that the current interpretation of § 101, and in
particular the abstract idea exception, is causing a free fall in the patent system. … See
Bilski, Prometheus, Myriad (under consideration). … Holding that all of these claims are
directed to no more than an abstract idea gives staggering breadth to what is meant to be
a narrow judicial exception.”89 She continued, “[I]f all of these claims, including the
system claims, are not patent-eligible, this case is the death of hundreds of thousands of
patents, including all business method, financial system, and software patents as well as
many computer implemented and telecommunications patents.”90
Judge Moore’s opinion illuminates the flaws in the approach of Judge Lourie in
CLS Bank v. Alice Corp. She cites the ancient Supreme Court case of Burr v. Duryee for
the principle that a machine is a concrete thing, not an idea:
A machine is a concrete thing, consisting of parts, or of certain devices
and combinations of devices. The principle of a machine is properly
86
Slip opinion, p. 3 et seq.
Slip opinion, p. 10.
88
Slip opinion for Judge Rader, p. 1.
89
717 F.3d at 1313.
90
717 F.3d at 1313.
87
- 14 -
defined to be ‘its mode of operations,’ or that peculiar combination of
devices which distinguish it from other machines. A machine is not a
principle or an idea.91
Judge Moore then points out that the Federal Circuit’s Alappat decision provides
rigorous support for the proposition that a programmed computer is a patent eligible
machine, in conflict with Judge Lourie’s approach:
Our court, sitting en banc, applied these principles to hold patenteligible a claim that would read on a general purpose computer
programmed to carry out the operations recited in the claim. In re Alappat,
33 F.3d 1526, 1545 (Fed.Cir.1994) (en banc). We stated that, although
many of the means-plus-function elements recited in the only asserted
independent claim represent circuitry elements that perform mathematical
calculations, “the claimed invention as a whole is directed to a
combination of interrelated elements which combine to form a machine”
for performing the invention's anti-aliasing technique. Id. at 1544. We
explained that “[t]his is not a disembodied mathematical concept which
may be characterized as an ‘abstract idea,’ but rather a specific machine.”
Id. The patent applicant admitted that its claim “would read on a general
purpose computer programmed to carry out the claimed invention.” Id. at
1545. We nonetheless held that the claim was patent-eligible under § 101,
explaining that “such programming creates a new machine, because a
general purpose computer in effect becomes a special purpose computer
once it is programmed to perform particular functions pursuant to
instructions from program software.” Id. (emphasis added). Judge Lourie's
opinion completely repudiates Judge Rich's approach in Alappat. The two
are not reconcilable.92
The fissure most apparent in the Federal Circuit in CLS Bank v. Alice Corp.,
relating to the system claims, puts Judge Lourie on one side with Judges Dyk, Prost,
Reyna, and Wallach, and, on the other side, Judge Rader with Judges Linn, Moore,
O’Malley, and Newman. At the bottom of this fissure lies its cause, Mayo v. Prometheus.
Indeed, because the approach in Mayo v. Prometheus of abstracting a claim to determine
patent eligibility can be used to deny patent eligibility to any patent claim, and because
obviously the Court did not intend to invalidate all patent claims, the ruling in Mayo v.
Prometheus fails to provide any usable guidance for evaluating patent eligibility; for that
reason the decision is bad jurisprudence.
The uncertainty of the law relating to patent eligibility, introduced by Mayo v.
Prometheus, and now manifested in cases like CLS Bank v. Alice Corp., desperately
91
68 U.S. (1 Wall.) 531, 570 (1863), quoted at 717 F.3d at 1316.
717 F.3d at 1316. Judge Rader’s opinion also references Alappat in this context. 717 F.3d at 1302 and
1305. Judge Lourie argues, unconvincingly in the view of this author, that the “word of technology” has
changed; he also states, correctly, that “[t]he Supreme Court has spoken since Alappat on the question of
patent eligibility”. 717 F.3d 1292. It is an open question, however, whether Mayo v. Prometheus should
disembowel patent eligibility of computer-implemented inventions in the manner urged by Judge Lourie.
92
- 15 -
needs to be repaired. If it is to be repaired by a court, it will be by the Supreme Court,
although it is the Supreme Court that unanimously issued the decision in Mayo v.
Prometheus.
On the other hand, a one-sentence legislative amendment would solve these
problems:
Section 101 of Title 35 of the United States Code shall be amended by adding the
following sentence at the end thereof:
An invention that produces a useful, concrete, and tangible result shall not be
denied eligibility for a patent on the ground that it is directed to a law of nature, natural
phenomenon, or abstract idea.
The rationale for this legislative proposal is to provide a single surgical solution to
nullify the effect and rationale of Prometheus while otherwise leaving the jurisprudence
of section 101 intact.
Judge Rich in State Street Bank & Tr. Co. v. Signature Financial Group, Inc., 149
F.3d 1368, 1373 (Fed Cir. 1998) quoted Diamond v. Diehr, to the effect that “In Diehr,
the Court explained that certain types of mathematical subject matter, standing alone,
represent nothing more than abstract ideas until reduced to some type of practical
application, i.e., “a useful, concrete and tangible result.” Judge Rich continued by saying
that “Today, we hold that the transformation of data, representing discrete dollar
amounts, by a machine through a series of mathematical calculations into a final share
price, constitutes a practical application of a mathematical algorithm, formula, or
calculation, because it produces ‘a useful, concrete and tangible result’ – a final share
price momentarily fixed for recording and reporting purposes and even accepted and
relied upon by regulatory authorities and in subsequent trades.” Id.
Thus the legislative proposal has deep jurisprudential roots, and the language of
the proposal is drawn from the Supreme Court. Moreover, concepts here run parallel to
the points in the amicus brief of the United States filed in Prometheus itself. The
Prometheus decision characterized the Government’s position thus: “the Government
argues that virtually any step beyond a statement of a law of nature itself should
transform an unpatentable law of nature into a potentially patentable application
sufficient to satisfy §101’s demands.”93 The Government brief said this, among other
things: “The utility of every invention turns on its ability to produce a predictable chain
of reactions leading to the desired result. If the “natural” character of that link were
sufficient to trigger the “law of nature” exception to patent-eligibility under Section 101,
the exception would swallow the rule. ¶ b. It is therefore essential to apply the judicially
crafted “law of nature” and “physical phenomenon” exceptions to Section 101 in a
restrained manner and with an eye toward their animating purposes.” 94
Although it can be said that the Court with Bilski has rendered State Street
obsolete, in fact the concept of “transformation” in Bilski is indeed present in State Street
as well, which relied on Diamond v. Diehr. So the chosen phrase “a useful, concrete and
tangible result” ripples through a series of cases and has a rather specific context.
93
94
132 S.Ct. at 1303.
Government Brief at page 19.
- 16 -
The use of this phrase in the context of the proposed amendment is intended to
implement the position of the Government brief in Prometheus that the threshold of
section 101 should be relatively low and that sections 102, 103, and 112 can be used to
weed out inventions that are not patent-worthy. The same point was made in State Street
itself: “Whether the patent's claims are too broad to be patentable is not to be judged
under § 101, but rather under §§ 102, 103 and 112. Assuming the above statement to be
correct, it has nothing to do with whether what is claimed is statutory subject matter.” 95
The patent system would be in better condition with such an amendment.96 Until
then, one can only hope that the Supreme Court will repair the damage of its decision in
Mayo v. Prometheus.
95
149 F.3d 1368, 1377.
Such an amendment to section 101 to override the Supreme Court ruling in Prometheus would parallel
the change by the 1952 Patent Act in section 103 to override the Supreme Court ruling in Cuno
Engineering Corp. v. Automatic Devices Corp., 314 U.S. 84, 90, 91 (1941)(“flash of creative genius”) with
respect to what constitutes an “invention”. This latter story is recounted in Judge Rader’s opinion in CLS
Bank v. Alice Corp, 717 F.3d at 1295 et seq. See also Graham v. John Deere Co., 383 U.S. 1, 15 (1966).
96
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