July 9, 2012
Alice in Wonderland
Alice Corporation got patents on a computerized trading platform that ameliorates settlement risk. CLS Bank, spooked over its own infringement, filed a DJ. A DC district court judge ameliorated her docket by ruling the four Alice patents invalid under §101, as being drawn to mere "abstract ideas." The appeals court thought the claims something more concrete, albeit with dissent. To the courts, patents read like pornography: they know what they like when they see it. Patent holders best get used to bending over.
Alice v. CLS Bank (CAFC 2011-1301) precedential; Judges Linn (author), Prost (dissent) and O'Malley
In a model of court cogency, the opinion cuts to the chase, so as to
provide clear guidance.
The Patent Act defines patent eligible subject matter broadly: "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." 35 U.S.C. § 101 (emphasis added). Section 101 is a "dynamic provision designed to encompass new and unforeseen inventions." J.E.M. Ag. Supply, Inc. v. Pioneer HiBred Int'l, Inc., 534 U.S. 124, 135 (2001). As the Supreme Court has recognized, "Congress intended statutory subject matter to 'include anything under the sun that is made by man,'" Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (citing S. Rep. No. 82-1979, at 5 (1952) and H.R. Rep. No. 82-1923, at 6 (1952)).
It is true, however, that not everything can be patented. The Supreme Court has explained that "laws of nature, physical phenomena, and abstract ideas" fall outside the scope of § 101, and are reserved to the public domain. Bilski II, 130 S. Ct. at 3225. In Mayo Collaborative Services v. Prometheus Laboratories, Inc., the Supreme Court explained that these exceptions to statutory subject matter are "implicit" in the statute. 132 S. Ct. 1289, 1293 (2012). "Such discoveries are 'manifestations of . . . nature, free to all men and reserved exclusively to none.'" Id. at 2 (citing Chakrabarty, 447 U.S. at 309 (quoting Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948)). In practice, should not be understood to subvert the patent's constitutional mandate "[t]o promote the Progress of Science and useful Arts." U.S. Const. art. I, § 8, cl. 8; see, e.g., Research Corp., 627 F.3d at 868 (Fed. Cir. 2010) ("[S]ection 101 does not permit a court to reject subject matter categorically because it finds that a claim is not worthy of a patent.").
In contrast to § 101, which sets forth the type of subject matter that is patent eligible, §§ 102 and 103 broadly ensure that the public remains free to use that which is known and obvious variants thereof. See 35 U.S.C. §§ 102, 103. In addition, § 112 protects the public storehouse of knowledge by preventing persons from obtaining patent protection for inventions not fully disclosed, enabled, or claimed with particularity. See 35 U.S.C. § 112. The comprehensive provisions of 35 U.S.C. §§ 102, 103, and 112 do the substantive work of disqualifying those patent eligible inventions that are "not worthy of a patent." Research Corp., 627 F.3d at 868. "Section 101 is a general statement of the type of subject matter that is eligible for patent protection 'subject to the conditions and requirements of this title.' Specific conditions for patentability follow . . . . The question therefore of whether an invention is novel 'is wholly apart from whether the invention falls into a category of statutory subject matter.'" Diamond v. Diehr, 450 U.S. 188, 198-90 (1981) (citing In re Bergy, 596 F.2d 952, 961 (CCPA 1979)).
It should be self-evident that each of these four statutory provisions--§§ 101, 102, 103, and 112--serves a different purpose and plays a distinctly different role. No one section is more important than any other. Together, they evince the intent of Congress in furthering the constitutional objective of promoting the progress of the useful arts. Because each of these sections serves a different purpose and plays a different role, invalidity, patentability, and patent eligibility challenges under these sections present distinctly different questions. See Prometheus, 132 S. Ct. at 1303-04. District courts have great discretion to control the conduct of proceedings before them, including the order of presentation of issues and evidence and the sequence of events proscribed by the Federal Rules and leading up to judgment. See, e.g., Amado v. Microsoft Corp., 517 F.3d 1353, 1358 (Fed. Cir. 2008) ("District courts . . . are afforded broad discretion to control and manage their dockets, including the authority to decide the order in which they hear and decide issues pending before them."). Although § 101 has been characterized as a "threshold test," Bilski II, 130 S. Ct. at 3225, and certainly can be addressed before other matters touching the validity of patents, it need not always be addressed first, particularly when other sections might be discerned by the trial judge as having the promise to resolve a dispute more expeditiously or with more clarity and predictability. See MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1260 (Fed. Cir. 2012). Thus, consistent with its role as the master of its own docket, a district court properly acts within its discretion in deciding when to address the diverse statutory challenges to validity.
Here, the district court exercised its discretion to entertain a challenge to the validity of the patents in suit under 35 U.S.C. § 101. The district court's decision ultimately turned on, and thus this appeal is primarily directed to, the issue of whether the claimed inventions fall within the "abstract ideas" exception to patent eligibility. While the Supreme Court's recent decision in Prometheus reiterated the trilogy of "implicit" exceptions to patent eligibility, including the exception for abstract ideas, it did not directly address how to determine whether a claim is drawn to an abstract idea in the first instance.
The abstractness of the "abstract ideas" test to patent eligibility has become a serious problem, leading to great uncertainty and to the devaluing of inventions of practical utility and economic potential. See Donald S. Chisum, Weeds and Seeds in the Supreme Court's Business Method Patent Decision: New Directions for Regulating Patent Scope, 15 Lewis & Clark L. Rev. 11, 14 (2011) ("Because of the vagueness of the concepts of an 'idea' and 'abstract,' . . . the Section 101 abstract idea preemption inquiry can lead to subjectively-derived, arbitrary and unpredictable results. This uncertainty does substantial harm to the effective operation of the patent system."). In Bilski, the Supreme Court offered some guidance by observing that "[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right." Bilski II, 130 S. Ct. at 3230 (quoting Le Roy v. Tatham, 55 U.S. (14 How.) 156, 175 (1852)). This court has also attempted to define "abstract ideas," explaining that "abstract ideas constitute disembodied concepts or truths which are not 'useful' from a practical standpoint standing alone, i.e., they are not 'useful' until reduced to some practical application." Alappat, 33 F.3d at 1542 n.18 (Fed. Cir. 1994). More recently, this court explained that the "disqualifying characteristic" of abstractness must exhibit itself "manifestly" "to override the broad statutory categories of patent eligible subject matter." Research Corp., 627 F.3d at 868. Notwithstanding these well-intentioned efforts and the great volume of pages in the Federal Reporters treating the abstract ideas exception, the dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive. "Put simply, the problem is that no one understands what makes an idea 'abstract.'" Mark A. Lemley et al., Life After Bilski, 63 Stan. L. Rev. 1315, 1316 (2011).
Several decisions have looked to the notion of "preemption" to further elucidate the "abstract idea" exception. In Bilski, the Supreme Court explained that "[a]llowing petitioners to patent risk hedging would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea." 130 S.Ct. 3231 (emphasis added). Previously, in O'Reilly v. Morse, 56 U.S. 62 (1853), the Supreme Court held that a claim to electromagnetism was not eligible for patent protection because the patentee "claim[ed] the exclusive right to every improvement where the motive power is the electric or galvanic current, and the result is the marking or printing intelligible characters, signs, or letters at a distance." Id. at 112-13 (emphases added). The Morse Court reasoned that the claim would effectively "shut the door against inventions of other persons . . . in the properties and powers of electro-magnetism" because "it matters not by what process or machinery the result is accomplished." Id. at 113 (emphasis added). Again, in Gottshalk v. Benson, 409 U.S. 64 (1972), the Supreme Court emphasized the concept of "pre-emption," holding that a claim directed to a mathematical formula with "no substantial practical application except in connection with a digital computer" was directed to an unpatentable abstract idea because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on an algorithm itself." Id. at 71-72 (emphasis added). In Parker v. Flook, 437 U.S. 584 (1978), the Court again emphasized the importance of claims not "pre-empting" the "basic tools of scientific and technological work," and further held that mere field of use limitations--there, to the oil refining and petrochemical industries--or the addition of "post-solution" activity--there, adjusting an "alarm limit" according to a claimed mathematical calculation--could not "transform an unpatentable principle into a patentable process." Id. at 589.
In contrast to Morse, Benson, and Flook - where the claims were found to "preempt" an "idea" or algorithm - in Diehr, the Supreme Court held that the claims at issue (directed to a process for curing rubber using the mathematical "Arrhenius" equation) did not "preempt the use of that equation." Diehr, 450 U.S. at 187. Rather, the claims "only foreclose[d] from others the use of that equation in conjunction with all of the other steps in the claimed process." Id. (emphasis added). The Diehr Court held that the claims were "not barred at the threshold by § 101" because they were "an application of a law of nature or mathematical formula to a known structure or process," which "incorporate[d] in it a more efficient solution of the equation." Id. at 187, 188.
Our Constitution gave Congress the power to establish a patent system "[t]o promote the Progress of Science and useful Arts . . . ." U.S. Const. art. I, § 8, cl. 8. The patent system is thus intended to foster, not foreclose, innovation. See id. While every inventor is granted the right to exclude, or "preempt," others from practicing his or her claimed invention, no one is entitled to claim an exclusive right to a fundamental truth or disembodied concept that would foreclose every future innovation in that art. See Morse, 56 U.S. at 112-13. As the Supreme Court has "repeatedly emphasized . . . patent law [must] not inhibit further discovery by improperly tying up the future use of laws of nature." Prometheus, 132 S. Ct. at 1301. "[T]here is a danger that grant of patents that tie up [laws of nature, physical phenomena, and abstract ideas] will inhibit future innovation premised upon them, a danger that becomes acute when a patented process amounts to no more than an instruction to 'apply the natural law,' or otherwise forecloses more future invention than the underlying discovery could reasonably justify." Id. (emphasis added); see also Benson, 409 U.S. at 68 ("Here the 'process' claim is so abstract and sweeping as to cover both known and unknown uses of the BCD to pure binary conversion." (emphasis added)). Thus, the essential concern is not preemption, per se, but the extent to which preemption results in the foreclosure of innovation. Claims that are directed to no more than a fundamental truth and foreclose, rather than foster, future innovation are not directed to patent eligible subject matter under § 101. No one can claim the exclusive right to all future inventions. Morse, 56 U.S. at 112-13; Benson, 409 U.S. at 68.
In determining whether a claim is directed to a non-statutory abstract idea, the Supreme Court acknowledged this court's "machine-or-transformation test [as] a useful and important clue, an investigative tool," but not as a dispositive test. Bilski II, 130 S. Ct. at 3227. As four Supreme Court Justices acknowledged, during the Industrial Age, few patents were granted for discoveries that did not satisfy the machine-or-transformation test. Id. Today, computers play a role in every part of our daily life. They are found in everything from toasters to transponders. The computer, with all of its hardware and software variations, may be one of the greatest inventions of all time, and there can be no question that advances in computer technology have fostered and will continue to foster innovation in all areas of science and technology. Many patents drawn to inventions implemented in computer hardware or software, however, are argued not to pass the machine-or-transformation test. Thus, courts must sometimes look beyond the machine-or-transformation test to distinguish eligible from ineligible computer-related claims. See Bilski II, 130 S. Ct. at 3227.
The mere implementation on a computer of an otherwise ineligible abstract idea will not render the asserted "invention" patent eligible. See Fort Props. Inc. v. Am. Master Lease LLC, 671 F.3d 1317, 1322 (Fed. Cir. 2011) ("[An] abstract concept cannot be transformed into patentable subject matter merely because of connections to the physical world."); Dealertrack Inc. v. Huber, 674 F.3d 1315, 1333 (Fed. Cir. 2012) ("Simply adding a 'computer aided' limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible."); CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1375 (Fed. Cir. 2011) ("[W]e have never suggested that simply reciting the use of a computer to execute an algorithm that can be performed entirely in the human mind" is sufficient to render a claim patent eligible.). On the other hand, where the "addition of a machine impose[s] a meaningful limit on the scope of a claim," and "play[s] a significant part in permitting the claimed method to be performed, rather than function[ing] solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations," that machine limitation renders the method patent eligible. SiRF Tech., Inc. v. Int'l Trade Comm'n, 601 F.3d 1319, 1333 (Fed. Cir. 2010) (emphasis added); see also Diehr, 450 U.S. at 187 ("It is now commonplace that an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection."); Research Corp., 627 F.3d at 868 (holding that a process is patent eligible subject matter when it "presents functional and palpable application in the field of computer technology."); Alappat, 33 F.3d at 1544-45 (holding that claims directed to a specially-programmed computer--a "specific machine to produce a useful, concrete, and tangible result" - are directed to patent eligible subject matter). It can, thus, be appreciated that a claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not.1 But even with that appreciation, great uncertainty remains, and the core of that uncertainty is the meaning of the "abstract ideas" exception.
1 See Lemley, 63 Stan. L. Rev. at 1345 ("Under an appropriate § 101 scope analysis, the relevant concern is not whether there is a physical machine per se in the specification or claim language. Rather, the question should be whether the claim is so abstract and sweeping as to preclude all uses of the inventive idea, or whether it is sufficiently applied.").
As the Supreme Court has recently acknowledged, "too broad an interpretation of [the exceptions to § 101] could eviscerate patent law. For all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Prometheus, 132 S. Ct. at 1293. Any claim can be stripped down, or simplified, removing all of its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed. But nothing in the Supreme Court's precedent, nor in ours, allows a court to go hunting for abstractions by ignoring the concrete, palpable, tangible, and otherwise not abstract invention the patentee actually claims. It is fundamentally improper to paraphrase a claim in overly simplistic generalities in assessing whether the claim falls under the limited "abstract ideas" exception to patent eligibility under 35 U.S.C. § 101. Patent eligibility must be evaluated based on what the claims recite, not merely on the ideas upon which they are premised. In assessing patent eligibility, a court must consider the asserted claim as a whole. Diehr, 540 U.S. at 188.
It is inappropriate to dissect the claim into old and new elements and then to ignore the presence of the old elements in the analysis. This is particularly true in a process claim because a new combination of steps in a process may be patentable even though all the constituents of the combination were well known and in common use before the combination was made. The 'novelty' of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within the § 101 categories of possibly patentable subject matter.
Id. at 188-89.2
2 The dissent contends that following Prometheus, "there is no doubt that to be patent eligible under § 101, the claims must include an 'inventive concept.'" Dissent 3. From this, the dissent criticizes the majority for not inquiring whether the asserted claims include such an inventive concept or even whether the claims disclose anything inventive. But that is precisely what the majority has done in examining the language of the claims themselves and in criticizing the district court for ignoring the invention the patentee actually claims. The Supreme Court's reference to an "inventive concept" cannot be read to endorse overlooking the actual terms of the claims or the distillation of claim language to mere generalities. Prometheus simply states "that a process that focuses upon the use of a natural law also contain other elements or a combination of elements, sometimes referred to as an 'inventive concept,' sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself." Prometheus, 132 S. Ct. at 1294 (emphases added). This is not a new idea, and imposes no "novelty" or "nonobviousness" inquiry into the patent eligibility analysis under § 101. See Diehr, 540 U.S. at 188-89.
In light of the foregoing, this court holds that when - after taking all of the claim recitations into consideration - it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101. It would undermine the intent of Congress to extend a judicially-crafted exception to the unqualified statutory eligibility criteria of § 101 beyond that which is "implicitly" excluded as a "fundamental truth" that is "free to all men and reserved exclusively to none." Bilski II, 130 S. Ct. at 3225, 3230 (citations omitted); see also id. at 3226 ("This Court has 'more than once cautioned that courts should not read into the patent laws limitations and conditions which the legislature has not expressed.'" (quoting Diehr, 450 U.S. 175, 182 (citation omitted))). Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible "abstract idea" under 35 U.S.C. § 101.3
3 The dissent expresses concern that the majority "devises a new approach to subject matter patentability" in the face of perceived Supreme Court guidance. Dissent 3. With all due respect for my sister in the dissent, the majority does no such thing. The majority merely recognizes that before the "implicit" exception for abstractness recognized by the Supreme Court and acknowledged by this court is allowed to overtake the intent of Congress as reflected in the broad statutory language of § 101, the determination of abstractness must be manifest. If a court, in applying all of the guidance of the Supreme Court in cases like Prometheus, Bilski II, Diehr, Flook, and Benson, and in considering all of the precedent from this court in cases like Fort Properties, Dealertrack, CyberSource, Research Corp., SiRF, and Alappat, is not wholly convinced that the subject matter of the claims is abstract, the claims in question must be held patent eligible.
Somewhere in that steaming pile there's a statute buried. But never
mind the legislature. The courts make the laws as they see fit, albeit
careful not to tread on things that the other governmental branches
give a fig about. Since all three branches agree that patents have
become passe as enforceable intellectual property, especially small
timers against large corporations, the fix is in. Gussying it up with
case law, especially in a way that affords ruling in an ad hoc manner,
caps it off as copasetic.
With that cleared up, the court parses the claims.
Alice's asserted claims are directed generally to the exchange of obligations between parties using a computer. The asserted patents, with the exception of minor differences, share a common specification. While the method, system, and media claims fall within different statutory categories, the form of the claim in this case does not change the patent eligibility analysis under § 101. CyberSource, 654 F.3d at 1374. "Regardless of what statutory category ("process, machine, manufacture, or composition of matter," . . . ) a claim's language is crafted to literally invoke, we look to the underlying invention for patent eligibility purposes." Id. "Labels are not determinative in § 101 inquiries . . . because the form of the claim is often an exercise in drafting." In re Maucorps, 609 F.2d 481, 485 (CCPA 1979) (internal citation omitted). Contrary to Alice's argument, therefore, the fact that computer systems are "machines" does not end the inquiry. Alappat, 33 F.3d at 1542 ("Because claim 15 is directed to a 'machine,' . . . [it] appears on its face to be directed to § 101 subject matter. This does not quite end the analysis, however, because the Board majority argues that the claimed subject matter falls within . . . the 'mathematical algorithm' exception."). "[T]he basic character of a process claim . . . is not changed by claiming only its performance by computers, or by claiming the process embodied in program instructions on a computer readable medium." CyberSource, 654 F.3d at 1375.
In distilling the bath water, the district court threw out the baby,
as would the dissent, the majority laments.
Because mere computer implementation cannot render an otherwise abstract idea patent eligible, see id. at 1374-75, the analysis here must consider whether the asserted claims (method, system, and media) are substantively directed to nothing more than a fundamental truth or disembodied concept without any limitation in the claims tying that idea to a specific application, see supra Part II.D.i. The district court looked past the details of the claims in characterizing them as being directed to the fundamental concept "of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk." CLS Bank, 768 F. Supp. 2d at 243. By doing so, the district court was able to treat the claims as encompassing nothing more than fundamental truths, much like the patent ineligible "abstract ideas" in Bilski, and this court's post-Bilski cases: CyberSource, Dealertrack, and Fort Properties. As explained above, however, ignoring claim limitations in order to abstract a process down to a fundamental truth is legally impermissible.4
4 The dissent engages in the same flawed analysis as the district court by allegedly "[s]tripp[ing the claims] of jargon" and creating a table of the "plain English translation" for each claim element. Dissent 5. It is impermissible for the court to rewrite the claims as it sees them. The invention is defined in the claims by the patentee, not the court. See 35 U.S.C. § 112.
Determining whether Alice's claims are directed to nothing more than a fundamental truth or disembodied concept requires this court to consider the scope and content of the claims. For the purpose of deciding patent eligibility at the district court, the parties agreed to a broad claim construction that was favorable to Alice. The district court concluded that each claim, including each of Alice's method claims, discussed below, requires computer implementation. See CLS Bank, 768 F. Supp. 2d at 236 ("CLS has agreed to a broad construction of terms favorable to Alice, and because the specification reveals a computer based invention, the Court can reasonably assume for present purposes that the terms 'shadow' credit and/or debit record and 'transaction' in the '479 Patent recite electronic implementation and a computer or an analogous electronic device.").
The patent specifications are consistent with the understanding that each asserted claim requires computer implementation.
Although computer implementation indicates that these claims would likely satisfy the "machine" prong of the machine-or-transformation test, see CyberSource, 654 F.3d at 1375 and Alappat, 33 F.3d at 1545, the mere fact of computer implementation alone does not resolve the patent eligibility question, see Dealertrack, 674 F.3d at 1333 ("Simply adding a 'computer aided' limitation to a claim covering an abstract concept, without more, is insufficient to render the claim patent eligible."); CyberSource, 654 F.3d at 1375. Indeed, almost every method in the Digital Age can be implemented on a specially-programmed computer. See, e.g., SiRF Tech., 601 F.3d at 1333 ("In order for the addition of a machine to impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations.").
In Bilski, CyberSource, Dealertrack, and Fort Properties ("the Bilski line of cases"), the Supreme Court or this court found some basis in the claims upon which to determine that they were directed to nothing more than patent ineligible abstract ideas. Unlike the Bilski line of cases, however, it is difficult to conclude that the computer limitations here do not play a significant part in the performance of the invention or that the claims are not limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties. The dissent criticizes the majority for failing to explain "why the specific computer implementation in this case brings the claims within patentable subject matter," Dissent 3, but this criticism is misplaced. The limitations of the claims as a whole, not just the computer implementation standing alone, are what place meaningful boundaries on the meaning of the claims in this case.
The asserted claims appear to cover the practical application of a business concept in a specific way, which requires computer implemented steps of exchanging obligations maintained at an exchange institution by creating electronically maintained shadow credit and shadow debit records, and particularly recite that such shadow credit and debit records be held independently of the exchange institution by a supervisory institution; that start-of-the-day balances be obtained from the exchange institution; that adjustments be made to the credit records based on only certain specified allowed transactions under the "adjusting" limitation; that such adjustments be made in chronological order; that at the end of the day, instructions be given to the exchange institution to reflect the adjustments made on the basis of the permitted transactions; and that such adjustments affect irrevocable, time invariant obligations placed on the exchange institution. '479 Patent col.65 ll.28-50. Transactions "that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time" are not permitted under the "adjusting" limitation, and do not result in any ultimate exchange of obligations in the INVENTICO system. Id. col.65 ll.36-43, col.24 l.59-col.25 l.2. The claim limitations can be characterized as being integral to the method, as "play[ing] a significant part in permitting the method to be performed," and as not being token post-solution activity. It is clear, moreover, that the limitations requiring specific "shadow" records leave broad room for other methods of using intermediaries to help consummate exchanges, whether with the aid of a computer or otherwise, and, thus, do not appear to preempt much in the way of innovation.
While the use of a machine in these limitations is less substantial or limiting than the industrial uses examined in Diehr (curing rubber) or Alappat (a rasterizer), the presence of these limitations prevents us from finding it manifestly evident that the claims are patent ineligible under § 101. See Research Corp., 627 F.3d at 868. In such circumstances, we must leave the question of validity to the other provisions of Title 35.
So, a qualified "we'll let this one pass this time" seal of
In dissent, Judge Prost would toe the plutocratic party line: down with any patents that smack of value via broad claims, or in the realm of finance, where the value is incalculable, at least to a judge.
The majority resists the Supreme Court's unanimous directive to apply the patentable subject matter test with more vigor. Worse yet, it creates an entirely new frame-work that in effect allows courts to avoid evaluating patent eligibility under § 101 whenever they so desire. I too find it difficult to answer the questions presented here with absolute certainty. Nonetheless, I believe that precedent and common sense counsel that the asserted patent claims are abstract ideas repackaged as methods and systems.
The majority has failed to follow the Supreme Court's instructions--not just in its holding, but more impor-tantly in its approach. The majority does not inquire whether the asserted claims include an inventive concept. Even more fundamentally, the majority questions whether the Supreme Court's abstract idea test is worka-ble at all. Maj. Op. 13-14. Based on this apprehension, I take it, the majority devises a new approach to subject matter patentability. We must now avoid deciding a § 101 case unless unpatentability is "manifestly evident." Maj. Op. 20.
I would be more empathetic if the majority's approach was based on a case-specific determination, made upon the application of the Supreme Court's abstract idea test to the asserted claims. As mentioned, however, the majority does not even attempt to inquire whether the claims disclose anything inventive. The bulk of the analysis focuses on the fact that the claims require "computer implementation," which the majority itself deems insufficient to pass muster under § 101. Maj. Op. 21-25. Nor is there any explanation for why the specific computer implementation in this case brings the claims within patentable subject matter. See also infra Part III. The majority merely posits that the additional limitations in the claims "can be characterized as being integral to the [invention]," but it does not explain whether they should be characterized as such, and what "integral" means in the context of § 101 in the first place. Maj. Op. 27.
Even if we were to punt the subject matter issue whenever it is difficult, we would not have any justifica-tion for reversing the district court in this case - especially on the method claims. The basic idea behind the claimed invention is the use of an intermediary in a financial transaction. At its most basic form, in a trans-action between parties 'A' and 'B,' a middle-man collects funds from 'A' but will not pass them to 'B' until 'B' has also performed. In more complicated settings, the inter-mediary makes intelligent choices in selecting the parties to the transaction in a way to minimize or hedge the transaction risk. In any event, this basic idea of "credit intermediation" is not just abstract; it is also literally ancient. See Temin, Peter, Financial Intermediation in the Early Roman Empire (November 2002), MIT Depart-ment of Economics Working Paper No. 02-39, available at http://ssrn.com/abstract=348103 or http://dx.doi.org/10.21 39/ssrn.348103 (exploring the use of financial intermediaries in the Early Roman Empire).
So where is the invention? The majority states that it is not the computer implementation, but "the claims as a whole" that make the invention patentable. Maj. Op. at 26. But setting any need for computer implementation aside, there is nothing in the method steps themselves that brings the invention within patentable subject mat-ter. Stripped of jargon, representative method claim 33 simply breaks down the idea of a financial intermediary into four steps: (a) creating a debit and credit account for each party, (b) checking the account balances in the morning, (c) adjusting the account balances through the day, and (d) paying the parties at the end of the day if both parties have performed.1 The claim in effect presents an abstract idea and then says "apply it." That is not enough. Prometheus, 132 S. Ct. at 1294 ("[T]o transform an unpatentable law of nature into a patent-eligible application of such a law, one must do more than simply state the law of nature while adding the words 'apply it.'").
The majority objects that "[i]t is impermissible for the court to rewrite claims as it sees them." Maj. Op. 23 n.4. But that is precisely what courts do in claim construction everyday. Perhaps what the majority actually means is that the plain English translation in Table 1 somehow glosses over a limitation that would otherwise narrow the claims to something that is non-abstract. One would wish that the majority had not kept that limitation a secret. The only hint appears where the majority points to the phrase "shadow records," as if that alone transmutes the abstract idea of the claims into patentable subject matter. Maj. Op. 27. But the claims use "shadow" to simply define an account that is used to track a party's payments (the account is a shadow of the party's performance). That is not a limiting feature at all; any financial intermediation would in one way or another use a "shadow" account. Therefore, the representative method claim does not limit the method steps in a way that the Supreme Court considers to be meaningful. It merely recites the steps of performing as an intermediary in a financial transaction, which is an abstract idea, nothing more and nothing less. Cf. Bilski, 130 S. Ct. at 3231.
That leaves determining whether the computer implementation - assuming one is required by the method claims - makes the invention patentable. It does not. As the majority itself notes, "the mere fact of computer implementation alone does not resolve the patent eligibility question." Maj. Op. 25. Nor is there anything about the use of computers in the method claims in this case that brings them within patentable subject matter.
The connection between the basic idea behind the claimed invention and the use of computers is not any stronger here than the relationship between the binary conversion system and the shift register in Benson, or the credit application system and computers in Dealertrack. Indeed, unlike in Benson and Dealertrack, the representative method claim does not even recite the use of a computer. And while some of the dependent claims recite computers, the specification shows that the use of computers is simply incidental. See also infra Part III. As I see it, therefore, the method claims do not present a difficult case. But district courts and litigants will now face a difficult task in deciphering the law and harmonizing precedent: What is it that sets Benson, Bilski, and Prometheus--and Dealertrack - apart from this case, and what legal principle justifies responding to a unanimous Supreme Court decision against patentability with even a stricter subject matter standard? I do not know, and I cannot find the answer in the majority opinion.
Now that the limits of patent-eligibility have been cleared up for the umpteenth time, legal scholars may rest assured that this far from the final word, however absurd it seems that the courts (or Congress) cannot deem to delineate the boundaries of what a patent may claim. What a shame. On with the guessing game.
Posted by Patent Hawk at July 9, 2012 12:11 PM | § 101