May 16, 2013
Down the Rabbit Hole
Alice, a corporation from Down Under, got a family of system and method patents that broadly claimed computerizing escrow as a way of mitigating settlement risk. CLS got spooked and got a summary declaratory judgment of invalidity via §101 without the judge bothering to construe the claims. In an en banc appeal, the CAFC, in affirmance, displays a profound ignorance of the law with a stunning absence of cogency.
CLS v. Alice Corporation (CAFC 2011-1301) en banc
Simple legal terminology takes a beating here. The seriatim opinions (a series written by individual judges, as singular consensus is lacking) in this case is instead labeled per curiam, which is typically a short unanimous opinion that does not identify the opinion's author.
While Chief Judge Rader is correct to note that no single opinion issued today commands a majority, seven of the ten members, a majority, of this en banc court have agreed that the method and computer-readable medium claims before us fail to recite patent-eligible subject matter. In addition, eight judges, a majority, have concluded that the particular method, medium, and system claims at issue in this case should rise or fall together in the §101 analysis.
In essence, there is no consensus in how to interpret §101.
Judge Lourie, with Dyk, Prost, Reyna and Wallach along, points out the self-contradictory nature of §101, in being both a broad grant by Congress, while restricted by the courts. Lourie admits that the court has a tenuous grasp on technology with regard to patentability, particularly computers.
The root problem, if there is one, is the CAFC's evisceration of §112 ¶2, which requires definite claims. If the claims are as broad as some judges opine, they should be unpatentable for indefiniteness. But then, the difference between being broad and being abstract is beyond the grasp of the CAFC bench.
"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 (2006). Short and unadorned, § 101 appears deceptively simple on its face, yet its proper application to computer-implemented inventions and in various other fields of technology has long vexed this and other courts.
The statute sets forth four broadly stated categories of patent-eligible subject matter: processes, machines, manufactures, and compositions of matter. As the Supreme Court has explained, Congress intended that the statutory categories would be broad and inclusive to best serve the patent system's constitutional objective of encouraging innovation. See Diamond v. Chakrabarty, 447 U.S. 303, 308-09 (1980) ("In choosing such expansive terms as 'manufacture' and 'composition of matter,' modified by the comprehensive 'any,' Congress plainly contemplated that the patent laws would be given wide scope."); Bilski, 130 S. Ct. at 3225 ("Congress took this permissive approach to patent eligibility to ensure that 'ingenuity should receive a liberal encouragement.'" (quoting Chakrabarty, 447 U.S. at 308)).
It is also important to recognize that § 101, while far-reaching, only addresses patent eligibility, not overall patentability. The statute directs that an invention that falls within one of its four enumerated categories "may" qualify for a patent; thus, inventions that are patent eligible are not necessarily patentable. As § 101 itself explains, the ultimate question of patentability turns on whether, in addition to presenting a patent-eligible invention, the inventor also satisfies "the conditions and requirements of this title," namely, the novelty, nonobviousness, and disclosure requirements of 35 U.S.C. §§ 102, 103, and 112, among others. See 35 U.S.C. § 101. Congress's broad approach to subject-matter eligibility ensures that the patent office doors remain open to most inventions, but even so, those that gain entry still must surmount various substantive and procedural hurdles that stand between patent eligibility and a valid patent. See Diamond v. Diehr, 450 U.S. 175, 191 (1981).
While the categories of patent-eligible subject matter recited in § 101 are broad, their scope is limited by three important judicially created exceptions. "[L]aws of nature, natural phenomena, and abstract ideas" are excluded from patent eligibility, id. at 185, because such fundamental discoveries represent "the basic tools of scientific and technological work," Gottschalk v. Benson, 409 U.S. 63, 67 (1972). Thus, even inventions that fit within one or more of the statutory categories are not patent eligible if drawn to a law of nature, a natural phenomenon, or an abstract idea. The underlying concern is that patents covering such elemental concepts would reach too far and claim too much, on balance obstructing rather than catalyzing innovation. But danger also lies in applying the judicial exceptions too aggressively because "all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012). Taken too far, the exceptions could swallow patent law entirely.
Accordingly, the basic steps in a patent-eligibility analysis can be summarized as follows. We must first ask whether the claimed invention is a process, machine, manufacture, or composition of matter. If not, the claim is ineligible under § 101. If the invention falls within one of the statutory categories, we must then determine whether any of the three judicial exceptions nonetheless bars such a claim--is the claim drawn to a patent-eligible law of nature, natural phenomenon, or abstract idea? If so, the claim is not patent eligible. Only claims that pass both inquiries satisfy § 101.
While simple enough to state, the patent-eligibility test has proven quite difficult to apply. The difficulty lies in consistently and predictably differentiating between, on the one hand, claims that would tie up laws of nature, natural phenomena, or abstract ideas, and, on the other, claims that merely "embody, use, reflect, rest upon, or apply" those fundamental tools. Mayo, 132 S. Ct. at 1293. For example, deciding whether or not a particular claim is abstract can feel subjective and unsystematic, and the debate often trends toward the metaphysical, littered with unhelpful analogies and generalizations. What is needed is a consistent, cohesive, and accessible approach to the § 101 analysis--a framework that will provide guidance and predictability for patent applicants and examiners, litigants, and the courts. As set forth below, the Supreme Court's foundational § 101 jurisprudence offers the guideposts to such a system, one that turns primarily on the practical likelihood of a claim preempting a fundamental concept. We would adopt this approach to address the abstractness of the specific computer-implemented inventions presented in this case, but it might also inform patent-eligibility inquiries arising in other contexts.
The claims go to a particular and specific implementation; not really broad at all. But the gallows is set, so the patents must swing. The root problem is that the patents are simply too valuable to be held by some pipsqueak company in Oz.
[U]pholding Alice's claims to methods of financial intermediation "would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea."
The basic confusion over computerization is laughable, if not pathetic for the court's misapprehension. As if software were metaphorical voodoo, Lourie lays out how its implementation creates an abstraction when written as a patent claim.
[C]omputers that have routinely been adapted by software consisting of abstract ideas, and claimed as such, to do all sorts of tasks that formerly were performed by humans. And 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.
That is what we face when we have a series of claims to abstract methods and computers fitted to carry out those methods. We are not here faced with a computer per se. Such are surely patent-eligible machines. We are faced with abstract methods coupled with computers adapted to perform those methods.
Chief Judge Rader's opinion, joined by judges Linn, Moore, and O'Malley, is unenlightening. Rader's peruses the legislative history of the statute to no effect. His analysis is vapid.
The relevant inquiry must be whether a claim includes meaningful limitations restricting it to an application, rather than merely an abstract idea.
And, we know that, even if a claim does not wholly pre-empt an abstract idea, it still will not be limited meaningfully if it contains only insignificant or token preor post-solution activity--such as identifying a relevant audience, a category of use, field of use, or technological environment.
[T]he fact that a claim is limited by a tie to a computer is an important indication of patent eligibility.
The 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.
Rader fundamentally misstates how software works. The ignorance is shocking.
This court long ago recognized that a computer programmed to perform a specific function is a new machine with individualized circuitry created and used by the operation of the software.
In reality, software simply directs a general-purpose algorithmic machine to a particular set of functions.
A telling footnote that goes to the heart of the issue is nonsensical.
We must disagree with Judge Lourie that a computer must do something other than what a computer does before it may be considered a patent-eligible invention. See Lourie Op. at 27 ("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."). Everything done by a computer can be done by a human. Requiring a computer to do something that a human could not would mean that computer implementation could never produce patent eligibility. If a computer can do what a human can in a better, specifically limited way, it could be patent eligible. Indeed, even an increase in speed alone may be sufficient to result in a meaningful limitation; if a computer can perform a process that would take a human an entire lifetime, a claim covering that solution should be sufficiently limited to be patent eligible.
The fact is that computer software, as a matter of course, does things that a human cannot. (Animation (CGI) is one example. Certain effects are achieved in movies that are practically impossible to generate otherwise. Any film buff knows this to be the case, especially considering science fiction movie "special effects".) The issue properly addressed here is not whether software is patent-eligible, but whether automation is itself conceptually new. Doing something on a computer that can be done by hand, no matter how tedious, is not patentable if it has been done. But that is a prior art invalidity question, not §101.
Although joined by Rader, Linn and O'Malley, Judge Moore has different take, finding the system claims patent eligible. She does appreciate the magnitude of inept jurisprudence on the CAFC bench.
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. The Supreme Court has taken a number of our recent decisions and, in each instance, concluded that the claims at issue were not patent-eligible. See Bilski, Prometheus, Myriad (under consideration). Today, several of my colleagues would take that precedent significantly further, lumping together the asserted method, media, and system claims, and holding that they are all patent-ineligible under § 101. 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. And let's be clear: if 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.
To get to their conclusion, my colleagues trample upon a mountain of precedent that requires us to evaluate each claim as a whole when analyzing validity.
Judge Newman surveys the wreckage.
The ascendance of section 101 as an independent source of litigation, separate from the merits of patentability, is a new uncertainty for inventors. The court, now rehearing this case en banc, hoped to ameliorate this uncertainty by providing objective standards for section 101 patent-eligibility. Instead we have propounded at least three incompatible standards, devoid of consensus, serving simply to add to the unreliability and cost of the system of patents as an incentive for innovation. With today's judicial deadlock, the only assurance is that any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.
Reliable application of legal principles underlies the economic incentive purpose of patent law, in turn implementing the benefits to the public of technology-based advances, and the benefits to the nation of industrial activity, employment, and economic growth. Today's irresolution concerning section 101 affects not only this court and the trial courts, but also the PTO examiners and agency tribunals, and all who invent and invest in new technology. The uncertainty of administrative and judicial outcome and the high cost of resolution are a disincentive to both innovators and competitors.
Newman then creates a wish list that has no fulfillment. One item - that "experimental use of patented information" not be barred - has nothing to do with this case; instead going to the Myriad opinion, where the CAFC let discovered DNA sequences be treated as patentable. Newman's wish is expressly against the law (§ 271: "whoever without authority makes, uses...").
A scolding dissent by Judges Linn and O'Malley (who had otherwise joined in much of the gibberish).
The method, media, and system claims we review today must rise and fall together; either they are all patent eligible or they are not. This is so, not because, as Judge Lourie's opinion concludes, they are all tainted by reference to the same abstract concept, but because the record we are presented makes clear that they are grounded by the same meaningful limitations that render them patent eligible.
The district court jumped the gun to kill the claims.
The summary judgment process occurred prior to construction of the asserted claims and their attendant limitations. Indeed, the court considered and granted CLS's summary judgment motion before ever conducting a hearing pursuant to Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996), and even before briefing on claim construction. As such, no determination has ever been made regarding how one of skill in the art would understand the claims as of the date of issuance. And, no careful assessment of the intrinsic record or prosecution history has ever occurred; much of this was never even made a part of the trial record.
Our colleagues ignore the record of the lower court proceedings and the stipulations by which CLS agrees it must be bound... [The other judges construe the claims ridiculously broadly to reach their conclusions.] None of those judges explains how the record supports the claim constructions in which they engage, however... And, they summarily reject the trial court's assumption that the method claims require the same computer implementation as the system claims.
Lourie is a special object of contempt for Linn and O'Malley.
Judge Lourie not only divorces his analysis from the record, he turns it on its head. [H]e ignores the substance of the stipulations and assumptions upon which the proceedings below were predicated. He then takes it upon himself to construe the claims, giving the method claims their broadest possible interpretation in the process. Indeed, Judge Lourie begins, not with the record, or even a proper exercise in claim construction, but with identification of what he finds to be the fundamental concept "wrapped up in the claim."
The denouement in this dissent:
The answer is not to rewrite the law by broadening the abstract ideas exception to § 101, especially if the only way to do so is to ignore the limitations in the claims actually before us.
In the finale, Chief Judge Rader indulges in nostalgic sentiment of 25 years on the bench, with dismay over the cacophonous discord here. As Chief Judge his primary responsibility is to sustain the court's respect of the law, by harnessing the collective experience of those with whom he shares the bench so as to reasonably interpret statute, and so provide guidance that affords consistency. Instead, this case is a pinnacle of failure for the CAFC, and especially for Chief Judge Rader, in exposing his incompetence in every facet (logician, legal scholar, leader).
In the end, a singular realization emerges: the CAFC itself seeing that its inability to establishing a meaningful consensus is a disgrace with a high cost.
Patents are a quite crooked game in this country, readily subject to judicial bias and caprice, always in the service of plutocracy. This case goes a long way in solidifying that impression.
Posted by Patent Hawk at May 16, 2013 10:17 PM | § 101