On May 10, 2013, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion in CLS Bank Intl. and CLS Services v. Alice Corporation Pty. Ltd. (No. 2011-1301, slip op. (Fed. Cir. May 10, 2013)) confronting the hot topic in patent law of patentable subject matter as applied to computer software. After the Supreme Court of the United States decided Bilski v. Kappos (130 S.Ct. 3218 (2010)) in 2010 rejecting the machine-or-transformation test (adopted by the CAFC prior to Bilski) as the sole test for patentable subject matter, the patent law community anxiously waited to see how the CAFC would approach patentable subject matter. In CLS Bank Intl.’s 134-page behemoth of a decision, the CAFC attempted to explain how patentable subject matter should be decided in cases involving computer software. The result was a per curiam opinion with a concurring opinion joined by only five out of the ten judges presiding, multiple dissents-in-part, a single complete dissent, and a reflection by Chief Justice Rader concerning patentable subject matter decisions made during his tenure on the CAFC. So how should we determine what computer software is patent-eligible?
Background of the Case
CLS Bank Intl. involved four different patents held by Alice Corporation Pty. Ltd. (“Alice Corp”) relating 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.” CLS Bank Intl., No. 2011-1301. The United States District Court for the District of Columbia (“District Court”) granted summary judgment holding that certain claims of Alice Corp’s U.S. Patents 5,970,479, 6,912,510, 7,149,720, and 7,725,375 were invalid under 35 U.S.C. § 101 (the statute relating to patentable subject matter). Alice Corp. appealed the District Court’s decision to the CAFC. On July 9, 2012 a panel of the CAFC reversed the District Court’s holding, finding that all of the claims at issue were patent eligible under § 101. On October 9, 2012, the CAFC granted CLS Bank Intl.’s petition for rehearing en banc.
Decision of the Court
In the per curiam opinion, the CAFC merely stated the holdings of the Court. The per curiam opinion affirmed the District Court’s holding that “the asserted method and computer-readable media claims of Alice Corp’s U.S. Patents were not directed to eligible subject matter under 35 U.S.C. § 101.” (Id.) As to the asserted system claims of Alice Corp’s U.S. Patents, an equally divided court affirmed the District Court’s holding that the claims were not directed to eligible subject matter under 35 U.S.C. § 101. The real excitement of the decision lies in the multiple concurring and dissenting opinions, as well as Chief Justice Rader’s reflections.
The largest concurring opinion, written by Judge Lourie, that the Court could muster was joined by five of the ten judges delivering the decision. The opinion reiterated the approach to determining whether subject matter is patentable is to first determine whether the subject matter falls within one of the four classes defined by 35 U.S.C. § 101 (process, machine, manufacture, or composition of matter) and, if it falls into one of these classes, then determine if it is excluded by one of the judicial exceptions to subject-matter eligibility (abstract ideas, laws of nature, and physical phenomena).
If a court determines that the subject matter is included within the judicial exceptions, additional analysis must be applied. At this point the analysis turns to whether there is any additional substantive limitations that narrow, confine, or otherwise tie down the claim so that the subject matter does not cover the full abstract idea itself. See Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289, 1300 (2012). The opinion recognized that this additional limitation arises from a genuine human contribution to the claimed subject matter (“inventive concept”). In addition, the Court stated that the genuine human contribution needed to be more than trivial as this type of contribution did not provide enough to prevent preemption of all uses of the fundamental concept in a field.
The opinion used this approach in deciding the patent-eligibility of the subject matter of CLS Bank’s patents. In holding the challenged patent claims ineligible, the Court made clear that merely adding generic computer functionality to increase speed and efficiency to an abstract concept does not provide a meaningful limitation necessary for patentable subject matter. The opinion also recognized that the Beauregard claims aimed at computer readable storage media presented only substantive limitations pertaining to the method steps of the program code embodied in the medium rather than the computer readable storage media itself, making it equivalent with the other method claims that did not have meaningful limitations.
The additional concurring opinions questioned the application of 35 U.S.C. § 101 by Judge Lourie’s opinion, arguing that the opinion had worked to broaden what is excluded from patentable subject matter under the judicial exceptions and even requiring a novelty requirement that had never existed before under § 101. The dissent added the argument that the rest of the Court had chosen to ignore the record of the District Court, as an appeal is only intended to be a “review.”
Where This Leaves Patent Law as Applied to Software Patents
It is important to recognize that none of the opinions, with the exception of the per curiam opinion that merely stated that the subject matter was ineligible for patent protection, received support from a majority of the judges. Therefore, there is no controlling law coming from this decision past the finding that the claims in question were not patentable.
What this decision provides us with is guidance of what courts and the United States Patent Office may look at in the future for determining if subject matter is patent-eligible. Judge Lourie’s opinion provided a method of which to apply for evaluating applications involving the judicially created exceptions to 35 U.S.C. § 101 (noted above). In particular for software patents, the opinion made clear that merely embodying an abstract idea in a computer application is not enough for the invention to be within patentable subject matter; there must be some additional genuine human contribution that limits the application from covering the entire abstract idea.
-Jeffrey S. Marlink, Patent Attorney