Recipe for a contentious Federal Circuit decision: empanel two judges who have different understandings of the patent-eligibility of computer-related inventions, sprinkle in a claim or two that could be viewed as a pure business method, let simmer. Judge Lourie and Chief Judge Rader are at it again, carrying out their ongoing dialog that began in CLS Bank Int'l v. Alice Corp and continued in Ultramercial Inc. v. Hulu LLC. In the former case, they set forth different patentable subject matter eligibility tests, and in the latter case they found themselves ultimately agreeing on the disposition of the claims with respect to 35 U.S.C. § 101, if not the rationale to reach that conclusion. Here, however, they apply disparate reasoning to come to different conclusions.
On Guidewire's motion for summary judgment, the District Court for the District of Delaware held all claims of Accenture's U.S. Patent No. 7,013,284 invalid under § 101. The District Court concluded that the patent was "directed to concepts for organizing data rather than to specific devices or systems, and limiting the claims to the insurance industry does not specify the claims sufficiently to allow for their survival." The District Court set forth this holding despite some of the claims being system claims. Accenture appealed for claims 1-7, the system claims, but not for claims 8-22, similar method claims. Judge Lourie, joined by Judge Reyna, affirmed the District Court. Chief Judge Rader dissented.
Claim 1 recites:
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 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 in communication with the insurance transaction database configured for providing information relating to the insurance transaction, said client component enabling access by an assigned claim handler to a plurality of tasks that achieve an insurance related goal upon completion; and a server component in communication with the client component, the transaction database and the task library database, the server component including an event processor, a task engine and a task assistant; wherein the event processor is triggered by application events associated with a change in the information, and sends an event trigger to the task engine; wherein in response to the event trigger, the task engine identifies rules in the task library database associated with the event and applies the information to the identified rules to determine the tasks to be completed, and populates on a task assistant the determined tasks to be completed, wherein the task assistant transmits the determined tasks to the client component.
In a nutshell, the claims require four components: an insurance transaction database, a task library database, a client, and a server. The client accesses the insurance transaction database to ultimately "achieve an insurance related goal." The server communicates with the client and the two databases, responds to changes in the information stored in the database, responsively identifies associated rules in the task library database, and transmits tasks to be completed to the client.
Notably, the claims as written do not specify whether these four components are hardware, software, or some combination thereof. Thus, given a literal interpretation, the claims could read on a pure software system comprising executing processes and data.
Judge Lourie began his discussion of the relevant law by referring to the en banc plurality opinion in CLS Bank, and more specifically, his own "inventive concept" analysis therein. This analysis requires, for a claim that encompasses an abstract idea, that one "identify and define whatever fundamental concept appears wrapped up in the claim so that the subsequent analytical steps can proceed on a consistent footing," and then evaluate the balance of the claim "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."
Judge Lourie acknowledged that this analysis was set forth in a plurality opinion. However, he focused on the fact that a majority of the en banc panel agreed that, in CLS Bank, the method and system claim rose or fell together because "the system claim essentially implemented the process of the method claim on a general purpose computer" and that the hardware limitations were not meaningful. Thus, he appears to believe that combining the analysis of method and system claims in similar circumstances has the weight of precedent in the Federal Circuit.
In a procedural twist, Judge Lourie noted that the District Court's judgment against the patent-eligibility of Accenture's method claims was not under appeal, and therefore was final. Based on this conclusion, and the similarity of the system and method claims, he further concluded that the system claims must also be patent-ineligible because "the system claims offer no meaningful limitations beyond the method claims that have been held patent-ineligible and because, when considered on their own, under [Mayo Collaborative Servs. v. Prometheus Labs., Inc.,] and our plurality opinion in CLS Bank, they fail to pass muster."
In his substantive analysis of the claims, Judge Lourie compared the limitations of Accenture's system and method claims "to determine what limitations overlap, then identify the system claim's additional limitations." He noted that system claim 1 did explicitly recite some limitations not in method claim 8, such as an insurance claim folder, a task library database, a server component, and a task engine, but that "these software components are all present in the method claims, albeit without a specific reference to those components by name." Indeed, these components appear to be defined functionally in claim 8.
Further, Judge Lourie noted that claim 1 did not recite specific computer hardware components, and was a mere rewriting of the limitations of method claim 8 with a preamble indicating that the claim was directed to a system. Under his interpretation of CLS Bank and Prometheus, such a claim fails to lift any abstract idea therein to the level of being patentable subject matter. Further, he wrote that the computer hardware described in the specification "is merely composed of generic computer components that would be present in any general purpose computer." Thus, he implied that, even if generic computer structure were added to claim 1, these additional limitations would not be meaningful, and the claim would still fail under § 101.
Judge Lourie continued by addressing the patent-eligibility of the system claims on their own, regardless of the disposition of the associated method claims. He found that they fall short under this analysis as well. Accenture argued that claim 1 "narrows [the idea of generating tasks for insurance claim processing] through its recitation of . . . an insurance transaction database, a task library database, a client component, and a server component, which includes an event processor, a task engine, and a task assistant." Accenture further asserted that the "complexity and detail of the specification" were evidence that that invention advanced the field of computer software, and was not merely an abstract idea.
Applying his "inventive concept" analysis from CLS Bank, Judge Lourie identified the abstract idea of claim 1 as "generating tasks based on rules to be completed upon the occurrence of an event." Then, he considered whether the claim recites any additional substantive limitations to narrow this idea so that the claim doesn't encompass the full scope of the idea. He found that if even the claim were limited to being applied in a computing environment in the insurance industry, these restrictions were mere field of use limitations, and would not prevent the claim from preempting the abstract idea. Judge Lourie also rejected Accenture's argument that the complexity disclosed in the specification was relevant, as this complexity, in Judge Lourie's view, was not reflected in the claims.
In comparing claim 1 to the claims he found patent-ineligible in CLS Bank and those he found patent-eligible in Ultramercial, Judge Lourie found Accenture's claim 1 similar to those in CLS Bank. Particularly, the system claim in CLS Bank was also directed to a general purpose computer adjusting values stored in a "database" and then generating instructions. On the other hand, Judge Lourie posited that the claim in Ultramercial contained "additional limitations from the abstract idea of advertising as currency, such as limiting the transaction to an Internet website, offering free access conditioned on viewing a sponsor message, and only applying to a media product." Further, Judge Lourie noted that, in Ultramercial, the Federal Circuit reversed a pre-answer dismissal, whereas in the present case the Court was considering a post-claim-construction grant of summary judgment. Thus, the burden on the moving party (in both cases, the defendant) was greater in Ultramercial.
In dissent, Chief Judge Rader took issue with the majority's reliance on CLS Bank, as he believes that that case lacks precedential value. He pointed out that even though eight of the ten judges on the CLS Bank panel held that the method and system claims in that case rose or fell together, they did not state that all associated system and method claims must share the same fate. Further, two judges reached this conclusion merely due to the procedural posture and stipulations of the case.
On the substance of the case, Chief Judge Rader would have found the system claims patent eligible based on the specific combination of elements in claim 1. He faulted the majority for removing these limitations when boiling down the invention to merely "generating tasks based on rules to be completed upon the occurrence of an event." Chief Judge Rader provided several ways in which one could generate such tasks without infringing Accenture's claims, such as using a different number of databases or a different database structure. He also suggested that the claim required specific computer components such that "a human performing the claimed steps through a combination of physical or mental steps likewise does not infringe."
In comparing this case to CLS Bank and Ultramercial, can we provide any practical recommendations to those involved on patent prosecution or litigation? While the landscape of § 101 remains mired in quicksand, a few solid patches of earth are beginning to emerge.
1. Procedural posture matters. It is possible that Judge Lourie found the claims in Ultramercial patent-eligible mainly because they were considered on an early motion to dismiss, and therefore would need to be reviewed in the light most favorable to the patentee.
2. The Federal Circuit continues to take a dim view on claims that recite disembodied functionality, even if couched in the language of a system or device. Despite Chief Judge Rader's belief to the contrary, in my view Accenture's claim 1 could be performed as a series of mental or paper-and-pencil calculations. There is common thread throughout Bilski v. Kappos and Prometheus in the Supreme Court, as well as RCT v. Microsoft, CLS Bank, Ultramercial, and this case in the Federal Circuit. Notably, claims reciting disembodied functionality are more likely to be found patent-ineligible, but claims with limitations (not just a preamble) tying such functionality to physical devices or components are more likely to be found patent-eligible. Is the machine or transformation test making a quiet return?
3. In the wake of CLS Bank, some commentators have advocated drafting system and method claims with varied limitations and breadth, so that they are not lumped together for the purposes of a § 101 analysis. While this approach is commendable, it isn't a silver bullet. In this case, the majority deemphasized the differences between the limitations of the system and method claims. In CLS Bank, a number of claims across four related patents were lumped together despite having considerably diverse limitations.
4. Judge Lourie's inventive concept analysis, which was ultimately derived from Justice Breyer's opinion in Prometheus, remains unsettling in its subjectivity. A court must "identify and define whatever fundamental concept appears wrapped up in the claim." However, few guidelines for doing so exist. Thus, two judges could easily obtain two different variations of such an inventive concept for the same claim, one leading to the conclusion that the claim meets the requirements of § 101, the other not. In contrast, Chief Judge Rader advocates consideration of the plain language of claims, including all recited limitations.
5. Are § 101 appeals to the Federal Circuit likely to be determined by the luck of your panel draw? Ending up with Judges Rader and Newman may result in a more favorable outcome to the patentee than arguing in front of, as one example, Judges Lourie and Reyna. The existence of such a clear intra-circuit split, at best, limits the legal certainty of subject matter eligibility on both philosophical and practical levels.
Accenture Global Services, GmbH v. Guidewire Software, Inc. (Fed. Cir. 2013)
Panel: Chief Judge Rader and Circuit Judges Lourie and Reyna
Opinion by Chief Judge Rader; dissenting opinion by Circuit Judge Lourie