CLS Bank Int'l v. Alice Corp. (Fed. Cir. 2013) (en banc) -- Chief Judge Rader's Concurrence-in-part and Dissent-in-part

Federal Circuit SealA previous post presented the background of this case, as well as Judge Lourie's plurality concurrence.  As noted in that post, Alice's claimed inventions involved the reduction of settlement risk using a third-party intermediary.  Despite the claims being of various statutory classes, including process, article of manufacture, and machine, Judge Lourie found that they were all directed to patent-ineligible abstract ideas, and thus they failed to meet the requirements of 35 U.S.C. § 101.

This post continues the story of Alice by discussing Chief Judge Rader's concurrence-in-part and dissent-in-part.

CLSChief Judge Rader, joined by Judges Linn, Moore, and O'Malley, presented the lengthiest opinion in opposition to Judge Lourie.  Chief Judge Rader and Judge Moore would have affirmed the patent-ineligibility of Alice's method and computer-readable medium (CRM) claims, but came to this conclusion based on different reasoning than Judge Lourie.  On the other hand, Chief Judge Rader and Judge Moore believed that the system claims passed the § 101 bar.  Judges Linn and O'Malley would have held that all claims were patent-eligible.  Based on the style with which this opinion was drafted, it may have been in competition with Judge Lourie's concurrence for a majority of the en banc panel.

Throughout, Chief Judge Rader expounded the broad language of § 101, as well as for the separation of the §§ 101, 102, and 103 patentability analyses, which he accused Judge Lourie of conflating.  In doing so, he provided an overview of the legislative history, from the 1952 Patent Act, of the modern interpretation of § 101.  He further pointed to both statements of the authors of the 1952 Act, as well as subsequent case law and commentaries, that indicate that the § 101 analysis is not an "inventiveness" analysis, and that such an analysis instead falls within the ambit of § 103.  In a rebuttal of Judge Lourie's "discovery vs. invention" dichotomy, Chief Judge Rader pointed to the language of 35 U.S.C. § 100(a), which states that "[t]he term 'invention' means invention or discovery."

Regarding laws of nature, natural phenomena, and abstract ideas, he advocated restraint when applying these judicial exceptions so that they do not swallow the statutory language of § 101.  He also emphasized that claims pass the § 101 bar if they recite the application of such an exception, such as a practical use of an abstract idea.  As opposed to Judge Lourie's piecemeal approach, Chief Judge Rader advocated that determining whether this is the case for a given claim requires consideration of the claim as a whole.

Citing support in Diehr and Prometheus, he wrote:

Any 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.

Indeed, he strongly implied that Judge Lourie's approach could be used to render virtually any claim abstract.

He then stated that "[t]he relevant inquiry must be whether a claim includes meaningful limitations restricting it to an application, rather than merely an abstract idea," and proposed six factors to consider when undertaking this analysis:

•  First, "a claim is not meaningfully limited if it merely describes an abstract idea or simply adds 'apply it.' "

•  Second, "if a claim covers all practical applications of an abstract idea, it is not meaningfully limited."

•  Third, "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 pre- or post-solution activity -- such as identifying a relevant audience, a category of use, field of use, or technological environment."

•  Fourth, "a claim is not meaningfully limited if its purported limitations provide no real direction, cover all possible ways to achieve the provided result, or are overly-generalized."

•  Fifth, "a claim is meaningfully limited if it requires a particular machine implementing a process or a particular transformation of matter."

•  Sixth, "[a] claim also will be limited meaningfully when, in addition to the abstract idea, the claim recites added limitations" that are "central to the solution itself."

Remarkably, these factors overlap to a large degree with the four factors of Judge Lourie's "inventive analysis."  The main difference between the two is that Judge Lourie suggested considering whether the human contribution to the claim amounts "to more than well-understood, routine, conventional activity previously engaged in by researchers in the field."  Chief Judge Rader would eschew separate consideration of such a human contribution, and instead consider each claim as a whole.  However, the inclusion of the Chief Judge's sixth factor may make this consideration more difficult to achieve in practice.

His factors also reject the notion that there is an inventiveness or ingenuity requirement component in the § 101 analysis.  Instead, he stated that "[t]he eligibility inquiry is not an inquiry into obviousness, novelty, enablement, or any other patent law concept . . . [e]ach section plays a different role and no one section is more important than any other."  Unlike Judge Lourie, Chief Judge Rader would read the "inventive concept" language of Prometheus as:

[S]horthand for its inquiry into whether implementing the abstract idea in the context of the claimed invention inherently requires the recited steps.  Thus, in Prometheus, the Supreme Court recognized that the additional steps were those that anyone wanting to use the natural law would necessarily use.  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.  (Internal citation omitted.)

He went on to discuss how computer-specific limitations should be considered in light of these factors.  Invoking shades of the Bilski machine or transformation test, he wrote:

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.  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.  (Emphasis in original.)

While Judge Lourie seemed to believe that adding general purpose computer components (e.g., a processor, data storage, a transceiver, etc.) to a claim failed to provide meaningful limitations, Chief Judge Rader disagreed.  In fact, he quoted the language of In re Alappat, stating that "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."

Applying his reasoning to the system claims, the Chief Judge found all of them patent-eligible under § 101.  Acknowledging that issue before the Federal Circuit was whether to grant CLS's motion for summary judgment, he found that there was a lack of clear and convincing evidence that the claims were directed to an abstract idea.  Instead, relying on the reasoning of Bilski, he posited that "[i]f tying a method to a machine can be an important indication of patent-eligibility, it would seem that a claim embodying the machine itself, with all its structural and functional limitations, would rarely, if ever, be an abstract idea."  He also noted claiming an invention to include "circuitry, transistors, capacitors, and other tangible electronic components," or "electronically programmable machines that can fit in the palm of your hand," makes no difference on the abstractness of the claim.

Specifically, the representative system claim included "at least four separate structural components:  a computer, a first party device, a data storage unit, and a communications controller coupled via machine components to the computer and the first party device."  Chief Judge Rader found that, given this recited structure as well as further structural limitations of the invention's configuration, labeling the claim as abstract would defy the meaning of that term.  Particularly, he noted that "someone can use an escrow arrangement in many other applications, without computer systems, and even with computers but in other ways without infringing the claims," and that the recited structure was not inherent in the steps of performing a third-party escrow transaction.

With respect to the method and CRM claims, he considered these together because Alice had conceded that the CRM claims rise or fall with the method claims, despite the CRM claims having a different statutory category.  He framed the issue for the Court as "whether the recited steps are inherent in an escrow and claimed at a high level of generality, such that in fact the claim is not to a practical application of the concept of an escrow, but in effect claims the abstract concept of an escrow."

Nonetheless, in applying his analysis, he broke (or, at least, severely bent) his own rules on not conflating the analyses of § 101 and § 103, and considering the claim as a whole.  Particularly, in determining that the concept of an escrow is abstract, he cited to a prior art accounting reference.  He also performed a step-by-step analysis of the claim and found that each step "recites merely a general step inherent within the concept of an escrow, using a third party intermediary in this fashion."

Finally, Chief Judge Rader indicated that that method claims recited no computer structure.  He found that the stipulation of the method merely being performed by computer was insufficient to meet § 101 requirements due to its lack of specificity about how the computer implementation is arranged.  Chief Judge Rader's reasoning echoes that of the panel in Dealertrack v. Huber, which found a computer-aided method unpatentable because "[t]he claims are silent as to how a  computer aids the method, to what extent a computer aids the method, and the significance of a computer performance of the method.

Additional discussion of the open questions coming out of this decision will be the subject of future posts.

CLS Bank Int'l v. Alice Corp. (Fed. Cir. 2013) (en banc)
Opinion for the court per curiam; concurring opinion by Circuit Judge Lourie, joined by Circuit Judges Dyk, Prost, Reyna, and Wallach; concurring-in-part and dissenting-in-part opinion by Chief Judge Rader, joined by Circuit Judge Moore, and by Circuit Judges Linn and O'Malley as to all but part VI of that opinion; dissenting-in-part opinion by Circuit Judge Moore, joined by Chief Judge Rader and Circuit Judges Linn and O'Malley; concurring-in-part and dissenting-in-part opinion by Circuit Judge Newman; dissenting opinion by Circuit Judges Linn and O'Malley; additional reflections by Chief Judge Rader.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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