The Court of Appeals for the Federal Circuit issued a ruling on May 10 that may limit the subject matter eligibility of patent claims involving computer-implemented inventions. While legal practitioners had hoped this case, CLS Bank v. Alice Corp, would resolve crucial questions regarding the eligibility of patent claims in computer-implemented inventions, the Court was deeply divided in its opinion and was unable to provide clear guidance. As a result, the intellectual property community still awaits resolution of these issues.
The CLS Bank decision spotlights the Federal Circuit’s division on analyzing patent-eligible subject matter under Section 101. Until these divisions are resolved, the Patent Office will likely not change how it applies Section 101 to computer-implemented inventions. However, court decisions on this particular issue may continue to be inconsistent.
At issue in CLS Bank was whether the asserted claims were directed toward anything more than a pure abstract idea. A divided Court issued six separate opinions, none of which present a majority view as to how the analysis of subject matter eligibility and abstractness should proceed. The split among the judges of the Federal Circuit in this decision highlights the difficulties that both courts and practitioners have in interpreting Supreme Court precedent with regard to abstract ideas in patents.
The Supreme Court has defined three significant exceptions to the otherwise-broad subject matter eligibility of patents: laws of nature, natural phenomena, and abstract ideas. However, lower courts have struggled to articulate a standard test in line with this high-level Supreme Court guidance.
The Federal Circuit considered computer-implemented claims in patents owned by Alice Corporation. The Alice claims covered avoiding settlement risks during the closing of financial transactions. The method claims constituted a way of using third-party escrow accounts to overcome the risks of fraud and non-payment. The computer-readable medium claims described a program that carried out the steps of the method claims. Similarly the system claims described a computer system that carries out the steps of the method claims. A lower court found that the main method claim, “simply provides the formula, or manner, in which to use an electronic intermediary to exchange obligations as a way to hedge against the risk of loss” and that the method claim was abstract and therefore unpatentable. Arguing that the other claims, “are directed to the same abstract concept as the method claims,” the lower court also determined that the system and computer-readable medium claims would rise or fall together, and thus were patent ineligible as well.
A three-member panel of the Federal Circuit overturned the trial court, deciding that the implementation of the claimed methods on a computer system made the claims not abstract and are therefore patent-eligible. The full Court reversed the panel and affirmed the lower court ruling, finding that the method, system, and computer-readable medium claims were patent ineligible.
A majority of the Court agreed that the method and computer-readable medium claims were patent ineligible because the claims did not significantly add to a basic principle. The Court was evenly split, however, on the question of the eligibility of the system claims. Although the system claims in question included limitations tied to a machine, an opinion of the Court writing in support of their ineligibility stated that claim drafting strategies to circumvent the basic exceptions to patent ineligibility should not be credited. A dissenting opinion noted that by tying the system claims to a specific, tangible system, the system claims were more than merely abstract ideas. As the Court was evenly divided, the system claims were held ineligible due to a default rule requiring that a District Court ruling may only be overturned by a majority of the Court of Appeals. Because the system claims were held ineligible at the District Court, this holding was affirmed due to the rule.
The split opinion in the Court and the limited guidance provided suggests that the case may be further resolved, either by a Supreme Court resolution of this case or subsequent Federal Circuit decisions. The Supreme Court will additionally take up questions regarding patent eligibility in the forthcoming Association for Molecular Pathology v. Myriad Genetics. While that case involves unrelated technology (genetic engineering), it may address patent eligible subject matter generally. In some form, additional guidance is likely forthcoming.