Originally published in V&E IP Insights E-communication, July 10, 2012
On July 9, 2012, the Federal Circuit issued a split panel decision in CLS Bank Int'l v. Alice Corp., in which the majority attempted to make 35 U.S.C. Section 101's prohibition on patenting "abstract ideas" more concrete. The court below granted summary judgment that the four patents-in-suit were invalid as claiming unpatentable subject matter. The four patents, which included method claims, system claims, and media claims, covered a computerized trading platform for exchanging obligations in which a third party settled obligations between a first and second party so as to eliminate the "settlement risk" that one side would not meet its obligation. The majority reversed the district court's holding that the patents claimed ineligible abstract ideas. Instead, the majority held that a claim should be held inadequate under section 101 as an abstract idea only when, after considering all of the claim's limitations, it is "manifestly evident" that the claim is directed to a patent-ineligible abstract idea. Here, "[t]he asserted claims appear to cover the practical application of a business concept in a specific way" and left room for other methods of using intermediaries to consummate exchanges. The majority also emphasized that this issue need not always be addressed before other validity challenges, especially if other validity challenges may resolve the dispute more expeditiously or with more clarity and predictability.
Judge Prost's dissent criticized the majority as not having applied the patentable subject matter test with the vigor required by Bilski and Prometheus and instead creating an entirely new framework that would allow courts to avoid evaluating patent eligibility unless unpatentability is "manifestly evident."
What This Means for You
Although the majority attempted to solidify what constitutes unpatentable "abstract ideas," it appears to have introduced a "manifestly evident" standard that further muddies the waters of Section 101 law. As the majority points out, "[a]ny claim can be stripped down, or simplified, removing all its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed." Moreover, as the dissent alludes, the opinion appears to push back against the Supreme Court's more conservative Bilski and Prometheus opinions. The Federal Circuit has now issued conflicting opinions on whether adding process steps implemented on a general purpose computer is sufficient to render an otherwise patent-ineligible claim patentable. See e.g. Dealertrack v. Huber, 674 F.3d 1315 (Fed. Cir. 2012) (upholding invalidity under § 101 of a similar computer implemented business method). The only thing that is certain after CLS Bank Int'l is that whether a patent's claims only cover abstract ideas will continue to be hotly contested.
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