In CLS Bank International v. Alice Corp., No. 11-1301 (Fed. Cir. July 9, 2012), the Federal Circuit reversed the district court's grant of SJ in favor of CLS Bank International and CLS Services Ltd. (collectively "CLS Bank"), finding that the system, method, and media claims of the patents-in-suit are not directed to mere abstract ideas, but rather to practical applications of invention that fall within the categories of patent-eligible subject matter defined by 35 U.S.C. § 101.

Alice Corporation Pty. Ltd. ("Alice") is the owner of the patents-in-suit, which include U.S. Patent Nos. 5,970,479 ("the '479 patent"); 6,912,510 ("the '510 patent"); 7,149,720 ("the '720 patent"); and 7,725,375 ("the '375 patent").  The four patents-in-suit include system, method, and media claims directed to a computerized trading platform that enables a trusted third party to settle obligations between a first and second party in a manner that eliminates a "settlement risk" associated with a transaction.

CLS Bank filed suit against Alice seeking DJ of noninfringement against the '479, '510, and '720 patents, and Alice filed a counterclaim alleging that CLS Bank infringed those patents.  CLS Bank later moved for SJ, contending that the asserted claims of the '479, '510, and '720 patents were invalid under 35 U.S.C. § 101.  Alice opposed and cross-moved for SJ.  Following the Supreme Court's grant of certiorari in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), cert. granted sub. nom. Bilski v. Doll, 129 S. Ct. 2735 (June 1, 2009), the district court denied the parties' cross-motions for SJ as to subject matter eligibility without prejudice to refiling following the Supreme Court's decision on certiorari.

Upon issuance of the '375 patent, Alice filed amended counterclaims additionally asserting that CLS Bank infringed the claims of the '375 patent.  After the Supreme Court's decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010), the parties renewed their cross-motions for SJ, and CLS Bank additionally asserted the invalidity of the '375 patent under 35 U.S.C. § 101.  The district court granted CLS Bank's motion for SJ and denied Alice's cross-motion, finding that the asserted claims of the patents-in-suit were invalid for failing to claim patent-eligible subject matter under 35 U.S.C. § 101.  Alice appealed.

Noting the different purposes of 35 U.S.C. §§ 101, 102, 103, and 112, the Court stated that §§ 102, 103, and 112, and not § 101, perform the substantive work of disqualifying those patent-eligible inventions that are "not worthy of a patent."  Slip op. at 12 (citing Research Corp. v. Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010)).  The Court also observed that challenges to invalidity, patentability, and patent eligibility under these sections present distinctly different questions.  Although § 101 has been characterized as a "threshold test" and can be addressed before other matters touching the validity of patents, the Court noted that § 101 need not always be addressed first, particularly when other sections might be discerned by the trial judge as having the promise to resolve a dispute more expeditiously or with more clarity and predictability.  Thus, and consistent with its role as the master of its own docket, the Court observed that the district court properly exercised its discretion to entertain a challenge to the validity of the patents-in-suit under 35 U.S.C. § 101.

Judges:  Linn (author), Prost (dissenting), O'Malley

[Appealed from D.D.C., Judge Collyer]

This article previously appeared in Last Month at the Federal Circuit, August, 2012.

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