On May 10, 2013, the US Court of Appeals for the Federal Circuit issued a highly anticipated, but in the end somewhat unfulfilling, en banc decision in CLS Bank v. Alice Corp., holding that claims for a computerized trading platform were ineligible subject matter under 35 U.S.C. § 101, regardless of their characterization as a method, system, or computer readable medium. The en banc panel issued a per curiam decision and five separate opinions with no opinion gathering majority support for the legal rationale in invalidating the claims at issue. Thus, no opinion may serve as binding precedent. However, seven of ten judges agreed that the claims are invalid. Eight of the judges concluded that the particular method, medium, and systems claims should rise or fall together under the patent eligibility analysis. Thus, the basis upon which to decide whether computer software related claims are eligible for patent protection remains murky.

Alice's patents include method, computer-readable medium, and system claims that generally relate to a computerized trading platform for conducting financial transactions where a third party settles obligations between a first and a second party in order to eliminate settlement risk, including steps of creating a record, obtaining a balance, performing an adjustment, and instructing an exchange based on the adjustment. The asserted method claims do not mention any hardware or computer based limitations, but for purposes of the appeal, the parties agreed that the method claims are implemented via a computer. The computer readable medium claims recite a "computer program product comprising a computer readable storage medium having computer readable program code embodied in the medium" and further include "program code for causing a computer to send a transaction," as well as "program code for causing a computer to allow viewing of information relating to processing" of the exchange obligation. The processing feature further includes "electronically adjusting" various accounts to affect an exchange obligation and "generating an instruction" to adjust recited accounts. The system claims recite a "data processing system to enable the exchange of an obligation between parties," a "data storage unit" that stores information about a shadow credit record and a shadow debit record for a party, and a "computer" that is configured to "receive a transaction," "electronically adjust" the recited records in a particular manner, and "generate an instruction" to an exchange institution to adjust records.

Judge Lourie, writing on behalf of himself and Judges Dyk, Prost, Reyna and Wallach, expressed that after identifying whether a claim fits within one of the four statutory classes set out in § 101 (e.g., process, machine, manufacture, or a composition of matter), the court analyzes whether the claim 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.

This concurring opinion found that the method claims at issue are directed to an abstract idea related to a "form of escrow" for reducing settlement risk, and the computer implementation of the method claims is merely insignificant post-solution activity that does not meaningfully limit claim scope for purposes of patent eligibility. The computer readable medium claims suffered a similar fate, as the term "computer readable storage medium" is stated in broad and functional terms that are incidental to the claim. Despite their Beauregard format, the concurring opinion considered these computer readable medium claims as being equivalent to the method claims directed to an abstract idea and stated that "discrete claims reciting subject matter only nominally from different statutory classes may warrant similar substantive treatment under § 101 when, in practical effect, they cover the same invention." Likewise, the system claims recite a data processing system, a data storage unit, and a computer, but the concurring opinion viewed the system claims as a computerized system configured to carry out a series of steps that mirror the method claims. Despite the varied use of computer terminology in these claim formats, the concurring opinion found that these claims required the performance of the same basic processes and were a mere implementation of an abstract idea.

In a separate opinion, Chief Judge Rader (and Judge Moore) agreed that the method and computer readable medium claims were ineligible, but disagreed with the concurring opinion for considering a system claim an "abstract concept," thereby turning "a narrow exception into one which may swallow the expansive rule (and with it much of the investment and innovation in software)." Chief Judge Rader explained that because the system claims include various structural components, these claims further limit the system by requiring a structural configuration that performs the claimed functionality according to specific system requirements. Chief Judge Rader disagreed with the characterization of system claim limitations at issue as conventional post-solution activity, because the specification recited detailed algorithms for the software with which the recited hardware is programmed and dependent claims added additional structural and functional limitations that "render the system more concrete." Judges Linn and O'Malley joined Chief Judge Rader's opinion as to validity of the system claims.

Judge Moore (and Judges Rader, Linn and O'Malley) expressed concern with the impact of Judge Lourie's opinion. In her dissenting-in-part opinion, Judge Moore stated that "lumping together the asserted method, media, and system claims, and holding that they are all patent-ineligible under §101 ... gives staggering breadth to what is meant to be a narrow judicial exception." Judge Moore agreed with Chief Judge Rader and would have held the system claims as patent eligible.

Writing separately, Judge Newman expressed the view that while all claims stand and fall together, the method, system and medium claims are eligible under a broad statutory reading of § 101. Judge Newman explained that "it cannot be that computer-implemented developments may or may not be eligible under section 101 depending on how broadly they are sought to be claimed. Breadth of claiming, and undue breadth, are determined under sections 102, 103, and 112, not section 101." 

Finally, in yet another opinion, Judges Linn and O'Malley disagreed with the construction of the method claims employed in the other opinions as their basis for considering the method claims as patent eligible under § 101 and would have also found the system and medium claims as patent eligible.

While no single rationale gathered majority in this case, it is clear that a mere mention of a "computer" is unlikely to be sufficient to satisfy the patentable subject matter eligibility hurdle. Because the Alice court did not generate a precedential opinion, it further remains to be seen whether a method claim's failure to comply with § 101 requirements necessarily infects similarly drafted system and computer readable medium claims. The Federal Circuit certainly did not go as far as to say that all software is ineligible under § 101, and each judge appears to have a different threshold for determining whether an idea is abstract when implemented by a computer. 

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