On December 6, 2013, the Supreme Court announced it will review
the Federal Circuit's decision in CLS Bank International v.
Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013), in its spring
2014 term. The Court's decision to grant certiorari is welcomed
by most who have struggled to reconcile the Federal Circuit's
fractured decisions relating to 35 U.S.C. § 101, the
gatekeeper provision through which an application must pass before
being considered for novelty and non-obviousness. Although touted
as a case of particular importance to the software and electronics
industry, any decision by the Supreme Court will unavoidably impact
computer-implemented inventions in all industries.
The CLS Bank en banc court considered two fundamental and
important questions: (1) what test should be used to determine
eligibility of a computer-implemented invention; and (2) in
assessing patent eligibility, should it matter whether the
invention is claimed as a method, system, or storage medium? Rather
than provide answers, the court affirmed that Alice
Corporation's method and computerreadable media (CRM) claims
were not patent-eligible, split 5-5 on the patent-eligibility of
Alice Corporation's computer system claims, and authored five
conflicting opinions that caused many practitioners to sigh heavily
and scratch their collective heads. Id. at 1274 (per
curiam opinion), 1293. The Supreme Court's review will
hopefully provide some much-needed clarity.
The CLS Bank decision drew attention to the Federal
Circuit's struggle in recent years to reconcile legislative
history surrounding Section 101 and the Supreme Court's
precedent on patent eligibility. Contrary to its charter to provide
uniformity in patent laws by handling all patent appeals, the
Federal Circuit has instead issued a series of decisions since 2010
whose outcomes appear more panel-dependent than merit-dependent. A
case in point is Ultramercial, LLC v. Hulu, LLC and
WildTangent, Inc., 723 F.3d 1335 (Fed. Cir. 2013), decided one
month after CLS Bank by a three-judge panel led by Chief
Judge Rader, who surprised no one by writing a majority opinion
that was consistent with his group's views in CLS
Bank. In Ultramercial, the Judge Rader-led panel
found claims to a method for distributing copyrighted products
(e.g., songs, movies, books) over the Internet, where the consumer
receives a copyrighted product for free in exchange for viewing an
advertisement, were patenteligible, and emphasized that Section 101
should act as a "coarse filter" that should accommodate
unforeseen technologies. Id. at 1339. In two other panel
decisions—Accenture Global Services Gmbh v. Guideware
Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013) and Bancorp
Services, LLC v. Sun Life Assurance Co. of Canada (U.S.), 687
F.3d 1266 (Fed. Cir. 2012)—computer-related claims were found
to be patent-ineligible, using completely different reasoning. The
Accenture panel (led by Judge Lourie with Judge Rader in
dissent) held claims to a system for generating tasks to be
performed in an insurance organization ineligible under Section
101, reasoning that confining the claims to a computer and to the
insurance industry was insufficient to make the otherwise abstract
idea patent eligible. See 728 F.3d at 1345. In
Bancorp, the Judge Lourie-led panel held that systems and
methods for administering and tracking the value of life insurance
policies in separate accounts were abstract ideas and ineligible
under Section 101. See 687 F.3d at 1280-81.
Understandably, these recent decisions—and other Section 101
cases since the Supreme Court took up Bilski v. Kappos in
2010—have left practitioners, the U.S. Patent and Trademark
Office (USPTO), and lower courts adrift on how to apply Section
101. Chief Judge Rader himself lamented that the Federal
Circuit's "opinions spend page after page revisiting our
cases and those of the Supreme Court, and still we continue to
disagree vigorously over what is or is not patentable subject
matter." Accenture, 728 F.3d at 1348 (citing
MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259
(Fed.Cir. 2012)).
While the Supreme Court was considering petitions for certiorari in
both CLS Bank and Ultramercial, CLS Bank
is widely believed to be the better vehicle for addressing the
issues at hand. The decision comprises 135 pages of opinions
representing the viewpoints of ten Federal Circuit judges that
eloquently frame the issues. Three dozen amici, including
Bancorp (who filed its own petition for certiorari on November 8,
2013, but also signed onto the Trading Technologies amicus brief)
and Accenture (which has petitioned the Federal Circuit for a
rehearing en banc of its decision) urged the Court to grant review
in CLS Bank, citing as a primary reason that it is a
well-briefed en banc decision.
Additionally, Supreme Court review of CLS Bank allows the
Court to address the full range of computer-implemented invention
claims—computerized method, CRM and system claims requiring
computer hardware. By contrast, the Federal Circuit decision in
Ultramercial only addressed the patentability of a
computerized method claim.
The Supreme Court's consideration of CLS Bank will be
its third foray into Section 101 jurisprudence since Bilski v.
Kappos, 130 S. Ct. 3218 (2010). But the Court's decisions
in Bilski, Mayo Collaborative Services v. Prometheus
Laboratories, Inc., and Association for Molecular
Pathology v. Myriad Genetics, Inc. did not squarely address
computer-implemented inventions. In fact, the Supreme Court last
considered the issue in Diamond v. Diehr, 450 U.S. 175
(1981), when the Internet was in its infancy and
computer-implemented inventions were neither well-understood nor
ubiquitous. Although computer-implemented inventions were not at
the heart of the debate in Bilski, the Bilski
Court was cautious not to draw any lines or endorse tests that
would render software per se patent eligible. The Bilski
Court, in fact, declined to adopt the
"machine-or-transformation test" for fear that doing so
"would create uncertainty as to the patentability of software,
advanced diagnostic medicine techniques, and inventions based on
linear programming, data compression, and the manipulation of
digital signals." Id. at 3227. The Court further
recognized that "times change" "[t]echnology and
other innovations progress in unexpected ways." Id.
The Court cautioned that Section 101 is a "dynamic provision
designed to encompass new and unforeseen inventions."
Id. (citing J. E. M. Ag Supply, Inc. v. Pioneer
Hi-Bred Int'l, Inc., 534 U.S. 124, 135 (2001)).
In view of these musings, it seems unrealistic to expect that the
Supreme Court will announce any bright-line test for patent
eligibility, but it would also appear unlikely that the Court would
categorically exclude software from patent eligibility. It is
certain, however, that given Section 101's important role as
the first hurdle for patent applications at the USPTO and its
increasing importance in post-issuance validity disputes, this case
will be closely followed, and many "friends of the court"
briefs are expected. Whether the Supreme Court's decision
ultimately provides clarity on Section 101, or further muddy the
waters, remains to be seen.
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