What Constitutes an Abstract Idea in Intellectual Property?
On February 8, 2013, the United States Court of Appeals for the Federal Circuit (“CAFC”) reheard CLS Bank International v. Alice Corporation en banc. The en banc CAFC opinion that eventually results may clarify the long-unsettled question of what constitutes an “abstract idea” and is thus unpatentable under Section 101 of the Patent Act. The CAFC’s ruling is expected to have widespread implications, which may affect how courts, the United States Patent and Trademark Office, patent prosecutors, patent litigators, inventors, and patent holders analyze and value certain patents and patent applications. The opinion is expected to be of particular importance in the fields of software and business method patents.
I. What is the abstract ideas exception and why does it matter?
Section 101 of the Patent Act provides, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101 (2006 & Supp. V 2011). These categories (i.e., processes, machines, manufactures, and compositions of matter) are subject to three exceptions – laws of nature, physical phenomena, and abstract ideas – that, while not apparent from the statute’s text, are judge-made law constituting “stare decisis going back [more than] 150 years.” Bilski v. Kappos, --- U.S. ----, 130 S. Ct. 3218, 3225, 177 L. Ed. 2d 792 (2010) (citing Le Roy v. Tathum, 14 How. 156, 174-75, 14 L. Ed. 367 (1853)). Thus, a patent application may be denied, or an issued patent may be ruled invalid, if it is deemed to be drawn to an abstract idea.
II. The CAFC is deeply divided about what constitutes an abstract idea.
Plenty of ink has been spilled and much time has been spent analyzing past cases, yet the CAFC remains split about what constitutes an abstract idea. Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323, 1327 (Fed. Cir. 2011) (“Both members of the Supreme Court and this court have recognized the difficulty of providing a precise formula or definition for the judge-made ineligible category of abstractness.” (citations omitted)), vacated sub nom. WildTangent, Inc. v. Ultramercial, LLC, --- U.S. ----, 132 S. Ct. 2431, 182 L. Ed. 2d 1059 (2012). Neither the Supreme Court nor the CAFC has defined the word “abstract.” Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1065 (Fed. Cir. 2011) (citing Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010), and Bilski, 130 S. Ct. at 3236 (Stevens, J., concurring)). As the CAFC put it,
This effort to descriptively cabin § 101 jurisprudence is reminiscent of the oenologists trying to describe a new wine. They have an abundance of adjectives – earthy, fruity, grassy, nutty, tart, woody, to name just a few – but picking and choosing in a given circumstance which ones apply and in what combination depends less on the assumed content of the words than on the taste of the tongue pronouncing them.
MySpace, Inc. v. GraphOn Corp., 672 F.3d 1250, 1259 (Fed. Cir. 2012). The waters are even murkier for business method patents. Id.
A. Points of agreement.
The U.S. Supreme Court has stated that “all inventions at some level embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas,” Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. ----, 132 S. Ct. 1289, 1293, 182 L. Ed. 2d 321 (2012). Moreover, while abstract ideas themselves are not patentable, the application of an abstract idea is patent-eligible. Id. at 1293-94 (quoting Diamond v. Diehr, 450 U.S. 175, 187, 101 S. Ct. 1048, 67 L. Ed. 2d 155 (1981)). In addition, there is no per se rule against business method patents. Bilski, 130 S. Ct. at 3228-29. Furthermore, the machine or transformation test – wherein “‘[a] claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing’”– while not the sole test of whether an invention is drawn to an abstract idea, is “a useful and important clue.” Bilski, 130 S. Ct. at 3225-27 (quoting In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2008)). Also, an invention that can be performed entirely in one’s head or with pen and paper is unpatentable. CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, 1372 (Fed. Cir. 2011). In addition, a patent may not wholly preempt an abstract idea. Gottschalk v. Benson, 409 U.S. 63, 71-72, 93 S. Ct. 253, 34 L. Ed. 2d 273 (1972). Lastly, once it is apparent that the claims of a patent are drawn to an abstract idea, insignificant post-solution activity or an attempt to limit the claims to a particular technological environment are not enough to render the claims patent-eligible. Parker v. Flook, 437 U.S. 584, 590, 98 S. Ct. 2522, 57 L. Ed. 2d 451 (1978); Bilski, 130 S. Ct. at 3230 (citations omitted). While the foregoing principles are helpful, they have not made it clear for courts how various patent claims should be analyzed to determine whether they claim an abstract idea.
B. Whither goest ‘manifestly evident’?
In 2010, Chief Judge Rader, writing for a panel of the CAFC also composed of Judges Newman and Plager, declared: “this court . . . will not presume to define ‘abstract’ beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and the statutory context that directs primary attention on the patentability criteria of the rest of the Patent Act.” Research Corp., 627 F.3d at 868. The current divide amongst the CAFC judges may center around whether to follow the “manifestly evident” line of precedent, thereby interpreting the abstract ideas exception narrowly (invalidating fewer patents), or whether to disregard it, thereby interpreting the abstract ideas exception broadly (thereby making it harder to satisfy the Section 101 requirements).
In particular, while Judges Rader, Linn, Plager, and Newman have construed the abstract ideas exception narrowly; Judges Prost, Schall, Mayer, Moore, Bryson, Wallach, and Dyk have construed the abstract ideas exception broadly; and Judges O’Malley and Lourie have ruled both ways. For example, in Myspace, Judges Newman and Plager held that it would have to be “clear and convincing beyond peradventure – that is, under virtually any meaning of ‘abstract’ – that the claim at issue is well over the line” for it to be well-advised for a court to address Section 101 in an infringement suit. 672 F.3d at 1261. In addition, in Ultramercial, which the Supreme Court has since vacated and remanded to the CAFC, Chief Judge Rader, writing for a panel also composed of Judges Lourie and O’Malley, held the claims patentable and wrote, “The eligibility exclusion for purely mental steps is particularly narrow.” Id. at 1329-30, vacated sub nom. WildTangent, 132 S. Ct. 2431. Similarly, in Classen, Judges Newman and Rader took a narrow view of the abstract ideas exception and reasoned that claims must be “manifestly abstract” to be found invalid, while Judge Moore, dissenting, would have invalidated claims that the majority held valid. 659 F.3d 1057.
In contrast, in PerkinElmer, Inc. v. Intema Ltd., No. 2011-1577, 2012 WL 5861658 (Fed. Cir. Nov. 20, 2012) (nonprecedential), Judges Bryson, O’Malley, and Wallach found claims invalid without even mentioning the “manifestly abstract” line of precedent. Judges Prost, Schall, and Moore did the same in Fort Properties, Inc. v. American Master Lease, 671 F.3d 1317 (Fed. Cir. 2012). Similarly, in Cybersource, Judges Dyk, Bryson, and Prost viewed the abstract ideas exception broadly. 654 F.3d 1366. Likewise, in Bancorp Services v. Sun Life Assurance Co., 687 F.3d 1266 (Fed. Cir. 2012), Judges Lourie, Prost, and Wallach held claims invalid, after distinguishing Research Corp. In addition, Judge Mayer advocated “a robust application of section 101 at the summary judgment stage” in his dissent in Highmark, Inc. v. Allcare Health Management Systems, Inc., 687 F.3d 1300, 1324 (Fed. Cir. 2012) (Mayer, J., dissenting).
IV. And then there was Alice.
At issue in Alice are Alice Corp.’s four patents, which cover a computerized trading platform for having a third party settle obligations between a first and a second party, thereby eliminating settlement risk – the risk that one or both parties would fail to perform. Alice, 685 F.3d at 1343.
Judges Linn and O’Malley found the claims patentable, and held, “when – after taking all of the claim recitations into consideration – it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101.” Id. at 1352. Judges Linn and O’Malley continued, “Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible ‘abstract idea’ under 35 U.S.C. § 101.” Id. Judges Linn and O’Malley emphasized the importance of viewing the claim as a whole, writing, “nothing in the Supreme Court’s precedent, nor in ours, allows a court to go hunting for abstractions by ignoring the concrete, palpable, tangible, and otherwise not abstract invention the patentee actually claims.” Id. at 1351. Judges Linn and O’Malley continued, “It is fundamentally improper to paraphrase a claim in overly simplistic generalities in assessing whether the claim falls under the limited ‘abstract ideas’ exception to patent eligibility under 35 U.S.C. § 101.” Id.
Judge Prost disagreed. She issued a dissent stating that the majority ruling defied the “Supreme Court’s unanimous directive to apply the patentable subject matter test with more vigor.” Id. at 1356 (Prost, J., dissenting). Judge Prost continued, “Worse yet, it creates an entirely new framework that in effect allows courts to avoid evaluating patent eligibility under § 101 whenever they so desire.” Id. (Prost, J., dissenting). In addition, Judge Prost took a different approach to the claims, analyzing their patentability under Section 101 only after she stripped them of “jargon”. Id. at 1357-58 (Prost, J., dissenting) (setting forth what Judge Prost called a “plain English translation” of the claims). Judge Prost noted, “The majority objects that ‘[i]t is impermissible for the court to rewrite claims as it sees them.’ . . . But that is precisely what courts do in claim construction everyday.” Id. at 1358 (Prost, J., dissenting) (citation omitted).
V. The CAFC rehears Alice en banc.
Importantly, only judges in regular active service and any senior judge who served on the original panel could participate in the en banc rehearing of Alice. See 28 U.S.C. § 46 (2006 & Supp. V 2011). Thus, Judge Bryson, who just assumed senior status on January 7, 2013, and Senior Judges Mayer, Plager, Clevenger, and Schall did not participate in the rehearing, while Senior Judge Linn – who served on the original Alice panel – opted to participate. That left Judges Rader, Newman, and Linn, who have construed the abstract ideas exception narrowly; Judges Prost, Moore, Wallach, and Dyk, who have construed the abstract ideas exception broadly; Judges O’Malley and Lourie, who have ruled both ways; and Judge Reyna, who is so new that he hasn’t yet served on a panel construing the abstract ideas exception.
Despite active questioning from the CAFC judges, the en banc rehearing of Alice did not provide clear guidance as to how the eventual opinion will affect the Section 101 analysis. Rather, the en banc hearing put the CAFC judges’ differences of opinion on display. For example, while Judge Linn maintained his position that it is inappropriate to distill a claim down to its essentials, another CAFC judge (whose identity was not apparent from the audio recording) appeared to do just that, suggesting that the claim was to the goal that Alice Corp. sought to achieve, rather than to any particular way of achieving that goal. Similarly, Judge Moore read the claims in light of the specification, while another CAFC judge appeared to strictly limit his construction to the language of the claims. Several CAFC judges, including Judges Moore and Linn, expressed a concern that Section 101 should not serve the same function of screening for inventiveness as Sections 102 and 103. Other concerns raised by the CAFC judges included preemption, post-solution activity, whether the claims had been construed correctly as requiring computer-implementation, and whether Section 101 had to be addressed before Sections 102, 103, and 112.
The CAFC’s rift has left courts, patent litigators, prosecutors, patent holders, and inventors with no clear rules to define an abstract idea. The opinion that eventually results from the en banc rehearing of Alice may lend some clarity to this long-unsettled area of the law. Interested parties should also keep an eye out for what happens in Ultramercial v. WildTangent, No. 2010–1544, as that opinion may also have widespread implications regarding the fate of the abstract ideas exception. See WildTangent, 132 S. Ct. 2431, granting cert., vacating, and remanding Ultramercial, 657 F.3d 1323.