In En Banc Decision, Federal Circuit Finds Software-Related Claims Patent-Ineligible


On May 10, 2013, the United States Court of Appeals for the Federal Circuit issued a one-paragraph decision in CLS Bank v. Alice Corporation.  The following is a reproduction of the Per Curiam opinion in its entirety: 

Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method[1] and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. §101.  An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute. 


Six separate opinions of much greater length accompany the en banc decision.  However, in Chief Judge Rader’s concurring-in-part, dissenting-in-part opinion, an early footnote points out that “no portion of any opinion issued today other than our Per Curiam Judgment garners a majority,” and therefore, “though much is published today discussing the proper approach to the patent eligibility inquiry, nothing said today beyond our judgment has the weight of precedent.” 

In the main concurring opinion, Judge Lourie writes for five of the ten judges in support of the per curiam holding.  The opinion first states “the basic steps in a patent-eligibility analysis” as follows: 

We must first ask whether the claimed invention is a process, machine, manufacture, or composition of matter . . . [if yes,] we must then determine whether any of the three judicial exceptions nonetheless bars such a claim – is the claim drawn to a patent-ineligible law of nature, natural phenomenon, or abstract idea?  Only claims that pass both inquiries satisfy §101. 


The opinion then provides a useful history of relevant Supreme Court precedent, including discussion of Gottschalk v. Benson, Parker v. Flook, Diamond v. Diehr, Bilski v. Kappos, and Mayo v. Prometheus, leading up to an analysis of the claims at bar.  In first analyzing a representative method claim, Judge Lourie asserts:   

The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a “disembodied” concept, a basic building block of human ingenuity, untethered from any real-world application. 


His analysis proceeds to a question as to “whether the balance of the claim adds ‘significantly more’,” per Mayo, and he quite summarily concludes that “[n]one of [the claim’s] limitations adds anything of substance to the claim.”  To the extent that the method claims could be construed as requiring a computer for implementation, the opinion states: 

The requirement for computer participation in these claims fails to supply an “inventive concept” that represents a nontrivial, non-conventional human contribution or materially narrows the claims relative to the abstract idea they embrace. . . . In sum, there is nothing in the asserted method claims that represents “significantly more” than the underlying abstract idea for purposes of §101. 


The analysis of the computer-readable media claims and system claims were found to be similarly defective. 

            In a partial dissent, and on behalf of four of the ten judges, Chief Judge Rader begins with a philosophical discussion regarding the statute, using the word “expansive” and “breadth” several times to emphasize an overarching view that the Court should generally be very reluctant to import restrictions on patent eligibility.  Further, he asserts: 

A court must consider the asserted claim as a whole when assessing eligibility . . . Any claim can be stripped down, simplified, generalized, or paraphrased to remove all its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed. . . . A court cannot go hunting for abstractions by ignoring the concrete, palpable, tangible limitations of the invention the patentee actually claims. 


In addressing the notion that merely reciting a general purpose computer is not sufficient for patent eligibility, per Mayo, Judge Rader cites Bilski to support the following: 

[T]he fact that a claim is limited by a tie to a computer is an important indication of patent eligibility. . . . The key to this inquiry is whether the claims tie the otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something; if so, they likely will be patent eligible, unlike claims directed to nothing more than the idea of doing that thing on a computer.  [Emphasis in original.]


Later, with respect to the system claims at bar, Judge Rader opines: 

Labeling this system claim as an “abstract concept” wrenches all meaning from those words, and turns a narrow exception into one which may swallow the expansive rule (and with it much of the investment and innovation in software). 


However, with respect to the method claims, Judge Rader (writes for himself and Judge Moore) concludes that “the claim as a whole embraces using an escrow to avoid risk of one party’s inability to pay – an abstract concept.  Viewed as a whole, the claim is indistinguishable from the claim in Bilski [which was held to be patent-ineligible].” 

Judge Newman, writing separately in a dissenting opinion, indicated that the method, system and computer readable medium claims, standing or falling together, should be found patent-eligible, and she expressed some frustration: 

The ascendance of section 101 as an independent source of litigation  . . . is a new uncertainty for inventors.  The court, now rehearing this case en banc, hoped to ameliorate this uncertainty by providing objective standards for section 101 patent-eligibility.  Instead we have propounded at least three incompatible standards, devoid of consensus. . . . With today’s judicial deadlock, the only assurance is that any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.    


In view of the discord and the lack of any uniform guidance which is provided by this opinion, questions regarding which computer-implemented and/or software-related patent claims are patent-eligible under 35 U.S.C. §101 will remain unsettled for the time being.  Applicants wishing to claim subject matter tending towards an abstract principle would be well-advised to seek several alternate scope and approaches to claim drafting in order to protect their inventions in view of this ongoing debate.    


[1] Representative method claim = claim 33 of U.S. Patent No. 5,970,479: 

33.  A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of: 

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.