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CLS Bank International: A Fractured Landscape of Patent Eligibility for Business Methods and Systems*


Written by Eric W. Guttag
Eric W. Guttag IP Law Office
Posted: July 12, 2012 @ 7:30 am
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After the Supreme Court ruled in Bilski v. Kappos that a claimed method for managing (hedging) the risks associated with trading commodities at a fixed price was patent-ineligible under 35 U.S.C. § 101, the Federal Circuit has gone “hither and yonder” in trying to determine when other business methods and systems reach (or don’t reach) the patent-eligibility zone.  At the patent-ineligible end is CyberSource Corporations v. Retail Decisions, Inc. where Judge Dyk (joined by Judges Bryson and Prost) ruled that a method and system for detecting credit card fraud in Internet transactions was patent-ineligible under 35 U.S.C. § 101.  At the patent-eligible end is Ultramercial, LLC v. Hulu, LLC (recently vacated and remanded by the Supreme Court for reconsideration by the Federal Circuit) where Chief Judge Rader (joined by Judges Lourie and O’Malley) ruled that a claimed method for monetizing and distributing copyrighted products over the Internet was patent-eligible.  See Throwing Down the Gauntlet: Rader Rules in Utramercial that Breadth and Lack Specificity Does Not Make Claimed Method Impermissibly Abstract.

These polar opposite decisions in CyberSource and Ultramercial illustrate how fractured the Federal Circuit’s patent-eligibility landscape has now become for business methods and systems.  The most recent split decision in CLS Bank International v. Alice Corp. Pty. Ltd. where a claimed trading platform for exchanging business obligations survived a validity challenge under 35 U.S.C. § 101 epitomizes this problem.  As CLS Bank International unfortunately shows, an objective standard for judging the patent-eligibility of business methods and systems remains elusive, subject to an ever growing “tug-of-war” between the “inclusive” and “restrictive” patent-eligibility factions of the Federal Circuit.  In particular, after CLS Bank International, we are no closer to having a judicially accepted definition of what is (or is not) an “abstract idea” when it comes to claiming business methods and systems.

The CLS Bank International case started out as a declaratory judgment action by CLS Bank International against Alice Corporation, the owner of U.S. Pat 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), asserting that these patents were invalid, unenforceable, or otherwise not infringed.  All of these patents essentially related to a computerized trading platform for exchanging obligations in which a trusted (independent) third party settled those obligations between a first and second party so as to eliminate “settlement risk.”  CLS Bank International moved for summary judgment of invalidity under 35 U.S.C. § 101 with respect to asserted claims 33 and 34 of the ‘479 patent, all claims of the ‘510 and ‘720 patents, and later, all claims of the ‘375 patent after it issued.

The district court granted CLS Bank International’s summary judgment motion that the asserted claims of these four patents were invalid under 35 U.S.C. § 101.  Applying the almost moribund “machine or transformation” (MOT) test, the district court ruled that the nominal recitation of a general purpose computer in the method claims did not tie them to a particular machine or apparatus.  With respect to the “abstract idea” exception, the district further ruled that the method claims were invalid under 35 U.S.C. § 101 as being directed to the “fundamental idea of employing a neutral intermediary to ensure that parties to an exchange can honor a proposed transaction, to consummate the exchange simultaneously to minimize the risk that one party does not gain the fruits of the exchange, and then irrevocably to direct the parties, or their value holders, to adjust their accounts or records to reflect the concluded transaction.”  Regarding the computer system and media claims (the media claims were in the so-called “Beauregard” format), the district court essentially concluded that, because the method claims were directed to an “abstract concept,” the computer system and media claims were likewise directed to that “abstract concept,” and therefore patent-ineligible under 35 U.S.C. § 101.

Judge Linn, writing for the majority of the Federal Circuit panel (Judge O’Malley joining), reversed the district court, holding that the method, computer system, and media claims were “all directed to patent eligible subject matter” under 35 U.S.C. § 101.  Judge Linn’s opinion initially juxtaposes 35 U.S.C. § 101, with 35 U.S.C. §§ 102, 103, and 112 which Linn characterized as doing “the substantive work of disqualifying those patent eligible invention that are ‘not worth of a patent,’” citing the 2010 Federal Circuit decision of Research Corp. v. Microsoft Corp. (which suggests the latter three patent statutes should have primacy in validity determinations).  Even so, Judge Linn characterized these four sections as being equal, but also as serving different purposes and playing distinctly different roles in determining validity.  Somewhat surprisingly in view of what Justice Breyer said in Mayo Collaborative Services v. Prometheus Labs (which appears to virtually mandate 35 U.S.C. § 101 as the “threshold” validity inquiry), Judge Linn also said it was within the discretion of the district court to decide “when to address the diverse statutory challenges to validity.”  In other words, while the district court appropriately exercised its discretion to first address the patent eligibility challenge under 35 U.S.C. § 101, the district court could have, instead, (appropriately in Linn’s view) addressed the other validity challenges first.

Somewhat “tongue in cheek,” Judge Linn observed (correctly in my view) that, while Mayo Collaborative Services reiterated the three exceptions to patent eligibility (laws of nature, physical phenomena, and abstract ideas), “it did not directly address how to determine whether a claim is drawn to an abstract idea in the first instance.”  In fact, Linn’s further observation (the “abstractness of the ‘abstract ideas’ test to patent eligibility has become a serious problem, leading to great uncertainty and to the devaluing of inventions of practical utility and economic potential”) doesn’t understate how useless the Supreme Court’s “abstract idea” test currently is.  Indeed, I must applaud Judge Linn when says that the “dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive.”  Never were truer words said about what is very wrong with the Supreme Court’s “abstract idea” test.  (Linn even quotes, of all people, Professor Lemley as saying:  “Put simply, the problem is that no one understands what makes an idea ‘abstract.’”)

Not too surprisingly, Judge Linn’s opinion in CLS Bank International also addresses the doctrine of “preemption” as “further elucidate[ing] the ‘abstract idea’ exception.”  After a fairly lengthy discussion of the “preemption” doctrine as it has evolved in the case law, Judge Linn observes that the “essential concern is not preemption, per se, but the extent to which preemption results in the foreclosure of innovation.”  Accordingly, in Judge Linn’s view, for the “preemption” doctrine to apply, the claims must be “directed to no more than a fundamental truth [that] forecloses, rather than foster[s], future innovation.”  (I’ll come back later as to why I believe the “preemption” doctrine has been misstated and miscited in the patent-eligibility context.)

Judge Linn also acknowledged that the “mere implementation on a computer of an otherwise ineligible abstract idea will not render the asserted ‘invention’ patent eligible,” citing CyberSource, the 2012 decision of Fort Properties, Inc. v. American Master Lease LLC (investment tool for buying-selling properties patent-ineligible), and his 2012 opinion in Dealertrack, Inc. v. Huber (computer-aided method for processing credit applications over electronic networks patent ineligible).  But Linn also observed that a “claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not.”  Even so, Linn noted (quite correctly) that “great uncertainty remains, and the core of that uncertainty is the meaning of the ‘abstract ideas’ exception.”

The most poignant statement in Judge Linn’s opinion about how claim language is all too often mistreated in applying the “abstract idea” test is the following:

Any claim can be stripped down, or simplified, removing all of its concrete limitations, until at its core, something that could be characterized as an abstract idea is revealed.  But 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.  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.  Patent eligibility must be evaluated based on what the claims recite, not merely on the ideas upon which they are premised.  In assessing patent eligibility, a court must consider the asserted claim as a whole (citing Diamond v. Diehr).  (Emphasis added.)

Wow!  I can also almost hear in Linn’s statement above the resurrection of the discarded “useful, concrete, and tangible result” (UCT) test of State Street Bank & Trust Co. v. Signature Financial Group, Inc. which, in my opinion, is the only objective test for determining whether the claimed invention is (or is not) merely an “abstract idea.”  If nothing else, Linn’s statement refocuses appropriate attention on the key principle in Diehr that the claimed invention must be considered “as a whole” in determining patent eligibility under 35 U.S.C. § 101; that key principle was unfortunately completely glossed over in Mayo Collaborative Services.

Judge Linn follows this key principle from Diehr with yet another key principle:  “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 [35 U.S.C.] § 101.”  That essentially restates another “truism” from Ultramercial that the claimed invention should be “manifestly abstract” before 35 U.S.C. § 101 should come into play.  Indeed, Judge Linn later concludes this “manifestly abstract” thought by stating that “it is inappropriate to hold that the claim is directed to a patent ineligible ‘abstract idea’ under 35 U.S.C. § 101” 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.”

Where Judge Linn’s opinion runs into trouble is in applying these “key principles” he enunciates to the specific method claims in CLS Bank International.  Based on what the district concluded, one key assumption that Linn’s opinion relies upon is that each of the method claims “requires computer implementation.”  That’s certainly true of the method claims of the ‘510 patent which specifically recited an “electronic adjustment limitation” and which even CLS Bank International agreed “require[ed] the use of a computer.”  Unfortunately, method Claim 33 of the ‘479 patent (which was deemed to be “representative” of the asserted method claims) does not recite any sort of “computer implementation.”  In fact, method Claim 33 of the ‘479 patent could, conceivably (if with some difficulty), be carried out entirely without the use of a computer.

An even greater problem with Judge Linn’s opinion is reconciling how this supposed “computer implementation” of the claimed methods in CLS Bank International is a “practical application of a business concept in a specific way” which is different from the claimed methods held to be patent ineligible in CyberSource, Fort Properties and even his own opinion in Dealertrack.  Unfortunately, Linn’s opinion does not directly address how the claimed methods in CLS Bank International are distinguishable from what appear to be similar claimed methods (at least in general concept of the business methods involved) from those deemed patent ineligible in these three cases.  That weakness in Linn’s majority opinion was not lost on dissenting Judge Prost:  “These authorities [including Dealertrack and Fort Properties] should have compelled us to hold that the asserted method claims in this case are abstract.”  And if the claimed methods in CLS Bank International cannot be distinguished from those in CyberSource, Fort Properties and Dealertrack in terms of patent eligibility, it’s also hard to see how the claimed systems and media in CLS Bank International make it to the patent eligibility zone.  (I’ll also come back later to how Linn’s ruling in CLS Bank International might be reconciled with his ruling in Dealertrack.)

Judge Prost’s dissenting opinion makes the snide remark that the Supreme Court in Mayo Collaborative Services “hint[ed] (not so tacitly) that our subject matter patentability test is not sufficiently exacting.”  But the holding in Mayo Collaborative Services was also based on the claimed drug dosage calibration method there essentially covering a “law of nature,” not an “abstract idea.”  Even worse, Judge Prost’s dissent simply states that the “asserted patent claims are abstract ideas repackaged as methods and systems.”  While stating that the “majority questions whether the Supreme Court’s abstract idea test is workable at all,” nowhere does Judge Prost’s dissenting opinion say or define exactly what the Supreme Court’s “abstract idea” test is, other than “I know it when I see it.”  And as Judge Linn’s majority opinion correctly observes in footnote 4, Judge Prost’s dissent “engages in the same flawed analysis as the district court by allegedly ‘[s]tripp[ing the claims] of jargon’ and creating a table of the ‘plain English translation’ for each claim element.”

Another troublesome view expressed in Judge Prost’s dissent is that patent-eligibility of the claims under 35 U.S.C. § 101 must now be based on the “inventive concept.”  (This “inventive concept” view is apparently based on a couple of passing references in Mayo Collaborative Services which discuss where Prometheus’ claimed drug dosage calibration method fell relative to the claimed inventions in Parker v. Flook and Diehr.)  In fact, Judge Prost’s dissent criticizes the Judge Linn’s opinion for “not inquir[ing] whether the asserted claims include an inventive concept.”  But in rebuttal, Judge Linn states in footnote 2 of his majority opinion:  “that is precisely what the majority has done [i.e., considered the inventive concept] in examining the language of the claims themselves and in criticizing the district court for ignoring the invention the patentee actually claims.”  As correctly observed by Judge Linn in footnote 2, the reference to “inventive concept” in Mayo Collaborative Services also cannot (and should not) “be read to endorse overlooking the actual terms of the claims or the distillation of claim language to mere generalities.”  Otherwise, the “inventive concept” would impose a “novelty” or “nonobviousness” requirement in the patent-eligibility analysis under 35 U.S.C. § 101 in violation of Diehr.

Judge Prost’s dissent is correct in observing that “[w]hen it comes subject matter patentability, we do not write on a blank slate.”  Unfortunately, as Judge Linn’s majority opinion and Judge Prost’s dissenting opinion in CLS Bank International painfully show, that “slate” is now so muddled that we are without any workable objective definition of what is an “abstract idea” for evaluating when business methods and systems reach the patent-eligibility zone.  The Federal Circuit panels continue to bounce back and forth between the “restrictive” patent-eligibility approach exemplified by CyberSource (which Judges Dyk, Prost, Bryson, and Moore appear to subscribe to) and the “inclusive” patent-eligibility approach exemplified by Ultramercial (which Chief Judge Rader, as well as Judges Linn, O’Malley, Newman, and Lourie appear to subscribe to).  Even more alarming (and exasperating) is that each decision on patent-eligibility appears to hinge completely on the “luck of the draw” as to which Federal Circuit judges make up the respective panel.  That virtually “screams out” for an en banc decision by the Federal Circuit to resolve these conflicting patent-eligibility approaches and to define a workable (and objective) “abstract idea” test.  (In my opinion, after Bilski, expecting the Supreme Court to develop a workable (and objective) version its “abstract idea” test for the patent-eligibility business methods and systems is a “pipe dream.”)

I’m also of the view that the current “slate” for determining patent-eligibility of business methods and systems under 35 U.S.C. § 101 requires at least some “rewriting” in certain respects.  First, as Judge Linn’s majority opinion in CLS Bank International suggests, more credence should be given to claimed business methods and systems that are truly “electronically” (e.g., computer) or machine implemented as being presumptively in the patent-eligibility zone.  If one (and especially more) of the steps clearly specify or recite electronic/computer/machine implementation, the more likely it is that the claimed business method is patent-eligible under 35 U.S.C. § 101.  In other words, electronic/computer/machine implementation should be viewed as taking the claimed business (or system) out of being merely an “abstract idea,” and into a “safe harbor” for patent-eligibility.  That’s also how the holding in CLS Bank International can be reconciled with Dealertrack.  The problem in Dealertrack is that the claimed method there simply said “computer-aided” in the preamble (in my opinion, always a problematical spot in the claim for establishing validity value) without ever stating specifically how any of the recited steps were computer-implemented.  In fact, by specifying/reciting that the steps are implemented electronically/by computer/by machine, that should also avoid the charge often made that certain claimed business methods merely involve “mental steps.”

Second, the “preemption” doctrine should not be treated as a patent-eligibility issue under 35 U.S.C. § 101, but instead as “enablement” issue under 35 U.S.C. § 112, first paragraph.  One of the real problems in patent-eligibility jurisprudence is that O’Reilly v. Morse is frequently (mis)cited as a patent-eligibility case.  In fact, O’Reilly v. Morse is not a patent-eligibility case, but is instead what we would now call a “is the claim scope fully enabled?” case.  What Samuel Morse tried to claim was “electro-magnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distance” when all he could exemplify was his specific telegraph system.  The Supreme Court was unwilling (rightly so) to give Morse such broad claim scope which he had failed to fully exemplify and “enable.”

Third, using Judge Linn’s words in CLS Bank International, unless the claimed business method or system is found to be “directed to nothing more than a fundamental truth or disembodied concept” (i.e., is “manifestly abstract”), further judicial resources should not be squandered on patent-eligibility under 35 U.S.C. § 101.  Instead those judicial resources should be directed towards the primary validity statutes, namely 35 U.S.C. §§ 102, 103, and 112.  What is particularly ironic about Judge Prost’s dissenting opinion is it “squanders” much of its judicial energy railing against the Judge Linn’s majority opinion on the patent-eligibility issue under 35 U.S.C. § 101, yet later suggests the claimed business method and system in CLS Bank International is highly vulnerable to attack for “lack of novelty” or “obviousness under 35 U.S.C. §§ 102 and 103.  In characterizing the “basic idea” of the claimed business method and system as being “use of an intermediary in a financial transaction), Judge Prost makes the following statement:  “this basic idea of ‘credit intermediation’ is not just abstract; it is also literally ancient” (citing a 2002 paper exploring the use financial intermediaries in the Early Roman Empire).

Fourth, I would suggest trying to resurrect the “useful, concrete, and tangible results” (UCT) test of State Street too hastily discarded by the Federal Circuit in its en banc Bilski ruling.  I know the UCT test has its critics and is problematical in view of Supreme Court’s own Bilski ruling.  But all other proposed standards for judging patent-eligibility under 35 U.S.C. § 101, especially the Supreme Court’s “I know it when I see it” test for “abstract ideas,” have paled to subjectivity, and have simply led to conflicting, inconsistent, and irreconcilable rulings by the various Federal Circuit panels.  Put it this way, the UCT test at least tries to judge objectively what is an “abstract idea” which the Supreme Court’s current “I know it when I set it” test does not.  If nothing else, readopting the UCT test might get the Supreme Court to “put up or shut up” on what it means by an “abstract idea.”

I realize that my proposed modifications/alteration to the currently fractured patent-eligibility landscape are heretical and certainly controversial.  But I also believe we must IMMEDIATELY challenge (and hopefully change) the current chaotic “slate” for judging the patent-eligibility of business methods and systems under 35 U.S.C. § 101, rather than continuing to endure the judicial pendulum that swings between the poles of CyberSource and Ultramercial.  If ever there was a case for mending this fracture patent-eligibility landscape, the split decision in CLS Bank International is as good a candidate as any.

*© 2012 Eric W. Guttag.  Posted July 12, 2012 on IPWatchdog.com


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28 comments
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  1. I enjoyed reading that. But I’m not as gloomy as the writer. In the medium term, let the two CAFC camps play ping pong for, with every Decision, the difference that separates they comes into sharper focus. It’s getting sharper all the time, isn’t it?

    Then find the perfect case for en banc review, when both sides can argue their different crystallised visions. What emerges will do the job nicely, from then on.

    As Chief Judge Rader well knows (because he is often in Munich) that’s how they do it at the EPO and, so far, it’s worked wonderfully well.

    And in the meantime, if some marginal cases fall one side of the margin, and others the other side, is it such a big deal? A greater tragedy by far is the lottery that befalls EVERY pending case at the USPTO, and NOT confined to a few cases on the margin of eligibility, when it comes to 35 USC 103.

  2. Thanks for the comments, MD. I’m not gloomy, just frustrated by the lack of consistency in rulings by the Federal Circuit panels on the patent-eligibility of business methods and systems. (That “frustration” is probably driven by scientific training as an undergraduate chemistry major.) That inconsistency is fueled by a Supreme Court that doesn’t have the decency (or courtesy) to define what it means by “abstract idea,” other than “I know it when I see it.” Inconsistent rulings (the “ping pong” as you call it) that can’t be reconciled undermine the value of stare decisis, and eventually lead to disrespect not only from the general public, but eventually from the attorneys.

    I do agree that determinations at the USPTO (as well as at the Federal Circuit) on issues under 35 USC 103 are also subject to inconsistency problems. That’s also fueled by the Supreme Court’s nebulous ruling in KSR International that now put’s “common sense” into play and simply ignores the language of 35 USC 103. When you hear the High Court utter rhetorical nonsense about the improbability of finding patentability in a combination of “old elements” (or that “wherein” clauses are “steps” as expressed in Mayo Collaborative Services), it’s hard to have confidence that the courts are paying any attention to what the patent statutes actually say.

  3. If they disregard the Statute to some extent, that’s because that extent is itself unclear. 35 USC, for example. Why does is say “new” and does it cover any “process” under the sun, including mental processing?

    What constitutes “quality” in a court decision (especially in a jurisdiction that runs on stare decisis)? In my book, one that brings simplification, clarity and a serviceable roadmap. One that obfuscates is poor quality.

    So, I’m not seeing much “quality”, these days, at SCOTUS, in patent law matters.

    I’m forced to conclude that if you want clarity and ever-increasing legal certainty in the law of patents, then best get rid of stare decisis, eh?

  4. MD,

    Actually, clarity and consistency is enhanced by following stare decisis. The premise of stare decisis is that prior decisions guide rulings in subsequent decisions so you have greater predictability and consistency in how future decisions will come out and can advise clients accordingly. Mayo Collaborative Services is a ghastly example of the Supreme Court saying they’re following precedent but then ignoring it, namely a key passage in Diamond v. Diehr.

    BTW, I’m a second generation patent attorney. My dad taught me very firmly that the “end doesn’t justify the means.” The “process” in law does matter, and stare decisis is judicial way to keep the “process” consistent, logical, and rational.

  5. EG,

    I think Prost J. gives it away in his dissent when he argues that one does not to be a rocket or computer scientist. Clearly he is neither.

    The law has been, until Prost’s law came into force, that patent claims are construed from the point of view (PoV) of one “skilled” in the art, not from the PoV of one who is not a computer scientist and does not know the difference between a “created” computer file (shadow record) and an imaginary shadow of one’s enlarged self as glimpsed at from within a self-aggrandizing daydream. The latter is an abstract illusion. The former is a physical, real world thing.

  6. SB,

    Thanks for the comments. Actually Prost is a “she,” and she is definitely in the same “restrictive” patent-eligibility wing as Judges Dyk, Bryson, and Moore.

    What worries me most about all this “abstract idea” test nonsense as applied to business methods and systems is how it impacts probably our greatest techonology growth area, namely data processing, which includes financial transaction processing like that in CLS Bank International. Much of this data processing technology manipulates the data into different and useful forms which should be treated as “transformative” but that’s not how the Federal Circuit always sees it and certainly not how the Supreme Court seems to see it. Some of the greates of value of this data processing is simply monitoring the data and moving it about to different locations as needed. Again, I see all this judicial energy being exerted against patent-eligibility challenges of business methods and systems as a colossal waste of judicial resources that would be better directed against other validity issues under 35 USC 112, 102, and 103.

  7. Gene, I need a get-out-jail pass please from your spam catcher. :-)

  8. EG,

    I personally have a hard time comprehending how a lay judge (or a lay person on the street for that matter) understands words like “computer” or “software” when they use them.

    Often I get a feeling that they are just making noises, and when pressed to define the semantic underpinning of this noise, they shrug their shoulders and respond with a “well, you know”. Sorry. No I do not know.

    So first I would be most interested in understanding what goes on in Judge Prost’s head when she uses words like “computer” or “software” and what she thinks of when a patent specification (or claim) says that the step of “creating” a “shadow record” should take place. Is that some sort of “abstraction”? Some magical whimsical thing that takes place in an abstract software land?

    The same kind of frustration applies when I see Judge Posner (district court judge) say there something called a “software industry” (and I guess he knows it when he sees it) and that this specific “software industry” should not be getting patents. What’s going on in his head? What exactly is his definition of this illusive “software” thing and when exactly is one outside the “software industry” as opposed to being inside of it? Is a lay person who uses his/her smartphone to send a simple text message inside or outside the “software industry”? Why?

    Inquiring and exasperated patent practitioners want to know. :-)

  9. Ah Stare Decisis. As an Englishman, I used to look down on any jurisdiction (that is to say, everything in the world except the former British Empire) as devoid of legal certainty.

    But after 30+ years of the evolving jurisprudence of the EPO I have changed my mind.

    24 EPO Boards of Appeal, none deferring to any of the others, pump out 1000+ unappealable Decisions per year. One “Enlarged Board of Appeal” gets involved when there are incompatible strands of caselaw emanating from different Boards, to lay down the consensus line, to which all Boards then adhere, from then on. Rader CJ is an assiduous student of all this.

    Of course, EPO caselaw is a historical accident. Why, to this day, is there no Supreme Court of Europe instructing the EPO and laying down the stare decisis for it? Why is it that, today, nobody in Europe’s patent community wants the Court of Justice of the European Union laying hands on the corpus of EPC law laid down by the EPO Enlarged Board of Appeal. This is a puzzle and an insult to those who urge that stare decisis is unassailable.

  10. to which all Boards then adhere

    MaxDrei, you are describing stare decisis whether you are aware of it or not. Your enlarged board is the equivalent of the Supreme Court. Further, you take insult far too easily. If you want to play that game, there is a perfectly fine blog I can recommend for you.

  11. Anon, I agree with you, that every jurisdiction needs something that works like stare decisis. Otherwise chaos. Nevertheless, the patents judges of Europe are consistently at pains to stress that there is no Doctrine of Stare Decisis on the mainland in Europe, and that they are NOT bound by ANY decisions issuing from the EPO. If they adhere to them at all, it is because of their persuasive power, not because they are bound to.

    And, yes, I think I know the blog you allude to. Terrible what’s happened there. Such a shame.

  12. MD, yes, it is a “shame” what’s happening with the other blog’s post about CLS Bank International. This is an important case to discuss and debate, without hurling so much verbal vitriol. Sometimes I grin, but mostly I grimace at the comments made on the other blog.

  13. MaxDrei states in response: “Anon, I agree with you, that every jurisdiction needs something that works like stare decisis. Otherwise chaos

    Thanks MaxDrei.

    Now can we have you stop posting like you did at post three: “I’m forced to conclude that if you want clarity and ever-increasing legal certainty in the law of patents, then best get rid of stare decisis, eh?” ?

    This is not the first time I have seen you post that type of message and then retreat from that idea when someone brings up the fact that Stare Decisis is a critical legal concept. Not sure if you think that you are “testing the waters” or will invite a deeper discussion on the matter by posting so, but it’s an easily refutable point that simply does not need such testing.

  14. Who’s retreating? I’m not. We need something that works, something like stare decisis but which is not stare decisis as such. Would you like to read the next words, and then tell me what stare decisis means to you?

    Article 112 (3) of the EPC provides: The decision of the Enlarged Board of Appeal referred to in paragraph 1(a) shall be binding on the Board of Appeal in respect of the appeal in question.

    Note the last 7 words.

    Then: Article 21 of the Rules of Procedure of the Boards of Appeal of the EPO reads as follows:

    Should a Board consider it necessary to deviate from an interpretation or explanation of the Convention contained in an earlier opinion or decision of the Enlarged Board of Appeal, the question shall be referred to the Enlarged Board of Appeal.

    Anon, is that article 21 reconcilable with stare decisis? I mean, can you imagine that the CAFC deciding one day to “deviate” from SCOTUS and so finding it “necessary” to “refer its question” to SCOTUS?

  15. You seem to want to play semantic word games MaxDrei.

    I decline. Thanks.

  16. http://en.wikipedia.org/wiki/Precedent

    Wrong again, Anon. But fortunately we don’t need to continue. As far as I’m concerned, the Wikipedia link above explains it all, and puts my position better than I can do in my own words. I commend it to any interested readers.

  17. MaxDrei,

    Please read your own submitted reference. I think if you read (and understand) it closely (paying attention to the the notions of “respect” and both “binding” and “persuasive”) you will see that your understanding of stare decisis (at least how you attribute this to US Law) is not correct.

    You are trying to pick an unwinnable argument with your attempted provocative statements in the nature of “I’m forced to conclude that if you want clarity and ever-increasing legal certainty in the law of patents, then best get rid of stare decisis, eh?

    Your statement is legally incorrect. You want to back up your statement with an opinion that misconstrues the meaning and plays semantics. Nothing more. Any response from me is pointless as you do not have the mind open to understanding what the legal term really means. Thus, I refuse to joust further. You may have the last word if you desire.

  18. For those reviewing this decision the key question, I think, is whether there is clearly identifiable subject matter in the four patents, or in any of them, whcih would make it unattractive for a reviewing panel of the CAFC or for the Supremes to reverse. However ingenious our legal theories are, we need a solid basis of fact. Judge Prost says that she cannot find facts to support patentability, and what is said by the majority on my reading has more subtlety than persuasiveness. In Europe, a very respected and knowledgeable patent attorney firm could not find a way towards allowability and although our laws differ this cannot be a good fact for Alice.

    It is common ground that an unpatentable business idea is not made patentable merely by a requirement to do it on a computer, and if the Alice invention is more than this, the question arises sharply: “Why?” Judge Prost said just that, and if she had received a convincing answer she might have changed her mind. All of this is unfortunate because the majority said some useful and helpful things, but not in support of a case that has clear merit.

  19. It is common ground that an unpatentable business idea is not made patentable merely by a requirement to do it on a computer

    Mr. Cole, I take issue with your repeated pronouncements such as the one above that plainly ignores not only the fact of the legal difference between the US and EPO patent systems, but the fact that you have been apraised of this legal difference. I am specifically talking about how the US Law allows patents for the Useful Arts and that this is broader than the EP’s technical arts.

    To put it plainly, I find it insulting that a man of your intelligence persists in insinuating that US law does not allow patents for business methods. This is the third thread over two blogs that I see you make this mistake, that I see you corrected on this mistake and that I see you continue to post in this errant manner.

    This case clearly is not about an unpatentable business method, merely being done on a computer, no matter how much you buy into the lone dissenting judge’s viewpoint.

    To clamor that this is “common ground” when no such common ground exists, AND you have been corrected in this errrant view, is reproachable.

    On top of that, the tie-in to technology is a stipulated fact!

    I suggest you read the case and understand the stipulated facts that the claims at issue necessitated the interaction with technological means. When the court is faced with this agreed upon fact patern, onelone judge in dissent cannot abrogate that fact.

    Further, your continued downplaying of the majority view has me questioning your “impartiality,” and that is not something I enjoy doing. But I must say that such slanted views, especially in light of posts pointed out the bias, are not hallmarks of an intellectually honest discussion, and I believe that you are better, much better than such naked partisanship.

  20. Paul, I’m sceptical there is the “common ground” you discern.

    When you refer to an “idea” I suppose you would claim it as a “process”. I know that such an “abstract idea” isn’t rendered patent-eligible simply be reciting in the corresponding process claim that the subject matter be implemented on a computer. But the words you use in your sentence above are “business idea”. Is every pure business process per se for you nothing more than an “abstract idea”? Or do you think there might be some processes of doing pure “business” which are NOT per se mere abstract ideas? Ryan Alley surmises that it is the degree of specificity with which you lay out in your specification how your clever business process is to be implemented that will be decisive for the patent-eligibility of that process.

    But that’s not so for patentability in Europe, is it?

  21. @ Anon

    To quote Judge Linn: “The mere implementation on a computer of an otherwise ineligible abstract idea will not render the asserted “invention” patent eligible….where the “addition of a machine impose[s] a meaningful limit on the scope of a claim,” and “play[s] a significant part in permitting the claimed method to be performed, rather than function[ing] solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations,” that machine limitation renders the method patent eligible. These principles apply to abstract business ideas in the same way that they apply to an abstract idea in any other field.”

    To quote Judge Prost in the context of Prometheus: “The Court once again iterated that “the prohibition against patenting abstract ideas cannot be circumvented by attempting to limit the use of the formula to a particular technological environment… In any event, this basic idea of “credit intermediation” is not just abstract; it is also literally ancient. See Temin, Peter,… So where is the invention? The majority states that it is not the computer implementation, but “the claims as a whole” that make the invention patentable.”

    So there can be no doubt that BOTH the majority AND the minority agreed that mere computer implementation is not enough.

    And I certainly do NOT take the general position that business methods are unpatentable either under 35 USC or under the EPC. Some may be, others are not. My position is that on the face of the claims in issue there is an element of doubt that the majority position can be supported, but like any other commentator I was not involved in the facts of the case and should not express any view with certainty.

    And while it is clearly wrong to confuse 101 with 103, Alice’s position would be stronger if a new result could be identified from the claimed subject-matter that was surprising and would make a strong 103 case. Can you help by identifying such a result?

    @Max:

    If ideas form a set, then business ideas are a sub-set. That is all that was intended.

  22. OK Paul. I see. But what still troubles me is this: How best to explain to Americans that, when a business person does NOT find a claimed (and enabled) specific detailed computer-implemented business “process” obvious but, rather, admirably inventive, nevertheless in Europe the claimed subject matter is deemed unpatentably obvious (because a computer programmer would have found it obvious how to implement the inventive process). Perhaps one can say that the “business process” is no more than an abstract idea till you implement it, and inventive activity in formulating the idea doesn’t “count” towards patentability?

    Is this like copyright, in that it’s not the idea that’s protected by copyright but, rather, the skill and labour that goes into reducing the inventive idea to material form?

  23. So there can be no doubt that BOTH the majority AND the minority agreed that mere computer implementation is not enough.

    Except Paul, this is a strawman argument that no one except you is making. It is undoubtedly clear that an “invention” can perfectly satisfy any of the base enumerated categories of patent eligible subject matter and still violate one of the judicial exceptions. No one is saying otherwise.

    and would make a strong 103 case. Can you help by identifying such a result?

    That is neither the question, nor the issue before the court. How many angels dance on the heads of pins of different issues in court cases?

    Once again, I find your treatment of the subject, of the points raised (and ignored) to be disappointing at best. If I wanted misdirection in the comments, I know of a different blog I can attend.

  24. @Anon: Why do these four patents relate to really good inventions that justify patents? On what ways do they boldly go where no man has gone before? What is exciting about them? If there is no simple answer to that and the case is further reviewed there must be a serious risk of reversal.

    The wisest observation that I know of in the whole of patent law was that of Mr Justice Bradley in Loom v Higgins 105 U.S. 580 (1881): “It may be laid down as a general rule, though perhaps not an invariable one, that if a new combination and arrangement of known elements produce a new and beneficial result, never attained before, it is evidence of invention.” The questiion I was asking in my last comment was whether you could point to a new result in the four patents in question that could provide the evidence referred to by Mr Justice Bradley. If such evidence is lacking, that deficiency of evidence goes in the bad fact column and say what you might about angels dancing on the heads of pins or mistreatment of the subject, that fact cannot be altered.

    For the avoidance of doubt, I would rather the decision was affirmed than reversed. That is why I suggested that you pick up the flag and run with it. Saying that I mistreat the subject or referring to angels dancing on a pin is mere waffle. Only a worthwhile result will serve. So can you rise to the challenge of identifying what is good about these inventions and pick up the flag? If not, then your comments are mere vanity.

  25. So can you rise to the challenge of identifying what is good about these inventions and pick up the flag? If not, then your comments are mere vanity.

    Your answer to my good friend Anon is a non-answer Paul. Anon is correct about which issue and what question is before the court. Your desire to go on a frolic and decide an issue not in question and not briefed is spurious and unprofessional. That you desire to hang your hat on that discussion instead of the immediate one screams that you do not have a view that can be supported under US law.

    Mere waffle? Yes, but not by who you suppose. Mere vanity? You are sadly mistaken.

    Why don’t you “rise to the challenge” of putting your bias in check and discuss the actual case before you? The actual issue before you? Why don’t you acknowledge the facts of this case without diving into the tall grass? Why don’t you acknowledge just what the extent of US Patent law is regarding “Useful Arts?”

    I would take your invitation to frolic and put it where it belongs, but that would likely ban this comment.

  26. Just about the only clear thing about this case is the court’s admission that, basically, no one knows what an “abstract idea” is. The new rule issued in this opinion is so broad as to encompass nearly every invention; certainly, clever claim drafting could render almost anything patent-eligible, if it follows this new guideline. Which is one reason why I have to side with the dissent in this instance.
    http://www.generalpatent.com/blog

  27. […] systems, as evidenced by the split decision in CLS Bank International v. Alice Corp. Pty. Ltd. See CLS Bank International: A Fractured Landscape of Patent Eligibility for Business Methods and Systems…. In CLS Bank International, I observed that each decision by the Federal Circuit on […]

  28. […] the case, defendant CLS Bank argued that Alice’s four software patents covering a computerised trading platform for exchanging obligations was too abstract to be […]