UPDATED 5/12/2013 at 3:31pm
In what can only fairly be characterized as utterly ridiculous, 5 of the 10 judges on the Federal Circuit to hear CLS Bank v. Alice Corporation en banc would find that claims that satisfy the machine-or-transformation test are not patentable. While I think it is inappropriate to find the systems claims patent ineligible that isn’t what makes the decision utterly ridiculous. The decision is an embarrassment because 5 other judges would have found the systems claims patent eligible. Thus, we have an even split of opinion at the Federal Circuit.
The Federal Circuit decision in CLS Bank v. Alice Corp. is now being horribly mischaracterized in the media, which will now only further complicate the matter in the court of public opinion. This decision offers no precedent whatsoever regarding systems claims because it was a tie. Alice Corporation loses the systems claims not because that is the law of the land announced by the Federal Circuit, but rather because a single district court judge determined that the systems claims were patent ineligible. Had that same district court judge found the systems claims patent eligible then Alice would have prevailed.
In other words, the Federal Circuit is essentially abdicating its authority relative to whether systems claims are patentable to the district courts and presumably also to the Patent Trial and Appeals Board at the United States Patent and Trademark Office. Whatever the district court or PTAB does is just fine. Well, not quite.
It would actually be preferable if the decisions of the district court or PTAB were final relative to systems claims because at least then we would have some level of finality. But truthfully we have no certainty or finality. For many years now attorneys have openly discussed and litigants have noticed and exploited the fact that there is a complete lack of uniformity of patent laws. The decision you will receive on appeal at the Federal Circuit is nearly 100% dependent on the 3 judges randomly assigned to hear your appeal. Nowhere is that more obvious now than with respect to system claims.
If you are before 2 or more of the following judges software is not patentable and the patentee will lose all claims: Judges Lourie, Dyk, Prost, Reyna and Wallach. If you are before 2 or more of the following judges at least some of your software claims, if properly written to recite tangible structure, will be patent eligible: Chief Judge Rader, Judge Moore, Judges Newman, Linn and O’Malley.
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Chief Judge Rader goes around the lecture and CLE circuit constantly preaching the importance of certainty and the ability to give a CEO a straight answer; not having to tell the CEO that if you spend millions of dollars I can get you an answer in 3 to 5 years, perhaps longer. Chief Rader is 100% correct. Without certainty business cannot move forward. Without a way to know that the rights you obtain are valid why obtain the right in the first place? Lack of certainty is killing the business community in the United States. Regulations upon regulations, a tax structure that is never settled for more than half a political cycle and a patent litigation system that is wholly incapable of providing justice.
For crying out loud patents are supposed to be a property right. Does any of this look like property? Let me explain some objectively true fundamentals about the law. When a statute is passed, such as the AIA, applications filed under the old statute are governed under the old statute, not the new statute. When Courts, including the Supreme Court, issue a ruling changing property rights dealing with real estate the changes are applied prospectively, not retroactively. But case after case after case changes the law relative to software and then that new law of the moment is applied against patent applications written and issued over a decade ago. How can anyone reasonably hit a moving target like this?
Had I been on the Federal Circuit my decision probably would have looked a lot like the opinion of Chief Judge Rader on some issues, and more like Judges Newman, Linn and O’Malley overall. I agree with Chief Rader and Judge Moore that we can and should go claim by claim to determine patent eligibility, since the question is whether the claims are valid.
I would go claim by claim and not let any other claiming technique influence my determination. We are supposed to go claim by claim to determine whether a claim is allowable and if allowed whether it is invalid. So why group claims together across multiple patents and say if one is bad then all are bad? Notwithstanding, because the defendant made certain admissions at the Markman hearing and before the Federal Circuit during oral argument it is much easier to understand understand why Judges Newman, Linn and O’Malley determined that if one set of claims is found patent eligible then all of them should be patent eligible.
Judge Lourie explained:
For some systems claims, the abstract ideas exception may indeed be plainly inapplicable, and such claims will face little difficulty passing through the §101 filter. But applying a presumptively different approach to system claims generally would reward precisely the type of clever claim drafting that the Supreme Court has repeatedly instructed us to ignore. As illustrated by the obvious parallels between the method and system claims now before us, it is often a straightforward exercise to translate a method claim into system form, and vice versa. That much has long been recognized. Thus, when §101 issues arise, the same analysis should apply regardless of claim format: Does the claim, in practical effect, place an abstract idea at risk of preemption? And, if so, do the limitations of the claim, including any computer-based limitations, add “enough” beyond the abstract idea itself to limit the claim to a narrower, patent-eligible application of that idea? Or, is it merely a Trojan horse designed to enable abstract claims to slide through the screen of patent eligibility?
Thus, Judges Lourie, Dyk, Prost, Reyna and Wallach decided that the system claims are patent ineligible because the method and computer readable medium claims were, in their opinions, patent ineligible.
So what is the point of having claims then? I know the statute requires claims, but claims are obviously superfluous in the with respect to a §101 patent eligibility inquiry, at least as far as Judges Lourie, Dyk, Prost, Reyna and Wallach are concerned.
Also, did you notice above how Judges Judges Lourie, Dyk, Prost, Reyna and Wallach turn the question of preemption on its head. They don’t want to ask whether there is or will be preemption, but rather whether there is a risk of preemption. Not even whether preemption is likely, but whether there is a risk of preemption. Breathtaking!
Judges Judges Lourie, Dyk, Prost, Reyna and Wallach also define the question relative to the systems claims:
The question we must consider is whether a patent claim hat ostensibly describes such a system on its face represents something more than an abstract idea in legal substance. Claims to computers were, and still are, eligible for patent. No question should have arisen concerning the eligibility of claims to basic computer hardware under §101 when such devices were first invented. But we are living and judging now (or at least as of the patents’ priority dates), and have before us not the patent eligibility of specific types of computers or computer components, but computers that have routinely been adapted by software consisting of abstract ideas, and claimed as such, to do all sorts of tasks that formerly were performed by humans. And the Supreme Court has told us that, while avoiding confusion between §101 and §§102 and 103, merely adding existing computer technology to abstract ideas — mental steps — does not as a matter of substance convert an abstract idea into a machine.
So computer hardware is unquestionably patent eligible? This shows an extraordinarily naive view of computers and software. Do these Judges actually believe that it is computer hardware that makes everything possible? Are they so hopelessly living in the past that if they can’t see it and touch it then it can’t be patent eligible?
Perpetuating the myth that the computer is where the magic lies does nothing other than ignore reality. Software is what makes everything happen. Perhaps the IT people at the Federal Circuit should remove the software from the computers of Judges Judges Lourie, Dyk, Prost, Reyna and Wallach (and their clerks too). Then perhaps they will understand that the computer is a dumb terminal wholly incapable of performing virtually any functionality absent software.
Sure, the computer monitor can act as a nice holder of sticky notes, and it can also be a giant (albeit clumsy) paper weight without software installed. But try and do anything useful with a computer without software and then those Judges just might realize that it is software that drives the machine.
For crying out loud, software drives a multitude of machines! Maybe the auto mechanic for Judges Judges Lourie, Dyk, Prost, Reyna and Wallach should remove the software from their cars. Perhaps as they are stranded and forced to walk to work they might have time to contemplate the world they seem to want to force upon the rest of us; a world that clings to mechanical machines completely non-reliant on software. That will be great for the economy!