USPTO: No Change to Software Patentability Evaluation

In a one-page memorandum to the Patent Examining Corps dated May 13, 2013, Deputy Commissioner for Patent Examination Policy Drew Hirshfeld had a simple message to respond to the Federal Circuit’s en banc non-decision in CLS Bank v. Alice Corp. The message was this: “there is no change in examination procedure for evaluating subject matter eligibility.” (emphasis in the original)

This is hardly a surprise given that there were 7 different opinions with only one opinion garnering more than 5 out of 10 Judges. The sole opinion that achieved a majority was a mere 58 words in length and did nothing more than explain that given the fracture of the Court all that could reasonably be said was that the decision of the district court had been affirmed by an equally divided Court, which unfortunately rendered the claims all patent ineligible.

In his opinion Chief Judge Rader explained in footnote 1: “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.”

Indeed, the Federal Circuit has made a mess out of software. The only hope is that the Supreme Court will step in and clear things up, which I full well understand is a scary thought.

In any event, here is what the USPTO memo to Patent Examiners had to say about the Court’s decision:

CLS Bank Decision

The patents in suit relate to a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate “counterparty” or “settlement” risk. The district court found all of the claims invalid because they were directed to an ineligible abstract idea under 35 U.S.C. § 101. The Federal Circuit heard the case en banc and affirmed the district court in a divided decision.

Along with the decision, the Federal Circuit also issued six separate opinions by various members of the court concurring, dissenting, and offering reflections on the decision. Despite the Court’s sharp divide voiced in the six separate opinions, several important themes emerged, such as:

• There was agreement that the test for eligibility is not a rigid, bright line test and must be made by evaluating a claim as a whole, on a case-by-case basis, using a flexible approach.
• Many of the judges explicitly noted that the test for eligibility is a separate and distinct inquiry from other patentability concerns, particularly novelty and obviousness.
• It was generally agreed that when evaluating the claims as a whole the claim must be analyzed to determine whether the additional limitations add significantly more, or in other words add meaningful limits, to the abstract idea or law of nature.

Given the multiple divergent opinions, the USPTO is continuing to study the decision in CLS Bank and will consider whether further detailed guidance is needed on patent subject matter eligibility under 35 U.S.C. § 101.

As I sat reading this at first I thought it was very reasonable, and it is about as clear a summary of this mess as possible I suppose. What is sad, however, is that “[m]any of the judges explicitly noted that the test for eligibility is a separate and distinct inquiry from other patentability concerns…” There should be complete unanimity of agreement across the entire industry that patent eligibility is a separate inquiry. That the simplicity of the Patent Act is now being ignored by some is thanks to the Supreme Court’s decision in Mayo v. Prometheus.

So as we hope for the Supreme Court to step in let’s not kid ourselves. Of late the Supreme Court has gotten a number of easy cases correct — Microsoft v. i4i, Hyatt v. Dudas and Monsanto v. Bowman. But when it comes to patent eligibility this particular Supreme Court has a mixed record at best. If they get Myriad right there may be cautious optimism.