UPDATED June 13, 8:24pm ET (see comment #15 & #19)
Earlier this morning the United States Supreme Court issued its much anticipated ruling in Association of Molecular Pathology v. Myriad Genetics. Justice Thomas wrote for a a nearly unanimous Court, only Justice Scalia wrote separately and he concurred in part and concurred in the judgment. The decision is not long, and approximately half of the decision is background, yet at the end of the day much damage has been done to the biotechnology industry, the medical industry and the patent system. Indeed, the assault on patents continues.
According to Todd Dickinson, Executive Director of the American Intellectual Property Law Association, the outcome was fairly predictable given the oral argument, although 9-0 was a bit surprising. Dickinson told me via telephone earlier today the the decision itself is disappointing because it “keeps framing an anti-patent narrative.” He went on: “Patents are terribly useful to incent innovation and necessary to provide funding. If we undermine the patent system further I think we will be shooting ourselves in the foot.” I couldn’t agree more!
On Tuesday, June 11, 2013, the Patent Trial and Appeals Board issued a ruling in SAP America, Inc. v. Versata Development Group, Inc., which is the result of a Covered Business Method challenge to U.S. Patent No. 6,553,350 filed by SAP on September 16, 2012. The PTAB, per Administrative Patent Judge Michael Tierney, determined that “Versata’s ’350 claims 17, and 26-29 are unpatentable under 35 U.S.C. § 101.” Looking more closely at the ruling, however, makes it clear just how significant this ruling will be. The breadth of the 101 determination is shocking and virtually guarantees that 101 will be used by patent examiners to effectively prevent software patents from issuing altogether.
In a nutshell, the PTAB ignored all the recited tangible computer elements embodied in the claims. Once the specifically articulated and necessary structure is ignored the PTAB then concluded that the claims protect only an abstract idea.
In order for there to be infringement each and every limitation would have to be found in the accused infringing method. So under what authority does the PTAB ignore specifically recited structure? The authority that the PTAB seems to be relying on to ignore claim terms is unclear and not explained in the opinion in any satisfactory way. It does, however, seem that the fact that the invention can be implemented in any type of computer system or processing environment lead the PTAB to treat the method as one that could be performed on a “general purpose computer,” rather than a specific purpose computer. Thus, the PTAB picks up on the arbitrary and erroneous distinctions between general purpose computer and specific purpose computer without as much as a thought and wholly without factual explanation.
As I read CLS Bank v. Alice, I wondered if 35 USC 101 is really a question about the claims or about the specification? 35 USC 101 states:
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.
This section does not say anything about the claims and while the claims define the invention they are not the invention. To suggest otherwise is to confuse reality and elevate the draftsman’s art above the inventor’s work.
In a one-page memorandum to the Patent Examining Corpsdated 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.”
Chief Judge Rader’s band De Novo should play a dirge tonight.
On May 10, the Federal Circuit issued its en banc opinion in CLS Bank. Within 48 hours, I had twice read the 135 page decision. It may be a bullet to the head of the software industry. Don’t take my word for it: four different judges say so:
And let’s be clear: if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents. If all of the claims of these four patents are ineligible, so too are the 320,799 patents which were granted from 1998-2011 in the technology area “Electrical Computers, Digital Processing Systems, Information Security, Error/Fault Handling.” Every patent in this technology category covers inventions directed to computer software or to hardware that implements software. In 2011 alone, 42,235 patents were granted in this area. This would render ineligible nearly 20% of all the patents that actually issued in 2011. If the reasoning of Judge Lourie’s opinion were adopted, it would decimate the electronics and software industries. There are, of course, software, financial system, business method and telecom patents in other technology classes which would also be at risk. So this is quite frankly a low estimate. There has never been a case which could do more damage to the patent system than this one.
That parade of horribles is not entirely fair to Judge Lourie’s concurrence. Judge Lourie based his opinion on the fact that the disputed patent is directed not just to electronics, but to an insignificant use of modern electronics to implement an arguably basic financial transaction. I doubt that Judge Lourie would expand the holding in CLS Bank far beyond that specific fact pattern. Nevertheless, as quoted above, the dissenting judges do not share even this much optimism.
While the Supreme Court has done away with the “useful, concrete and tangible result” test from State Street Bank v. Signature Financial, in Bilski v. Kappos, 8 out of 9 Justices (i.e., everyone except Justice Scalia) signed onto an opinion that recognized that the patent claims in State Street displayed patent eligible subject matter. Indeed, the dissenters in Bilski specifically acknowledged that the claims at issue in State Street did not deal with processes, but dealt with machines. See Footnote 40 of the Steven’s dissent.
The import of this is that machines are specifically patent eligible subject matter, so if the claims of State Street are to machines then claims that are similarly configured would also be directed to machines and therefore patent eligible. So if the systems claims at issue in CLS Bank v. Alice Corp. are configured similarly to those that now stand invalid that would mean that Judges Lourie, Dyk, Prost, Reyna and Wallach have ignored the Supreme Court. Any fair comparison of the claims, as shown below, demonstrates this rather conclusively.
Similarly, the United States Supreme Court famously ruled in Diamond v. Diehr, that the United States Patent and Trademark Office inappropriately rejected claims to a computerized process for molding raw, uncured synthetic rubber into cured precision products. Ultimately, thanks to the decision of the Supreme Court the inventors, Diehr and Lutton, received U.S. Patent No. 4,344,142. If the claims in Diamond v. Diehrare similar to those that now stand invalid that would be further proof the Federal Circuit as a whole has ignored the Supreme Court.
By now most are likely already familiar with the unfortunate reality that the United States Court of Appeals for the Federal Circuit issued a non-decision in CLS Bank v. Alice Corporation on Friday, May 10, 2013. There were 10 judges who heard the case en banc, with 7 of the 10 finding that the method claims and computer-readable medium claims were not patent eligible. While there may be reasonable room for a difference of opinion relative to those claims, it was the system claims that specifically and clearly recited tangible structure that has thrown the patent law of software into such disarray. 5 Judges would have found that the systems claims were patent ineligible (Judges Lourie, Dyk, Prost, Reyna and Wallach), and 5 Judges would have found the systems claims were patentable subject matter (Chief Judge Rader, Judges Newman, Moore, Linn and O’Malley). For more see Federal Circuit Nightmare in CLS Bank and 5 CAFC Judges Say Computer Patentable, Not Software and Did the CAFC Ignore the Supreme Court in CLS Bank?
Today, however, I want to write about one of the more bizarre passages I have ever seen in any decision, and then pose an almost unthinkable question: Is IBM’s Watson still patent eligible in the view of Judges Lourie, Dyk, Prost, Reyna and Wallach?
First, let’s start with the passage. Judge Lourie, who was joined by Judges Dyk, Prost, Reyna and Wallach, actually wrote: “At its most basic, a computer is just a calculator capable of performing mental steps faster than a human could. Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility.”
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