The Patent Drafting Disclosure Revolution: Don’t Ask Alice

By Joseph Root
September 30, 2014

EDITOR’S NOTE: This article is an excerpt from Rules of Patent Drafting: Guidance from Federal Circuit Cases, 2014 Edition, which is now available at Amazon.com. This is the seventh installment of this series. To read other installments please see Joseph Root on Patent Claim Drafting.

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No question exists that patent eligibility under Section 101 has been, and remains, the most active question in patent law. Watching the rapid flow of cases back and forth between the Federal Circuit and the Supreme Court exceeds the excitement generated by most TV shows in sheer entertainment value. The only question open for discussion is whether we are watching “Game of Thrones,” “Survivor”, or “Modern Family.” Actually, the best choice may be “Lost”.

To understand the Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l, a page of history provides more illumination than a book of Lewis Carroll references. Here we need to pick up at the point when everyone thought the computer patentability wars were over.

By the late 1990’s, the last frontier was business methods. We had absorbed Diamond v. Diehr and moved on to Beauregard claims and propagated signals. Everyone was making, or wanted to be making, tons of money in the Dot.Con era, and little patience remained for outdated rules.

And then came State Street Bank, where the Federal Circuit said :

Today, we hold that the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces “a useful, concrete and tangible result”—a final share price momentarily fixed for recording and reporting purposes.

Suddenly, crunching and displaying data was patentable invention. As if that language lacked clarity, the court addressed business methods directly: “We take this opportunity to lay this ill-conceived exception to rest.”

While the State Street Bank panel appeared to give due deference to both Benson and Flook, it apparently viewed those cases as having been at least modified, if not superseded, by Chakrabarty. Certainly, the fact that Chakrabarty not only broke an important barrier in finding patentable subject matter in a living organism, coupled with the expansive “anything under the Sun” language seemed to signal the decline, if not the demise, of the older cases. If one were to apply the State Street Bank rationale to the patent at issue in Benson, it is difficult to see how that claim would be held invalid. The rub, of course, was that both Benson and Flook remained good law, regardless whether the Federal Circuit chose to apply them.

The decade following the State Street Bank decision certainly was be the Golden Age of business method patents. The tenor of the era is completely captured by Amazon.com’s “One Click” patent. The resulting backlash against business method patents, and arguably against patents in general, culminated in the recent series of Supreme Court decisions in the patent field, some sharply critical of the Federal Circuit.

After the furor following the “One-Click” episode, attention turned to a case working its way through the PTO and the Board, In re Bilski. That application involved a method for managing risks in commodity trading, with claims setting out steps of making a series of commodity transactions, identifying parties having counter-risk positions, and initiating transactions with both parties to achieve a balanced risk position.

The Federal Circuit had been reading the election returns, however, and it threw State Street Bank under the bus:

[W]hile looking for “a useful, concrete and tangible result” may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible   under § 101. And it was certainly never intended to supplant the Supreme Court’s test.

The Bilski “machine or transformation” test springs directly from standard of Benson and Diehr. The holding sets out the applicable rule as, “A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”

The Supreme Court, as widely expected, quickly granted certiorari, but the resulting decision, styled Bilski v. Kappos, generated considerably more smoke and heat than light. All nine Justices agreed that Bilski’s application fell outside of § 101, and that the machine-or-transformation test was not the sole measure of patentable utility. Beyond that, four justices fully joined Justice Kennedy in the opinion of the Court, holding that Mr. Bilski was trying to patent an abstract idea, the concept of hedging risk.

The stack of opinions makes it difficult to extract concrete guidance, but Justice Breyer’s conclusion points the way toward a useful, practical analysis:

In sum, it is my view that, in reemphasizing that the “machine-or transformation” test is not necessarily the sole test of patentability, the Court intends neither to deemphasize the test’s usefulness nor to suggest that many patentable processes lie beyond its reach.

At bottom, the Supreme Court once again criticized the Federal Circuit for generating and applying a relatively clear and straight-forward test.

Close on Bilski’s heels, the Federal Circuit decided Cybersource Corp. v. Retail Decisions, Inc.,which resurrected the “mental steps” analysis of days gone by. The fatal defect of the claims at issue turned on the fact that ‘obtaining information about other transactions,’ and ‘constructing a map of credit card numbers’ can all be performed in the human mind. A step requiring only human thought constitutes an abstract idea, not patent-eligible under § 101. Such steps embody the ‘basic tools of scientific and technological work’ that are free to all men and reserved exclusively to none, the court noted.

[Patent-Search]

Then the Supreme Court delivered its opinion in Mayo Collaborative Services v. Prometheus Labs, Inc. That case specifically involved a biotechnology-related process, but it set out a rule that extends beyond that arena: “If a law of nature is not patentable, then neither is a process reciting a law of nature, unless that process has additional features that provide practical assurance that the process is more than a drafting effort designed to monopolize the law of nature itself.”

Mayo paved the way for Alice Corp. v. CLS Bank Int’l, possibly the most divided set of opinions the Federal Circuit has ever produced. Indeed, the opinion was delivered per curiam, noting that a majority of judges agreed that the software method and media claims were not patent-eligible, and that the court divided equally on the patent eligibility of the system claims. In four opinions and one “Additional Reflections,” stretching over 67 pages, the Federal Circuit judges wrestled with the Mayo standard, primarily with the questions of identifying an “abstract concept” and then how one determines when sufficient “additional features” are present. In addition to abstruse questions of law, Judge Moore addressed the practical impact of the court’s decision:

I am concerned that the current interpretation of § 101, and in particular the abstract idea exception, is causing a free fall in the patent system. … Holding that all of these claims are directed to no more than an abstract idea gives staggering breadth to what is meant to be a narrow judicial exception. 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.

Chief Judge Rader’s “reflections” likewise focus on practical considerations, such as consistency: “I enjoy good writing and a good mystery, but I doubt that innovation is promoted when subjective and empty words like ‘contribution’ or ‘inventiveness’ are offered up by courts to determine investment, resource allocation, and business decisions.”

The Supreme Court accepted the challenge. Justice Thomas, writing for a unanimous Supreme Court, applied the two-part Mayo test to affirm the Federal Circuit’s decision, as well as to attempt the clarification of that test. In doing so, he seemed to make clear that the proper analytical process is at each stage to ask, “Are the claims at hand are more like those of Diehr, or those of Bilski?” The first step asks whether the claims are directed to an abstract concept, and here the analysis focused sharply on Bilski:

On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “ ‘a fundamental economic practice long prevalent in our system of commerce.’ ” The use of a third-party intermediary (or “clearing house”) is also a building block of the modern economy. Thus, intermediated settlement, like hedging, is an “abstract idea” beyond the scope of §101.

In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.

The second step, whether sufficient additional features are added to the editor the abstract idea, likewise write the claims at issue with those of Bilski. The problem, said Justice Thomas, was that “the method claims, which merely require generic computer implementation, failed to transform that abstract idea into a patent-eligible invention.” Rather than solving the questions raised by Chief Judge Rader, the opinion simply repeats phrases from previous opinions:

[W]e must examine the elements of the claim to determine whether it contains an “’inventive concept’ ” sufficient to “transform” the claimed abstract idea into a patent-eligible application. A claim that recites an abstract idea must include “additional features” to ensure “that the [claim] is more than a drafting effort designed to monopolize the [abstract idea].” Mayo made clear that transformation into a patent-eligible application requires “more than simply stat[ing] the [abstract idea] while adding the words ‘apply it.’ ”

Instead of explaining these terms, however, the opinion pointed to Mayo, where the claimed methods were “well known in the art,” amounting to “nothing significantly more than an instruction to doctors to apply the applicable laws when treating their patients.” Here, implementing an abstract idea on computer fell short of providing an “inventive concept.” As in Flook, a conventional computer implementation of an abstract idea does not merit eligibility for a patent. Diehr, on the other hand, qualified for patent eligibility because the abstract idea was employed to solve an existing technological problem.

The summary of this analysis should be considered at length:

These cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it’ ” is not enough for patent eligibility. Nor is limiting the use of an abstract idea “‘to a particular technological environment.’” Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent’s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” that addition cannot impart patent eligibility. This conclusion accords with the pre- emption concern that undergirds our §101 jurisprudence. Given the ubiquity of computers, wholly generic computer implementation is not generally the sort of “additional featur[e]” that provides any “practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself.”

The fact that a computer “necessarily exist[s] in the physical, rather than purely conceptual, realm,” is beside the point. There is no dispute that a computer is a tangible system (in §101 terms, a “machine”), or that many computer-implemented claims are formally addressed to patent-eligible subject matter. But if that were the end of the §101 inquiry, an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept. Such a result would make the determination of patent eligibility “depend simply on the draftsman’s art,” thereby eviscerating the rule that “ ‘[l]aws of nature, natural phenomena, and abstract ideas are not patentable,’ ”

Applying those principles to the claims at issue, the Court concentrated on the facts that each claimed function was known, and the implementation of that function was conventional. Thus, the opinion characterized the step of creating and maintaining shadow accounts as amounting to “electronic record-keeping – one of the most basic functions of a computer.” In the end, “each step does no more than require a generic computer to perform generic computer functions.”

Drafters clearly need guidance in structuring claims in this area, but no guidance is forthcoming. Amid the chaos, however, a safe harbor can be identified with some certainty: A claim and specification that clearly set out a combination of a generic computer and specialized software to create a specialized “machine” states the best chance of surviving a Section 101 analysis. For starters, go back and read both Diehr and Bilski. The difference between those cases is that the former identifies a problem and sets out a technical solution that had not been implemented previously. Bilski never does that. With all of the verbiage from both the Federal Circuit and Supreme Court, one can lose sight of the fact that the “machine-or-transformation” test still offers a secure path to patent eligibility. A drafter must set out to demonstrate that the invention at hand offers a new and unconventional application of whatever principle is involved, and that demonstration must shine through every aspect of the application.

The situation facing business method drafters remains fluid, with run-of-the-mill business method patents continuing to fall. Additionally, the Supreme Court has again bounced the technically similar case in Ultramercial, Inc. v. Hulu, LLC back to the Federal Circuit. Rather than setting out highly generalized claims, the process there consists of 10 specific steps that serve to limit any abstract idea within the invention. This case merits attention, as it may well turn out to be the case that sets out clear rules for business method patents.

In the meantime, drafters need guidance on structuring patent claims in the here and now. The answer seems to lie in tying the claims closely to the technology. This result amounts to Bilski with benefits. If one applies the machine-or-transformation standard, acceptability under § 101 seems assured. If not, one is free to argue that the particular invention may not meet the machine-or-transformation test, but it is not an abstract idea. Given the uncertainty prevailing at the moment, providing a flexible specification and claims, capable of responding to a number of different directions from both the Supreme Court and the Federal Circuit, offers the most promise.

The Author

Joseph Root

Joseph Root has served as both IP and General Counsel, in-house and out, for corporations and law firms, in a career spanning three decades. In 2008 he founded QualiPat, a company performing IP services and training. There, he built, trained, and managed an IP team in India that performed patent drafting and analytics, including preparing and filing over 300 US patent applications. He is also the author of Rules of Patent Drafting: Guidelines from Federal Circuit Case Law.

Over the course of his career, Joe has assumed both management and hands-on responsibilities for the identification, protection, and enforcement of both patents and trademarks. His expertise was recently recognized by London-based Intellectual Asset Management magazine, which named him to the “IAM Strategy 250 – The World’s Leading IP Strategists.” Joe received his JD (magna cum laude) at Wake Forest University School of Law, and a BS in engineering from the United States Military Academy at West Point. Prior to law school, he worked as an engineer, production supervisor, and soldier, including a tour commanding an infantry company in Vietnam. He is now a country patent lawyer in the hills of North Carolina, with his wife Natalie and bearded collie Claymore.

Joe can be reached at jroot@qualipat.com.

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Discuss this

There are currently 4 Comments comments.

  1. EG September 30, 2014 8:56 am

    Joseph,

    Thanks for the article. Some astute observations about dealing with the broken two-part Alice test, including the uncertainty we’re in in drafting viable claims to software. I especially agree with your assessment that suggests the specification must make clear that software is a machine-implemented component for the computer. On particularly myopic and technologically ignorant view expressed by Alice that goes back to Benson is that software implemented on a generic computer somehow does not change the generic computer. That’s utter nonsense as clearly once the software is loaded on that computer the operation of the computer is manifestly changed.

    Another possibility for avoiding the broken two-part Alice test is suggested by the Solutran decision from the PTAB which involved a paper check processing method. The PTAB was particularly influenced by the this method being more a physical process (which included digital scanning of the paper checks before creating digital images of them), and thus the first part of the Alice test (is there an “abstract idea”) didn’t apply.

    In the end though, the broken two-part Alice test makes many data/information processing/management methods/systems problematical to claim. As I point out in my prior IPWatchdog article, the only true “fix” for this situation is for Congress to amend the 35 USC 101 as I suggest.

  2. American Cowboy September 30, 2014 5:03 pm

    Alice and its fans will make inventors use trade secrets instead of patents, so they won’t have to worry about patent disclosure rules.

  3. Gene, but not Gene Q October 1, 2014 7:50 am

    The title of this piece should be “The Claim Drafting Revolution: Don’t Ask Alice”.

  4. step back October 1, 2014 7:56 am

    The recent epidemic of mindless judges who embrace the “I know it when I feel it” meme is telling.

    We have re-entered the Dark Ages.
    Science is out.
    Salem-style witch hunting is in (is vogue).
    The modern version of witch and witch craft is the inventor and his (or her) insistence on reaping compensation for a job well done by means of the patent system.

    How do you tell if an inventor is witch or not?
    Dunk him/her into a vat of boiling oil and see if he/she can do something “significantly more”.

    Too many ‘respectfully yours’ patent practitioners bow too deep before the claimed authority of the Supremes and their cohorts on the CAFC. Alice v. CLS is a pure LSD trip through and through.

    It is time to stop making excuses for the insanity of the latest anti-science and anti-logic actions of the courts. Call them what they are. Salem witch hunts.