Posts Tagged: "Alice v. CLS Bank"

On July 3, 2014, I had the opportunity to interview Judge Michel, former Chief Judge of the United States Court of Appeals for the Federal Circuit. The interview took place at the University Club in Washington, DC. Our conversation was wide ranging, dealing with all the pressing issues of the moment in the patent world. In part 1 of the…

Judge Michel: “[I]t’s bad news at least for the reason that it will create total chaos. No one will know what is eligible and what is not eligible so there will be no predictability, no consistency, and that by itself will create delays and costs and discourage progress that the Constitution was trying to promote by encouraging Congress to create the patent system. Consider the decision makers. You’ve got 9,000 patent examiners, 250 or so board members, approximately 1,000 district judges, and a few other people, the International Trade Commission, the Federal Circuit, and so on. So you’re talking about 10,000 decision makers. I don’t see any way they can apply the Alice standard in a way that’s fair or consistent or predictable. And all the other people who are involved in advising economic actors and business leaders are similarly faced with chaos and uncertainty, delay and extra costs.”

From a patent challenger’s perspective, Alice further reinforces the need to evaluate whether an early dispositive motion under § 101 can end the litigation. In crafting such motions, it is important to clearly define the abstract idea and to demonstrate how it is merely well-understood, routine, conventional activity. Additionally, it may be helpful to articulate how the claims do not recite any technological improvement. Another strategy is to petition the PTO to institute a covered business method (CBM) patent review. A CBM proceeding may be preferred as the evidentiary burden is lower compared to district court litigation. Currently, the PTO has taken the position that § 101 is an available basis for challenging claims in a CBM proceeding. However, please note that the availability of §101 is being challenged at the Federal Circuit.

A troubling aspect of the analysis in the Alice opinion is the suggestion that an invention, once patent eligible, can become patent ineligible simply based on the passage of time and public adoption. Dialogue in the oral argument as well as statements in the Court’s opinion suggest this line of reasoning, which arguably originated in Bilski, has become an accepted principal . . . An invention may initially be susceptible to patenting but may later become ineligible for patenting (as opposed to becoming unpatentable due to lack of novelty or obviousness) as it becomes more adopted, ubiquitous, successful or commonplace. Ubiquity, it would seem, is now the touchstone not only for patentability but for patent eligibility too.

Over the last several days I have heard of an alarming trend from the United States Patent and Trademark Office — Patent Examiners are canceling Notices of Allowance and yanking previously granted claims back into prosecution while citing the United States Supreme Court’s ruling in Alice v. CLS Bank. In some instances granted claims are being pulled back into prosecution only to be rejected as lacking patent eligible subject matter even after the issue fee has been paid. This is an alarming trend that seems to be building steam as virtually everyone who operates in this space is now seeing this happen and/or they are seeing supplemental office actions issued where the pending office action never rejected claims based on patent eligibility grounds.

He says he has seen the below form paragraph twice within a week. Most alarming, in one case the form paragraph came in the form of a supplemental office action, but the original office action, which was outstanding, didn’t have any patent eligibility rejections under 35 U.S.C. 101… Clearly this form paragraph does not come from the initial guidance the USPTO sent to examiners. In that initial guidance Deputy Commissioner for Patent Examination Policy, Andrew Hirshfeld, told patent examiners that “the basic inquiries to determine subject matter eligibility remain the same as explained in MPEP 2106(I).” Therefore, USPTO told patent examiners that while the framework of the analysis had changed the substance of the analysis had not changed.

The Supreme Court’s Alice decision has again left the IP bar without a clear, repeatable test to determine when exactly a software (or computer-implemented) claim is patentable versus being simply an abstract idea “free to all men and reserved exclusively to none,” Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948). This is perhaps not surprising as Alice is a case more about so-called “business method” patents than software patents! (In fact, three justices in a succinct, 116-word concurring opinion indicated that they would impose a per se ban on patenting business methods!) With respect to software patents, however, we still find ourselves with a myriad of USPTO Section 101 guidelines, flowcharts and presentation slides – the latest of which is a March 4, 2014, 19-pager which may very well get fatter after Alice!

EDITORIAL NOTE: This article is a continuation of Alice, the Illusory Death of Software Patents. We can return to the beginning of the analysis and revisit preemption. As stated, the Court sees § 101 as protecting the big ideas that are fundamental to commerce, science, and technology, patents that would preempt and “block” innovation. The Court realizes that every patent…

With apologies to the great humorist, the report of the death of software patents is an exaggeration. The Court set forth a two-step test grounded in Bilski v. Kappos and Mayo v. Prometheus. While the Court may not have defined a clear boundary for so called “abstract ideas” specifically, it did squarely place this case within the “outer shell” of the law set forth in Bilski and Mayo. In doing so it articulated an approach that focuses not on finding the boundary line, but rather on the core properties of an ineligible patent claim.

At least initially, the USPTO instructions to examiners seems extremely patentee friendly, which I must say comes as a surprise given the largely anti-patent rhetoric that has come from the White House over the last 16 months. Indeed, the USPTO has told examiners that the reason Alice’s claims were determined to be patent ineligible was because “the generically-recited computers in the claims add nothing of substance to the underlying abstract idea.” Hirshfeld also told examiners: “[T]he basic inquiries to determine subject matter eligibility remain the same as explained in MPEP 2106(I).” Therefore, nothing has changed as far as the USPTO is concerned.

On Thursday, june 19, 2014, the United States Supreme Court issued its much anticipated decision in Alice v. CLS Bank. In a unanimous decision authored by Justice Thomas the Supreme Court Court held that because the claims are drawn to a patent-ineligible abstract idea, they are not eligible for a patent under Section 101. In what can only be described as an intellectually bankrupt opinion, the Supreme Court never once used the word “software” in its decision.

Certain things are obvious. It was obvious in the oral arguments that it was a challenge for both the Supreme Court judges and the lawyers to distinguish between abstract ideas, ideas, computer programs, technological innovations, patentable subject matter, and inventions. This confusion also showed up in the seven different written opinions of the judges in the Appeals Court review of this same case… Mr. Perry was wrong about word processing and e-mail. Providing a “technical solution to a then unmet problem” and providing a “technological advance” often does not constitute making an invention. That’s because with computers you can often make a technical advance that is obvious.

It seems undeniable that Alice missed many opportunities to score easy points. Indirect arguments were made by Alice that didn’t seem very persuasive. Indeed, if one is to predict the outcome of the case based on oral arguments alone it did not go well for Alice today. Only three things give Alice supporters hope after this oral argument as far as I can tell. First, the government seems to be asking the Supreme Court to overrule precedent in Bilski that is not even four years old, which simply isn’t going to happen. Second, the egregious overreach and outright misleading nature of the CLS Bank argument should raise a legitimate question or two in the mind of the Justices. Third, the reality simply is that at least the systems claims recite numerous specific, tangible elements such that it should be impossible to in any intellectually honest way find those claims to cover an abstract idea.

BEAR: ”When the Constitution was written, there was no concept of software. Nor was there computer hardware. We had physical, you know, very physical mechanical inventions. And computers have come around and software has come around, and the interpretation of these statutes has had to shift with the technology. And as unimaginable as it may seem to us here in 2014, there’s something in our future as unimaginable as software was when the Constitution was written. Inventions in that future domain need to not be shut down because of the way we rule today on §101. So the request for not having a real hard line – a bright line – is important. It protects the possibility of fostering future inventions in domains we can’t even imagine.”

BEAR: ”[T]here’s an amusing little brief worth visiting. It’s by a number of companies including LinkedIn, Netflix, Twitter, Yelp and Rackspace – whom I respect and appreciate as innovators – and takes a fairly radical stance. I believe it’s important for anyone reading along to be studying briefs on all sides. Their main approach is to establish that software patents are not only not necessary, but hinder innovation. While positioning themselves to be seen as utopian, the politics strike me as appealing to the fearful, emotionally insecure side of people. Twitter represents that they are recruiting engineers based on a purported fact that they don’t want to engage in offensive patenting. It seems intentionally misleading and inviting reactionary public support. Let me read you a sentence. It says, “Both trade secret and copyright law already protect software and effectively prevent both wrongful use and explicit copying by others.” As if, somehow, that addresses the issues at hand.”