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U.S. Federal Circuit Responds to Supreme Court on Patent Eligibility

Reversing a summary judgment of patent ineligibility under 35 U.S.C.§101, the Federal Circuit in a 2-1 decision responded to the Supreme Court’s recent decision in Prometheus v. Mayo with the caution that patent eligibility must be decided by examining claims for specific, concrete applications of the ideas behind an invention.  CLS Bank v. Alice Corp., Fed. Cir., No. 11-1301, 9 July 2012.  Alice Corporation Pty Ltd is an Australian corporation.

According to the Court, if, after taking all of the claim recitations into consideration, it is not “manifestly evident” that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under Section 101.

Judge Prost dissented, writing that the majority failed to follow the Supreme Court’s Prometheus ruling by not inquiring whether the claims include an “inventive concept” and by devising its own patentable subject matter test.

The challenged patents in this case are directed to a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate “settlement risk.”  The district court granted a summary judgment motion that the claims were not patent eligible because they are directed to an abstract idea.  On appeal the Federal Circuit reversed, concluding that the system, method, and media claims are directed to practical applications of an invention falling within the categories of patent eligible subject matter defined by Section 101.

The “abstract ideas” test for patent eligibility has become a serious problem because of its “abstractness,” Judge Linn observed.  He noted that several Supreme Court decisions have discussed the concept of “preemption” to elucidate the “abstract idea” exception to patent eligibility.

However, he added that Diamond v. Diehr, 450 U.S. 188 (1981), addressed claims containing a mathematical equation, and held that they only foreclosed the general use of the equation in conjunction with all of the other steps in the claimed process.  Thus, the essential concern, according to the Court, is not preemption per se, but the extent to which preemption results in the foreclosure of innovation.

With respect to implementing inventions in computer hardware or software, the court stated that the “mere implementation” on a computer of an otherwise ineligible abstract idea will not render the invention patent eligible, citing Fort Props. Inc. v. Am. Master Lease LLC, 671 F.3d 1317 (Fed. Cir. 2011).

However, Judge Linn wrote that a machine limitation can render a method patent eligible where the machine imposes a meaningful limit on the scope of the claim and where it plays a significant part in permitting the claimed method to be performed, citing SiRF Tech., Inc. v. Int’l Trade Comm’n, 601 F.3d 1319 (Fed. Cir. 2010).  A machine is insufficient, he added, if it functions solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations.  A claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible, Judge Linn explained, whereas a claim to nothing more than the idea of doing that thing on a computer may not. He added the following:
While the use of a machine in these limitations is less substantial or limiting than the industrial uses examined in Diehr (curing rubber) or Alappat (a rasterizer), the presence of these limitations prevents us from finding it manifestly evident that the claims are patent ineligible under § 101. … In such circumstances, we must leave the question of validity to the other provisions of Title 35.

To read the Court’s opinion and the dissenting opinion, click here.

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