Planet Bingo, LLC v. VKGS LLC: Bingo invention fails abstract idea test

September 4th, 2014

In Planet Bingo, LLC v. VKGS LLC, 2013-1663 (Fed. Cir. Aug. 26, 2014) (nonprecedential), the Federal Circuit upheld a § 101 invalidity finding on summary judgment by the court below.  The opinion is brief, spending only three paragraphs on the determination that the claims are “directed to an abstract idea” and an additional five on the determination that “the claims at issue do not have an ‘inventive concept’ sufficient to ‘transform’ the claimed subject matter into a patent-eligible application.”

Unfortunately for the patentee, all briefs in the case were filed before the Supreme Court’s decision in Alice Corp. v. CLS Bank International, No. 13-298 (U.S. June 19, 2014) was decided.  Accordingly, when the Federal Circuit applied the two-step process defined by the Supreme Court in Alice, it did so without direct input from the parties.  As a result, the opinion does not provide a thorough consideration of all relevant elements.  Nonetheless, the Federal Circuit opinion is an affirmance of the lower court’s decision, and so a review of the more detailed analysis presented there may be helpful in understanding the Federal Circuit’s position.

The approach taken by Judge Bell of the Western District of Michigan was, if anything, more exhaustive than the two steps identified by the Supreme Court in Alice.  To refresh, those steps were (1) determining if “[t]he claims at issue are directed to a patent-ineligible concept” such as an “abstract idea” and (2) if so, determining if the claims “transform that abstract idea into a patent-eligible invention” by supplying an “inventive concept.”  To frame the discussion, an example claim is below.

7. A method for playing a game of Bingo which comprises the steps of:

(a) providing a system for managing a game of Bingo which comprises:

a computer with a central processing unit (CPU) and with a memory and with a printer connected to the CPU;

an input and output terminal connected to the CPU and memory of the computer; and

a program in the computer enabling:

(i) input of at least two sets of Bingo numbers which are preselected by a player for repetitive play in games of Bingo over a period of time;

(ii) storage of the sets of Bingo numbers which are preselected by the player as a group in the memory of the computer;

(iii) assignment of a player identifier unique to the player for the group having the sets of Bingo numbers which are preselected by the player wherein the player identifier is assigned to the group for multiple sessions of Bingo;

(iv) retrieval of the group using the player identifier;

(v) selection from the group by the player of at least one of the sets of Bingo numbers preselected by the player and stored in the memory of the computer as the group for play in a selected game of Bingo in a specific session of Bingo wherein a number of sets of Bingo numbers selected for play in the selected game of Bingo is less than a total number of sets of Bingo numbers in the group;

(vi) addition by the computer of a control number for the set of Bingo numbers which is selected by the player for play in the selected game of Bingo;

(vii) output of a receipt with the control number, the set of Bingo numbers which is selected for play in the selected game of Bingo, a price for the set of Bingo numbers which is selected for play in the selected game of Bingo, a date of the selected game of Bingo and optionally a computer identification number; and

(viii) output for verification of a winning set of Bingo numbers by means of the control number which is input into the computer by a manager of the game of Bingo;

(b) playing the game of Bingo using the set of Bingo numbers wherein the player signals a Bingo to indicate the set of Bingo numbers which is selected for play in the selected game of Bingo is the winning set of Bingo numbers; and

(c) verifying the winning set of Bingo numbers with the control number with the program.

Returning to the Alice analysis: (1) Are the claims directed to an abstract idea?

The district court determined that the claims “encompass[] the abstract idea of managing/playing the game of Bingo.”  File No. 1:12-CV-219 (W.D. Mi. Dkt. 73).  This determination was made with reference only to the claims themselves.  Citing to Cybersource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011), the court noted that processes that “consist[] solely of mental steps which can be carried out by a human using pen and paper … [are] not patentable.”  At this stage, the court appears to be applying the “mental steps” test to the identified abstract idea, not to the claim itself.  While no court has yet provided a clear explanation of how to define the abstract idea encompassed by a claim, this suggests that one reasonable method of doing so is to identify the portion of the claim that consists solely of mental steps.

(2) Do the claims supply an inventive concept that transforms that abstract idea into patent-eligible subject matter?

The district court held that the additional limitations “provide only for the use of a computer performing its most basic functions: storing numbers, assigning identifiers, allowing for basic inputs and outputs, printing of a receipt, displaying of numbers, and/or matching a player’s numbers with the called numbers for verification.”  Accordingly, the claims failed this prong as well.

The question this raises is: How do the courts distinguish the patent-eligible process discussed in Diamond v. Diehr, 450 U.S. 175 (1981) from the patent-ineligible processes of Alice and Planet Bingo?  In Diehr itself, the Court held that even though the Arrhenius equation was known, and using molds to cure rubber was known, a process that used a computer to recalculate the Arrhenius equation and adjust the cure time was patent-eligible.  The basis for this was the improvement of “constantly measuring the actual temperature inside the mold.”  In Alice, the Court revisited Diehr and declared that the claims had been found patent-eligible because it “used a ‘thermocouple’ to record constant temperature measurements inside the rubber mold – something ‘the industry ha[d] not been able to obtain.”  Accordingly the distinction appears to be that in Diehr a hardware element that was not routinely connected to computers was used to enable the process while in Alice and Planet Bingo the computer is used for its ordinary purposes.  Given that thermocouples (which, it should be noted, are not actually recited in the claims) were well-known in the art even at the time of Diehr, and given that using a computer for its ordinary purposes is not sufficient to confer patent-eligibility, it is unclear why using a thermocouple (or other thermometer) for its ordinary purpose of measuring temperature should convert an otherwise ineligible method into an eligible one.

One is left wondering if the difference is simply that the final step of Diehr was curing rubber, and so was an innovation that was useful to an existing, traditional industry, while the systems of Alice and Planet Bingo are innovations that relate to finance and gambling, and so are somehow deemed less worthy of patent protection.  If true, this bias finds no support in statutory law, and without explicit admission from the courts that this is the case, even legislative remedies are difficult to pursue.

My thanks to Domenico Ippolito for this posting.

Recent Grants in Electronic Commerce Technology Group Provide Evidence that At Least “Technical Inventions” Still Pass Muster Under Alice

August 15th, 2014

In a recent post Dennis Crouch has provided two charts showing the grant rate of patents filed between 2003 and 2010, divided by technology area.  See http://patentlyo.com/patent/2014/08/update-patent-rates.html and http://patentlyo.com/patent/2014/08/patent-grant-technology.html.  These charts show that technology area 3620 – Electronic Commerce – has a relatively low allowance rate of about 35%.  However, this area also has the highest rate of still-pending applications, at about 23%.  The high rate of still-pending applications suggests either that, relative to the applications in the sample, the electronic commerce applications were filed later in the sampling period, or that the electronic commerce applications are, on average, taking longer to prosecute to completion (either allowance or abandonment).  Unfortunately, without more detail, these charts do little to explain why electronic commerce applications are taking longer to prosecute (if they are) or why electronic commerce applications are facing a below-average allowance rate.  One possible explanation for the low allowance rate is the additional § 101 hurdles presented by Bilski and Alice, in particular the calling-out in Alice of a “fundamental economic practice” as an abstract idea.


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Experian Marketing Solutions, Inc. v. RPost Communications Ltd. – PTAB finds electronic messaging a “technological invention” outside ambit of Covered Business Method review

July 17th, 2014

In Experian Marketing Solutions, Inc. v. RPost Communications Ltd., Case CBM2014-00010 (June 19, 2014), the Patent Trial and Appeal Board denied a request for covered business method patent review even though it found that the patent included claims for “performing data processing or other operations used in the practice, administration, or management of a financial product or service.”  Experian petition ExperianMktgSolutions_v_RPostCommLtd_CBM2014-0010


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Digitech Image Technologies, LLC v. Electronics For Imaging, Inc. — Data structures per se not patentable

July 17th, 2014

In Digitech Image Technologies, LLC v. Electronics For Imaging, Inc., Case No. 13-1600 (Fed. Cir. July 14, 2014), the Federal Circuit affirmed a district court decision invalidating all claims of Digitech’s patent (U.S. Patent No. 6,128,415).  In making its decision, the court considered three independent claims of the ‘415 patent.

Independent claim 1 recites “A device profile … comprising … first data … and second data ….”  Similarly, independent claim 26 recites “A device profile … comprising data ….”  The claims do not recite any storage media holding the device profiles, but are entirely directed to the profiles themselves.  These claims appear on their face to be directed to data structures per se, and the Federal Circuit so held, finding that claims 1 and 26 are “directed to information in its non-tangible form.”[1] Notably, the application that led to the ‘415 patent was filed on September 6, 1996, but In re Warmerdam, 33 F.3d 1354 (Fed. Cir. 1994) had already established that a “data structure” “is not one of the categories of subject matter recited in Sec. 101.”  Thus, the rejection of this claim is based on case law from 1994, and does not reflect a post-Alice change.


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Drafting Software Patent Applications to Meet Section 101 after the Alice Decision

June 25th, 2014

My thanks to Peter Leal of Schwegman, Lundberg & Woessner, P.A., for this guest post:

In Alice Corporation PTY. Ltd. v. CLS Bank International, et al, handed down on June 19, 2014,  the U.S. Supreme Court held the Alice claims invalid under 35 U.S.C. § 101, using the two-step test for determining patent statutory subject matter set forth in the Court’s 2012 decision, Mayo Collaborative Ser­vices v. Prometheus Laboratories, Inc., 566 U. S. ___, ___.  One first determines whether the claim recites non-statutory subject matter such as an abstract idea.  If it does, then one “determines whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.”

In applying the second step to the method claims in Alice, the Court stated:

Viewed as a whole, these method claims simply recite the concept of intermediated settlement as performed by a generic computer.  They do not, for example, purport to improve the function­ing of the computer itself or effect an improvement in any other tech­nology or technical field. An instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer is not “enough” to transform the abstract idea into a patent-eligible invention.

Many software patent applications include a flowchart of the inventive concept and a block diagram of a computer system.  Several pages of detail describing the computer system are often included in the written description.  Claims are then directed to the inventive concept outlined in the flowchart as an operation of the disclosed computer system.  Software applications so drafted and claimed appear to be considerably more than the “unspecified, generic computer” in the above quotation from Alice.  However, one cannot be certain of the validity of patents issuing on this type of patent application until one of the patents is ultimately litigated.  A large number of patents may depend on that ultimate litigation.

Additional disclosure to that outlined above may help insure that claims directed to software meet section 101 after Alice.  One view of computer software patents is that the above flowchart amounts to an improvement in the function of the disclosed general purpose computer.  Consequently the patent application drafter might consider also including in software patent applications an additional figure of hardware logic design that discloses a hardware implementation of the flowchart.

On June 25, 2014 the USPTO issued “Preliminary Examination Instructions in view of the Supreme Court Decision in Alice Corporation PTY. Ltd. v. CLS Bank International, et al (the “Instructions”).”  In addressing the above second step, the Instructions state:

If an abstract idea is present in the claim, determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself.  In other words, are there other limitations in the claim that show a patent-eligible application of the abstract idea, e.g., more than a mere instruction to apply the abstract idea?  Consider the claim as a whole by considering all claim elements, both individually and in combination.

Limitations referenced in Alice Corp. that may be enough to qualify as “significantly more” when recited in a claim with an abstract idea include, as non-limiting or non-exclusive examples:

  • Improvements to another technology or technical fields;
  • Improvements to the functioning of the computer itself;
    • Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment

The hardware logic design figure suggested above may be viewed as a limitation that qualifies as “significantly more” since it is an “improvement[s] to the functioning of the computer itself” as in the above quotation from the Instructions.

Moreover, the current law allows patent applicants to claim the operation of an apparatus as a method.  Method claims drawn to the suggested hardware figure should be given breadth to cover a general purpose computer programmed to operate as the hardware logic diagram.  The Beauregard and system claims should likewise be given similar breadth.

 

 

 

Alice v. CLS Bank: Supreme Court Continues to Grope in Dark for Contours of Abstract Idea Exception

June 19th, 2014

In Alice Corp. v. CLS Bank Int’l (2014), the Supreme Court unanimously affirmed the one-paragraph per curium opinion of the en banc Federal Circuit, which found all claims of U.S. Patent Nos. 5,970,479, 6,912,510, 7,149,720, and 7,725,375 invalid under 35 U.S.C. § 101 for being directed to an abstract idea.

The Court based its affirmance on an application of a two-step process outlined in Mayo Collaborative Services v. Prometheus Labs, 566 U.S. ___ (2012). The first step is the determination of whether the claims are directed to a patent-ineligible concept such as a law of nature, natural phenomenon, or abstract idea. This step implicitly includes the identification of the concept at issue. The second step is to determine if the claims recite “an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.”

The Court avoided providing “the precise contours of the ‘abstract ideas’ category” by relying on the similarity between Alice’s claims for intermediated settlement and Bilski’s claims for hedging. The Court characterized the Bilski claims as “a method of organizing human activity.” Accordingly, while only three justices signed Justice Sotomayor’s concurrence, stating that “any claim that merely describes a method of doing business does not qualify as a ‘process’ under §101,” the unanimous decision does implicate business methods as likely directed to abstract ideas.
At the Federal Circuit, the splintered opinion included a four-judge dissent that argued that the system claims should be patent-eligible even though the method claims were not. The Supreme Court disagreed with this view, finding that if the system claims were treated differently under §101, “an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept” which would “make the determination of patent eligibility depend simply on the draftsman’s art.” To convey patent-eligibility, the claims at issue must be “significantly more than an instruction to apply the abstract idea … using some unspecified, generic computer.”

In my previous post regarding the oral argument before the Supreme Court, I noted that the Court seemed to be looking for reasonable and clear rules regarding the limits of the abstract idea exception to patentable subject matter, but did not get such a rule from any party. Perhaps as a result, this case was decided purely on its similarity to Bilski, and without providing much guidance as to the scope of the exception.

My thanks to Domenico Ippolito for this posting.

Congratulations to the USPTO’s New Regional Director Russ Slifer

June 16th, 2014

My congratulations to Russ Slifer, the new Regional Director of the USPTO’s Denver office.  I have known Russ since he started his career in patent law in 1994 at the Schwegman firm, and followed his career through his private practice representing several of America’s top high technology companies, to his many years as Chief Patent Counsel for Micron.  The USPTO is fortunate to have gained Russ for their leadership team.  He has always demonstrated a mastery of his craft, is amazingly productive, shows sound judgement in all his affairs, is a progressive manager, and has been a leader in every aspect of his professional life.  No doubt he will provide Michelle Lee and the USPTO a strong leader for the Denver office, continue to help the Office evolve and adapt to the ever changing needs of industry and policy, and get things done.  Once again, my congratulations to Russ and the USPTO.

Cotropia Study of USPTO Allowance is Rate is Total Bunk – Methodology Can Easily Result in “Corrected Allowance Rates” far in Excess of 100%, the Lower the Actual Allowance Rate Goes

May 13th, 2014

(My thanks to Domenico Ippolito for his research on this post)

In his article Getting Patents is Preposterously Easy under Obama, Timothy Lee asserted that the Patent and Trademark Office “needs a way to permanently reject patent applications” and called giving the Office that power a “common-sense reform.”[1] In support of this assertion, Mr. Lee refers to Apple’s “slide to unlock” patent, implying that the patent was allowed only because of exhaustion on the part of the PTO “after six years of back and forth.”  He goes on to say that 92% of patent applications eventually result in allowance, and that this high percentage shows that the PTO is over-“permissive” and contributing to “a proliferation of low-quality patents.”  None of these points survive a closer look.

Having decided a priori that the slide-to-unlock patent should not have issued, Mr. Lee then turns to the allowance rate of the PTO in general, accusing the Office of allowing 92% of all applications, which “may mean that the patent office approved applications that didn’t deserve a patent.”  As Mark Twain famously said, “there are three kinds of lies: lies, damned lies, and statistics.”  So let’s tread cautiously where statistics are involved, and consider carefully what they reflect.  The PTO conveniently provides a dashboard with statistics showing that 51% of applications are being allowed.[2] As an applicant, that statistic is important: it means there’s a 51% chance that you’ll get an allowance on a single round of examination, before substantial additional fees kick in.  However, since an RCE can be filed after a Final Rejection, the 51% figure does not accurately reflect the chance of an original application eventually issuing as a patent.  Fortunately, the PTO dashboard also provides that number: it’s currently 70%.

Why is the PTO’s adjusted allowance rate so much lower than the 92% reported by the article Mr. Lee refers to?  The answer is simple: because the 92% figure is not an allowance rate.  The University of Richmond (UR) report “corrects” the 51% allowance rate reported by the PTO by adjusting the number of application disposals.[3] Walking through a calculation, the “nominal” number of application disposals was 548,051.  That number was corrected by subtracting out the RCEs, leaving 390,143 disposals.  Taking 51% of 548,051 as the number of allowances, and 390,143 as the number of disposals, a partially corrected allowance rate of 74% was obtained.  While this number is substantially higher than the rate of about 68% shown by the PTO for 2012,[4] at least the UR report and the PTO agree that this is an allowance rate.

However, UR goes on to calculate an allowance rate “corrected … for all Refiled Continuing Applications (including CIPs).”  The number generated after this “correction” is of uncertain value, at best.  To generate the corrected value, the number of allowances is held constant, but the number of disposals is reduced by the number of “continuations,” “refiled continuing applications,” and other “continuing applications.”  In this manner, an “allowance rate” of 89% was calculated for 2012.  This rate shows that for every application that is finally disposed of, an average of 0.89 patents issues.  That sounds similar to an allowance rate, and the rate is close to 100%, so does that mean that virtually every application eventually issues as a patent?  No.  That statistic was already calculated as 68% or 74%, depending on the source.  In fact, this number doesn’t have an upper bound of 100%, so the fact that it is close to 100% doesn’t have any particular significance.  To demonstrate the point, assume a 50% nominal allowance rate out of 500,000 disposals.  Further assume that continuations are filed in 90% of the cases.  Then the “corrected” allowance rate would be 250,000 allowances divided by the 50,000 cases finally disposed of – yielding a “corrected” 500% grant rate.  The statistic generated in this manner – whether the result is 89%, 92% or 500% — has no particular significance either to the inventor considering filing a patent application or to the outside observer interested in determining if the PTO is overly-permissive, as Mr. Lee alleges.  Calling it an allowance rate is sloppy at best, and deliberately misleading at worst.

The truth of the matter is that the increase in RCEs, far from showing that applicants can bully the PTO into granting dubious patents, instead shows that patent prosecution is harder, is taking longer, is costing more, and is resulting in the issuance of patents with narrower claims.  Contrary to Mr. Lee’s assertions, the PTO’s successful efforts in reducing pendency have resulted primarily from an increase in Office personnel, not from reduced quality of examination.[5]


[3] See Patent Applications and the Performance of the U.S. Patent and Trademark Office, Cotropia et al., available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2225781 (numbers used in the article are taken from Appendix C).

[4] http://www.uspto.gov/dashboards/patents/kpis/kpiAllowed.kpixml.

[5] See http://www.uspto.gov/dashboards/patents/kpis/kpiExaminers.kpixml (showing 6,642 examiners in November 2012 and 8,041 in March 2014); see also http://www.uspto.gov/patents/stats/examstaffing.jsp (showing 6,063 examiners in Q1 2009).

 

Dave Kappos’ open letter to President Lincoln: A must read for leaders of all stripes

May 2nd, 2014

For those of you that have not yet read David Kappos’ open letter to President Lincoln, please take a moment to read it at Managing IP’s blog:  http://www.managingip.com/Blog/3334558/Guest-post-An-open-letter-to-Abraham-Lincoln-from-David-Kappos.html.

A great many of us that have been in the patent field for a long time believe Mr. Kappos was one of the greatest, if not the greatest, Director of the US Patent Office of our times.  It is heartening to know that he will continue to be a steady hand on the wheel of patent policy, even if only as a private sector advocate for sensible policy.

No doubt Lincoln’s understanding of the importance of the patent system was at least in part owing to his own inventiveness.  Leaves one wondering if the reverse is true – is the patent system least appreciated by those that are least inventive?  Certainly those that depend on copying others to succeed stand to gain the most by diminishing the value of the creativity of others.

Dave – thanks again for showing us why you will long be remembered as a truly great Director of the US Patent Office, and a fine student of history as well.

 

 

Supreme Court Arguments in Alice Corp. v. CLS Bank – Going between Scylla and Charybdis?

March 31st, 2014

The Supreme Court heard oral arguments in Alice Corp. v. CLS Bank, No. 13-298, today (March 31, 2014) regarding the question presented of “[w]hether claims to computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101.”  Arguments were heard from the petitioners, the respondents, and the United States as amicus curiae.

From the questions and comments of the justices, one might get the impression that at least some members of the Court were not entirely certain that the Alice patent was directed to an abstract idea.  The Court also seemed to be wrangling with how to draw the line between “technological” software inventions and those based on abstract ideas only.  At one point, Justice Breyer noted there were a lot of suggestions in the 42 briefs filed in the case as to “how to go between Scylla and Charybdis,” suggesting that on one side there was the evil of patenting abstract ideas, and on the other, the harm caused to legitimate software inventions by an overly restrictive test for Sec. 101 eligibility.

Naturally, the petitioners argued that the claims were not directed to an abstract idea, but to “a very specific way of dealing with a problem.”  Just as naturally, the respondents argued that the claims were simply directed to “[d]ebit, credit, and pay,” and thus were at a high level of abstraction.  The government took perhaps the most anti-software-patent position, arguing that improving “the functioning of computer technology” (e.g., through improved encryption or compression algorithms) or using a computer to “improve another technology” would be patent-eligible, but that other software claims would fail under Section 101.  Rather than focusing on the arguments made by the attorneys, the summary below is organized to emphasize the questioning of the Justices.

Questioning the Petitioners

Justices Kennedy, Ginsburg, and Breyer questioned the petitioners as to whether “intermediate settlement” is “less abstract than hedging,” since hedging was found to be a non-eligible abstract idea in Bilski.  Justice Breyer described a hypothetical pen-and-paper (or even abacus) implementation of the abstract idea of “solvency.”  After the petitioners observed that the hypothetical was a mere caricature of the claims, Justice Breyer agreed, but described it as a “caricature designed to suggest that there is an abstract idea here.”  In responding to these questions regarding the abstractness of the invention, petitioners argued that the claims solved the problem of the risk of non-settlement using software “that the patent specifically describes by function.”

Justice Sotomayor raised the question of functional claiming, expressing concern that the claim limitations amounted to no more than “reconciling accounts … through a computer.”

Justice Scalia asked why “doing it through a computer” shouldn’t be enough to confer patent-eligibility.  Just as mechanical inventions perform labor-saving tasks that could be performed by hand, so do computer inventions.  Petitioners agreed that computer-implemented inventions shouldn’t be singled out.

Justice Kagan was interested in pulling apart the invention into an “idea” and a “computer.”  Petitioners were wary of such a division, and argued that the invention, to be useful, had to be performed on a computer and thus could not be separated.

Justice Breyer expressed his concern about striking the right Section 101 test as a policy matter.  If the bar for patentability is too low, business success will depend more on patent lawyers than on anything else.  If the bar for patentability is too high, then no computer-implemented inventions will be protectable.  Regarding Mayo, Justice Breyer said he found it to be “an obvious case” of patent-ineligibility, but deliberately left the line vague so that attorneys could weigh in and help “figure out how to go further.”  Petitioners responded that the line shouldn’t be moved to invalidate more patents.  Congress, by passing the AIA, provided for administrative review of more patents, but did not change the substantive law.  Petitioners suggested that the Court should view this as an endorsement of the status quo and interpret claims as written rather than reducing them to a caricature before applying Section 101.

Questioning the Respondents

Justices Breyer, Sotomayor, Ginsburg, and Kennedy asked, in different ways, if any business process claims would be patent-eligible and what the proper line to draw for Section 101 eligibility would be.  Similarly, Justice Kagan asked about the level of detail required in the claims regarding the computer-implemented steps in order to be patent-eligible and about the potential harm to already-issued patents from tightening the standards of Section 101.  Respondents referred the court to the PTO’s rules that held “economic concepts, legal concepts, financial concepts, teaching concepts, dating and interpersonal relationships and generally how business should be conducted as examples of those things that are likely abstract.”  Respondents further noted that Congress, in the AIA, said that business methods “that pertain to data processing in the financial services industry and do not offer technological solutions” “are subject to special scrutiny.”  Regarding the impact on the patent system, Respondents claimed that “this is a very small problem” because out of 22,000 infringement litigations since Bilski only 57 decisions on Section 101 grounds have been issued by the district courts.

Chief Justice Roberts asked about the teachings of the patent, and if the detailed flowcharts it contained took the invention beyond an abstract idea.  Respondents argued that the complex flowcharts were not related to the claims at issue.  Chief Justice Roberts also asked about the patent-eligibility of a computer-implemented process that was theoretically human-implementable but would be impractical without a computer.  Respondents argued that the claims at issue were not impractical without a computer, but did not address the broader question.

Questioning the Government

Justice Ginsburg, Breyer, and Kennedy asked if the government’s proposed rule would invalidate all business-method and software patents.  The government responded that it would be difficult to identify a patent-eligible business method unless an improved technology, such as an improved encryption algorithm, was involved.

Justice Sotomayor asked if the case before the Court is even a software patent case, since the claims at issue are directed to systems.  The government argued that the claims could be found invalid as system claims because they are directed to abstract ideas without additional technical innovation.

Chief Justice Roberts asked if the government’s proposed non-exhaustive 6 factor test was going to provide greater clarity and certainty.  The government responded that it really boils down to whether the claimed innovation improves a computer’s functioning or improves the functioning of another technological process.  If neither of those is true, the innovation is not patent eligible.

Conclusion

Justices Breyer, Kennedy, Ginsburg, and Sotomayor in particular seemed concerned that the precedents they had set so far had not led to clarity for the Court of Appeals for the Federal Circuit regarding the application of Section 101 to software claims.  Many questions were directed to trying to find proposed language to use to provide better guidance.  However, the suggested guidance did not seem to be what they were looking for.  Petitioners argued for a very narrow reading of the abstract idea exception.  Respondents and the government argued for a very broad one.  Since the Court appears to be sensitive to the set expectations of patentees and yet unwilling to give up on the abstract idea exception, it will have to craft its own answer, with very little help from any of the parties who argued before it today.

Transcript of S.Ct. Hearing in CLS Bank

My thanks to Domenico Ippolito of Schwegman, Lundberg & Woessner, P.A., for this post.