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IP Alert
IP Alert: Federal Circuit Again Opines on Subject Matter Eligibility

July 17, 2012

On July 9, 2012, the Court of Appeals for the Federal Circuit issued its opinion in CLS Bank v. Alice Corp. Pty., Ltd., another case addressing the issue of patent subject matter eligibility. As previously reported, earlier this year in Mayo Collaborative Services v. Prometheus Laboratories, Inc., the U.S. Supreme Court held that laws of nature, natural phenomena, and abstract ideas are not eligible for patent protection. The CLS Bank case focused on the “abstract idea” exception to patent eligibility. In this case, the Federal Circuit held that a claim is not directed to an abstract idea unless “the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept.”

The patents at issue were directed to a computerized trading platform for settling obligations between two parties to an agreement (i.e., for a trade, sale, or exchange). The claims all implicated the use of a computer, and specified, in various ways, the creation maintenance, and manipulation of various types of financial records ancillary to the sales agreement. The district court held the claims were not directed to patentable subject matter, and the patent owner, Alice, appealed.

The Federal Circuit began its analysis by noting that much uncertainty exists as to the abstract idea exception to patentability, and that such uncertainty “has become a serious problem.” The court continued by observing that “the dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive. ‘Put simply, the problem is that no one understands what makes an idea ‘“abstract.”’ Mark A. Lemley et al., Life After Bilski, 63 Stan. L. Rev. 1315, 1316 (2011).”

The court attempted to resolve this problem by annunciating the “manifestly evident” standard, specifically, “when—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 [patent ineligible].” The court further held that “[u]nless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application,” then “it is inappropriate to hold that the claim is directed to a patent ineligible ‘abstract idea’ under 35 U.S.C. § 101.”

The court distinguished the patentee’s claims from claims held not to be patent eligible in a number of earlier cases in light of the requirement that the claims be practiced via a computer. Observing that “it is difficult to conclude that the computer limitations here do not play a significant part in the performance of the invention or that the claims are not limited to a very specific application,” the court held that it was not “manifestly evident” that these claims are directed to an abstract idea. The court was careful to explain, however, that simply requiring implementation on a computer did not make the claims patentable, but rather the specification of a specific way of using a computer was significant, saying “a claim that is drawn to a specific way of doing something with a computer is likely to be patent eligible whereas a claim to nothing more than the idea of doing that thing on a computer may not.”

The court held that the claims at issue were directed toward such a specific way of using a computer, and upheld the claims as patent eligible.

In dissent, Judge Prost opined that the panel majority had not followed Supreme Court precedent, and submitted that “the asserted patent claims are abstract ideas repackaged as methods and systems.”

The CLS Bank case provides significant guidance both in the preparation of patent applications in the computer sciences field and in the litigation of infringement actions. For more information on this case, please contact Fitch Even partner Steven G. Parmelee.

--Written by Fitch Even attorney Joshua P. Smith

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