CLS Bank v. Alice Corp: Software Patentability On the Briefs - Patent ...

by Dennis Crouch

Briefing continues in the CLS Bank software patent case. ?The accused infringer (CLS Bank) has filed its brief arguing that the Alice patent lacks any core inventive concept and therefore lacks subject matter eligibility under Section 101 of the Patent Act. ?Briefs in support of CLS and those nominally in support of neither party have also been filed. ?Alice will file its brief in January and I expect a set of additional briefs in support. ?As in the Bilski case, Alice's asserted claim here is one that appears invalid on other grounds -- namely obviousness. ?However, the district court ruled on summary judgment (and before claim construction) that the claim was invalid as lacking patent eligiblity under Section 101.

The text of the asserted claim is below:

A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:

(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;

(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;

(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party's shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and

(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.

In its first opinion, the Federal Circuit reversed the lower court ruling - finding that the claim did not merely encompass an abstract idea but instead embodied a practical implementation that fits within the scope of patent eligible subject matter. ?In a subsequent en banc order, the court asked that the parties focus on two particular questions of law:?

I. What test should the court adopt to determine whether a computerimplemented?invention is a patent ineligible ?abstract idea?; and when, if ever,?does the presence of a computer in a claim lend patent eligibility to an otherwise?patent-ineligible idea?

II. In assessing patent eligibility under 35 U.S.C. ? 101 of a computerimplemented?invention, should it matter whether the invention is claimed as a?method, system, or storage medium; and should such claims at times be considered?equivalent for ? 101 purposes?

I have attempted to extract some core elements of each brief. I should note that all of these brief have much more nuance than is shown. I attempted to categorize the briefs filed on behalf of neither party. My approach was quite subjective and I am confident that others would have classified them in a different manner.?

Practical keys here are (1) whether subject matter eligibility is about the inventive concept or instead more focused on the scope of a well construed claim; (2) invention

Party Brief:

In Support of CLS (Defendant)

• "Simple economics makes clear that, if patent protection for software were curtailed, the adverse consequences would be swift and severe. . . . Two factors are of particular significance?whether a claim can be implemented solely via a mental process or necessarily relies upon a machine for execution; and whether the claim uses an abstract idea or law of nature in a way that is novel, useful, and limited. When an invention falls short under both of these standards, it most likey is not patentable under Section 101. . . . Assessed under this framework, the software at issue here is not patentable. . . .?It is plain that credit intermediation long preexisted computer implementation, and that it is a process that can be performed in the human mind, or by a human with pencil and paper. In addition, the computer aspect of the claims here does not add anything of substance to the mental process at issue. The computer implementation of the abstract idea is not limited in any fashion. And there is no suggestion that the process here is in anyway dependent upon computer technology to accomplish the directed end."

• File Attachment: EFF & Pub Knowledge--ISO CLS.pdf (514 KB) Patents are causing more harm than benefit. This is especially true for software patents that regularly include broad functional claims. However, Section 101 analysis is problematic because of its ambiguity. The EFF brief argues that the way to cure this is to more broadly interpret 35 U.S.C. ? 112(f) (2012) so that functional software claims be given limited scope under the Federal Circuit's Means-Plus-Function doctrine. This approach stems from a recent article by Mark Lemley and fits directly within the avoidance doctrine that Professor Merges and I suggested in our 2010 article.
• File Attachment: CCIA--ISO CLS.pdf (200 KB) Prometheus requires an inventive concept to pass 101.
• File Attachment: Clearing House Ass'n--ISO CLS.pdf (819 KB)? Banking industry brief argues that "threshold" language means that "the Section 101 inquiry is the first step in the legal framework to determine patentability" and should be rigorously enforced.??
• File Attachment: Google et al.--ISO CLS.pdf (982 KB).? Google acknowledges the difficulty with the abstract idea test because the term "abstract" is so difficult to define.? However, Google argues that the abstract ideas are much easier to identify individually than to define generally. This is roughly the same as know-it-when-you-see-it test for obscinity.? Google also writes that "abstract patents are a plague on the high-tech sector."
• File Attachment: Stites Amicus Brief.pdf (262 KB) "The software patent game is a less than a zero sum game for the participants and has a large inhibiting effect on software innovation." Stites argues that the court should simply eliminate software patents.

?In Support of Neither Party, but Promoting a Stronger ? 101 Requirement

• File Attachment: British Airways et al--ISO Neither Party.pdf (191 KB) Supreme Court has rejected the "course-filter" "manifestly-evident" approach offered by the original CLS panel. Whether a claim fails under Section 101 can ordinarily be determined very early in a case and without and detailed claim construction.
• File Attachment: Profs Hollaar & Trzyna--ISO Neither Party.pdf (217 KB) The only way to draw a clear and reasonable line on subject matter eligibility is to focus on its link to technology.
• File Attachment: Juhasz Law Firm--ISO Neither Party.pdf (285 KB) "The test to determine whether a computer-implemented invention is a patent ineligible "abstract idea" should be whether steps that are central to the claim (i.e., not token extra-solution activity) have a "physical" or "virtual" link to a specific real or tangible object."
• File Attachment: Koninklijke Philips--ISO Neither Party.pdf (549 KB) An applicant and patentee should have the burden of proving that the claimed software implementation is subject matter eligible.
• File Attachment: Internet Retailers--ISO Neither Party.pdf (2454 KB) Simply rewriting a method claim as a system or storage medium cannot render the claim subject matter eligible. The Federal Circuit should empower district courts to make 101 determinations very early in cases ? well before claim construction or the completion of discovery. "The savings to the parties in money and the courts in time are self-evident. And those savings are more likely to be obtained in precisely those cases in which the patents are least likely to be valid or valuable, cases brought under low-quality patents. Judicious application of Section 101 is likely to winnow out the worst patents at the lowest cost."

In Support of Neither Party, but Promoting a Weaker ? 101 Requirement

• File Attachment: IP Owners Ass'n--ISO Neither Party.pdf (301 KB) Software is generally patentable under Section 101. However, a claim "must describe the use of [a] computer with sufficient detail to avoid preempting other uses of the idea and the computer implementation must be a meaningful and significant element of the invention." A detailed claim construction is ordinarily necessary to determine whether that claim is directed to statutory subject matter.
• File Attachment: CLS-Bank_v_Alice_USA-amicus-ISO-Neither-Party.pdf (311 KB) See this.
• File Attachment: Sigram Schindler--ISO Neither Party.pdf (474 KB) The abstract idea test is sufficiently defined.
• File Attachment: NY IP Law Ass'n--ISO Neither Party.pdf (735 KB) Efforts in some decisions to dissect the claim into old and new parts or computer and non-computer elements, should be rejected as squarely inconsistent with the Supreme Court's holdings in Diamond v. Diehr, 450 U.S. 175 (1981), and Bilski. "NYIPLA does not agree that method, system and storage medium claims should ipso facto rise and fall together. Rather, each claim (regardless of its type) should be considered independently as a whole to determine whether it is directed to patent-eligible subject matter."
• File Attachment: IP Law Ass'n of Chicago--ISO Neither Party.pdf (1024 KB) Subject matter eligibility should be broad and flexible. IPLAC's test is similar to the government's factor's in its brief. However, the tone of the IPLAC questions suggest broader eligibility. When a claim includes a computer program, IPLAC would ask: "(a) Are the claims drawn to subject matter otherwise statutory, because if so, they do not become nonstatutory simply because they use a mathematical formula, computer program or digital computer. Diehr. (b) Are process claims, as a whole, without regard to the novelty of any element or steps, or even of the process itself, nothing more than a statutory process and not an attempt to patent a mathematical formula, because if so, they are not nonstatutory. (c) Do the claims implement or apply a formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing), because if so, the claims are statutory. (d) Do the claims apply the laws to a new and useful end, because if so, they are statutory."
• File Attachment: Conejo-Valley-Bar-Assn--ISO-Neither-Party.pdf (1589 KB) There is no need for a strong section 101 eligibility requirement because the other sections of the patent act do the work already.
• File Attachment: IBM--ISO Neither Party.pdf (1624 KB) "In the exceptional case when the patent eligibility of a computer implemented invention is not readily apparent, the functional requirement of a computer counsels in favor of patent eligibility." Methods are different from systems and are different from storage media. As such, the subject matter eligibility issues are also different and thus, a system claim might be patent eligible while its parallel method claim may be ineligible.

Source: http://www.patentlyo.com/patent/2012/12/file-attachment-bsa-software-alliance-iso-clspdf-169-kb.html

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