Computer-implemented Business Method Found Patentable By Federal Circuit
In CLS Bank International v. Alice Corporation Pty., decided on July 9, 2012, a split federal circuit panel addressed patent eligibility under 35 U.S.C. § 101, and in particular what is an “abstract idea,” as it relates to computer-implemented inventions. This federal circuit panel held that “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 inadequate under § 101.” This decision provides guidance to those seeking to protect computer related inventions.
The court considered three related patents covering a computerized trading platform in which a third party settles obligations between parties to obviate “settlement risk.” Settlement risk occurs when parties enter into an agreement to make a trade but delay the settlement of the trade. At the agreed settlement time, however, one party may not have sufficient funds to satisfy its obligation to the other party.
The invention covered by the patents, as analyzed by the majority, is a method implemented by a computer at a supervisory institution that exchanges obligations among parties who have debit and credit records with exchange institutions. The supervisory institution maintains shadow debit and credit accounts for each party. These accounts are processed independently of the exchange institutions. The supervisory institution obtains start-of-the-day balances for each of the shadow accounts and receives transactions from each of the exchange institutions. These transactions result in adjustments of the shadow accounts. The transactions are processed in chronological order. An adjustment may be made to the shadow debit account only if, after the transaction, the value of the shadow debit account is not less than the value of the shadow credit account. At the end of the day, the supervisory institution instructs one of the exchange institutions to irrevocably exchange credits or debits according to only the permitted transactions.
The district court invalidated the patents on summary judgment under 35 U.S.C. § 101 as directed to an “abstract idea.” The district court found that the claims of the three patents were directed to “the fundamental idea of employing a neutral intermediary to ensure that the parties to an exchange can honor a proposed transaction, to consummate the exchange simultaneously to minimize the risk that one party does not gain the fruits of the exchange and then irrevocably to direct the parties or their value holders to adjust their accounts or records to reflect the concluded transaction.”
The majority noted two concerns of the Supreme Court as stated in Mayo v. Prometheus: First, that the patent law must not inhibit further discovery by improperly tying up the future use of laws of nature, natural phenomena and abstract ideas. Second, that too broad an interpretation of the exceptions to § 101 could eviscerate patent law, as all inventions, at some level, use or apply laws of nature, natural phenomena or abstract ideas.
Responding to these concerns, the majority characterizes the concept of an “abstract idea” as itself “somewhat abstract.” Further, “ …. the dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive.” Still further, the majority noted that, “[i]t is fundamentally improper to paraphrase a claim in overly simplistic generalities in assessing whether the claim falls under the limited ‘abstract ideas’ exception to patentability under 35 U.S.C. § 101.” Quoting Diamond v. Diehr, the majority asserted that it is improper “to dissect the claim into old and new elements and then ignore the presence of the old elements in the analysis.”
In order to resolve these issues, the majority applied a test: “[i]t can, thus, be appreciated that 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 the computer may not.” According to this test a claim will be found to be patent-ineligible only if it is “manifestly evident” that the claim, including all of its elements, is directed to an abstract idea. Here, the majority found that the claims are “limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties” and that they “leave broad room for other methods using intermediaries to help consummate exchanges, whether with the aid of a computer or otherwise, and, thus, do not appear to preempt much in the way of innovation.”
In an apparent attempt to shift focus from the elusive abstract idea determination, the majority noted that the district court has discretion to evaluate evidence of unpatentability under sections 101, 102, 103 and 112 of the patent law and to select one or more of these grounds “as having the promise to resolve a dispute more expeditiously or with more clarity and predictability.”
In her dissent, Judge Prost criticized the majority for not following the directives of Mayo: to determine if the claim includes an abstract idea and then “inquire whether the claim limitations that are added to the abstract idea are inventive.” She summarized the test as requiring the court to look beyond the non-inventive aspects of the claims and ask whether the remaining portion is an abstract idea.
Thus, computer-implemented inventions remain patentable in the eyes of at least one federal circuit panel where the claim is drawn to a specific way of performing a process.
Posted: July 12th, 2012 under Patent.