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American Intellectual Property Law Association

CLS BANK: PATENT ELIGIBILITY UNDER SECTION 101

JIPA/AIPLA Meeting

By Joseph A. Calvaruso

Orrick, Herrington & Sutcliffe LLP

April 9, 2014

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CLS Bank International v. Alice Corporation

Asserted Claims

Method

• No hardware or computer based limitations but parties and court agreed the method claims require a computer including a processor and memory for implementation.

Computer Readable Medium

• Program code for causing computer to send a transaction and do specified processing

System

• Data processing system

• Data storage unit

• Computer configured to receive a transaction electronically, adjust records and generate instructions

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District Court

• Granted Summary Judgment of Invalidity because all three types of claims are directed to an abstract idea.

Original Federal Circuit Panel

• Reversed – all three types of patents are patentable.

CLS Bank International v. Alice Corporation

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CAFC Agreed To Hear Case En Banc And Asked Two Questions

1. “What test should the court adopt to determine whether a computer-implemented 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?” and

2. “In assessing patent eligibility under 35 U.S.C. §101 of a computer-implemented 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 [purposes of §101]?”

CLS Bank International v. Alice Corporation

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En Banc Decision Affirmed District Court Holding That All The Asserted Claims Are Patent Ineligible

• “Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. §101.”

• “An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter.”

• “[N]othing said today beyond our judgment has the weight of precedent”.

CLS Bank International v. Alice Corporation

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Determining §101 Eligibility

• Does the claim fit one of the four statutory classes – process, machine, manufacture or composition of matter?

• Is the claim directed to one of the three judicially created exceptions to patentability – law of nature, natural phenomenon, abstract idea?

CLS Bank International v. Alice Corporation

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Judge Lourie’s “Significantly More Test”

• Identify and define the abstract idea.

• Remove the abstract idea from the claim and determine whether the rest of the claim adds one or more additional substantive limitations that add “significantly more” to the basic abstract idea, thus narrowing, confining or otherwise tying down the claim so that it does not cover the abstract idea itself.

CLS Bank International v. Alice Corporation

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Judge Lourie’s “Significantly More Test” (cont’d)

• Human contributions that are merely tangential, routine, well understood or conventional cannot confer patentability.

• Insignificant post-solution activity is not enough.

• Bare field of use limitations cannot confer patent eligibility.

CLS Bank International v. Alice Corporation

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Judge Rader’s “Meaningful Limitations” Test

• Identify and define the abstract idea.

• Considering the claim as a whole, determine whether the claim is tied to a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention and the claim does not preempt virtually all uses of the underlying abstract idea.

CLS Bank International v. Alice Corporation

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The '545 Patent Claims A Method For Monetizing Copyrighted Products

1) receiving media products from a copyright holder,

2) selecting an advertisement to be associated with each media product,

3) providing said media products for sale on an Internet website,

4) restricting general public access to the media products,

5) offering free access to said media products on the condition that the consumer view the advertising,

Ultramercial, Inc. v. Hulu, LLC722 F.3d 1335 (Fed. Cir. 2013)

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The '545 Patent Claims A Method For Monetizing Copyrighted Products (cont’d)

6) receiving a request from a consumer to view the advertising,

7) facilitating the display of advertising and any required interaction with the advertising,

8) allowing the consumer access to the associated media product after such display and interaction, if any,

9) recording this transaction in an activity log, and

10) receiving payment from the advertiser.

Ultramercial, Inc. v. Hulu, LLC722 F.3d 1335 (Fed. Cir. 2013)

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Federal Circuit Reversed District Court Holding Of Invalidity

• The claim is directed to a specific application of a method implemented by several computer systems, operating in tandem, over a communications network.

• There is no evidence that the recited steps are all insignificant pre or post solution steps.

• There are many ways to accomplish that abstract concept of monetizing advertising that do not infringe the claims.

Ultramercial, Inc. v. Hulu, LLC722 F.3d 1335 (Fed. Cir. 2013)

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Accenture Patent

System for generating tasks to be performed by an insurance corporation:

• Insurance transaction database

• Task library database for storing rules for determining tasks

• Client component

• Server component having an event processor, a task engine and a task assistant wherein the event processor causes the task engine to identify rules for determining the task to be completed.

Accenture Global Services, GMBH v. Guidewire Software, Inc.728 F.3d 1336 (Fed. Cir. 2013)

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Federal Circuit Affirmed District Court Holding Of Invalidity

• Abstract idea – generating tasks [based on] rules. . .to be completed upon the occurrence of an event.

• The limitations are essentially a database of tasks, a means to allow a client to access those tasks and a set of rules that are applied to that task on a given event.

• The claims only contain generalized software components arranged to implement an abstract concept on a computer.

• Simply implementing an abstract concept on a computer, without meaningful limitations to that concept, does not transform a patent ineligible claim into a patent eligible one.

Accenture Global Services, GMBH v. Guidewire Software, Inc.728 F.3d 1336 (Fed. Cir. 2013)

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• CLS Issue as framed by the Supreme Court: – “Whether 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 as interpreted by this Court.”

• Oral argument March 31, 2014; decision to follow.

Supreme Court Review

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• Patents challenged under Section §101 have a presumption of validity and require proof by clear and convincing evidence.

• Differences in claim format (method, media, system, apparatus) are not likely to change the §101 determination where they all track the same abstract idea.

• Adding references to specific computer components working in a particular way should help.

So Where Are We?

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• [A] claim is not “meaningfully limited” if it merely describes an abstract idea or simply adds “apply it.”

• [A] claim is not “meaningfully limited” if its purported limitations provide no real direction, cover all possible ways to achieve the provided result, or are overly-generalized.

• It is not the breadth or narrowness of an idea that is relevant, but whether the claim covers every practical application of that abstract idea.

So Where Are We?

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• [E]ven if a claim does not wholly pre-empt an abstract idea, it still will not be “meaningfully limited” if it contains only insignificant pre- or post-solution activity – such as identifying a relevant audience, a category of use, field of use, or technological environment.

• [A] claim is “meaningfully limited” if it requires a particular machine implementing a process or a particular transformation of matter.

So Where Are We?

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•Joseph A. CalvarusoPartner

Orrick, Herrington & Sutcliffe LLP51 West 52nd Street

New York, N.Y. 10019

•(212) 506-5140(914) 414-5174

•jcalvaruso@orrick.com

Thanks for your attention! Questions?