Not Just a Flook?: Consideration of Prior Art When Evaluating Subject Matter Eligibility

Article co-written by Yuri Levin-Schwartz, Ph.D., a law clerk at MBHB.

On May 10, 2013, the Federal Circuit handed down the much-anticipated en banc decision in CLS Bank Int’l v. Alice Corp.[1] This case is perhaps the most important 35 U.S.C. § 101 jurisprudence regarding the patent eligibility of computer-implemented inventions since the Supreme Court’s Bilski v. Kappos and Mayo v. Prometheus decisions.[2] While the overall effect of this case remains to be seen and is likely to be a subject of heated debate, this decision has the potential to impact both patent litigation and prosecution.

As a brief introduction, the claims at issue included method, computer-readable medium (CRM), and system claims directed to facilitating a previously-arranged exchange between two parties requiring the use of “shadow” records maintained by a third-party “supervisory institution.”[3] Although some of the claims do not expressly recite computer-based steps, the parties stipulated that all claims required electronic implementation using a computer and memory.[4] The district court initially found all asserted claims invalid under § 101, but a Federal Circuit panel reversed this decision.[5] The Federal Circuit subsequently granted CLS’s petition for a rehearing and vacated the panel’s reversal, paving the way for the en banc decision.[6]

In a per curium opinion, the Federal Circuit affirmed the district court’s holding that all of the computer-implemented claims at issue were not directed to patent-eligible subject matter under 35 U.S.C. § 101, with a majority of the court (7-3) affirming the district court’s ruling that the method and CRM claims are invalid under § 101 and an equally-divided court (5-5) affirming the district court’s ruling that the system claims are invalid under § 101.[7] However, the Federal Circuit was unable to reach a consensus on a framework for evaluating patent eligibility of computer-implemented inventions going forward, and thus there was no majority opinion to support this affirmance. Rather, the decision included five different opinions, which are discussed below.

Judge Lourie’s Concurrence

The first opinion was Judge Lourie’s concurrence, which was joined by Judges Dyk, Prost, Reyna, and Wallach.[8] Judge Lourie began by admitting the difficulty of analyzing patentability under § 101 and acknowledging the need for “a consistent, cohesive, and accessible approach to the § 101 analysis.”[9] Judge Lourie then turned to the inevitable overview of Supreme Court decisions impacting § 101 as guideposts for this analysis.[10] In an example of judicial foreshadowing, he viewed the Benson, Flook, Diehr, and Bilski cases through the lens of Prometheus and focused on the judicial exception to patentable subject matter when claims incorporate abstract ideas or laws of nature.[11] Leaning heavily on Flook, he applied Prometheus‘s approach for analyzing such claims, with special concern on the practical likelihood of a claim preempting a fundamental concept.[12] This led Judge Lourie to the following four step analysis:

  1. Determine “whether the claimed invention fits within one of the four statutory classes set out in § 101.”[13]
  2. Determine whether “the claim pose[s] any risk of preempting an abstract idea.”[14]
  3. If an abstract idea is implicated by the claim, “identify and define whatever fundamental concept appears wrapped up in the claim.”[15]
  4. Finally, “[w]ith the pertinent abstract idea identified, the balance of the claim can be evaluated to determine whether it contains additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.”[16]

Judge Lourie equated this final step to requiring an “inventive concept,” i.e., “a genuine human contribution to the claimed subject matter.”[17] Judge Lourie stated that this step does not require “inventiveness” in the same sense that claims must be novel and nonobvious.[18] Rather, the analysis “considers whether steps combined with a natural law or abstract idea are so insignificant, conventional, or routine as to yield a claim that effectively covers the natural law or abstract idea itself,”[19] such as (1) limitations that were necessary to every practical use of the abstract idea,[20] (2) limitations that do not “amount to more than well-understood, routine, conventional activity previously engaged in by researchers in the field,”[21] (3) “token or trivial limitations”,[22] and (4) “bare field-of-use limitations . . . where the claim as written still effectively preempts all uses of a fundamental concept within the stated field.”[23]

Applying this framework, Judge Lourie found that the method claims were invalid under § 101 because (1) they draw on the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary and (2) fail to add “significantly more” to this idea.[24] In doing so, Judge Lourie found that the computer participation in these claims fails to supply an “inventive concept” because it just performs accelerated calculations and thus does not meaningfully limit claim scope.[25]

For similar reasons, Judge Lourie also found that the CRM and system claims were invalid under § 101. With respect to the CRM claims, Judge Lourie opined that they were not truly drawn to a specific CRM but rather to the underlying method, so he treated the CRM claims as equivalent to the methods for § 101 purposes.[26] Further, with respect to the system claims, Judge Lourie noted that the only difference from the method claims was the addition of a few generic computer components that did not offer a meaningful limitation beyond generally implementing the method via a computer.[27]

Chief Judge Rader’s Concurrence-In-Part and Dissent-In-Part

Chief Judge Rader presented the lengthiest opinion in opposition to Judge Lourie, and set forth an alternative framework for assessing patent eligibility of computer-implemented inventions that was joined by Judges Linn, Moore, and O’Malley.[28] Applying this framework, Judge Rader found the method and CRM claims invalid and the system claims valid under § 101.[29] Judge Moore joined these findings in their entirety, while Judges Linn and O’Malley only joined the findings with respect to the system claims.[30]

Judge Rader focused on the broad language of § 101 and the separation of the §§ 101, 102, and 103 patentability analyses, which he accused Judge Lourie of conflating with his “inventiveness” standard.[31] Judge Rader also took issue with Judge Lourie’s piecemeal approach to patent eligibility and advocated for consideration of claims as a whole.[32] Judge Rader ultimately concluded that “[t]he relevant inquiry must be whether a claim includes meaningful limitations restricting it to an application, rather than merely an abstract idea.”[33] To assist with this inquiry, Judge Rader identified various factors that show a claim is not meaningfully limited:

  • The claim “merely describes an abstract idea or simply adds ‘apply it.’”[34]
  • The claim “covers all practical applications of an abstract idea.”[35]
  • While the claim “does not wholly pre-empt an abstract idea, . . . it contains only insignificant or token pre- or post-solution activity—such as identifying a relevant audience, a category of use, field of use, or technological environment.”[36]
  • The claim’s “purported limitations provide no real direction, cover all possible ways to achieve the provided result, or are overly-generalized.”[37]

Correspondingly, Judge Rader identified two factors that show a claim is meaningfully limited:

  • The claim “requires a particular machine implementing a process or a particular transformation of matter.”[38]
  • “[I]n addition to the abstract idea, the claim recites added limitations” that are “central to the solution itself.”[39]

Notably, these factors overlap to a large degree with the factors of Judge Lourie’s approach. The main difference is that Judge Lourie focuses on the “human contribution” to the claim, while Judge Rader focuses on the claim as a whole. Another difference between the two approaches is their view on claim limitations directed to a general-purpose computer—Judge Lourie did not believe that these were meaningful limitations for purposes of § 101, while Judge Rader found these limitations to be “an important indication of patent eligibility.”[40]

Applying his framework to the claims at issue, Judge Rader found the system claims to be patent eligible under § 101, because there was a lack of clear and convincing evidence that the claims as a whole were directed to an abstract idea.[41] Indeed, in Judge Rader’s view, labeling the system claims as an “abstract concept” would defy the meaning of that term in view of the structural components and relationships recited in those claims.[42]

On the other hand, Judge Rader found the method and CRM claims (which he considered together in view of Alice’s concession that they rise and fall together) invalid under § 101.[43] As a threshold issue, Judge Rader found that these claims embody “elements of abstractness which propel this court into further examination of [their] eligibility.”[44] Judge Rader then considered “whether the recited steps are inherent in an escrow and claimed at a high level of generality, such that in fact the claim is not to a practical application of the concept of an escrow, but in effect claims the abstract concept of an escrow”—which led him to conclude that the claims were not patent eligible.[45] Judge Rader also noted that the method claims’ implicit reference to computer implementation, without more, is insufficient to meet § 101.[46]

Judge Moore’s Dissent-In-Part

Judge Moore filed a separate opinion (which was joined by Judges Rader, Linn, and O’Malley) to further criticize Judge Lourie’s finding that the system claims were invalid under § 101, which echoed many of the same sentiments as Judge Rader’s opinion–including the desire for an approach that considers claims as a whole and avoids conflating the requirements of §§ 101, 102, and 103.[47] Ultimately, Judge Moore decided that when looking at the hardware and software elements recited in the system claims, “it is impossible to conclude that [the system claims are] merely an abstract idea.”[48] Rather, Judge Moore found that these are “pure system claim[s]” that are “directed to a specific machine configured to perform certain functions,” and are thus patent eligible.[49]

Judge Newman’s Concurrence-In-Part and Dissent-In-Part

Judge Newman took issue with the conflation of patent eligibility with the legal criteria of patentability, as well as the apparent failure to recognize the right to study and experiment with the knowledge disclosed in patents.[50] To address these issues, Judge Newman proposed a return to the statute. Under this proposed approach, “when the subject matter is within the statutory classes in section 101, eligibility is established,” and then issues of patentability (e.g., claim breadth) would be addressed under the other sections of the statute.[51] Thus, Judge Newman found all of the claims at issue to be patent eligible.[52]

Judge Linn’s and Judge O’Malley’s Dissent

In stark contrast to their colleagues, Judges Linn and O’Malley would have reversed the District Court and found all claims patent eligible for procedural reasons. This is because the parties had stipulated that the claims included “whatever limitations Alice asserted a skilled artisan would assume they possessed”—which required electronic implementation using a computer and memory.[53] Consequently, Judges Linn and O’Malley faulted Judges Rader and Moore for improperly construing the method claims more broadly than the system claims, and also reproached Judge Lourie for importing the breadth of the method claims into the system and CRM claims.[54] Given the parties’ stipulation, Judges Linn and O’Malley would have the claims at issue rise or fall together.[55] With respect to the merits, Judges Linn and O’Malley found the system claims patent eligible for the reasons set forth in Judge Rader’s opinion, and they would also apply that same rationale to find the method and CRM claims patent eligible.[56]


© 2013 McDonnell Boehnen Hulbert & Berghoff LLP

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[1] No. 2011-1301, 2013 U.S. App. LEXIS 9493 (Fed. Cir. May 10, 2013) [hereinafter CLS Bank].

[2] See Bilski v. Kappos, 130 S. Ct. 3218 (2010) [hereinafter Bilski]; Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012) [hereinafter Prometheus]. 

[3] CLS Bank, 2013 U.S. App. LEXIS 9493, at *42-43.

[4] Id. at *43.

[5] Id. at *7.

[6] Id. at *7-8.

[7] Id. at *8, *63.

[8] Id. at *7.

[9] Id. at *18.

[10] Id. at *19-27; see Gottschalk v. Benson, 409 U.S. 63 (1972) [hereinafter Benson]; Parker v. Flook, 437 U.S. 584, (1978) [hereinafter Flook]; and Diamond v. Diehr, 450 U.S. 175 (1980) [hereinafter Diehr].

[11] *27-29; see Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948) [cited as Funk].

[12] Id. at *32-36.

[13] Id. at *32.

[14] Id.

[15] Id.

[16] Id. at *33.

[17] Id. at *35.

[18] Id. at *34.

[19] Id. at *38-39.

[20] Id. at *37.

[21] Id.

[22] Id.

[23] Id. at *38.

[24] Id. at *43-45.

[25] Id. at *46.

[26] Id. at *51.

[27] Id. at *60.

[28] Id. at *63.

[29] Id. at *63-64.

[30] Id.

[31] Id. at *94.

[32] Id. at *81.

[33] Id. at *84-85.

[34] Id. at *86.

[35] Id.

[36] Id. at *88.

[37] Id. at *89.

[38] Id. at *90.

[39] Id. at *90-91.

[40] Id. at *92.

[41] Id. at *113.

[42] Id. at *109.

[43] Id. at *121.

[44] Id. at *118.

[45] Id.

[46] Id. at *120-21.

[47] Id. at *122-23, 129-30.

[48] Id. at *138-139.

[49] Id. at *139.

[50] Id. at *143-44.

[51] Id. at *157.

[52] Id. at *160.

[53] Id. at *162-63.

[54] Id. at *166-67.

[55] Id. at *165-66.

[56] Id. at *174-175.