There’s an old saying that “bad facts make bad law,” acknowledging that a court’s decisions regarding extreme cases can result in law poorly adapted to less extreme cases. The Supreme Court’s recent trio of 35 U.S.C. § 101 decisions regarding method claims (Bilski v. Kappos, Mayo Collaborative Services v. Prometheus Laboratories, Inc., and this term’s Alice Corp. v. CLS Bank Int’l) followed a common pattern for patent cases reviewed by the Court: the claims at issue were poorly drafted, claiming more than the patentee was likely to have been entitled.
But unlike the Court’s treatment of other such claims (like the claims in KSR v. Teleflex Int’l, for example), in these recent cases the Court has not addressed the substantive patent law under §§ 102, 103, or 112. Rather, the core of the disputes and the questions before the Court involved the patent eligibility of the claims under § 101. In part due to how the questions were framed, and in equal part how the Court seems to think about patent law, the lines between §§ 101, 102, and 103 have become blurred, removing some of the doctrinal certainty that the Federal Circuit has labored for a generation to impart to patent law.
More disturbingly, the Supreme Court has not clarified what makes a claim fall into the patent-ineligible category of abstract ideas, laws of nature, or natural phenomena. As a consequence, the state of the law regarding patent eligibility is in flux and thus it is difficult to predict with any confidence how courts or the Patent Office will assess patent eligibility in instances where the claims are more circumscribed within the confines of what the patentee has disclosed.
The CLS Bank case is the most recent of the Court’s patent eligibility decisions, and the Court unanimously affirmed the Federal Circuit’s per curiam opinion (itself an effort to apply the Court’s patent eligibility jurisprudence regarding computer-based methods) that all of Alice’s claims were too abstract to meet the requirements of § 101. The claims at issue included method claims (directed, according to the Court, to methods for implementing an intermediated settlement that are well-known in the art), system claims involving implementation of the method using a general purpose computer, and computer readable-media claims for directing a general purpose computer to implement the method. None of the distinctions thought heretofore to matter between claims to methods, systems, and computer-readable media made any difference to the Court.
In providing a rationale for its decision, the Court considered the Mayo opinion to have provided a two-prong framework for performing the patent-eligibility analysis:
First, we determine whether the claims at issue are directed to [an abstract idea, law of nature, or natural phenomenon]. If so, we then ask, [w]hat else is there in the claims before us? To answer that question, we . . . search for an inventive concept — i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.
The Court did not rely solely on Mayo, however, and asserted that its jurisprudence from Gottschalk v. Benson, through Parker v. Flook, Bilski, and finally the Mayo opinion is consistent in both the underlying principles and how the patent-eligibility analysis should be performed. The opinion distinguished the Court’s seemingly contrary decision in Diamond v. Diehr in a way that may be useful in determining what is patent-eligible subject matter and how it should be claimed: “In other words, the claims in Diehr were patent eligible because they improved an existing technological process, not because they were implemented on a computer.” And, in a footnote, the Court declared that its Mayo analysis is consistent with the patent law principle that the claims should be considered as a whole because the Mayo decision instructs a court to consider the elements of the claim at issue both individually and in their entirety.
Nevertheless, the Court expressly declined to clearly define the term “abstract idea,” stating that “we need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.” Instead, the Justices relied on the conceptual similarity between patentee Alice’s claims and those found patent-ineligible in Bilski. In the Court’s view, both were attempts to preempt a preexisting human activity (hedging in Bilski, intermediated settlement here). The Court stated that “[i]t is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of ‘abstract ideas’ as we have used that term.”
Taken in this light, the Court’s views are consistent with other instances where the Court denied patentability for claims that attempted to encompass subject matter in the prior art. But those cases were based on the equivalent of § 102, a standard (novelty) more readily assessed objectively (the claimed subject matter is either in the prior art or it is not) rather than categorically and subjectively under § 101 (wherein the Court seems to think it can “know [a patent eligible claim] when [it] see[s] it”).
The Court’s reliance on § 101 is apparently at odds with its earlier decision in Diehr, which stands for the principle that patent-eligibility under § 101 is independent from novelty under § 102 and non-obviousness under § 103. The Court’s characterization of Alice’s and Bilski’s claims as “preexisting human activity” conflate these analyses and raise the question as to whether the Court intended to partially overrule Diehr. Regardless of its intentions, the Court’s decision to abjure the questions of novelty and non-obviousness in favor of subject matter eligibility decreases the extent to which prior precedent, including the Court’s, can be relied upon in deciding questions of claim scope.
After a brief discussion of the Court’s understanding of how a conventional general purpose computer works, the Court opined that the manner by which a computer implements the claimed (and ineligible) method is not “enough” to render the system claims patent-eligible because said implementation is entirely conventional. In words arising from the Mayo decision, Alice’s claims did not include “significantly more” than an abstract idea and thus were considered to be no more than the abstract idea itself.
Despite these deficiencies, the Court’s opinion did provide some guidance on how it will determine what is “enough” that must be added to an abstract idea, law of nature, or natural phenomenon to render a claim encompassing these categories to be patent-eligible, based on the rubric that there must be something in the claimed invention that improves existing technology:
The method claims do not, for example, purport to improve the functioning of the computer itself. There is no specific or limiting recitation of . . . improved computer technology . . . . Nor do they effect an improvement in any other technology or technical field. Instead, the claims at issue amount to “nothing significantly more” than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer. Under our precedents, that is not “enough” to transform an abstract idea into a patent-eligible invention.
Thus, generic computer hardware is not something “significantly more” and Alice’s system and computer-readable medium claims fell with the method claims:
Put another way, the system claims are no different from the method claims in substance. The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long “warn[ed] . . . against” interpreting § 101 “in ways that make patent eligibility ‘depend simply on the draftsman’s art.’”
This decision answers two questions about how to apply the Mayo analysis that were not apparent from that opinion. First, the two-prong Mayo test should be applied for claims encompassing any judicial exclusion to § 101, not just those that incorporate a law of nature as in Mayo. Second, the Mayo analysis is not limited to method claims – it can be applied to claims of other statutory classes as well. It is also evident that this decision is an incremental one, insofar as it does not strike down all software patents and is crafted as an application of the Court’s earlier precedents, particularly Bilski and Mayo. From the opinion, it is clear that the Court is still striving for balance between tying up fundamental building blocks that would inhibit innovation, while not swallowing patent law whole (because everything ultimately is based on an abstract idea, law of nature, or natural phenomenon). The Court’s decision is also entirely consistent with its disinclination to enunciate broad proscriptions against patenting particular areas of technology, as evidenced by its decisions in Bilski (which did not rule all business method claims to be patent-ineligible), Association for Molecular Pathologists v. Myriad Genetics (which was limited to rendering genomic DNA patent-ineligible but did not disturb patent-eligibility for cDNA), and even Bowman v. Monsanto (which cautioned against interpreting the Court’s decision in that case to apply to all “self-replicating technologies”).
It is a fair question to ask: how can one avoid a § 101 rejection in view of the CLS Bank decision? The Mayo test as applied here provides something of a recipe (albeit an incomplete one) for doing so:
There may be another beneficial strategy to use during the next year or two as the Patent Office and the courts hash out the contours of the CLS Bank decision. This strategy is to start by drafting software and business method claims as narrowly as possible (e.g., include specific hardware in the claims) but that still cover at least one commercially-valuable embodiment of the invention. Should these claims be allowed, a continuing application can be filed having claims that do not recite some of this hardware. This approach (starting narrow, then going broad) has the added advantage that it often leads to faster allowances, and also lets the applicant carefully probe the boundaries of § 101.
Alice’s claims could have, and probably should have, been attacked as being anticipated or obvious. After all, this decision relies on the existence of prior art that could have been used for such a purpose. Instead, the Court has fully opened the Pandora’s Box that it peeked into with Mayo, apparently sanctioning the use of prior art to render a claimed invention well-known, conventional and thus abstract under § 101.
Ultimately, CLS Bank continues the trend of two other patent cases decided this term, Limelight Networks, Inc. v. Akamai Technologies, Inc. and Nautilus, Inc. v. Biosig Instruments, Inc., in which the Court has placed further limits on the scope of patent protection. In doing so, the Court has introduced new avenues for challenging the validity of patents.
 561 U.S. 593 (2010).
 132 S. Ct. 1289 (2012).
 134 S. Ct. 2347 (2014).
 550 U.S. 398 (2007).
 CLS Bank, 134 S. Ct. at 2360.
 Claim 33 of U.S. Patent No. 5,970,479 is the representative method claim and recites:
“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.”
U.S. Patent No. 5,970,479 (filed May 28, 1993).
 CLS Bank, 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct. at 1294, 1297) (internal citations omitted).
 409 U.S. 63 (1972).
 437 U.S. 584 (1978).
 CLS Bank, 134 S. Ct. at 2358 (emphasis added).
 Id. at 2355 n.3.
 Id. at 2357.
 See Am. Wood-Paper Co. v. Fibre Disintegrating Co. (The Wood Paper Pulp Cases), 90 U.S. 566 (1874); Cochrane v. Badische Anilin & Soda Fabrik, 111 U.S. 293 (1884).
 See Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J., concurring).
 Diamond v. Diehr noted that “[t]he question therefore of whether a particular invention is novel is ‘wholly apart from whether the invention falls into a category of statutory subject matter.’” 450 U.S. 175, 190 (1981) (quoting In re Bergy, 596 F.2d 952, 961 (C.C.P.A. 1979)). After CLS Bank, and consistent with the Court’s decision in Mayo, it appears as if novelty (or lack thereof) can play a major role in determining whether claims are statutory under § 101. In finding Alice’s claims drawn to the abstract idea of “intermediated settlement,” the Court cited several references (some of which may or may not qualify as prior art under §§ 102 or 103) to establish that such undertakings were “fundamental economic practice long prevalent in our system of commerce.” CLS Bank, 134 S. Ct. at 2356. Similarly, when considering the impact of the recited (or stipulated) computer implementation, the Court stated that “all of these computer functions are well-understood, routine, conventional activities previously known to the industry.” Id. at 2359.
 In Bilski, the Court held that “while the machine-or-transformation test has always been a ‘useful and important clue,’ it has never been the ‘sole test’ for determining patentability.” Bilski, 561 U.S. at 593. In this case, Alice’s computer-readable media and system claims were struck down under § 101, despite some being tied to general-purpose computer hardware. Thus, it appears that to pass the machine-or-transformation test, claims must be tied to a particular machine and not just a generic computer.
 CLS Bank, 134 S. Ct. at 2356 (citations omitted).
 Id. at 2360 (quoting Mayo, 132 S. Ct. at 1294).
 Justice Sotomayor’s concurring opinion is brief and to the effect that she believes business method patents to be patent ineligible per se because they do not fall within the ambit of a “process” under the Patent Act. CLS Bank, 134 S. Ct. at 2360 (Sotomayor, J., concurring). Justices Breyer and Ginsberg join her here, as they did in Justice Stevens’ concurring opinion in Bilski. Id.; see also Bilski, 561 U.S. 593 (Stevens, J., concurring). The other Justices apparently are not yet ready to make all business method claims ineligible for patenting, provided that they satisfy the rule reiterated here that there must be something that improves existing technology or otherwise does not merely adapt methods for controlling human activity for implementation by a computer.
133 S. Ct. 2107 (2013).
 133 S. Ct. 1761 (2013).
 134 S.Ct. 2111 (2014).
 134 S.Ct. 2120 (2014).
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