Eligibility of Computer and Software-Related Patents is Again Before the Supreme Court

September 23, 2013

By: N. Scott Pierce and Mary K. Murray, Ph.D.

Hamilton Brook Smith Reynolds Alert

  • Following its decision that isolated human genes are not patentable, the U.S. Supreme Court is now being asked to provide a clear demarcation between what is and is not patent eligible for computer and software-related patents.
  • If the Court agrees to hear the case, an unambiguous ruling, regardless of the outcome, would be welcome to settle the varying opinions of lower courts. 

The losing party in each of two cases that were recently decided by the Court of Appeals for the Federal Circuit has, independently, requested review by the Supreme Court of the statutory provision for patent eligibility under Title 35 of the United States Code, Section 101.  One of the two parties seeking review, WildTangent, Inc., was a losing co-defendant in an infringement action, Ultramercial, LLC, et al. v. Hulu LLC, et al., and had unsuccessfully asserted that the plaintiff's patent, to a method for using advertising as currency over the internet, was invalid as not being eligible for patent protection.  In the other case, CLS Bank v. Alice Corp., the Federal Circuit held that patents owned by Alice Corporation, directed to methods and computerized systems for creating and exchanging financial instruments, such as so-called "derivatives," failed to meet the requirements under the same statutory provision for patent eligibility.  Section 101 states that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title."
 
Both requests, by WildTangent and Alice, cited the "failed" hearing by the Federal Circuit in CLS Bank, which was heard en banc (by all of the judges) and resulted in a decision without a written majority opinion, but with five separate opinions variously concurring and dissenting in-total or in-part.  WildTangent and Alice concluded that the Federal Circuit was "hopelessly divided" and "irreconcilably fractured," respectively, over how Section 101 should be applied. 
 
Is the Inclusion of a Computer or "Other Hardware" in a Claim Sufficient for Patent Eligibility?

For its part, Alice stated that the Federal Circuit "utterly failed to provide any meaningful guidance" in CLS Bank.  According to Alice, all of the claims at issue in CLS Bank either recite "a computer and other hardware, as well as the structural configuration of that hardware," or "require implementation by a computer," and properly qualify as patent-eligible subject matter, despite the per curiam decision by the Federal Circuit in CLS Bank holding otherwise.  Relying on two earlier Supreme Court cases, Bilski v. Kappos and Diamond v. Diehr, Alice argued that Judge Lourie's concurring opinion (which was the "plurality opinion," having garnered more votes than any other concurring or dissenting opinion) "examined the limitations in the claimed methods to determine whether each [limitation] was sufficiently 'inventive' and not overly 'well-understood' or 'conventional.'"  In Alice's view, the reasoning of the Federal Circuit was contrary to explicit instructions from the Supreme Court in Diehr, which stated that "[i]t is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis."  Further, Alice stated that Lourie's plurality opinion "disregards the instruction of this [Supreme] Court in Bilski that connecting a method to a machine, as the asserted claims expressly and concretely do, is indicative of patent-eligibility."  Alice argued that, "under the proper analysis, Alice's asserted claims are directed to patent-eligible subject matter."

Is the Absence of a Computer in a Claim Sufficient for Patent Ineligibility?

WildTangent on the other hand, stated that the Federal Circuit's decision in Ultramercial, which upheld the patent at issue, was "written in sweeping doctrinal terms that sharply conflict not only with this [Supreme] Court's precedents but with the Federal Circuit's prior decisions."  In explanation, WildTangent stated that the Federal Circuit's decision in Ultramercial was erroneous because it held that the "method at issue satisfied § 101 as a patent-eligible application of computer technology because it 'invokes computers and applications of computer technology,'" and particularly so because none of the claims asserted against WildTangent "reference any 'computer interface,' much less specify computer programming."  According to WildTangent, "the court [in Ultramercial] framed the issue with a heavy thumb -- if not truck -- on the scale for patent eligibility," by "effectively eliminating § 101's own screening role in favor of other grounds for invalidity," and "by adopting a heightened standard for abstractness" by finding patent eligibility of an invention where it "is not 'so manifestly abstract as to override the statutory language of section 101.'"  WildTangent argued that the Federal Circuit has established "a virtually insurmountable rule that computer-related method claims are patent eligible," and that such a rule is "sharply at odds with this [Supreme] Court's precedents."  Summarizing, WildTangent stated that, "because CLS Bank did not produce a precedential rationale for the court, the conflict between this case and the Federal Circuit's pre-CLS Bank cases also remains."
 
If the Supreme Court Decides to Hear the Case...

Alice and WildTangent appealed to the Supreme Court for guidance in view of the "Federal Circuit's intractable internal conflict over § 101" and the fact that there is "no prospect that this dispute or uncertainty will be resolved by the Federal Circuit."  Despite the fact that Alice and WildTangent are each seemingly seeking conflicting outcomes in their respective appeals to the Supreme Court, it is possible that, given the fact that both cases involve computer and software-related subject matter, and because of the importance of providing guidance in the face of the Federal Circuit's apparently conflicting views, the Supreme Court may grant review and decide only one of these cases, and remand the other to the Federal Circuit for reconsideration once the Supreme Court has made its decision.

Decisions on the respective requests for review by Alice and WildTangent are expected before the end of this year.
 

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September 23, 2013

By: N. Scott Pierce and Mary K. Murray, Ph.D.

Hamilton Brook Smith Reynolds Alert

  • Following its decision that isolated human genes are not patentable, the U.S. Supreme Court is now being asked to provide a clear demarcation between what is and is not patent eligible for computer and software-related patents.
  • If the Court agrees to hear the case, an unambiguous ruling, regardless of the outcome, would be welcome to settle the varying opinions of lower courts. 

The losing party in each of two cases that were recently decided by the Court of Appeals for the Federal Circuit has, independently, requested review by the Supreme Court of the statutory provision for patent eligibility under Title 35 of the United States Code, Section 101.  One of the two parties seeking review, WildTangent, Inc., was a losing co-defendant in an infringement action, Ultramercial, LLC, et al. v. Hulu LLC, et al., and had unsuccessfully asserted that the plaintiff's patent, to a method for using advertising as currency over the internet, was invalid as not being eligible for patent protection.  In the other case, CLS Bank v. Alice Corp., the Federal Circuit held that patents owned by Alice Corporation, directed to methods and computerized systems for creating and exchanging financial instruments, such as so-called "derivatives," failed to meet the requirements under the same statutory provision for patent eligibility.  Section 101 states that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title."
 
Both requests, by WildTangent and Alice, cited the "failed" hearing by the Federal Circuit in CLS Bank, which was heard en banc (by all of the judges) and resulted in a decision without a written majority opinion, but with five separate opinions variously concurring and dissenting in-total or in-part.  WildTangent and Alice concluded that the Federal Circuit was "hopelessly divided" and "irreconcilably fractured," respectively, over how Section 101 should be applied. 
 
Is the Inclusion of a Computer or "Other Hardware" in a Claim Sufficient for Patent Eligibility?

For its part, Alice stated that the Federal Circuit "utterly failed to provide any meaningful guidance" in CLS Bank.  According to Alice, all of the claims at issue in CLS Bank either recite "a computer and other hardware, as well as the structural configuration of that hardware," or "require implementation by a computer," and properly qualify as patent-eligible subject matter, despite the per curiam decision by the Federal Circuit in CLS Bank holding otherwise.  Relying on two earlier Supreme Court cases, Bilski v. Kappos and Diamond v. Diehr, Alice argued that Judge Lourie's concurring opinion (which was the "plurality opinion," having garnered more votes than any other concurring or dissenting opinion) "examined the limitations in the claimed methods to determine whether each [limitation] was sufficiently 'inventive' and not overly 'well-understood' or 'conventional.'"  In Alice's view, the reasoning of the Federal Circuit was contrary to explicit instructions from the Supreme Court in Diehr, which stated that "[i]t is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis."  Further, Alice stated that Lourie's plurality opinion "disregards the instruction of this [Supreme] Court in Bilski that connecting a method to a machine, as the asserted claims expressly and concretely do, is indicative of patent-eligibility."  Alice argued that, "under the proper analysis, Alice's asserted claims are directed to patent-eligible subject matter."

Is the Absence of a Computer in a Claim Sufficient for Patent Ineligibility?

WildTangent on the other hand, stated that the Federal Circuit's decision in Ultramercial, which upheld the patent at issue, was "written in sweeping doctrinal terms that sharply conflict not only with this [Supreme] Court's precedents but with the Federal Circuit's prior decisions."  In explanation, WildTangent stated that the Federal Circuit's decision in Ultramercial was erroneous because it held that the "method at issue satisfied § 101 as a patent-eligible application of computer technology because it 'invokes computers and applications of computer technology,'" and particularly so because none of the claims asserted against WildTangent "reference any 'computer interface,' much less specify computer programming."  According to WildTangent, "the court [in Ultramercial] framed the issue with a heavy thumb -- if not truck -- on the scale for patent eligibility," by "effectively eliminating § 101's own screening role in favor of other grounds for invalidity," and "by adopting a heightened standard for abstractness" by finding patent eligibility of an invention where it "is not 'so manifestly abstract as to override the statutory language of section 101.'"  WildTangent argued that the Federal Circuit has established "a virtually insurmountable rule that computer-related method claims are patent eligible," and that such a rule is "sharply at odds with this [Supreme] Court's precedents."  Summarizing, WildTangent stated that, "because CLS Bank did not produce a precedential rationale for the court, the conflict between this case and the Federal Circuit's pre-CLS Bank cases also remains."
 
If the Supreme Court Decides to Hear the Case...

Alice and WildTangent appealed to the Supreme Court for guidance in view of the "Federal Circuit's intractable internal conflict over § 101" and the fact that there is "no prospect that this dispute or uncertainty will be resolved by the Federal Circuit."  Despite the fact that Alice and WildTangent are each seemingly seeking conflicting outcomes in their respective appeals to the Supreme Court, it is possible that, given the fact that both cases involve computer and software-related subject matter, and because of the importance of providing guidance in the face of the Federal Circuit's apparently conflicting views, the Supreme Court may grant review and decide only one of these cases, and remand the other to the Federal Circuit for reconsideration once the Supreme Court has made its decision.

Decisions on the respective requests for review by Alice and WildTangent are expected before the end of this year.
 

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