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CLS Bank Int'l: DC District Court Drives Stake into "Heart" of Business Method Patents

In CLS Bank v Alice (D.D.C. 2011),  the District Court for the District of Columbia found four patents (U.S. Patent No. 7149720; U.S. Patent No. 6912510; U.S. Patent No. 5970479; and U.S. Patent No. 7725375) owned by Alice Corporation invalid under 35 U.S.C. Sec. 101.   In short, the district court found that the “heart” of the patented invention in suit, as claimed in its various forms (including method claims, system claims and Beauregard claims) was a business method “directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk.”  The court found this idea was “a basic business or financial concept” much like that struck down in Bilski v. Kappos, 130 S. Ct. 3218 (2010)

In distinguishing Research Corp. Techs. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010), the district court noted that  “[u]nlike the concrete and palpable blue noise mask and pixel-by-pixel comparison method which resulted in a higher quality halftone digital image all while using less processor power and memory space which was before the Federal Circuit in Research Corp., see 627 F.3d at 865, Alice’s method claims are hardly limited to “specific applications” of an fundamental concept.” 

As to the system claims of the ’720 patent, the court found the claims, “as written, would wholly preempt the use of the abstract concept in any computer.”  The court further noted that “[d]espite the fact that the ’720 Patent system claims and Alice’s asserted method claims are directed to different patent eligible categories under § 101, their preemptive effect would be largely one and the same.”

 The Beauregard “article of manufacture” claims, in the court’s view, fared no better than the system claims:  “Lastly, the three program claims in the ’375 Patent are also directed to the same abstract concept despite the fact they nominally recite a different category of invention under § 101 than the other claims asserted by Alice.” 
While the court’s decision gave little or no heed to the system or article of manufacture claims of the CLS patents, it did recognize that under some circumstances the application of an abstract concept can be patentable:  “To be sure, the application of an abstract idea does not render a claim unpatentable under § 101, see Diehr, 450 U.S. at 187, however these claims seek to claim the fundamental  concept itself, and not a limited or specific application of the concept.” 
As the courts, patent practicioners and industry all struggle to understand the contours of the “abstract idea” exception to Section 101 subject matter, it is helpful to have a somewhat broader construct in which to understand this evolving legal doctrine.  Here are a few of my thoughts on the subject:
1) All inventions begin as “ideas,” since, at least at the instance of conception, all inventions arise as a thought in the human mind. 
2) Not all inventive ideas, however, despite existing only as thought, are considered “abstract”, so as to fall within the judicially created exceptions to Section 101 subject matter, for if all inventive ideas were considered “abstract”, all claimed inventions would require analysis to determine if they “wholly preempt” the abstract idea from which they were born.   In other words, every invention would have an “abstract idea” component that could not be “wholly preempted.”  Since this type of analysis, so far, has not been applied to all inventive ideas, we can deduce that only certain types of “abstract ideas” are considered objectionable under the judicially created exceptions to Section 101 subject matter. 
3) Accordingly, the judicially-created exceptions to patent-eligibility under Section 101 implicitly sorts ideas into those that are “abstract” and those that are not. 
4)  Based on the exceptions explicitly enumerated by the Supreme Court to date, it is not clear if scientific principles, laws of nature and mathematical algorithms are not considered abstract ideas, but rather are excluded from Section 101  for separate reasons. 
5) Precisely why financial and/or contract-based ideas are considered excluded “abstract ideas”, while other ideas, although existing only in the human mind, are somehow considered “not-abstract”, is unclear based on jurisprudence to date.
6)  If we accept the proposition that some ideas are not considered abstract, and therefore do not have to be analyzed as a judicially-created exception to Section 101, and others are abstract, and therefore cannot “wholly preempt” the ideas, then we need one or more rules to logically seperate objectionable abstract ideas from non-objectionable ideas. 
7) One can argue that the Research Corp. case, introduced the “technological arts” test to determine if an idea is abstract and therefore subject to the restrictions governing the patenting of abstract ideas, or are not, and therefore not subject to those restrictions.  (“Indeed, this court notes that inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” (emphasis added) Research Corp., Id. at 869.)  
8) In the instant case, the court in CLS seems to acknowlege this test by finding that there were no technological innovations described in the CLS patents — that only routine, non-innovative application of technology was described for implementing the judicially excluded abstract ideas.
So, what’s the practicioner to do?  I would say, for now, that if you are patenting inventions related to a financial or contractual idea, consider claiming first those aspects of the innovation that involve non-obvious implementations of the idea.  You might also consider filing at least one application that avoids discussing the financial or contractual aspects of the innovation at all, instead treating the data representative of such financial or contractual aspects generically as “processed data.”  If there is no point of novelty left after subtracting the financial or contractual limitations from the claims, then be forwarned that the claim may not pass muster under Section 101 if the logic used in CLS holds up on appeal.

Principal & Chief Innovation Officer

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