CLS Bank v. Alice Corp. – “Abstract” Computer Patents Under Attack

The Electronic Frontier Foundation (“EFF”) has filed an amicus brief in CLS Bank v. Alice Corp., wherein the Federal Circuit will be holding an en banc hearing to address the issue of when a computer implemented patent should be invalidated under 35 U.S.C. § 101 for claiming an abstract idea.  Section 101 provides that”[w]hoever invents or discovers anynew and useful process, machine, manufacture, or composition of matter, or anynew and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  Despite Section 101’s broad and sweeping language, the Supreme Court has routinely recognized that there are limits to what can be patented, and that “laws of nature, physical phenomena, and abstract ideas” fall outside the scope of § 101.  Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010).

The patents in question in CLS Bank v. Alice Corp.[1] cover a computerized trading platform for exchanging obligations so as to eliminate “settlement risk.”(such a platform can be used for stock and foreign currency trades).  The District Court invalidated the patent under Section 101 as covering an “abstract idea” ineligible for patent protection.  The Federal Circuit initially overturned the lower court and upheld the validity of the patent.  According to the majority opinion, “[W]hen — after taking all of the claim recitations into consideration — it is not manifestly evident that a claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate under § 101.”  The Court went on to determine that the claims in question passed its newly formulated test because they “appear to cover the practical application of a business concept in a specific way. . .”  The Court’s opinion highlighted specific elements such as creating electronically maintained shadow credit and shadow debit records, requiring such shadow credit and debit records to be held independently of the exchange institution by a supervisory institution, etc.

Some commentators believe the Federal Circuit’s decision ignored and/or was inconsistent with recent precedent seeking to rein in the scope of patent eligible subject matter.  According to EFF’s attorney Julie Samuels, patents like the one involved in CLS Bank v. Alice Corp. “lead to harmful monopolies on simple ideas like ways of running a business or cooking a meal.”  Recognizing the inherent difficulties of defining what constitutes an improper “abstract idea”, the EFF is advocating for a more vigorous application of Section 112(f) to combat the perceived problem of overbroad computer implemented patents.  Section 112(f) requires disclosure of structure corresponding to the acts covered by the patent.  According to the EFF, software patents that do not contain an algorithm should automatically be found invalid.  “Giving Section 112(f) the teeth Congress intended would simplify the Section 101 inquiry by limiting the scope of the question and eliminating from contention many patents that this court has already found to be impermissibly abstract,” the group argues.

The Federal Circuit’s en banc order has formulated the questions presented as follows:

a.         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?

b.              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 § 101 purposes?

Oral argument has not yet been scheduled for the en banc hearing.  Stay tuned.


[1] U.S. Patent Nos. 5,970,479; 6,912,510; 7,149,720; and 7,725,375.

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Posted on December 12, 2012, in Invalidity, Patent and tagged , , , . Bookmark the permalink. Comments Off on CLS Bank v. Alice Corp. – “Abstract” Computer Patents Under Attack.

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