Category Archives: Patent

Intellectual Ventures’ Damages Claims, Professor Cotter’s Reaction

Reuters quotes our very own Professor Cotter regarding the novel damages argument being made by Symantec and Trend Micro against Intellectual Ventures (IV). According to the news service, IV seeks more than $300 million from the two companies for infringing a patent purchased for $750,000. Symantec and Trend Micro have told a Delaware Court that such a large licensing fees cannot be reasonable for a patent acquired for so little.

Thomas Cotter, a patent damages expert at the University of Minnesota Law School who is not involved in the case, said he is unaware of any court ruling along the lines being urged by Symantec and Trend Micro. For Intellectual Ventures, which says it has earned about $3 billion to date from licensing its thousands of patents, the stakes could hardly be higher.

“If the royalty is capped at the purchase price, there’s obviously no point in being a patent assertion entity,” Cotter said. Read the rest of this entry

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“The Innovation Act of 2013” – Representative Goodlatte Introduces New Bill Seeking to Curb Perceived Patent Litigation Abuses

On October 23, 2013, House Judiciary Committee Chairman Robert Goodlatte introduced “The Innovation Act of 2013.” (H.R. 3309) The bill is in response to perceived abuse of the patent litigation system by Non-Practicing Entities (referred to derogatorily as “Patent Trolls.”) The bill is being distinguished from other recent reform proposals on the basis that it “target[s] abusive behavior rather than specific entities.”  The bill’s authors have been careful to note that it does not attempt to eliminate valid patent litigation.  Rather, the stated goal is “preventing individuals from taking advantage of gaps in the system to engage in ‘litigation extortion.’”

Some of the key highlights of the bill are:

1.         Heightened pleading requirements.  Without limitation, the bill would require Plaintiffs to provide: i) an identification of each patent and each claim allegedly infringed; ii) an explanation as to where each element of each claim is found in each “accused instrumentality”; iii) whether each element is infringed literally or under the doctrine of equivalents; iv)  how the terms of each claim correspond to the functionality of the accused instrument; v) for any indirect infringement, a description of the direct infringement and any acts allegedly inducing or contributing thereto; vi) allege indirect infringement; vii) a description of the “right” of the party to assert infringement, viii) a description of the principal business of the party alleging infringement; and ix) a list of all infringement complaints involving the same patent(s).

2.         Joinder.  The bill would allow joinder of an “interested party” where a defendant shows the plaintiff has no substantial interest in the patent other than asserting it in litigation.  “Interested Party” is defined to include: i) assignees of the patent; ii) persons with a right to enforce or sublicense the patent; iii) persons with a direct financial interest in the patent, including attorneys and law firms representing the plaintiff;

3.         Attorneys Fees to the Prevailing Party. The bill provides that the court “shall” award reasonable fees and other expenses to the prevailing party unless the position of the non-prevailing party was “substantially justified” or “special circumstances make an award unjust.”  Of note – the bill expressly allows prevailing defendants to collect fee awards from non-plaintiffs having a substantial interest in the patent-at-issue.

4.         Limitations on Discovery.  The bill would allow only limited discovery until after claim construction.

The bill also contains substantive changes to the AIA’s new IPR and PGR proceedings.  First, the bill seeks to limit PGR estoppel. Under the AIA, PGR creates estoppel for “any ground that the petitioner raised or reasonably could have raised. . .” 35 U.S.C. § 325(e) (italics added.)  The bill would narrow such estoppel solely to grounds actually raised.  The authors of the bill presumably want to promote use of PGR by limiting estoppel concerns.

Second, the bill seeks to change the PTO’s longstanding practice of applying the broadest possible claim construction in review proceedings.  The proposed bill would require the PTO to “constru[e] each claim of the patent in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.” To the extent the authors of the bill are seeking to curtail NPE litigation, one wonders why they would propose a narrower claim construction, thereby making it easier for the NPEs’ patents – many of which are perceived to be obvious and overbroad — to survive review.

To see why former USPTO Director Kappos supported and favored continuing application of the broadest possible claim interpretation see http://www.uspto.gov/blog/director/entry/ensuring_quality_inter_partes_and.

http://www.uspto.gov/blog/director/entry/ensuring_quality_inter_partes_and

ONE YEAR LATER – IPR WIDELY ACCEPTED AND GAINING MOMENTUM

The new AIA Inter Partes Review proceedings (“IPR”) became effective September 16, 2012.  USPTO statistics reveal IPR has been widely accepted with IPR filings steadily increasing.  In October 2012, the first full month the new IPR procedures were in effect, approximately 25 IPRs were filed. Less than a year later in July 2013, approximately 75 IPRs were filed – a 200% increase.  A total of 459 IPRs were filed through August 30, 2013. The rate of IPR filings now greatly exceeds the average filing rates for the old Inter Partes Reexamination proceedings.

Interpartes review data

inter partes reexam data

Inter Partes Reexamination

A variety of factors are responsible for the widespread acceptance and utilization of IPR, including: 1) the expedited nature of IPR (decision required within 12 months of filing); 2) the availability of limited “litigation” style discovery; 3) the express ability of the parties to enter into a settlement prior to a final decision (“put the genie back in the bottle”); and 4) filing deadlines (a defendant in a patent litigation may only request IPR for up to one year after being served with the complaint).

In addition to the new benefits afforded by IPR, the traditional benefits of administrative review verses a district court challenge remain, including: 1) significantly lower average attorneys fees; 2) lower “preponderance of the evidence” standard (compared to heightened “clear and convincing evidence” applied in district court); 3) no presumption of validity; and 4) application of broadest claim interpretation (compared to district court canon that claims be construed to preserve their validity).

IPR has continued to gain momentum despite the AIA’s adoption of a heightened standard for commencement/initiation of the review proceeding.  The old “substantial new question of patentability” standard resulted in roughly 95% of Inter Partes Reexamination proceedings being allowed to proceed.  The “SNQ” standard has been replaced by what was intended to be a heightened standard.  Specifically, an IPR requestor must now establish a “reasonable likelihood that the requestor will prevail with respect to at least one of the claims challenged.”  The initial data indicates a slight decrease in the initiation rate under the new standard.  Through August 2013, 87% of IPR petitions filed have been allowed to proceed.

Based on one year of data, it appears the USPTO will increasingly become the forum of choice for patent validity challenges.

Supreme Court to Review “Exceptional Case” Standard for Patent Cases

This week the Supreme Court granted cert petitions in two patent cases: Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare Health Management.  Both cases address 35 U.S.C. § 285, which allows a court to award reasonable attorneys’ fees to the prevailing party in “exceptional cases.”  Under Section 285, a case is “exceptional” if the litigation (1) was brought in subjective bad faith; and (2) is objectively baseless.  Octane Fitness addresses the propriety of this two-prong test.  Highmark addresses the appropriate standard for reviewing a district court’s exceptional case determination under the two-prong test.

In Octane Fitness, the district court granted accused infringer Octane’s motion for summary judgment of non-infringement, but denied Octane’s motion for attorneys’ fees under Section 285.  The district court found that the litigation was neither objectively baseless nor brought in subjective bad faith.  On appeal, Octane sought to lower the standard for exceptionality to “objectively reasonable” in order to “re-balance what it alleges as the power of large companies over smaller companies in infringement litigation.”  The Federal Circuit affirmed, refusing to revisit “the settled standard for exceptionality.”

In its Supreme Court petition, Octane argued that Section 285, as interpreted by the courts over time, “has strayed from the original intent of preventing ‘gross injustice’ to an accused infringer (the result of a defendant having to spend $1 million plus to defend itself against overreaching and unfounded contentions), to a standard that is near-impossible for an accused infringer to meet no matter the unreasonableness of the litigation, and that consequently serves as no deterrent to the assertion of spurious claims.”  Octane noted that a patentee, on the other hand, can establish an exceptional case solely on a finding of willful infringement.  Willful infringement requires that a patentee show by clear and convincing evidence that (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and (2) the accused infringer knew or should have known about this objectively-defined risk of infringement.  According to Octane, a patentee’s ability to rely on a finding of willful infringement results in a lower threshold for prevailing patentees than for prevailing accused infringers seeking to recover their fees under Section 285.

In Highmark, after several years and millions of dollars in legal costs, accused infringer Highmark prevailed on summary judgment.  Conducting an extensive analysis, the district court determined the case was exceptional under 35 U.S.C. § 285 on several grounds, including: (1) no pre-filing investigation was performed by an attorney – rather, attorneys relied on an analysis performed by a non-attorney/non-engineer, and claim charts and summary judgment rulings from another case in which Allcare had asserted the same patent (both of which focused on claim construction and not infringement); (2) Allcare asserted meritless defenses, knowing such defenses were not available; (3) Allcare argued in a jurisdictional motion to dismiss that it had no control over a pre-litigation survey of potential infringers, although subsequent Allcare filings contradicted that assertion; (4) Allcare engaged in needless alterations of its claim construction assertions; and (5) Allcare continued to pursue infringement claims as “leverage,” even after its own expert conceded there was no infringement.

Affording no deference to the district court’s findings that the suit was objectively baseless, the Federal Circuit reversed in part, finding that at least some of the aspects of the case were non-frivolous.  In a sharply contested six to five vote, the Federal Circuit denied rehearing en banc.  One of the dissents observed that the Federal Circuit’s de novo review “deviates from precedent . . . and establishes a review standard for exceptional case findings in patent cases that is squarely at odds with the highly deferential review adopted by every regional circuit and the Supreme Court in other areas of law.”

The Court’s grant of these two cases appears to confirm the need to address the rise of non-practicing entity (“NPE”) litigation.  The patentee in Allcare was an NPE, and although the patentee in Octane Fitness is a large manufacturer/seller of exercise equipment, it never sold a commercial product covered by the patent at issue in that case.  According to Blue Cross Blue Shield Association, who submitted an amicus brief in the Highmark case, “[t]he one weapon that parties sued by NPEs have to level the playing field and deter abusive litigation tactics is the threat of shifting attorney’s fees ‘in exceptional cases.’”  Blue Cross further commented that Section 285 “plays a critical role in regulating the quality of patent infringement lawsuits,” because the prospect of the prevailing party recovering its attorneys’ fees “incentivizes patent holders and accused infringers to litigate only legitimate, good-faith disputes over patent infringement and validity.”

 

Details of the “patent troll” Minnesota consent decree

The first-in-the-nation settlement between the Minnesota Attorney General and patent litigant MPHJ Technology Investments has been widely reported, including by  the Washington Post, Bloomberg, Law360, and Ars Technica. But none of these outlets have posted a copy of the settlement agreement and the resulting court order.

The agreement and order can be found here. Captioned as an “Assurance of Discontinuance” (see Minn. Stat. § 8.31), the agreement and order together function as a consent decree.

Although several provisions of the agreement are interesting, perhaps most interesting is a stayed, conditional civil penalty:

MPHJ, including the MPHJ Subsidiaries and affiliates, represents and warrants that it has not received money from any Minnesota resident or entity for a patent license or an alleged infringement of a patent or patent rights. If, contrary to this representation and warranty, the State discovers Minnesota residents or Minnesota entities did pay MPHJ money for a patent license or for an alleged infringement of a patent or patent rights, then as penalty for violation of this Paragraph 4, MPHJ shall pay the State a civil penalty of $50,000 and refund all such money paid by Minnesota residents and entities.

The Assurance thus explains that MPHJ did not make any money from Minnesota residents in response to its demand letters.

Related cases in Vermont and Nebraska continue. Law360 reports that MPHJ removed the Vermont Attorney General’s litigation to federal court, and that the Attorney General is seeking to remand the case to state court. Meanwhile, a federal judge in Nebraska has granted a  preliminary injunction for the law firm that represents MPHJ, allowing it to continue litigating patent cases there The Nebraska Attorney General had sent the firm a cease-and-desist letter, demanding that the firm stop its patent-enforcement efforts. Patently O has more details here.

Fresenius USA, Inc. v. Baxter Intern., Inc. – Federal Circuit Decision Further Promotes Administrative Review of Patents

The Federal Circuit has ruled that a patent infringement judgment in excess of fourteen million dollars ($14,000,000.00) was rendered void and moot by a PTO decision invalidating the subject patent despite a prior Federal Circuit decision in the case affirming the validity of the patent.  Fresenius USA, Inc. v. Baxter Intern., Inc.— F.3d —-, 2013 WL 3305736 (C.A.Fed., July 2, 2013 (Cal.)) Coupled with the new broader scope and expedited administrative review provided for in the America Invents Act, the decision continues a trend of favoring or promoting administrative review of patents over district court litigation.

The decision will allow defendants to consider administrative challenges to the validity of a patent much further into the district court litigation process.  Prior to this ruling, prevailing wisdom was that a re-examination proceeding needed to be completed prior to the conclusion of district court proceedings to be useful.  A defendant who uncovers relevant prior art late in a proceeding may now be more likely to commence a re-examination proceeding as long as it can be completed prior to any appeals.

The decision raises interesting issues concerning separation of powers and the finality of judgments.  In a strongly worded and well-reasoned dissenting opinion, Judge Pauline Newman argued the decision improperly allows an administrative agency to void a final Federal Circuit Court of Appeals judgment.  Judge Newman wrote:

The court today authorizes the Patent and Trademark Office, an administrative agency within the Department of Commerce, to override and void the final judgment of a federal Article III Court of Appeals. The panel majority holds that the entirety of these judicial proceedings can be ignored and superseded by an executive agency’s later ruling.

The majority justified its decision on the grounds that the there was no “final” judgment. According to the majority, the prior decision affirming the validity of the patent was not final because the matter had been remanded solely to address post-judgment damage issues.  According to Judge Newman this position is inconsistent with well-established principals of finality:

The panel majority argues that the rules of finality do not apply here because the Federal Circuit, with its final judgment, included a remand to the district court to assess post-judgment damages. The courts of the nation have dealt with a variety of circumstances in which a final judgment included a remand to the district court. Here, all of the issues on appeal were finally adjudicated by the Federal Circuit; the remand authorized the district court to determine only post-judgment royalties. The remand had no relation to any issue in reexamination; validity had been finally resolved in the courts.

. . .The majority proposes that the final adjudication of patent validity can be redecided by the courts and thus by the PTO, because of the remand to assess post-judgment damages. This theory is contrary to the precedent of every circuit. All circuits impose finality and preclusion as to issues that were finally decided in full and fair litigation. . .

The America Invents Act contains certain procedural mechanisms which should prevent this from becoming a recurring concern.  Specifically, under the AIA: 1) Post Grant Review and Inter Partes Review will be prohibited if a civil action challenging the validity of the patent has been previously filed; and 2) a civil action challenging validity filed after the filing of either a Post Grant Review or Inter Partes Review petition will automatically be stayed (With the exception of “Covered Business Method Patents” these provisions are applicable only to patents issued from applications filed after March 16, 2013 (patents granted under the new “First Inventor to File” Rules).

FTC v. Actavis dissent avoids discussing any presumption of illegality

Professor Cotter’s post below on FTC v. Actavis, and his related SSRN paper both argue that the Court’s opinion all but in name adopt the presumptive-illegality approach that the decision purported to reject. Interestingly, the dissenting opinion has no mention of the presumption, favorably or unfavorably.

Chief Justice Robert’s dissent—joined by Justices Scalia and Thomas—does, however, argue that the correct approach should “be to ask whether the settlement gives Solvay monopoly power beyond what the patent already gave it….” Whether the dissent is legally correct, though, reverse payments are different than ordinary settlements in at least one respect.

Usually, a settling plaintiff claiming damages is paid by the defendant an amount equal to or less than the damages claimed. But in reverse-payment settlements, the money flows the opposite direction from traditional settlements: the plaintiff who claims its patent was infringed pays the defendant who allegedly infringed the patent. But simply, the alleged trespasser is paid by the property owner. This is odd. The dissent calls it “a distinction without a difference,” but I am not so sure, especially in light of the Hatch-Waxman Act’s provisions, which form the backdrop for these disputes.

Nonetheless, the clear winner is the FTC—not just in this case, but in the future cases it now can bring. Chairwoman Edith Ramirez issued this statement:

We look forward to moving ahead with the Actavis litigation and showing that the settlements violate antitrust law. We also are studying the Court’s decision and assessing how best to protect consumers’ interests in other pay for delay cases.  Fighting anticompetitive patent settlements has been a priority for the Commission beginning under the Chairmanships of Robert Pitofsky, through Timothy J. Muris, Deborah Platt Majoras, William E. Kovacic, and culminating under the leadership of Chairman Jon Leibowitz.

 

 

FTC v. Actavis

The U.S. Supreme Court’s decision yesterday in FTC v. Actavis, Inc. brings some resolution to the decade-long dispute over the level of antitrust scrutiny that is appropriate for evaluating the legality of “reverse-payment” or “pay-for-delay” agreements settling pharmaceutical patent infringement litigation between brand-name and generic drug companies.  Writing for a 5-3 majority in Actavis, Justice Breyer rejected both the scope-of-the-patent test and the presumptive illegality approach, and held instead that courts should review reverse-payment settlements under the rule of reason.   Or say the opinion states.  In reality, the Court appears to have all but in name adopted the presumptive illegality approach it purported to reject.  One might speculate about the political or prudential considerations that went into the majority’s characterization of what it was actually doing, but as I read the opinion reverse-payment settlements of the type at issue in Actavis are now subject to a de facto regime of presumptive illegality.  I have completed a brief essay on the case, which interested readers can access here; see if you agree or disagree with my analysis.

Vermont, White House Aim at So-Called Patent Trolls

Vermont’s Attorney General has sued a patent holding company—MPHJ Technology Investments, LLC—for violation of the state’s consumer fraud statutes. The Vermont complaint alleges “unfair and deceptive trade practices.” The substance of the complaint asserts that one or more in a series of threatening letters was false, deceptive or misleading. Specifically, it says the letters falsely claimed to have received a “positive response,” misrepresented the treatment that most recipients gave the letter, or that the defendant did not make an adequate investigation before sending its letters threatening suit.

The complaint raises a host of interesting issues, including jurisdiction, federalism and the First Amendment. These types of suits may be preempted by 28 U.S.C. § 1338, which gives federal courts exclusive jurisdiction over claims arising under the patent laws. They may be impliedly preempted too. Further, the Petition Clause may limit state’s abilities to restrict the kinds of federal claims threatened or brought by persons. This is a case to watch.

The White House has taken notice of patent holding companies too. Recently it released a report titled “Patent Assertion and U.S. Innovation.” The report, prepared by the President’s Council of Economic Advisers, the National Economic Council, and the Office of Science & Technology Policy discusses “Patent Assertion Entities” (PAEs). The report cites the recent uptick in litigation filed by PAEs:

patent_troll_chart

The White House’s report favorably cites the basis of Vermont’s lawsuit as an example of “abusive practices in litigation by patent assertion entities.” The report makes a few interesting points:

  • Not all PAEs are bad.
  • PAEs cause more harm than good in the net.
  • PAEs can harm large and small companies alike.
  • Claim uncertainty, especially in software patents, provides PAEs with an unfair bargaining power.
  • 19th Century patent litigation problems involving agricultural equipment and railroad equipment may provide a roadmap to address issues with today’s PAEs.

The report contains general recommendations to promote more straightforward, precise patents, to apply a higher burdens for novelty and non-obviousness, and to reduce patent litigation costs. The positions taken by the White House with respect to issues like Vermont’s are especially interesting because the likelihood that state-level action will be preempted may depend in large part on articulated federal goals and interests.

CLS Bank v. Alice Corp.: a New Hermeneutic of Suspicion

CLS Bank Int’l v. Alice Corp.PTY, (2013 WL 1020941 (C.A.Fed.)(Dist.Col))), a per curiam opinion of the Federal Circuit, conflates method, system, and media claims in rejecting all of them under 35 USC § 101. The Court’s reasoning depends upon the proscription against “abstract ideas” in Supreme Court judicial precedent interpreting the statute. This article suggests that this is an incorrect approach.

Every patent claim contains an abstract idea. It has to, because we are using words to describe the claimed invention. If we could put the invention itself into a claim, then the idea might not be abstract. Even a claim to a simple mechanical invention such as a wrench is abstract, e.g.,

1. A wrench for removing a bolt from a workpiece.

“Wrench,” “bolt,” and “workpiece” are all abstract at some level: we do not include the actual physical objects in the claim. Of course we don’t because a) the PTO would have to store the actual physical objects and b) any competitor would have to get access to the actual physical objects to design around the claim.

Then, of course, the conscientious patent draftsman, realizing that he or she does not know of all possible prior art, and desiring to get the broadest claim coverage, will proceed to a higher level of abstraction:

2. A tool for removing a fastener from an object.

But “tool” and “fastener” may be too broad, considering the known prior art. Nevertheless, this “abstract” claim will never be rejected under 35 USC § 101. Why? Because it does not claim a computer process. Correctly, the Examiner will look at the other provisions of patentability: 35 USC §§ 112, 102, and 103.

Why should the examination process be different for claims drawn to computer inventions? If we claim the binary code that carries out the programmed function, a claim might not be “abstract,” e.g:

1. A computer, having a processor, a memory, and an input/output device, the memory having binary data, the binary data being executed by the processor, each group of binary digits comprising an instruction directing the processor,  the instructions further comprising:

a) 010010101001

b) 100000100111

etc.

But of course, no patent draftsman would write such a claim. The binary representation of the program would be exceedingly long, infringement could only be proved by getting a copy of the actual binary data of the alleged infringer, etc.  Instead, the draftsman would begin by writing an “abstract” claim, e.g.,

2. A method of addition on a computer having a processor, a memory, and an input/output device, the memory having a program executed by the processor, the program comprising the following steps:

a) store a first number in a first portion of the memory;

b) store a second number in a second portion of the memory; and

c) add the first number and second number, storing the result in a third portion of the memory.

The claim now covers the implementation of the program in many possible computers, no matter what the actual binary coding of the instructions is for that computer. This is good. But the claim is abstract: it is not limited to the actual concrete instructions in a particular computer. Note also that the claim claims a mathematical algorithm (addition). It is also a method claim. It is also not limited to a particular machine. For all of the above reasons, the claim would undoubtedly be rejected under § 101, Bilski v. Kappos, and the USPTO Memorandum “Interim Guidance for Determining Subject Matter Eligibility for Process Claims in view of Bilski v. Kappos.”

A different method claim that might be eligible under the “Interim Guidance” memorandum would have the following characteristics:

(1)   incorporation of a particular machine or apparatus;

(2)   the machine or apparatus implements the steps of the method, as opposed to where the machine or apparatus is merely an object on which the method operates;

(3)   the machine or apparatus imposes meaningful limits on the execution of the claimed method steps;

(4)   performance of the claimed method results in or otherwise involves a transformation of a particular article;

(5)   performance of the claimed method does not involve an application of a law of nature;

(6)   a general concept (principle, theory, plan or scheme) is not involved in executing the steps of the method.

Is there any doubt in the reader’s mind that most of the words in the above guidance are abstract? What is the difference between an apparatus “implementing the steps of the method” and the apparatus is “merely an object on which the method operates?” What are “meaningful limits?” What is “transformation” and what is “a particular article?” What is a “law of nature?” What is a “general concept?”

How can a patent draftsman avoid claiming an abstract idea when the USPTO’s guidance is so highly abstract? He or she has a very difficult task, indeed.

So what is the patent draftsman to do? In addition to method claims, the draftsman writes system claims. Presumably, these claims are no longer subject to the “Interim Guidance for Determining Subject Matter Eligibility for Process Claims in view of Bilski v. Kappos” Memorandum. This was a generally accepted best practice until CLS Bank. The draftsman wrote a claim to a computer, a memory, a processor, and an input/output unit. Execution of the claim resulted in the transformation of a particular article (a real-world physical object ideally). The claim did not involve an application of a law of nature (whatever that may be!) And the claim did not involve the execution of the steps of a general concept on the machine (whatever a “general concept” might be!)

A system claim that a draftsperson might write would be the following:

3. A system for adding two numbers, the system comprising a processor, a memory, and an input/output device, the memory having a program executed by the processor, the program comprising the following steps:

a) store a first number in a first portion of the memory;

b) store a second number in a second portion of the memory;

c) add the first number and second number, storing the result in a third portion of the memory; and

d) output the results through the input/output device.

Note that in the above claim: the claim is drawn to physical objects (processor, memory, input/output device); the machine implements the steps of the method; the machine imposes meaningful limits on the execution of the claimed method steps; performance of the claimed method results in the transformation of a particular article (the computer’s memory); performance of the claimed method does not involve an application of a law of nature; and a general concept is not involved in executing the steps of the method.

This claim very likely would not be patentable under 35 USC § 102, but is there any reason to treat it differently under 35 USC § 101 than the claim to a wrench above?

Since CLS Bank, however, the claim must not only pass the USPTO’s “Interim Guidance” memorandum for method claims. CLS Bank now sets up a hermeneutic of suspicion in examining system claims, as well as method claims. Apparently believing that all patent draftspersons employ “clever claim drafting” to merely recast an ineligible method claim into a system claim, the Court in its per curia opinion decides that, although the claims are “formally drawn to physical objects” it is “often a straightforward exercise to translate a method claim into system form, and vice versa.” The “asserted method and system claims require performance of the same basic process.”

Well, of course the system and method claims require “performance of the same basic process”: the invention! As we have seen, any claim to an invention involves the use of words, and therefore involves “abstraction.” We have also seen that the USPTO “Interim Guidance for Determining Subject Matter Eligibility for Process Claims in view of Bilski v. Kappos” memorandum uses highly abstract words to guide the Examiner (and claim draftsperson) in deciding what is an abstract claim. To provide maximum claim coverage for the inventor, the patent draftsperson drafts system claims as well as method claims. Now, after CLS Bank, because the system claims are in the same patent application as the method claims, the ineligible subject matter in the method claims has infected the system claims with ineligibility.

So, continuing with our example, transforming the above method claim into a system claim would not result in patentability.

As Judges Moore, Rader, Linn, and O’Malley write in their dissenting-in-part opinion, the per curia opinion “lump[s] together the asserted method, media, and system claims…holding that they are all patent-ineligible…giv[ing] staggering breadth to what is meant to be a narrow judicial exception.” These judges predict that this holding may be the death-knell for “hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications systems.”

The consequences of Bilski and other recent cases on 35 USC § 101 have now reached a nadir. The snake has swallowed its own tail. In attempting to establish a Procrustean bed on which to make all computer software claims fit, the Federal Circuit is cutting the legs off software patents. The per curia opinion’s statement in CLS Bank that the approach “might also inform patent-eligibility in other contexts” (i.e. medical treatments, gene patents, etc.) can only make one shudder.

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