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Continued Uncertainty for Software Patents

A recent decision of the United States Court of Appeals for the Federal Circuit exemplifies the continuing lack of clarity regarding what constitutes patent-eligible subject matter.

U.S. patent law, specifically 35 U.S.C. § 101, states that a patent may be obtained for “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Courts have long recognized three judicially-created exceptions to these broad categories of patent-eligible subject matter, namely, “laws of nature, natural phenomena, and abstract ideas.” Unfortunately, these three exceptions are not clearly defined.

The question of patent eligibility has been particularly unsettled in connection with software patents. While software patents themselves are not clearly defined, the term loosely encompasses patents and patent applications with claims directed to methods of performing tasks utilizing a computer.

The recent case of CLS Bank Int’l v. Alice Corp. Pty. was a potential vehicle for the Court of Appeals of the Federal Circuit to clarify this unsettled area of patent law. Here, CLS Bank sought to invalidate patents owned by Alice relating to a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate “counterparty” or “settlement” risk, i.e., when only one of the two parties actually pays its obligation. ***Instead, the Federal Circuit, sitting en banc, provided a fractured opinion and further confused the analysis of what constitutes a patent-ineligible abstract idea. *** On consideration of the appeal en banc, the issue became further muddled as ten judges of the Federal Circuit released seven different opinions. None of the seven opinions garnered majority support, although seven of the ten judges agreed with the district court that the method and computer-readable media claims lack subject matter eligibility. Only five Federal Circuit judges affirmed the district court’s holding that the system claim lacked subject matter eligibility.

In light of these recent decisions, it is important to note that patents and patent applications are evaluated under the law as it currently stands, not the law as it existed at the time the application was filed or when the patent issued. If an inventor files a patent application today, receives an issued patent four years later, and that patent is challenged two years later, the judicial landscape six years hence may bear little resemblance to the morass of today. Whether this thought brings relief or trepidation is a separate matter entirely.

For software developers seeking patent protection, we suggest that extra effort be used to provide a broad, thorough, and detailed specification in any patent application. Once filed, the specification of an application cannot be amended to include new matter. As the law changes and hopefully clarifies after comment by the Supreme Court, it may be necessary to amend the claims in the application to adapt to the changes. A strong specification will help ensure that support is available for any amendments which may become necessary.

Exploring the opinions in further detail, five judges agreed with the district court and confirmed that the system, method, and media claims were invalid for failing to recite patent-eligible subject matter. These judges set forth a procedure for determining whether a computer-implemented claim recites patent-eligible subject matter or falls into the exception for abstract ideas. The first step is to determine whether the claimed invention fits within one of the four categories set forth in § 101, namely, a process, machine, manufacture, or composition of matter. Assuming this condition is met and concerns of abstractness remain, the fundamental concept or idea associated with the claim must be identified and defined. The inquiry next proceeds by evaluating the claim to determine whether it preempts the full abstract idea, or whether it contains additional substantive limitations that narrow or confine the claim. Put another way, the claim should reflect a genuine human contribution to the claimed subject matter that is more than a trivial appendix to the underlying abstract idea. If such a contribution is present, then the claim recites patent-eligible subject matter.

Four judges would reverse the decision that the system claims were not patent-eligible. They opined that the key to assessing computer implemented claims is to question whether the claims tie an otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something. If so, the claims are likely patent-eligible, unlike claims directed to nothing more than the idea of doing that thing on a computer.

In a separate dissent, the same four judges expressed concern that the “abstract idea” exception to patent-eligible subject matter has been needlessly expanded, putting hundreds of thousands of issued patents at risk. The judges opined that recitation of specific mechanical system components in the system claims should be an important factor in determining that the claims are not directed to an abstract idea. Colloquially put, “[w]hen you walk up to the § 101 gate holding a computer in your arms (or software for that matter), you should not be rejected because your computer is an abstract idea.”

Of these four judges, two agreed that the method and media claims were not patent-eligible. However, they came to this conclusion for different reasons than those set forth by the five judges. Disagreeing with the analytical procedure proposed by those five judges, the two judges opined that the method claim, viewed as a whole, embraces using an escrow to avoid risk of one party’s inability to pay – an abstract concept. When claim elements are viewed individually, they only recite the steps inherent in that concept, stated at a high level of generality, and implement those steps according to methods long used in escrows. These judges also considered it important that the method claim did not recite the use of a computer or other machine.

The other two judges of that group of four would reverse the decision that all claims are not patent-eligible. While the group of five judges concluded that all claims are tainted by reference to the same abstract concept, these two judges asserted that all claims are grounded by the same meaningful limitations. These judges propose that the group of five judges greatly erred by focusing on a fundamental concept or idea associated with a claim instead of focusing on the claim itself. The trial court construed the claims in favor of Alice Corp., finding that the method and media claims require the computer-implemented limitations of the system claims. With these limitations, these two judges believe that the method, media, and system claims all include meaningful limitations such that they do not preempt all commercial uses of an abstract idea, and should thus all be patent-eligible.

The final judge disagreed with both the group of five judges and the group of four judges. This judge opined that patent eligibility should be interpreted broadly, and that all inventions falling within the statutory classifications of “process, machine, manufacture, or composition of matter” should be eligible for protection without reliance on judicially-created concepts such as abstractness, inventiveness, and preemption.

In Accenture Global Servs., GmbH v. Guidewire Software, Fed. Cir., No. 2011-1485, Sept. 5, 2013, the Federal Circuit found in a 2-1 decision that a computer-implemented system for handling insurance claim processing tasks is not eligible for patenting under 35 USC § 101.  In Accenture, an issued patent included method and system claims, both of which were found ineligible under 101 at the district court level.  The patentee appealed only with respect to the system claims.  The majority in the instant case claimed that the majority of the CLS Bank judges supported the view that “system claims that closely track method claims and are grounded by the same meaningful limitations will generally rise and fall together.”  Here, the court compared the appealed system claims to the conclusively invalid (since they were not appealed) method claims, and found that the system claims had no meaningful limitations over and above the method claims.

Here are a few points to consider:

Limiting the abstract idea by applying it in a computer environment and in a particular industry (e.g., insurance industry) does not confer patent eligibility (citing Bancorp Servs. LLC v. Sun Life Assurance Co. of Canada (USA), 687 F.3d 1266, 1280 (Fed. Cir. 2012))

The complexity of the implementing software or the level of detail in the specification does not transform a claim reciting only an abstract concept into a patent-eligible system or method (Accenture; however, the “intricate and complex computer programming” was cited as a factor for patent eligibility in Ultramercial, Inc. v. Hulu, LLC, No. 2010-1544 (Fed. Cir., June 24, 2013))

In Accenture, the Federal Circuit used a “preemption analysis,” where it identified the abstract idea of a patent claim, then analyzed to determine whether additional substantive limitations narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.  The analysis reportedly follows CLS Bank and Ultramercial.

The patent eligible software claims in Ultramercial further distinguished the “abstract idea of advertising as currency” by including limitations “such as limiting the transaction to an Internet website, offering free access conditioned on viewing a sponsor message, and only applying to a media product.”  In contrast, the Accenture claims “contain only generalized steps of generating a task in response to events.”

The majority opinion author, Judge Alan Lourie, cited the plurality opinion he wrote in the CLS Bank v. Alice en banc decision.

The dissent in Accenture, Chief Judge Randall Rader, disagreed with the majority’s characterization that any part of CLS Bank had precedential weight. Instead, Rader presented arguments following Ultramercial v. Hulu, a case wherein he authored the opinion finding Internet advertising claims patentable.

I would advise the client that the law of patent eligibility is unsettled, particularly in connection with computer software.  Today, it appears that claims to software are patent eligible if they include meaningful, substantive limitations over and above what could be considered an abstract idea.  However, it is important to note that an application filed today will be evaluated under the law as it stands at the time of review, not the law of today.  Both CLS Bank and Accenture have been appealed to the Supreme Court, so it is likely that the understanding of the patent eligibility of software will chance significantly over the next few years. In the petition for writ of certiorari, ** the Federal Circuit “utterly failed to provide any meaningful guidance” and is “admittedly and hopelessly fractured

Alice v. CLS Bank Question – Whether claims to computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of 35 U.S.C. §101 as interpreted by this Court?

WildTangent v. Ultramercial Question - When is a patent's reference to a computer, or computer-implemented service like the Internet, sufficient to make an unpatentable abstract concept patent eligible under 35 U.S.C. §101?

Whether the Supreme Court reviews Alice or WildTangent, patent practitioners and technology companies hope that the Court will provide clarity regarding the patent eligibility of computer-implemented claims.


Apart from the Supreme Court, the judges of the Federal Circuit provide the final word on interpretation of patent law. As is evident from the plurality of opinions, there is a great amount of legal uncertainty regarding the patent eligibility of inventions which could be considered to incorporate an abstract idea. The legal landscape is especially murky in the field of computer-implemented inventions. The judges of the Federal Circuit have offered several mutually exclusive tests for determining patent eligibility and it is unclear which, if any, will be followed by courts in later cases or by the Patent and Trademark Office when examining patent applications.

If you have any questions regarding these or other patent matters, please contact Dr. Brian Chellgren or another patent attorney at Bingham Greenebaum Doll LLP. 

  • Partner

    Brian is an attorney in the firm's Lexington office, a member of the firm's Business Services Department, and Chair of the Intellectual Property Practice Group. A registered patent attorney with degrees in molecular biology (B.S ...



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